Case Note & Summary
The dispute arose from a garnishee order issued under the Income Tax Act, 1961, against M/s. Krishna Kapoor & Co., which was deemed a defaulter for an alleged tax liability. The order led to the sale of the firm's property, purchased by Raja Properties. Surinder Nath Kapoor, a partner in Krishna Kapoor & Co., contested the validity of the garnishee order and the subsequent sale, arguing that the amount specified in the order was fictitious and not properly notified. The Supreme Court found that the garnishee order was indeed null and void as it was based on an amount not specified in the notice, and thus, the sale was also invalid. The court ruled that the auction-purchaser was entitled to withdraw the deposited amount and receive interest as compensation, with part of the compensation to be borne by the Revenue and part by the firm. The court emphasized the importance of due process in issuing garnishee orders and held that any sale executed under a null order is itself a nullity, regardless of confirmation (Paras 219-222).
Headnote
A) Income Tax - Garnishee Order - Validity of Garnishee Order - Income Tax Act, 1961, Section 226(3)(x) - The garnishee order was deemed null and void as it was based on a fictitious sum not specified in the notice, and any sale executed pursuant to such an order is also a nullity. The court held that the auction-purchaser is entitled to compensation due to the invalidity of the garnishee order (Paras 219-221).
Issue of Consideration
Whether a garnishee order passed under section 226(3)(x) of the Income Tax Act for a fictitious sum without notice is valid, and the consequent sale of property is null and void.
Final Decision
The Supreme Court held that the garnishee order was null and void, and the sale executed pursuant to it was also invalid. The auction-purchaser was entitled to withdraw the deposited amount and receive interest as compensation, with part of the compensation to be borne by the Revenue and part by the firm M/s. Krishna Kapoor & Co. (Paras 219-222).
Law Points
- garnishee order
- nullity
- Income Tax Act
- compensation
- auction sale
