Case Note & Summary
The dispute arose from recovery proceedings under the Income Tax Act, 1961, against the petitioner, a partner of a firm, for outstanding tax demands for assessment years 1986‑87 and 1987‑88. The firm’s appeals against the assessment orders were dismissed by the Commissioner of Income‑tax (Appeals) and the Income Tax Appellate Tribunal (ITAT), whose common order dated 15‑6‑1994 confirmed the demands. As the firm failed to pay, the Tax Recovery Officer attached the petitioner’s residential flat and, after several unsuccessful attempts to auction it, finally sold the flat on 30‑3‑2004 by a proclamation of sale dated 23‑2‑2004 for a bid of Rs. 10,00,000 confirmed in favour of the Government of India. The petitioner objected before the Tax Recovery Officer on the ground that the sale was barred by limitation under Rule 68B of the Second Schedule to the Income Tax Act, but the objection was rejected and the sale confirmed. The petitioner then filed the writ petition assailing the confirmation of sale. The core legal issue was whether a sale of attached immovable property conducted beyond the period of limitation stipulated in Rule 68B is valid. The petitioner argued that the limitation commenced from the date the demand became final, i.e., 15‑6‑1994, and with the allowable extensions the sale had to be completed by 31‑3‑2000, making the 2004 sale invalid. The revenue contended that the limitation should be computed from the dismissal of the petitioner’s miscellaneous application on 19‑5‑1998, and that the sale on 30‑3‑2004 was within the extended period. The court analysed Rule 68B in detail, noting that the limitation of three years under sub‑rule (1) runs from the end of the financial year in which the demand becomes conclusive or final, with a possible one‑year extension under the proviso and exclusions only when proceedings are actually stayed by court order. The court found that the demand had attained finality on 15‑6‑1994, and that the miscellaneous application filed by the petitioner did not seek or obtain any stay of recovery or sale; therefore the pendency of that application could not be excluded under Rule 68B(2). Consequently, the limitation for sale expired on 31‑3‑2000 (five years from the end of financial year 1994‑95). The sale conducted on 30‑3‑2004 was clearly beyond that period and therefore invalid. The attachment was deemed to have been vacated by operation of Rule 68B(4). The court rejected the revenue’s plea of delay and laches, as the petitioner had raised the limitation point before the sale. The petition was allowed, the sale confirmation was quashed, and the attachment declared vacated, with no order as to costs.
Headnote
A) Tax Law - Recovery - Limitation for Sale of Attached Property - Rule 68B of Second Schedule to Income Tax Act, 1961 - Sale of immovable property attached for recovery of tax, interest, or penalty must be effected within three years from the end of the financial year in which the demand becomes conclusive or final under Section 245-I or Chapter XX; the proviso extends limitation by one year in cases of re‑sale; if sale is not made within such period, the attachment is deemed vacated under Rule 68B(4) - Held, the sale confirmed on 30‑3‑2004 was beyond the permitted period (five years inclusive of extensions) because the demand had become final on 15‑6‑1994, the end of the financial year being 31‑3‑1995, and the limitation expired on 31‑3‑2000; hence the sale was invalid and the attachment stood vacated (Paras 9‑12, 16). B) Tax Law - Recovery - Exclusion of Time Under Rule 68B(2) - Rule 68B(2) of Second Schedule to Income Tax Act, 1961 - The period during which the levy or the proceedings of attachment or sale are stayed by an order or injunction of any court is excluded while computing limitation; the mere filing of a miscellaneous application by the assessee seeking stay of auction, without any order of stay being passed, does not attract the exclusion - Held, the pendency of the petitioner’s miscellaneous application before the ITAT from 19‑9‑1996 to 19‑5‑1998 did not exclude time because neither the recovery of tax nor the sale was stayed; therefore the limitation continued to run from 15‑6‑1994 as contended by the petitioner (Paras 14‑15).
Issue of Consideration
Whether sale of attached immovable property under the Income Tax Act, 1961 made beyond the period of limitation prescribed under Rule 68B of the Second Schedule is valid.
Final Decision
Writ petition allowed. The confirmation of sale dated 30-3-2004 is quashed and set aside. The attachment of the petitioner’s flat is deemed vacated under Rule 68B(4). Rule made absolute in terms of prayer clause (a) with no order as to costs.
Law Points
- Limitation for sale of attached immovable property under Rule 68B of Second Schedule to Income Tax Act
- 1961 commences from the date the demand becomes final
- sale beyond the prescribed period is invalid and attachment is deemed vacated
- pendency of miscellaneous application without stay order does not exclude time under Rule 68B(2)
