Case Law Details
RELEVANT PARAGRAPH
After considering the submissions made on behalf of the learned advocates appearing on behalf of the respective parties, this Court is of the view that in order to decide the issues raised in the instant writ petition it is necessary first to advert to the impugned order dated 6th August, 2007 passed by the TRO-I, Hooghly. The order of the TRO was passed under Rule 11(6) of the second schedule to the Income Tax Act, 1961. While dealing with the matter, the TRO took into consideration the earlier orders passed by this Court in C.O. 8094 (W) of 1996 and W.P. 12187(W) of 2006. While proceeding to deal with the principal issue as to whether the property-in- question could be auctioned for the recovery of the outstanding demand of Dwarka Prasad Agarwala, the TRO issued notices to all concerned in terms of the order passed by the High Court on 09th June, and heard the matter at length. The TRO in his order dated 06th August, came to several findings based on evidence, which are, inter alia, as follows: –
With regard to the question as to whether Panna Bai had shown the property-in- question in the wealth tax return or not, the TRO concluded that Panna Bai residing at 24B, Nimtoala Ghat Street, Calcutta-6, had shown the property in the wealth tax return for the assessment year 1966-67 furnished on 30th June, 1966. He, however, observed that the order could not be verified for non-availability of the records in the department.
With regard to the question as to whether Panna Bai was the benamidar of Dwarka Prasad Agarwala or not, the TRO, held that without doubt the transaction was benami and the real owner of the property at 13,Kalipukur Lane (Road), Sheoraphully, Hooghly, was Dwarka Prasad Agarwala and Panna Bai, wife of Dwarka Das Agarwala, was the ostensible fictitious owner. The TRO further held, inter alia, that Dwarka Prasad Agarwala had acquired the property in the name of fictitious benamidar Panna Bai, wife of Dwarka Das Agarwala. The TRO also held that a registered deed was prepared and executed after considerable deliberation and the name of the Panna Bai, wife of Dwarka Das Agarwala, was expressly shown as the purchaser or the transferee in the deed. But, the address which was written in the wealth tax return was forged, as proved by the field enquiry conducted by the inspector. Therefore, the TRO came to the conclusion that Panna Bai, wife of Dwarka Das Agarwala, had no existence. The beneficiary of the property was also Dwarka Prasad Agarwala as per deposition of the tenants. Upon the death of Dwarka Prasad Agarwala, his heirs were enjoying their interest in the property and the filing of application before the High Court against the attachment and auction of the property, standing in the name of a fictitious benamidar, proves the interest of the heirs, i.e., interest of Dwarka Prasad Agarwala in the property.
If Panna Bai and Panna Devi was the same person, the name of the husband must be Dwarka Das Agarwala as per purchase deed of the disputed property, whereas the name of husband of Panna Devi Agarwala is Dwarka Prasad Agarwala. Therefore, the TRO held that Panna Bai, Panna Devi and Panna Devi Agarwala could not be the same and identical person and proceeded to reject the claim of the writ petitioner, as raised in his letter dated 09th July, 2007. The TRO also specifically observed that the explanation as to why Panna Bai, wife of Dwarka Das Agarwala, should not be treated as the benamidar of Dwarka Das Agarwala on the basis of evidence as submitted was sought for vide letter dated 28th May, 2007, but was not adduced by the evidences and reply of Vishwanath Agarwala. The TRO proceeded to observe that practically Vishwanath Agarwala did not answer this vital issue.
The TRO finally proceeded to reject the claim of the petitioner Vishwanath Agarwala, son of Panna Devi Agarwala, observing that the same was not tenable in law and passed his order under Rule 11(6) of the second schedule to the Income Tax Act, 1961, rejecting his plea while concluding that the property could be auctioned for recovery of the outstanding demand of Dwarka Prasad Agarwala. The confirmation of sale to the highest bidder, Kanahaiya lal Bhagat, was to be issued after one month from the date of service of the order upon Vishwanath Agarwala.
