IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI
DATED THE 22ND APRIL, 2004
PRESENT: HON’BLE MRS. JUSTICE A. SUBBULAKSHMY
CHAIRPERSON
MA-37/2003
(MA-95/02 in RA-1/02 in MP-3&4/01 in RP-375/01 in OA-1144/1995-DRT, Hyderabad)
BETWEEN:
State Bank of India,
Main Branch, Bank Street,
Koti, Hyderabad.
…. Appellant
(Counsel: Mr. K.S. Sundar)
AND
1. Mr. V. Chakrapani, (Party in person)
325, Kabra Complex,
M.G. Road, Secunderabad,.
2. M/s. Bi Metalic Steel & Alloys Ltd.,
Rep. by its Official Liquidator,
Hyderabad.
3. Allahabad Bank,
Parklane Branch,
Secunderabad.
… Respondents
: O R D E R :
1. The Original Application (OA) was allowed by the Tribunal by Order dated 13.1.1997. Recovery proceedings commenced. The 1st respondent filed MP-3/2001 before the Recovery Officer praying to close the recovery proceedings against immovable properties of the defaulter as barred by limitation and another petition MP-4/2001 was also filed before the Recovery Officer by M/s. V.M. Finance & Leasing Company against the property and the Recovery Officer rejected both the applications by Order dated 28.8.2002.
Then the petitioner in MP-3/01 preferred an appeal RA-1/2002 before the Presiding Officer and that was dismissed by the Tribunal by Order dated 4.10.2002.
Again the 1st respondent filed Review Petition MA-95/2002 before the Tribunal for reviewing its Order dated 4.10.2002 and the Review Petition was allowed by the Tribunal by Order dated 6.1.2003 and consequently RA-1/02 was also allowed. That Order dated 6.1.2003 is being now challenged by the Bank in this appeal.
2. The Recovery Officer in his Order dated 28.8.2002 has found that the Demand Notice under Rule-2 of the Second Schedule of Income Tax Act, 1961 were issued under Part-1 of the Rules whereas attachment of the property is provided under Rule 48 of the said rules and service of attachment is provided under Rule 49 and Proclamation of Attachment is provided under Rule 50 and Rule 51 clearly states that the attachment of property under Rule 48 shall relate back to the date on which the notice to pay arrears was served and the time limit of four years stipulated in Rule 68(B) shall be taken into consideration only with reference to the service of the proceedings commenced from the stage of Rule 48 i.e. attachment and not earlier in view of the language used under Rule 68(B) of the Second Schedule to the Income Tax Act, 1961 to the effect that no sale of immovable property shall be made under this part after expiry of 4 years and in the present case attachment of immovable property was issued under Rule 48 on 31.7.2001 and still the period of 4 years is available for proceeding further and it is not barred by limitation.
3. Even though the PO, DRT, initially dismissed the appeal RA-1/02 preferred as against the Recovery Officer’s Order, on the Review Petition (MA-95/02) filed by the 1st respondent herein, the PO, DRT allowed that Review Petition by Order dated 6.1.2003 holding that after recovery proceedings are taken he is empowered to act only under the provisions of the Income Tax Act, which is made applicable under Section 29 read with Section 34 of the RDDB&FI Act and he has ultimately found that it is barred by limitation.
The PO’s finding is that the Recovery Officer has to take action with regard to the recovery only under the provisions of the Income Tax Act, which is made applicable under Section-29 read with Section-34 of the RDDB&FI Act.
4. Section-29 of the RDDB&FI Act, 1993 reads as follows :-
“Application of certain provisions of Income-tax Act: The provisions of the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the income-tax :
Provided that any reference under the said provisions and the rules to the “assessee” shall be construed as a reference to the defendant under this Act.”
5. Section-34 of the RDDB&FI Act, 1993 reads as follows -
“Act to have overriding effect – (1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.
(2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948, the State Financial Corporations Act, 1951, the Unit Trust of India Act, 1963, the Industrial Reconstruction Bank of India Act, 1984 [the Sick Industrial Companies (Special Provisions) Act, 1985 and the Small Industries Development Bank of India Act, 1989]”
6. Section-29 of the RDDB&FI Act clearly states that only the provisions of the Second and Third Schedule to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962 as in force from time to time shall as far as possible apply with necessary modification. It clearly states that the provisions of Second and Third Schedules to the Income tax Act, 1961 alone will apply and not the entire Income Tax Act.
So, the finding of the PO, DRT that after execution proceedings started the provisions of the Income Tax Act is made applicable under Section 29 read with Section 34 of the RDDB&FI Act, is erroneous and it is liable to be set aside in as much as Section 29 reads that the provisions of Second and Third Schedules to the Income Tax Act and Income Tax (Certificate Proceedings) Rules, 1962 alone will apply as far as possible.
