IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 13.06.2008 CORAM THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA W.A.No.2066 of 2004 M/s Tarapore & Co., 827, Mount Road, Chennai-600 002. .. Appellant Vs. 1.The Tax Recovery Officer V(1), Cennai-34. 2.Union of India, rep. by Secretary to Government, Ministry of Finance, Central Secretariat, North Block, New Delhi. .. Respondents For Appellant : Mr.Ramachandran,S.C., for Ms.Anita Sumanth For Respondents : No appearance Writ Appeal filed under Clause 15 of the Letters Patent against the order dated 24.08.2000 passed by the learned single Judge in W.P.No.14198 of 2000 JUDGMENT
(Judgment of the Court was made by K.RAVIRAJA PANDIAN,J.)
The writ appeal is filed against the order of the dismissal of the writ petition in W.P.No.14198 of 2000, wherein, the relief of issuance of a writ of declaration, declaring that Rule 11 of the Second Schedule to the Income Tax Act, 1961, as ultra vires and unconstitutional and consequently to strike down the said Rule, has been sought for. The said relief was sought on the ground that the Tax Recovery Officer, being a statutory creation, cannot decide the issue as to the bona fide of the transfer made in respect of the property owned by the alleged defaulter under the Income Tax Act. Even to find out as to whether any transfer of property was made with the intention to defraud the revenue, some enquiry has to be conducted under Rule 11(6) of the Act. Such enquiry can only be carried out by a competent Civil Court. Such power vested with the Tax Recovery Officer to conduct an enquiry is illegal and against the Article 19 of the Constitution of India.
3. The above writ petition came to be filed in the following circumstances:
One late Loganatha Mudaliar is defaulter in payment of Income Tax and in order to recover the same, his 50% of the share in immovable property called Dhun Building, Mount Road, Chennai, was attached on 01.02.1998 by issuance of an order of attachment. Pursuant to the same, the Tax Recovery Officer has asked the Managing Director of the appellant/writ petitioner company to furnish copies of the title deeds and sketch of the superstructure for their record purpose. The appellant made a representation objecting that. When the Tax Recovery officer proposed to settle the proclamation of sale on 12.02.1996, the appellant challenged the settlement proclamation by filing a writ petition in W.P.No.1919 of 1996. After the sale, he filed another writ petition challenging the proclamation itself in W.P.No.2480 of 1996. Those two writ petitions were filed on the ground that the settlement of proclamation and proclamation were made without following due process of law contemplated under Rule 11 of the Income Tax Rule i.e., no enquiry, as required under the Rules, has been conducted. The said writ petitions came to be disposed off by setting aside the proclamation directing the Tax Recovery Officer to hold the enquiry after giving opportunity to the appellant and investigate the appellant’s claim under Rule 11 of the second schedule. Further, the Tax Recovery Officer was directed to consider all such evidence as the appellant might choose to place before him in support of his said claim. After that, the writ petition, which is the subject matter of the appeal came to be filed challenging the very provision itself. The said writ petition was dismissed by observing as follows:
7. I am not able to accept the submission of the learned Senior counsel so as to declare the said Rule 11 as ultra vires. Even to find out as to whether any transfer of property is made with intention to defraud the Revenue, some enquiry has to be conducted under the Rule 11(6). Moreover, the observation of the Apex Court is only in cases, where the property is transferred with intention to defraud the Revenue, such suit has to be filed by the Department and not in other cases. Merely because such observation is made, it cannot be said that the Rule 11(6), in which the parties are directed to file suit, has to be declared as unconstitutional.
8.The next submission made by the learned Senior Counsel for the petitioner is that the Officer, belongs to the Department cannot decide his own case, and so the said provision cannot be sustained. But unfortunately, this issue has not been raised in the said writ petitions in W.P.Nos.1919 and 280 of 1996. In the said writ petitions, the learned Judge has directed the Tax Recovery Officer, to proceed further after giving due notice to the petitioner to hold an enquiry. So, at this stage, the petitioner cannot challenge the said provision, on the ground that the Tax Recovery officer is a departmental officer. Even if any order is passed by the Tax Revenue Officer against the interest of the petitioner, it can always file an appeal before the Chief Commissioner or Commissioner under Rule 86 to the schedule.
The correctness of the said order is now canvassed in this writ appeal.