One of the contentions of the petitioner in the instant application is that the order of the TRO was passed without jurisdiction since the TRO acting under Rule 11 of the second schedule to the Income Tax Act, 1961 did not have any authority to go into or adjudicate the question of benami. In my opinion, this contention raised by the writ petitioner is wholly without basis since the writ petitioner himself had earlier moved the writ petition, being C.O.No. 8094(W) of 1996, which was disposed of by the Court on 11th September, 2003. It is clear from the order dated 11th September, 2003 passed by the writ court in C.O.No. 8094(W) of 1996 that the writ petitioner (Vishwanath Agarwala) was given an opportunity to produce materials before the TRO showing that in her income tax return, Panna Bai, had disclosed the disputed property as her own property or that this very property was assessed under wealth tax. The writ court had further directed that the impugned sale was to be kept in abeyance till final decision was taken by the income tax authority holding that 13, Kalikapukur Lane was not shown by Panna Bai in the income tax return or wealth tax return and it was further established that she was a benamidar of her husband, as claimed in the affidavit-in- opposition.
In my view, the above direction was explicit in nature. No appeal was preferred by the writ petitioner (Vishwanath Agarwala) against the order dated 11th September, 2003. In fact, he submitted to the jurisdiction of the TRO and an order was passed by the TRO on 23rd January, 2004 which was subsequently set aside by the order dated 09th June, 2006 passed by the writ court in W.P. No. 12187 (W) of 2006 at the instance of Kanhaiya Lal Bhagat, being the respondent no.4 herein. It is noticed that while disposing of W.P.No. 12187 (W) of 2006 the court observed, inter alia, as follows:-
“In the order of this court dated September 11th, 2003 it was specifically mentioned that the authority should give the decision regarding confirmation of sale of the property after considering the materials placed by the parties. There is no dispute that in the auction held by the authorities the petitioner purchased the property in question on May 22nd, 1996. There is no dispute either that in the writ petition in which the order dated September 11th, 2003 was made the petitioner was a respondent. In para. 6 of the writ petition it has been specifically alleged that before making the impugned order dated January 23rd, 2004 the tax recovery officer had not given any notice to the petitioner offering him the opportunity of producing materials and hearing. It is also apparent on the face of the impugned order that notice of hearing was given only to the person who took out the writ petition in which the order dated September 11th, 2003 was made. It is, therefore, apparent that the order was made against the petitioner without giving him any opportunity to present his case. It is also apparent that the tax recovery officer made the order contrary to the directions given by this court. The impugned order is liable to be set aside on this ground alone.
It is to be noted that affidavit of service has been filed stating that notice was given to all the respondents. However, only the fourth respondent (the original owner of the property) has entered appearance. I am also of the view that the impugned order is liable to be set aside on the ground that it is not a reasoned order. From the last paragraph of the order it is apparent that without dealing with the materials produced before him and without giving the reasons for reaching the conclusion, the tax recovery officer abruptly reached the conclusion that the auction sale in favour of the petitioner was not fit for confirmation. The order is grossly vitiated for these reasons. The authority was under the obligation to record reasons in support of his order.
For these reasons I set aside the impugned order dated January 23rd, 2004 and allow this writ petition to this extent. I order that the tax recovery officer shall hear the matter once again. Before giving the reasoned decision, the authority shall give notice to the petitioner and the fourth respondent and also to other persons who may be affected by the order. The noticed persons shall be given reasonable opportunity to produce materials in support of their respective cases. They will be entitled to submit their representations narrating their respective cases. After considering the materials produced and after giving the petitioner and the fourth respondent and other noticed parties opportunity of hearing, the tax recovery officer shall make the fresh order in the matter. The fresh order shall be made within eight weeks from the date of receipt of a copy of this order by the tax recovery officer.”
