In a recent ruling, the division bench of the Bombay High Court held that the assessee cannot claim that the sale of attached property is time-barred under Rule 68B of the Second Schedule, where he has applied to Settlement Commission for extension of time for payment of demand as per Order of Settlement and his application is pending and writes to TRO for putting sale on hold based on such application.
Assessee-petitioner, in the instant case is engaged in developing properties. Pursuant to a search, block assessment was carried out against him. After completion of assessment, petitioner approached the Settlement commission, who granted relief to the assessee. However, the relief was not accepted by the petitioner. On failure to pay tax dues, the department attached the petitioner’s residential bungalow.
Assessee challenged the action before the High Court by contending that the order of demand, which is conclusive, was passed more than three years from the end of the financial year in which the order giving rise for demand of any tax, interest etc. It was therefore, barred by limitation under Rule 68B of Schedule II of the Income Tax Act.
Considering the facts of the case, the bench noted that the Settlement Commission had control over the proceedings. Dismissing the petition, Justices Dharmadhikari and Prakash D. Naik, clarified that limitation under Rule 68B of Second Schedule cannot be applicable in case of sale of attached property of tax defaulters when the order of the Settlement Commission cannot be said to be ‘conclusive’ for the purpose of Rule 68B. The time limit cannot be computed until the application is disposed and unless it becomes conclusive.
It noted the fact that the Settlement Commission’s initial order was based on the petitioner’s request to make payment of the tax in installments. That request was accepted, installments were determined and even the time was stipulated. It is the petitioner, who sought modification of this time relief and extension to make payment by installments.
“There was an attachment levied and the petitioner apprehended that if the time to make payment expires, the auction may follow. Therefore, the request of the petitioner was to extend the time to make payment in installments and if that had been granted, nothing could have been done by the Revenue pursuant to the attachment. If the time was extended and the payment was made, then, the sale could not have taken place at all. In these circumstances, based on the petitioner’s request, no steps were taken. Secondly and more importantly, the Settlement Commission’s order itself was not conclusive until the request, as noted above, was dealt with and disposed of. The payment by installments was a direction incorporated in the order of the Settlement Commission. It is that main order, which has not attained finality, particularly in the light of the application made by the petitioner. If that order was not conclusive within the meaning of Rule 68B and which finding cannot be said to be perverse or vitiated by any error of law apparent on the face of the record.”
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