7. Rule-68B of the Second Schedule of Income Tax Act, 1961 reads as follows :-
“Time limit for sale of attached immovable property - (1) No sale of immovable property shall be made under this Part after the expiry of four years from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under the provisions of section 245-I or, as the case may be, final in terms of the provisions of Chapter XX.”
8. Rule-68B of the Income tax Act states that amount for recovery of which immovable property has been attached, that has become conclusive under the provisions of Section 245-I or, as the case may be, final in terms of the provisions of Chapter XX.
This Rule is not applicable under the RDDB&FI Act and these provisions cannot be applied to for sale of the property under the RDDB&FI Act. Rule-68B will apply only for the recovery of amount which has become conclusive under the provisions of Section 245-I or in terms of provisions of Chapter XX. Since the provisions of Section 245-I and Chapter XX are not applicable under the RDDB&FI Act, this cannot be invoked at all.
9. The 1st Respondent pointed out that by applying this provision under Rule-68B, the period of four years has to be reckoned from the end of the financial year in which the Order giving rise to a demand of any tax, interest, fine, penalty or any other sum of recovery to which the immovable property has been attached. The 1st respondent pointed out that the OA Order was passed on 13.1.1997 and from the end of the financial year if the period of four years is reckoned this case is clearly barred by limitation. He pointed out that the Order giving rise to a demand means Order passed in the main OA and from that date from the end of that financial year, no sale can take place after the expiry of four years. That argument is not an acceptable one. The provisions of Section 245-I or provisions of Chapter XX are not applicable under the RDDB&FI Act. The end of financial year will come only in the case of Income tax arrears and interest etc. and not under the RDDB&FI Act. The question of financial year will not arise under the Act under the provisions and Section 245-I or Chapter XX are also not applicable under the RDDB&FI Act. Section-29 of the RDDB&FI Act clearly states that only the provisions of Second and Third Schedule to the Income Tax Act, 1961 will apply with necessary modification. The Heading in Section-29 itself indicates that only certain provisions of the Income tax Act shall be applicable i.e. provisions of Second and Third Schedule to the Income Tax Act. So the whole of Income tax Act is not applicable under the RDDB&FI Act and also the provisions of Section 245-I or Chapter XX. The amount which has become conclusive under the provisions of Section 245-I or Chapter XX alone cannot be recovered after the expiry of four years from the end of the financial year and not the amount determined under the RDDB&FI Act. So, by invoking Section-68B of the Income-tax Act the 1st respondent cannot contend that the time limit fixed for sale of attached immovable property under the RDDB&FI Act is only four years from the end of the financial year in which the Order for demand arises. So the period of limitation set out in Rule-68B is not applicable for recovery of the amount under the RDDB&FI Act.
10. Further, Section-24 of the RDDB&FI Act states with regard to the limitation. It reads that the provisions of Limitation Act, 1963 shall, as far as may be, apply to an application made to a Tribunal. With regard to the limitation, it has been clearly set out under the Act that only the provisions of Limitation Act, 1963 shall apply to an application made under the RDDB&FI Act to the Tribunal. When there is specific provision with regard to the limitation under the RDDB&FI Act, the provisions contained in Section-68B of the Income-tax Act cannot be applied. Under the Limitation Act, the period of limitation for execution proceedings is 12 years.
11. Law empowers the Recovery Officer a period of 12 years to start the execution proceedings. When there is specific provision which is made applicable for recovery of the amount under the RDDB&FI Act, only that law is applicable and not the period of limitation provided under Rule-68B of the Income tax Act.
All the cases which have been transferred to the DRT under the RDDB&FI Act were pending before the Civil Court before the enactment of the RDDB&FI Act.
After the RDDB&FI Act came into force, under the provisions of this Act the cases pending before the Civil Court were transferred and only those provisions relating to recovery of proceedings for mortgage suits are applicable under the RDDB&FI Act as there is specific provision under the Act with regard to the period of limitation under Section-24 of the Act.
So, the period of limitation is only 12 years and not the period mentioned in Rule-68B of the Income Tax Act.
So, I do not find any force in the argument advanced by the 1st respondent. Order dated 6.1.2003 passed by the PO, DRT, Hyderabad, allowing the Review Petition (MA-95/02) and consequently allowing RA-1/2002 holding that the recovery proceedings against immovable properties is barred by limitation, is erroneous and it is liable to be set aside and it is set aside.
12. Appeal allowed. Order dated 6.1.2003 passed by the PO, DRT, Hyderabad, in the Review Petition (MA-95/2002) is set aside. Recovery Officer is directed to continue the recovery proceedings.
(Dictated to PS & the transcript corrected, pronounced & signed by me in the open court today the 22nd April, 2004).
[ MRS. JUSTICE A. SUBBULAKSHMY ]
CHAIRPERSON
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