INCOME TAX OFFICER vs. K. MAHIN KALLATRA

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WA/1487/2012HC KeralaKLHC01041290201203 January 2014Bench: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the writ appeal filed by the Revenue. The Court upheld the decision of the learned Single Judge, finding no merit in the Revenue's arguments. The Tribunal reasoned that a circular issued by the department cannot amend a statutory provision like Rule 68B of the Second Schedule to the Income Tax Act, 1961. Therefore, the statutory period of three years from the end of the financial year in which the assessment order attained finality (March 31, 2006) had to be applied strictly. Since the notice for sale was issued after this period expired, it was considered bad in law. The Court acknowledged that a similar issue was pending before the Supreme Court but concluded that, based on the facts and circumstances of the present case, no different view could be taken from the learned Single Judge's judgment. The appeal was accordingly dismissed.

What were the facts?

The Revenue (Income Tax Officer, Ward-1, Kasaragod, and others) filed a writ appeal against a judgment of the High Court of Kerala. The appeal challenged a notice (Ext.P11) proposing the sale of properties attached earlier (Ext.P7 to P9) for recovery of tax arrears. The attachment notices were issued on December 31, 2002. The respondent/petitioner (K. Mahin Kallatra) contended that the proposed sale violated Rule 68B of the Second Schedule to the Income Tax Act, 1961, which limits the sale of attached properties to three years from the end of the financial year in which the assessment order attained finality. The financial year in question ended on March 31, 2003, making the three-year period expire on March 31, 2006. The Revenue relied on a departmental circular extending this period to four years.

What were the issues?

1. Whether the proposed sale of attached properties is in violation of Rule 68B of the Second Schedule to the Income Tax Act, 1961, considering the time limit for sale. Assessee's Contention: The respondent/petitioner argued that the proposed sale of properties was illegal as it was initiated after the expiry of the three-year period stipulated under Rule 68B of the Second Schedule to the Income Tax Act, 1961. The assessment order attained finality on March 31, 2003, and the three-year period for sale expired on March 31, 2006. Therefore, the notice for sale issued thereafter was bad in law. Revenue's Contention: The Revenue relied on a circular issued by the department which purportedly extended the three-year period for the sale of attached properties to four years. They argued that this circular should be considered in determining the validity of the sale notice.

Which sections of the Income-tax Act were involved?

Rule 68B

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE FRIDAY, THE 3RD DAY OF JANUARY 2014/13TH POUSHA, 1935 WA.No. 1487 of 2012 ----------------------------- [AGAINST THE JUDGMENT IN W.P.(C).NO.13297/2006 DATED 20/01/2012 OF THIS HON'BLE COURT] ................. APPELLANTS: -------------------- 1. INCOME TAX OFFICER, WARD -1, KASARAGOD. 2. THE TAX RECOVERY OFFICER, KASARAGOD. 3. THE COMMISSIONER OF INCOME TAX, KANNUR.

BY SRI.P.K.R.MENON,SR.COUNSEL, SRI.JOSE JOSEPH, S.C. RESPONDENT/PETITIONER: ---------------------------------------- K. MAHIN KALLATRA, BARA, MANGAD, UDMA (VIA), KASARAGOD.

BY SRI.S.ARUN RAJ.

THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 03-01-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Prv.

MANJULA CHELLUR, CJ & A.M.SHAFFIQUE, J. * * * * * * * * * * * * * W.A.No.1487 of 2012 ---------------------------------------- Dated this the 3rd day of January 2014

J U D G M E N T SHAFFIQUE,J This appeal is filed by the Revenue. The writ petition is filed by the respondent herein challenging Ext.P11 notice informing the petitioner that the properties attached as per Ext.P7 to P9 will be sold. Ext.P7 to P9 were notices issued on 31/12/2002 attaching the properties specified therein, for recovery of amounts as arrears of tax. The writ petitioner contended that the proposed sale of properties is in violation of Rule 68B of the 2nd schedule to Income Tax Act 1961. This permits sale of attached properties only within three years from the end of the financial year in which the assessment order had attained finality. The end of the financial year with reference to orders of attachment as well as when the assessment order attained finality was on 31/03/2003 and

W.A.No.1487/2012 2 since three year period expired on 31/3/2006, the proposal for sale is illegal. 2. Before the learned Single Judge, Revenue relied upon a circular issued by the department which inter alia extended the three year period to four year period. The learned Single Judge found that the circular issued by the department cannot amend the statutory provision and therefore Rule 68B has to be applied in letter and spirit and when the period for sale expired on 31/3/2006 the notice for sale of properties is bad in law. 3. Having heard the learned Standing Counsel appearing on behalf of the Revenue, we do not think that a different view can be taken from the opinion expressed by the learned Single Judge. It is submitted that a similar issue is pending before the Supreme Court. But, as matters stand now, having regard to the facts and situation arising in the present case, no grounds are made out to take a different view from the judgment of the learned Single Judge.

W.A.No.1487/2012 3 We find no merit in the above appeal and accordingly the same is dismissed. (sd/-)

(MANJULA CHELLUR, CHIEF JUSTICE) (sd/-) (A.M.SHAFFIQUE, JUDGE) jsr

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