Consequent thereto, the TRO passed the order impugned, being the order dated 06th August, 2007. Since the TRO was bound by the specific directions given by the court in W.P.No. 12187(W) of 2006 and the earlier order passed by the court at the instance of the writ petitioner herein in C.O. 8094(W) of 1996 on 11th September, 2003, the order of the TRO, by no stretch of imagination, can be said to be an order without jurisdiction or that the question of benami could not be gone into by the TRO. In fact, in the order dated 11th September, 2003, the writ court had specifically directed the income tax authorities to take a final decision in respect of the property-in- question, which included the banamidar aspect, as well. The directions given by the High Court in the two orders made it clear that it was incumbent and obligatory upon the TRO to decide the matter in terms of such directions given by the court. The contention of the writ petitioner, while relying on the judgment of the Supreme Court in the case of Tax Recovery Officer –vs- Gangadhar Vishwanath Ranade (supra), that the TRO could not go into the question of benami since he had limited jurisdiction under Rule 11 cannot stand to any reason in view of the two earlier orders of the High Court, the first of which was passed at the instance of Vishwanath Agarwala, being the writ petitioner herein. No appeals were preferred therefrom by any of the parties herein. In the facts of the present case, it is clear that the TRO merely proceeded to pass a comprehensive reasoned order under Rule 11(6) based on the two earlier orders passed by the High Court in C.O.No. 8094(W) of 1996 and W.P.No. 12187(W) of 2006. That apart, the judgment of the Supreme Court Gangadhar Vishwanath Ranade (supra) was rendered in a completely different fact situation. In that case, the TRO had levied attachment under Rule 11 of the second schedule to the Income Tax Act, 1961, on an immovable property originally belonging to the deceased assessee which was claimed by his wife and daughter as of their ownership and in their possession in the objections which they were filed against the attachment proceedings under Rule 11. The Bombay High Court had set aside the order of the attachment of the TRO, against which an appeal was preferred by way of special leave before the Supreme Court. In the facts of that case it may be briefly noticed that initially on 23rd October, 1972 an immovable property, being a residential house of the assessee, was attached by the TRO. Assessee objected by stating that he had executed a mortgage of the property on 2nd December, 1967 in favour of the Bank of Maharashtra and further had executed a trust deed in respect of the property on 21st February, 1969 in favour of his wife and daughter. Objection was filed on behalf of the wife and daughter of the assessee claiming that the title to the said property vested in them as full owners and they were in possession of the said property. Objection was also filed by Bank of Maharashtra. It was contended by the assessee as well as his wife and daughter that on the day when notice was issued under Rule 2 of the second schedule to the Income Tax Act and also on the date when the said property was attached by the TRO, the property was of the ownership of the wife and daughter of the assessee who were also in possession of the property. Hence, the property was not liable to be attached for the dues of the assessee. A subsequent show cause notice dated 21st January, 1974 was issued under section 281 of the Income Tax Act, as then in force, on the assessee. The Income Tax Officer held an inquiry, recorded evidence and passed an order dated 09th May, 1974, declaring, inter alia, that the transfer in favour of the wife of the assessee and his daughter of the said immovable property was void as against the department under section 281 of the Income Tax Act. This decision was the subject matter of challenge in an earlier proceeding before the Bombay High Court. The Bombay High Court in the earlier writ proceedings by its judgment and order dated 09th January, 1981 held that the proceedings taken pursuant to the declaration or expression of an opinion by the Income Tax officer or authority under section 281 of the Act were a mere prelude to the procedure for recovery of tax and the order of the Income Tax Officer dated 09th May, 1974 did not, in any way, affect the rights of the parties pertaining to the said property which could be considered in proceedings under Rule 11. Consequent thereto, the TRO passed an order dated 17th September, 1981 and overruled the objections and declared that the mortgage, trust deed and conveyance were illegal and void and the said property was liable to attachment and sale. It was this order of the TRO that was assailed by the assessee and others by filing a writ petition before the Bombay High Court, which led to the order of the High Court setting aside the order of the TRO.
From the above narration of facts, it is absolutely clear that the fact situation in Gangadhar Vishwanath Ranade (supra) is distinct from that of the instant case. The TRO in the instant case has not proceeded to declare the transfer of the property-in- question as void under section 281 of the Income Tax Act, 1961. That was not what he was directed to do by the High Court in C.O.No. 8094(W) of 1996 and W.P.No.12187( W) of 2006. He was not supposed to nor did he go into any intricate questions of law regarding title, which is impermissible, in case of summary investigation as envisaged under Rule 11. He merely came to a finding that the real owner of the property was Dwarka Prasad Agarwala and the ostensible owner of the property was a fictitious person named Panna Bai and that the said Dwarka Prasad Agarwala was enjoying the income from the said property standing in the fictitious name of Panna Bai, wife of Dwarka Das Agarwala, who was actually the creation and benamidar of Dwarka Prasad Agarwala. The TRO, thereafter, concluded that the property could be auctioned for recovery of the outstanding demand of Dwarka Prasad Agarwala and proceeded to reject the claim of the writ petitioner, Vishwanath Agarwala, by passing the order under Rule 11(6) of the second schedule to the Income Tax Act, 1961. The judgment of the Supreme Court rendered in Gangadhar Vishwanath Ranade, therefore, has no manner of application at all in the facts and circumstances of the instant case.
