1. Rule. Mrs. Mauna Bhatt, learned counsel waived service of rule for respondents No.1 and 2. Mr. Aditya Mehta, learned counsel waived service of rule for respondent No.3. The petition is taken up for final hearing. 2. The petitioners have challenged the impugned order dated 8th May, 2012, as at Annexure “A” to the petition, by which the respondent No.1 – Tax Recovery Officer, Range- 2, Bhavnagar has issued an order prohibiting and restraining the respondent No.3 from transferring or charging the immovable property bearing Plot No.619, Kahan, Nutannagar, Yojana-2B, Mahuva, District Bhavnagar till further orders. Such order came to be passed in following factual background.
3. The respondent No.3 – Shri Jagdishchandra M. Sidhpura had substantial income tax outstanding dues. Such principal amount with interest came to Rs.73,44,318/-. The respondent No.3 was an owner of above mentioned residential plot with superstructure thereon which shall hereinafter to be referred to as “the suit property”. He desired to sell such suit property for a total consideration of Rs.27 lakhs to the petitioners. For such purpose, an agreement to sell was also entered into between the respondent No.3 and the petitioners on 16th June, 2011. Towards earnest money, the petitioners also paid a sum of Rs.2,70,000/- by two separate cheques.
4. Since there were sizable tax dues, including principal amount and interest, of the respondent No.3, he approached the respondent No.2 – Assistant Commissioner of Income Tax for grant of “No Objection Certificate” for sale of the suit property. In such application dated 22nd June, 2011, he pointed out that he had entered into an agreement to sell the suit property for a consideration of Rs.27 lakhs to the present petitioners and had also accepted advance of Rs.2,70,000/-. He stated that as per the Assessing Officer's notice dated 26th November, 2010, there is a net demand of Rs.26,69,961/- outstanding against him. He requested that the original title deeds of the suit property which are lying with the Department be released on payment of the sale consideration of Rs.27 lakhs. He volunteered to deposit with the Department advance money of Rs.2,70,000/- which he had received from the petitioners. He pointed out that if the original title deeds are not released within sixty days as stipulated in the agreement to sell, such agreement to sell shall stand cancelled and the advance received by him shall have to be returned to the proposed buyers.
5. In response to such request letter, since the official respondents gave no reply, the respondent No.3 addressed yet another letter dated 23rd November, 2011 and reiterated his request for release of the seized documents of the suit property. In such letter also, he referred to his outstanding dues of Rs.26,69,961/-.
6. Since there was no reply to such letter also, the respondent No.3 wrote yet another letter dated 22nd December, 2011 and reiterated his request for grant of No Objection Certificate. The respondent No.2 – Assistant Commissioner of Income Tax, on 10th January, 2012, granted such “No Objection” on certain conditions. It would be useful to reproduce the entire letter :
“No.BNR/Cir-2/Sale Deed/JMS/2011-12 To The Sub-Registrar of Properties Mahuva Dist. Bhavnagar Sir, Sub: Sale proceeds of Plot No.619, Nutannagar Yozana No.2B, Mahuva, Dist. Bhavnagar and the Building lying thereon – reg.
Ref: Agreement to sale dated 16.06.2011 of the above mentioned property.
Please refer to the above.
[2] With reference to the above, it is informed to you that my assessee Shri Jagdishchandra Manjibhai Siddhpura, Mahuva vide his application dated 23.11.2011 has submitted the agreement to sale of the above mentioned property in favour of (i) Shri Vikramsinh J. Vala, Mahuva and (ii) Shri Nareshkumar B. Mehta, Mahuva. The assessee has sought a No Objection Certificate from the Income Tax Department against the proposed sale deed, as the substantial Income Tax demand of Rs.73,44,318/- is outstanding against him.
[3] This office has no objection in transfer of the said property if following para is inserted in the proposed conveyance deed :-
“That the purchasers shall remit the entire sale proceeds (upto Rs.73,43,318/-) of the property to the Income Tax Department through cheque or draft favouring Assistant Commissioner of Income Tax, Circle-2, Bhavnagar.”
