Amount recovered Out of the Sale Proceeds cannot be Adjusted to the alleged dues of the Proprietorship concern of the Assessee: Madras HC [Read Judgment]

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While quashing the recovery proceedings under the Tamil Nadu General sales Tax Act, 1959, the Madras High Court held that, if the property of the assessee was to be brought for sale after his demise, notice to all his legal heirs should have been issued. Further, it was observed that the excess money so collected cannot be set off against the alleged dues of the proprietorship concern having different registration, though it is owned by the assessee.

In the instant case, the Commercial tax Officer has initiated the revenue recovery proceedings against the assessee. When the assessee was expired, the property was brought for auction. After the auction, the excess amount was adjusted towards the amount due by the sole proprietorship concern of the assessee.

The assessee, through his legal heirs, challenged the order raising the following four grounds. Firstly, after the demise of the owner of the property, if the same was to be brought for sale, notice to all his legal heirs should have been issued. Secondly, the impugned auction proceedings itself is vitiated on account of the fact that there was no clear thirty days from the date of publication of the auction notice. Thirdly, it is contended that the first respondent namely, the Commercial Tax Officer is not competent to issue the impugned proceedings and it is only the Assistant Commissioner who is entitled to exercise such powers in terms of Section 29(1) of the Tamil Nadu General Sales Tax Act, 1959. Fourthly, it was contended that M/s.Lakshmi Traders is a separate entity having a separate registration and the amount said to have been recovered out of the sale proceeds from the purchaser could not have been adjusted to the alleged dues of the said proprietorship concern.

The court satisfied that there is no record placed before this Court to show that there was a delegation in the proper manner as required under the statute.Regarding the first ground, it was observed that “the property was owned by late A.K.Lala Lajapathy and admittedly, he was one of the partners of the firm. On his demise, when the property is brought for sale by exercising their rights under the provisions of the Tamil Nadu General Sales Tax Act, all the legal heirs of late A.K.Lala Lajapathy should have been issued notice. The contention raised by the respondent in the counter affidavit in page 3 that they need not inform all the legal heirs is an incorrect stands since the property which is individual property of late A.K.Lala Lajapathy is brought for sale and on the date when it is brought for sale, the owner of the property is no more and he has left behind his widow, two sons and nine daughters. This is also one other inherent defect.”

While accepting the contentions raised above by the assessee, the single bench pointed out that,‘if the property is sold for recovery of the tax dues of A.K.Sivaprakasa Mudaliar and sons, which is a registered dealer, then adjustment could have been made only as against the said dues and there is no jurisdiction for the respondents to adjust the balance amount towards the alleged dues payable by a proprietorship concern namely, M/s.Lakshmi Traders which was a separate entity having a separate registration.”

Read the full text of the Judgment below.