LexSURINDER NATH KAPOOR versus UNION OF INDIA & ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
SURINDER NATH KAPOOR
v.
UNION OF INDIA & ORS.
' AUGUST 3, 1988
[RANGANATH MISRA AND,
0
MURARI MOHON DUTT, JJ.]
B
Income Tax Act, 1961-Whether a garnishee order passed by
Income-tax Officer under section 226(.J)(x)-Of-For payment of a
fictiiious sum withouc notice under section 226(3) of and whether con-
sequent sale of property pursuant to such an order are null and void.
This Civil Micellaneous Petition was filed by a firm, Raja Proper-
ties, for directions consequent upon the disposal of a special leave peti-
tion (civil) filed by one Surinder l'<ath Kapoor.
c
Surinder Nath Kapoor was one of the partners of M/s. Krishna
Kapoor & Co. M(s. Indo-Kashmir Carpets and Handicrafts was a sister D
concern of M/s. Krishna Kapoor & Co. The IAC (Asst!.) passed a
garnishee order under section 226(3)(x) of the Income Tax Aci ('the
Act') holding M/s. Krishna Kapoor & Co. a defaulter to the extent of
Rs.8,56.377 found due by tliat firm to the assessee M/s. lndo-Kashmir
Carpets & Handicrafts, and as a result of the garnishee order, the
property of' M/s. Krishna Kapoor & Co. was put up for sale by the Tax
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Recovery Officer, and purchased by the petitioner, Raja Properties,
and the sale was confirmed.
·
· Surinder Nath Kapoor made an application under rule 61 of the
Second Schedule to the Act before the Tax Recovery Officer, for setting
aside the sale abovesaid. The application was dismissed. Surinder Nath
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Kapoor tiled an appeal before the Tax Recovery Commissioner, he also
filed an application for stay of confirmation of the sale m question till
the disposal of that appeal. As no stay was granted, he filed a writ
petition in the High Couri, which dismissed the same. Being aggrieved
by the dismissal of' the writ petition, he filed a petition for special leave
in this Court. This Court, llpon being informed by. petitioner's counsel
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that the amount of tax involved had already been paid to the Depart-
ment. passed an order dated October 12. 1987, setting aside the sale
aforesaid. the confirmation of which had been stayed by this court. and
disposing of the special leave petition accordingly.
The Tax Recovery Officer did not dispose of the appeal afore-
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SUPREME COURT REPORTS
[1988] Supp. 2 S.C.R.
mentioned of Surinder Nath Kapoor, in view of the order of this Court
setting aside the sale. Surinder Nath tiled an application for clarifica-
tion of this Court's said order. During the pendency of the application
l'or clarification. the petitioner Raja Properties, the auction-purchaser,
filed the present petition for directions for recalling the order above-
said passed in the special leave petition and for dismissing the Special
B Leave Petition. As regards the clarification of its order. the Court
reiterated that by virtue of that order the sale stood set aside.
c
It was contended by the petitioner/auction-purchaser, Raja Pro-
perties, that the auction sale having been confirmed. the same could not
be set aside.
Disposing of the petition Of Raja Properties, the Court.
HELD: Sec. 226(3J(x) of the Act provides for the issue of a notice
on a .garnishee. Under clause (x), if a person to whom a notice is sent
fails to make payment in pursuance thereof to the Income-tax Officer,
D he shall be deemed to be an assessee in default in respect of the amount
specified in the notice. The amount specified in the notice in this case
was Rs.2,86,450. The firm. M/s. Krishna Kapoor & Co., did not deny
on oath that the said sum demanded was due by them to Indo-Kashmir
Carpets & Handicrafts. In view of clause (x). M/s. Krishna Kapoor &
·Co. would be deemed to be an assessee in default in respect of the said
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sum of Rs.2,86,450 as specified in the notice and not for any other
amount. The Income-tax Officer put up the property to sale for
Rs.8.56,377 ;55, which was not the amount specified in the garnishee
notice. The garnishee order was for a fictitious sum of Rs.8.56.377 .55,
as this amount was not mentioned in the notice under section 226(3) of
the Act. When an order is made for payment of a fictitious sum
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without giving an opportunity to the person against whom the order is
made, to shO\\' cause against the passing of such an order, the order is a
nullity. It will be deemed that there was no existence of such an order
and any step· taken pursuant to that order will also be a nullity. The
garnishee order passed by the IAC (Asst.) in this case for Rs.
8,56.377.55 wasExcerpt shown. Read the full judgment & AI analysis in Lexace.