[4] Subject to the above condition, permission to transfer the said property is granted.
(RAVI PRAKASH) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-2, BHAVNAGAR”
7. Pursuant to such “No Objection” granted under letter dated 10th January, 2012 by the Assistant Commissioner of Income Tax, the present petitioners entered into a registered sale deed dated 5th April, 2012 with the respondent No.3. In such sale deed itself, entire body of the “No Objection” issued by the Assistant Commissioner of Income Tax on 10.1.2012, was reproduced. The petitioners issued three cheques, all dated 5th April, 2012, of Rs.5 lakhs, Rs.14 lakhs and Rs.8 lakhs respectively in favour of the Assistant Commissioner of Income Tax, Circle-2, Bhavnagar. Such cheques though were received by the respondent No.2, he under two separate letters both dated 8th May, 2012, returned the same to the petitioners. In such letters, he did not indicate why he returned such cheques without realization.
8. The Tax Recovery Officer, Bhavnagar – respondent No.1 herein, thereafter issued two communications. On 8th May, 2012, he passed the impugned order prohibiting the respondent No.3 from transferring the suit property. It would be useful to take note of the contents of such order which read as under :
“To SHRI JAGDISHCHANDRA M. SIDHPURA, SHROFF BAZAR, MAHUVA – 364290 Whereas you, SHRI JAGDISHCHANDRA M. SIDHPURA, SHROFF BAZAR, MAHUVA, has failed to pay the sum of Rs.73,44,318/-
pertaining to A.Y. 1991-92 to 93-94 & 1005-96 payable by you in respect of certificate No. --- dated 18.04.2012 drawn up by the Tax Recovery Officer, Range-2, Bhavnagar and the interest payable under section 220(2) of the Income-tax Act, 1961.
Whereas you, SHRI JAGDISHCHANDRA M. SIDHPURA, SHROFF BAZAR, MAHUVA, has failed to pay the sum of
Rs.73,44,318/- payable by you in respect of certificate No.
--- dated 18.04.2012 drawn up by the TRO-2, Bhavnagar and the interest payable under section 220(2) of the Income-tax Act, 1961 and whereas the said Tax Recovery Officer has sent to the undersigned a certified copy of the said certificate under section 223(2) of the said Act specifying that an amount of Rs.73,44,318 is to be recovered from you/the defaulter.
It is ordered that you, the said SHRI JAGDISHCHANDRA M. SIDHPURA, SHROFF BAZAR, MAHUVA, be and you are hereby, prohibited and restrained, until the further order of the undersigned, from transferring, charging the under mentioned property which is included in the property of the defaulter by virtue of the Explanation to sub-section (1) of section 222 of the Income-tax Act, 1961, in any way and that all persons be, and that they are hereby prohibited from taking any benefit under such transfer or charge.
Specification of property PLOT NO.619, KAHAN NUTANNAGAR, YOJANA-2B, MAHUVA, DIST. BHAVNAGAR Given under my hand and seal at Bhavnagar this 9th day of May, 2012.
(K.J.VAGHELA) TAX RECOVERY OFFICER RANGE-2, BHAVNAGAR”
9. On 23rd May, 2012, the Tax Recovery Officer issued another communication to the Sub Registrar, Mahuva stating that huge tax demand is outstanding against the respondent No.3. No payments have been made against such dues. He had informed the department that he is intending to sell the suit property and sought “No Objection Certificate” from the Department. The Department received three cheques of Rs.14 lakhs, Rs.5 lakhs and Rs.8 lakhs from the petitioners, but the same were returned by the Assistant Commissioner and the assessee i.e. respondent No.3 was advised to contact the Tax Recovery Officer in connection with the transfer of the suit property, but he has failed to do so. The Sub Registrar was, therefore, requested to intimate if the assessee had transferred the suit property and registered the same with the Sub Registrar. It was further conveyed that, “You are once again requested to please make the registration in favour of any third party as null and void.”.
