P.R. Raman J.
1. The petitioner challenges exhibits P11 and P12 revenue recovery proceedings initiated against the property said to be owned and possessed by the petitioner herein for the alleged agricultural income-tax due from one Thomas Karkappilly. Exhibit P11 is a notice issued by the revenue recovery authority in which it refers to the proceedings of the District Collector dated July 29, 2002, and also his letter dated December 1, 2000. It further shows that as per the reference cited therein one Thomas Karukappilly, Puliara, Chittur, was a defaulter towards agricultural income-tax of an amount of Rs. 7,64,597 and a revenue recovery certificate had been received from the Income-tax Officer, Mannarkadu, for recovery of the amount. It is stated that subsequently the said defaulter had transferred the property and hence notice was affixed in the property and on enquiry, it was found that three persons have purchased properties from the defaulter on different dates. One Brijith, W/o. Abraham purchased two acres of property as per registered sale deed No. 620 of 1996 in Sy. No. 2019. One Eldho C. Paul purchased an extent of 4 acres 40 cents as per registered document Nos. 428 and 429 of 1998 in the same survey number and an extent of two acres in the same survey number was purchased by one Abraham, S/o. Abraham Madathinakath (petitioner herein as per registered sale deed No. 1051 of 2000). It is also stated that revenue recovery notice was issued under Section 44(2) of the Act by speed post. But these notices were returned unserved and hence notice was affixed on October 28, 2002, and ordered to attach the property. Thereafter by exhibit P12 under date nil of May, 2003, notice under Section 49(2) of the Revenue Recovery Act was issued notifying the sale of the property. Even though the petitioner sought for a copy of the assessment order by exhibit P13 letter issued by the Agricultural Income-tax and Sales Tax Officer, Mannarkad, the petitioner was informed that the records have been forwarded to the Deputy Commissioner (A&I;), Commissionerate of Commercial Taxes, Trivandrum. Hence, he was not in a position to issue the certified copy of the assessment order.
2. According to the petitioner, he purchased 2.15 acres of land in Sy. No. 2019/part of Kallamala Village in Palakkad District from the third respondent on April 1, 1996, by registered sale deed No. 621 of 1996 of SRO, Agali. True copy of the document is produced as exhibit P1. On the same day, he purchased another extent of 2 acres of land in the same survey number by document No. 622 of 1996 of the same Sub-Registry Office. Exhibit P2 is a copy of the said registered sale deed. Thereafter he continued to be in possession of the property and he placed reliance on exhibit P3 possession certificate issued by the Village Officer under date February 19, 1997. Exhibit P3 shows a total extent of 4 acres 15 cents of land covered by document Nos. 622 and 621 of 1996 of the Sub-Registry office, Agali, in Sy.No. 2019/part as properties in the possession of the petitioner. Later, the petitioner sold these properties to one Eldho C. Paul as per document No. 429 of 1998 of the Sub-Registry Office, Agaly. Exhibit P4 is produced as true copy of the sale deed. This property is also seen mentioned in exhibit P11 as property outstanding in the possession of the third parties. Later in 2000, the petitioner repurchased the property from the said Eldho by these separate documents Nos. 1049/1/2000, 1050/1/2000 and 1051/1/ 2000. Exhibits P5 to P7 are the true copies of those sale deeds. Pursuant thereto, taxes in respect of the property were also paid by the petitioner as evidenced by exhibits P8 and P9. Exhibit P10 is the possession certificate issued by the Village Officer under date January 22, 2001.
3. It is the definite case of the petitioner that exhibit P11 order was not served on him. It is his case that the third respondent who is the alleged defaulter towards agricultural income-tax was not in station as is disclosed in exhibit P11 and coming to know about the revenue recovery proceedings, he approached the first respondent for serving a copy of the assessment order, but was turned down. It was in the circumstances that he approached this court. It is his contention that even prior to the assessment made on the third respondent, the petitioner had purchased the property and he is a bona fide purchaser without notice and no proceedings can be initiated against the property owned and possessed by him for any agricultural income-tax arrears due from the third respondent.
4. On behalf of the first respondent, a statement was filed wherein it is stated that Thomas Karukappilly (third respondent) owned and possessed 7.96 acres of land in resurvey No. 1104/Kallamala village corresponding to pre-Sy No. 2019 of an extent of 8.40 acres. A notice was issued to the first respondent on March 22, 1999, calling upon him to file a return and produce account books. It is admitted that notice was not served on the third respondent as it was returned. Another notice was served in Form Nos. 8 and 10 on May 12, 1999, and the same was also returned unserved. Thereafter, pre-assessment notice dated March 6, 2000, was despatched on March 13, 2000, which also could not be served. From the above statements, it can be seen that the first respondent had no case that it was a case of refusal to accept a notice by the third respondent. But it was a case where notice could not be served, still the first respondent passed an assessment order under date May 4, 2000, for the various years together, namely, 1994-95, 1995-96, 1996-97, 1997-98, 1998-99, 1999-2000. Assessment orders were despatched on June 2, 2000. It is clearly admitted in the subsequent statement that the above assessment orders were not served for the assessment years 1995-96, 1998-99 and 1999-2000. Since the rate of coffee was taken at Rs. 60 per kg., there is an omission and based on the remarks of the audit report, assessment orders were sought to be revised for these three years also and revised assessment orders were passed demanding additional amount of Rs. 3,50,240 and the amount due as per the assessment orders for six years, earlier referred to, the demand is stated to be Rs. 4,14,357. The revised assessment orders were despatched on June 18, 2002, and was subsequently sent by registered post on June 21, 2002, but they were also returned unserved.