4. The learned counsel appearing for the appellant submitted that the writ petition came to be filed in the year 2000. During the pendency of the writ petition as well the writ appeal, there was no interim order granted and tax might have been recovered by the first respondent. In those circumstances of the case, he required some time to get instructions to proceed with the case.
5. We heard the argument of the learned counsel appearing on either side and perused the material.
6. As narrated in the summation of facts, on 2.2.1996, the Tax Recovery Officer intimated the legal representatives of Loganatha Mudaliar, as also the appellant firm, which had been constituted prior to the demise of the said Loganatha Mudaliar and which owns the property, that he proposed to settle the proclamation of sale on 12.3.1996. That communication has been challenged by the appellant in W.P.No.1919 of 1996. Despite the interim order made by this Court in that writ petition, a proclamation of sale having been issued by the Tax Recovery Officer on 26.2.1996 and that proclamation was challenged in W.P.No.2480 of 1996. Before this Court, the appellant submitted that both under Section 16(1) and under Section 201, the Tax Recovery Officer has no power to declare what is otherwise a valid transaction as invalid and void. Those writ petitions were disposed of by this Court on 20.11.1998 by observing that the “Rule 11 of the Rules in the Second Schedule to the Act is a rule, which confers a valuable right to the persons, who claim rights in the properties, which are sought to be attached or sold by the authorities for recovery of dues under the Act. The Rule requires that an enquiry be held with regard to such claim and in cases, where it is found that he is not in possession of the property in his own right, the attachment be withdrawn. It is only when it is found that the assessee in default is some one acting on his behalf or holding it in trust for him is in possession, further proceedings are to be taken. Rule 11 seeks to render the order of the Tax Recovery Officer as final, subject to the right of aggrieved person to file a suit. In the rules, even the Tax Recovery Officer is required to file a suit, if he chooses to record as otherwise a valid transaction as void on account of contravention of Section 281 of the Act.” The right under Rule 11 being a valuable right, that rule cannot be bypassed in the manner done by the Tax Recovery Officer.
7. While that being so, the assessee, by filing this writ petition challenges the very provision of Rule 11 as ultra vires without any cause of action. The Rule requires that an enquiry to be held with regard to any claim and in cases, where it is found that the person is not in possession of the property in his own right, attachment be withdrawn. It is only when it was found that the assessee in default of someone acting on his behalf or holding in in trust for him is in possession, further orders are to be passed. That order is also subject to the right of the aggrieved party to file a suit. There is no arbitrariness in this provision. On the other hand, it only safeguards the interest of the parties. The other contention that the Department cannot decide his own case cannot be a ground for declaring the provision as invalid. Any dispute in the tax law cannot be regarded as adversarial one. The authorities under the Act are vested with the power to see whether the tax has been paid as required under law and adjust the same in accordance with the statutory provisions. The statutory authorities under the Act, who are vested with the power to see that the assessee has paid the tax in accordance with law, cannot be regarded as person acting adversarial to the interest of the assessee and thus they cannot be treated as deciding their own case. If the appellant is not satisfied with the enquiry conducted by the Tax Recovery Officer, it is open to him either to file a suit or challenge the same in the procedure known to law.
8. The appellant filed earlier writ petition as stated already by contending that the settlement of proclamation is not in accordance with Rule 11 and obtained a favourable order. Then once again he sought to challenge the very provision with which he has taken umbrage in the earlier proceedings, by taking a different stand now, which is impermissible in law and the attitude of the appellant reveals that the appellant filed repeated writ petitions in desperation in order to prevent the Recovery Officer from proceeding against the property. In the impugned order, it has been stated that the appellant cannot go on filing writ petition after writ petition without raising all the points in the earlier writ petition. Such sort of repeated filing of writ petitions has been deprecated by the latest decision of the Supreme Court in the case of UDAYAMI EVAM KHADI GRAMODYOG WELFARE SANSTHA AND ANOTHER VS. STATE OF U.P. AND OTHERS reported in 2008(2) LAW WEEKLY 490, in which the Supreme Court observed that the person who comes for equitable remedy must come with clean hands and should not take recourse to the legal proceedings over and over again, which amounts to abuse of process of law.
9. In terms of the above judgment and for the reasons stated supra, the writ appeal is dismissed. No costs.
raa
To
1.The Tax Recovery Officer V(1),
Cennai-34.
2.Secretary to Government,
Ministry of Finance,
Central Secretariat,
Union of India,
North Block,
New Delhi