10. The respondent No.3, after the Tax Recovery Officer passed the impugned order on 8th May, 2012, had addressed a detailed letter to the Assistant Commissioner of Income Tax on 17th May, 2012 pointing out that under “No Objection Certificate” dated 10th January, 2012 issued by the Assistant Commissioner, the suit property was sold under a registered sale deed dated 5th April, 2012 and total sale consideration of Rs.27 lakhs was tendered to the Department through three different cheques. He sated that since the sale deed has already been executed and registered in terms of the written permission granted by the Department, the same cannot now be attached and the attachment order may, therefore, be revoked. Since the Department did not oblige, the petitioners have preferred this petition calling in question the legality of the impugned communication dated 8th May, 2012 issued by the respondent No.1 – Tax Recovery Officer, Bhavnagar.
11. Having heard the learned counsel for the parties and having perused the record of the case, what clearly emerges is that the respondent No.3 had sizable outstanding tax dues which along with interest came to more than Rs.73 lakhs. The respondent No.3 desired to dispose of the suit property, for which an agreement to sell was entered into between the respondent No.3 and the present petitioners. After entering into such agreement to sell, the respondent No.3 approached the Department for “No Objection Certificate” pointing out that the property is being sold for a sale consideration of Rs.27 lakhs. It is true that in such letter dated 22nd June, 2011 seeking “No Objection Certificate”, the respondent No.3 stated that the outstanding tax demand was Rs.26,69,961/-, whereas in fact, with interest, the outstanding dues of the respondent No.3 was admittedly in excess of Rs.73 lakhs. If for some reason the Department had acted only on such representation of the respondent No.3 and was led to believe that the total tax dues do not exceed Rs.27 lakhs, perhaps the official respondents could have issued further communication retrieving their earlier step of granting “No Objection Certificate”. In the present case, however, the facts as they emerge clearly establish that despite the respondent No.3 not clearly stating his total tax dues in his letter dated 22nd June, 2011 seeking “No Objection Certificate”, the Department was fully aware that his tax dues, including principal amount and interest, were not Rs.26,69,961/-, but Rs.73,44,318/-. In the letter dated 10th January, 2012 granting “No Objection Certificate” to the respondent No.3, the Assistant Commissioner clearly indicated that the tax demand is of Rs.73,44,318/-. Thus, with this clarity, the Assistant Commissioner had granted the “No Objection Certificate” to the respondent No.3. Another important aspect of such “No Objection Certificate” is that the Assistant Commissioner was aware and acutely conscious that the suit property was being sold for a consideration of Rs.27 lakhs. In his “No Objection Certificate”, he referred to the agreement to sell entered into between the respondent No.3 and the petitioners. Such agreement to sell highlighted that the suit property was being sold for Rs.27 lakhs, for which the respondent No.3 has received an earnest money of Rs.2,70,000/-. Not just that, in the request letter dated 22nd June, 2011, the respondent No.3 had in clear terms pointed out that he intends to sell the suit property for a total consideration of Rs.27 lakhs. Thus, both important aspects of the matter, namely, the sale consideration of the suit property being put to sell and the total tax dues of the respondent No.3, were very much before the Assistant Commissioner when he decided to grant the “No Objection Certificate” for sale of the suit property. Not only that, these facts were before him; he was alive and acutely conscious of these factors before he took a decision to grant the “No Objection Certificate”. It was open for him to refuse to grant such “No Objection” either on the ground that the sale consideration being offered for the suit property was inadequate or some such other reason. He, however, for his own reasons, he decided not to object to such sale.
12. Learned counsel Shri Soparkar for the petitioners stated that the petitioners have information to believe that the Assistant Commissioner had ascertained the market value of the suit property and after having ascertained that Rs.27 lakhs matches the prevailing market price, had taken a conscious decision to grant such “No Objection Certificate”. However, we do not have such facts on record. The Department, though given an opportunity, has not been able to produce the file of the Assistant Commissioner of Income Tax, Bhavnagar, to point out any special reasons why the decision of the Assistant Commissioner should be seen to have been taken under some misconception. We have, therefore, proceeded on the basis of the record and not the statement made by the counsel.