The judgment of Supreme Court in Sawai Singhai Nirmal Chand (supra) was on the point of law as to whether a suit filed in pursuance of Order 21 Rule 63 of the Code of Civil Procedure, 1908, attracted the provisions of section 80 of the Code. The Supreme Court, while proceeding answer the point took into consideration the limited scope of enquiry under Order 21 Rule 58 of the Code of Civil Procedure, confining to question of possession as therein indicated, as distinct from a suit brought under Order 21 Rule 63, where not only the question of possession but also the question of title could be gone into. It may, however, be noticed that the judgment was rendered by the Supreme Court prior to the amendment of the Code of Civil Procedure, 1908, which was brought about by Act 104 of 1976. In my opinion, the limited scope of enquiry of the TRO while proceeding to exercise his jurisdiction under Rule 11 may be akin to the scope of enquiry under Order 21 Rule 58 of the Code of Civil Procedure, 1908 (as it stood prior to 1976 amendment), but that does not take away his power or authority to investigate under Rule 11 to come to a finding with regard to a property being in the nature of a benami transaction, for the purpose of sale by auction of that benami property for recovering the outstanding demand of the assessee. The judgment of the Supreme Court in Sawai Singhai Nirmal Chand’s case, therefore, is not of much assistance to the writ petitioner, in the facts of the instant case.
The contention of the writ petitioner that the order of the TRO dated 6th August, 2007 cannot even stand the test of scrutiny because it was passed in violation of the principles of natural justice, in my opinion, does not have legs to stand on. A plain reading of the impugned order makes it clear that the TRO gave adequate opportunity of hearing to all concerned, including the writ petitioner as well as the private respondent no.4 herein, in terms of the direction given by the High Court in the order 09th June, 2006, passed in W.P.No. 12187(W) of 2006. That apart, it is noticed that the writ petitioner was duly represented before the TRO, which is borne out from the impugned order itself. Moreover, it is also noticed that the specific query raised by the TRO regarding whether Panna Bai and Panna Devi Agarwala was the same person or not was sought to be answered by the writ petitioner-Vishwana th Agarwala by means of a letter received on 09th March, 2006, whereupon the TRO observed, “It is interesting to note that he did not use a single word regarding the query `whether Panna Devi Agarwala and Panna Bai was the same person or not’.” It is also noticed from the impugned order that the finding arrived at by the TRO with regard to whether Panna Bai was the benamidar of Dwarka Prasad Agarwala or not, was duly intimated to the writ petitioner-Vishwana th Agarwala by letter dated 28th May, 2007 and he was requested to explain within 1st June, 2007 why Panna Bai should not be treated as the benamidar of Dwarka Prasad Agarwala on the basis of the evidence gathered by the TRO. The authorised representative of Vishwanath Agarwala requested the TRO to grant time to give reply and finally on 09th July, 2007, Vishwanath Agarwala submitted his reply. Upon considering his reply, the TRO observed, inter alia, “Practically he (Vishwanath Agarwala) did not answer to this vital issue”. It is, therefore, not open to the writ petitioner to contend that the materials based on which the TRO formed his opinion were not made available to him or that he was not afforded an opportunity to controvert or deal with the same. All these clearly goes to show that the impugned order was passed by the TRO adhering to all known principles of natural justice.
I am in agreement with the submission made by the learned advocate for the respondent no.4, that in case of fiscal laws, such as the Income Tax Act, interpretation postulates strict construction. In my view, if one merely glances through the provisions of the various sub-rules under Rule 11, it becomes apparent that the TRO is duly empowered to investigate any claim or objection in connection to attachment or sale of a property in the manner set-out therein. In the instant case it is seen that the TRO has not made the slightest deviation from the strict letters of law which govern his power and jurisdiction under Rule 11.
However, in my opinion, the writ petitioner is not without any remedy.
Rule 11(6) of the second schedule of the Income Tax Act, 1961 reads as follows: –
“(6) Where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but, subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive.”
The above rule gives ample scope and provides adequate statutory protection to the writ petitioner to establish the right which he claims to the property-in- question by instituting a civil suit. The writ petitioner is therefore at liberty to approach the competent civil court and seek appropriate reliefs there.
For the interest of justice, however, in view of the above observation, the TRO may not finalize the sale in favour of the respondent no.4, only for a period of 45 days from date, to enable the writ petitioner to approach the competent civil court by instituting a suit in the meanwhile. Upon institution of the suit, the competent civil court shall consider the merits of the suit and any interlocutory application that may be filed in connection thereto, independently, without being influenced in any manner by any observation made herein, including the direction upon the TRO as indicated hereinabove.
