Full Judgment
A.M. Sapre, J.
1. The short question that falls for consideration in this writ filed under Articles 226 and 227 of the Constitution of India is, whether the impugned action of the respondent-income-tax authorities (Tax Recovery Officer) in auctioning the house in question is in confer-mity with the requirement of Rule 11 of the Second Schedule framed under Section 222/276 of the Income-tax Act, 1961. Since the respondent, i.e., the Income-tax Department, despite notice to them did not choose to file any return/counter affidavit placing any material on record, though the matter is pending in this court for the last seven years and hence, 1 have no option but to proceed to decide the petition only on the basis of what is pleaded and filed in the petition by the petitioner.
2. In realisation of certain income-tax arrears from respondent No. 4-- Gulab Chand (since dead)-and now deleted from the cause title, two houses bearing Nos. 118, Satigate and house No. 37, Musaddipura, both situated in Ujjain were put to auction by the Tax Recovery Officer by inviting public sale notice dated February 26, 1993 (annexure A). It is this action of the Tax Recovery Officer which was objected to by the petitioner by filing an objection dated March 18, 1993 (annexure B). In the objection, the petitioner claimed himself to be the owner of the houses in question and prayed that the houses in question cannot be attached treating them to be that of respondent No. 4. Since no order on this objection was passed or at least not communicated to the petitioner and hence this petition was filed.
3. Heard Shri G. M. Chaphekar, learned senior counsel with Shri N. K. Dave, learned counsel for the petitioner. None appeared for the respondents.
4. Having heard learned counsel for the petitioner and having perused the entire record, 1 am of the opinion that this petition deserves to be allowed as indicated hereinbelow.
5. The controversy involved in this petition is governed by Rule 11 of the Second Schedule framed under Section 222 and Section 276 of the Income-tax Act. This Schedule provides for the procedure for recovery of tax. Rule 4 provides for modes of recovery of the tax amount. Rule 4(b) provides for attachment and sale of the defaulter's immovable property. Rule 11 then provides as to how an investigation will be made of a title to the property in case any person raises an objection that the property proposed to be auctioned is not liable to be auctioned. Rule 11 reads as under :
'11. Investigation by Tax Recovery Officer.-(1) Where any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection :
Provided that no such investigation shall be made where the Tax Recovery Officer considers that the claim or objection was designedly or unnecessarily delayed.
(2) Where the property to which the claim or objection applies has been advertised for sale, the Tax Recovery Officer ordering the sale maypostpone it pending the investigation of the claim or objection, upon such terms as to security or otherwise as the Tax Recovery Officer shall deem fit.
(3) The claimant or objector must adduce evidence to show that-
(a) (in the case of immovable property) at the date of the service of the notice issued under this Schedule to pay the arrears, or
(b) (in the case of movable property) at the date of the attachment, he had some interest in, or was possessed of, the property in question.
(4) Where, upon the said investigation, the Tax Recovery Officer is satisfied that, for the reason stated in the claim or objection, such property was not, at the said date, in the possession of the defaulter or of some person in trust for him or in the occupancy of a tenant or other person paying rent to him, or that, being in the possession of the defaulter at the said date, it was so in his possession, not on his own account or as his own property, but on account of or in trust for some other person, or partly on his own account and partly on account of some other person, the Tax Recovery Officer shall make an order releasing the property, wholly or to such extent as he thinks fit, from attachment or sale.
(5) Where the Tax Recovery Officer is satisfied that the property was, at the said date, in the possession of the defaulter as his own property and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim.
(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.'
6. In my opinion, in the present case, there does not appear to be any investigation made by the Tax Recovery Officer on the objection filed by the petitioner referred to supra much less in the context of Rule 11 ibid to the effect that the property which is put to auction cannot be sold or that the same belongs to the petitioner. In my opinion, in the absence of any return filed by the Income-tax Department this court has to proceed on the assumption that the Tax Recovery Officer did not follow any procedure as prescribed in Rule 11 and simply proceeded to auction the property overlooking the requirement of Rule 11. This was not possible. It was necessary for the Tax Recovery Officer to have first decided the objection as provided in Rule 11 ibid and finding given one way or other, whether it is sustain-able or not. It was only then and depending upon the finding given, the properly in question could be put to sale for the realisation of the dues. Itis only the property whether movable or immovable which belongs to the defaulter-assessee that can be put to sale. It was an admitted fact that the petitioner was not a defaulter-assessee but it was respondent No. 4 who was the defaulter-assessee and, therefore, the Department was only entitled to proceed to attach the property in question provided it belongs to respondent No. 4. When some person raises an objection claiming the property to be that of belonging to him, when such person tenders some documentary evidence to support his claim, then in that event, unless his claim to the property is decided, the Tax Recovery Officer has no jurisdiction to auction the said property. Indeed, this is the object of Rule 11 of the Act.
7. Accordingly, and in view of the aforesaid discussion, this petition succeeds and is allowed to the extent that the respondent, i.e., the Tax Recovery Officer, will not proceed to auction the two houses in question pursuant to auction notice (annexure A) unless he (Tax Recovery Officer) first decides, the objection filed by the petitioner dated March 18, 1993, (annexure B) keeping in view the provisions of Rule 11 of the Second Schedule to the Income-tax Act. Let these objections be decided within four months from the date of this order after granting an opportunity to the petitioner.
8. No costs. Security amount, if deposited by the petitioner, be refunded as per rules.