13. What emerges from the record is that the Assistant Commissioner having taken stock of all relevant facts, decided to grant “No Objection Certificate” to the respondent No.3 to sell his suit property to the petitioners for a total consideration of Rs.27 lakhs. The only condition of such “No Objection Certificate” was that he should deposit the entire sale proceeds upto Rs.73,44,318/- with the Income Tax Department through cheque or draft. Despite serious efforts on the part of the counsel for the Department, we are unable to read such condition as requiring the respondent No.3 to deposit the entire tax dues of Rs.73,44,318/- only upon which the “No Objection Certificate” would be effective. To our mind, the condition required the respondent No.3 to deposit with the Department entire sale proceeds not exceeding Rs.73,44,318/-. If however there was a short-fall, as was bound to happen in the present case, since the total sale consideration of the suit property was Rs.27 lakhs, such condition never required that the assessee should muster from some other sources the difference between the two only upon which, he could effectively execute the sale deed in favour of the intending purchasers. To our mind, the Assistant Commissioner was conscious that the respondent No.3 had outstanding tax dues of Rs.73,44,318, including principal amount and interest and that the suit property was being sold for Rs.27 lakhs. Even after depositing the entire amount with the Department, there would be still outstanding tax dues. The “No Objection Certificate”, therefore, was granted with the full consciousness that after the sale of the suit property, the tax dues of the respondent No.3 would be reduced by Rs.27 lakhs and not be totally eliminated.
14. Under such circumstances, in our opinion, it was not open for either respondent No.2 or respondent No.1 to go back on such “No Objection Certificate”. The action of the respondent No.1 to issue prohibitory order against the respondent No.3 from selling the suit property was, thus, wholly unauthorized. His instructions to the Sub Registrar, Mahuva under his letter dated 23rd May, 2012 to make the registration of the sale deed null and void, was also wholly invalid.
15. Neither the respondent No.2 nor the respondent No.1 could have recalled the “No Objection Certificate” already granted under facts and circumstances noted above, that too, after the same was acted upon and the sale deed was presented for registration. In fact, in the present case, such “No Objection Certificate” is not even recalled. We also fail to appreciate how once the Assistant Commissioner has granted “No Objection Certificate”, the Tax Recovery Officer could have ignored or overruled such “No Objection Certificate” without any further process.
16. Had the Department been able to put forth a case of connivance or fraud or misrepresentation on the part of the respondent No.3 which led the Assistant Commissioner to grant such “No Objection Certificate”, we would have probed the matter further. In the present case, neither in the affidavit in-reply nor through oral submissions before us, any such plea was raised. We may notice that the affidavit in-reply has been filed by the respondent No.1 – Tax Recovery Officer and not the respondent No.2 – Assistant Commissioner of Income Tax.
17. Under the circumstances, the petition is allowed. The impugned order dated 8th May, 2012, as at Annexure “A” to the petition, is set aside. Consequently, the communication dated 23rd May, 2012 issued by the Tax Recovery Officer to the Sub Registrar, Mahuva, Dist. Bhavnagar, as at Annexure “M” to the petition, would stand invalidated.
18. This is, however, subject to the petitioners' depositing with the Department freshly validated cheques for a total sum of Rs.27,00,000/- (Rupees twenty seven lakhs only), with simple interest at the rate of 9% per annum from 5th April, 2012 till actual payment, which shall be done latest by 15th November, 2012.
19. Before closing, we may record that in the affidavit in- reply, one of the additional objections raised by the Department is that the payments were received directly from the petitioners and not respondent No.3. To our mind, such objection is wholly technical and appears to be an after-thought. In the impugned order, this was not the basis on which the prohibition order was issued despite grant of “No Objection Certificate”. In any case, the respondent No.3 has not raised any objection before the Department about the petitioners directly paying such amount to the Department. Before us also, the counsel for the respondent No.3 stated that such payment even if made by the petitioners and received by the Department for his outstanding tax dues, including principal amount and interest, he has no objection.
20. Rule is made absolute accordingly to the aforesaid extent.
[AKIL KURESHI, J.] [HARSHA DEVANI, J.] parmar*