5. As against the contention raised by the petitioner, in reply thereto, it is stated that the petitioner did not file any return and hence the Assessing Officer had no alternative but to recover the tax due by means of revenue recovery proceedings. It is the case of the respondent authority that though the petitioner is the present owner and in possession of the property, there is a statutory charge created for the purpose of agricultural income-tax of an amount of Rs. 7,64,597 and hence the property is liable to be proceeded against. It is stated that the assessment orders were passed in the name of the third respondent since he did not file any return nor did he indicate any transfer of the property by him. The revenue recovery authorities were understood to have taken steps to bring the properties for attachment and sale to realise the tax arrears.
6. Before proceeding to consider the rival submissions, it is useful to refer to some of the statutory provisions, which have a bearing in deciding the issue arising for consideration in the case. Section 35 of the Kerala Agricultural Income-tax Act, 1991, deals with the procedure for assessment and as per Section 35(2) of the Act enables an Agricultural Income-tax Officer to issue notice to such person, if any in his opinion, is assessable to tax under this Act in respect of the agricultural income-tax during the previous year and requiring him to furnish a return within 30 days of the notice and in case any such person fails to furnish the return, Section 39(4) enables the Assessing Officer to make an assessment on best judgment basis.
7. In the case of escaped assessment, that is to say if for any reason, agricultural income chargeable to tax under the Act has escaped assessment in any financial year or has been assessed at too low a rate, the Agricultural Income-tax Officer may at any time, within ten years of the end of that year and subject to the provisions of Sub-section (2), proceed to serve a notice on the person liable to pay the tax and can proceed to assess or reassess the income and the provisions contained in Section 35 shall apply. As per Sub-section (2) of Section 41, no notice can be issued under Sub-section (1) after the expiry of five years from the end of the relevant financial year, unless the Commissioner is satisfied on the reasons recorded by the Agricultural Income-tax Officer that it is a fit case for issue of such notice.
8. As per Section 45 of the Act, when any tax, penalty or any other sum is payable in consequence of any order passed under this Act or in pursuance of a return filed, the Agricultural Income-tax Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable together with a copy of such order. As contemplated under Section 45, where a notice of demand specified in Sub-section (1) is served (emphasis given) the amount due therein shall, together with the interest accrued under Sub-section (4) of Section 37, be a first charge on the properties of the assessee liable to pay such amount and where such amount or part thereof relates to the properties transferred by the assessee, also on such properties.
9. On a reading of Section 45, it can be seen that any amount of tax, penalty or any amount will be payable only in pursuance of any order passed under the Act or in pursuance of a return filed. In this case, no return was filed by the third respondent. Further, any such tax or other sum becomes payable only based on an order passed and the Agricultural Income-tax Officer is bound to serve upon the assessee a notice of demand enclosing a copy of such order of determination and only when such a notice of demand under Section 45(1) of the Act is served on the assessee could arise a first charge on the property of the assessee for the amount liable to be paid by him.
10. In the present case, even going by the statement filed, it can be seen that no demand was served on the assessee. As such the question of any charge arising under Section 45(2) does not arise. Even otherwise going by the statement filed by the first respondent, any move on the part of the officer to make an assessment on the third respondent in respect of the agricultural income-tax said to have derived from the properties was made for the first time only on March 22, 1999, whereas the petitioner had purchased the property by exhibits P1 and P2 as early as in 1996 itself. Therefore, by no stretch of imagination, could the property in question be charged with any liability for the arrears of tax due from the third respondent since there were no proceedings pending as in 1996 at the time of purchase of the property by the petitioner herein. Though a contention is raised by the respondent that the petitioner repurchased the property in June 26, 2000, from Eldho by which time the proceedings have already commenced, this contention has only to be rejected as irrelevant since Eldho is not the defaulter against whom any arrears of agricultural income-tax are due or payable. When the petitioner became absolute owner of the property by exhibits P1 and P2, he is free to sell the property to any third party and repurchase the same. It is not a case where the petitioner after such purchase sold the property in favour of the third respondent defaulter so as to attract the provision under Section 45(2) of the Act as on the date of repurchase in 2000. Section 45(2) of the Act only says that there shall be a first charge on the property owned by the defaulter concerned or transferred after the demand is served. In the present case, in 1999 the third respondent has ceased to be the owner itself of the property, hence there is hardly any case for the first respondent to contend that based on orders of assessment, liability has arisen on the part of the third respondent so as to fasten that liability on the property in question.
11. It was nextly contended that as per Section 62(3) of the Act, when a charge is created and the assessee parts with the possession by way of sale, mortgage, exchange or otherwise effects a transfer whatsoever, of any of his assets, in favour of any other person, with the intention of evading payment of tax or other sum such charge created or transfer made shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the proceedings. For two reasons, this provision has no application here. No proceedings were pending as in 1996 at a time when the petitioner purchased the property. Hence the transfer is not hit by Section 62(3) of the Act. Secondly, there is no case that after any proceeding was commenced, there was a transfer in favour of the petitioner which transfer was intended to evade payment of tax.
12. In view of my above finding, I hold that the proceedings initiated against the property of the petitioner as per exhibits P11 and P12 proceedings are clearly illegal. Exhibits P11 and P12 are therefore quashed. I declare that the property purchased by the petitioner of an extent of 4.15 acres of land covered by exhibits P1 and P2 which was subsequently sold and repurchased from the transferee cannot be proceeded with for any alleged sale for agricultural income-tax due from the third respondent.
13. The writ petition is thus allowed.