INCOME TAX: Attachment and Sale of Movable Property under the provisions of Income Tax Law

After elapse of 15 days notice period as given in ITCP 1 or extended time granted by Tax Recovery Officer (TRO), coercive measures under section 222 of the Income Tax Act, 1961 can be initiated if certified demand remains unpaid. Section 222 provides that when an assessee is in default or is deemed to be in default in making a payment of tax, the Tax Recovery Officer may draw up under his signature a statement in the prescribed form (i.e. Form No. 57 for form of statement drawn up by the Tax Recovery Officer) specifying the amount of arrears due from the assessee and shall proceed to recover from such assessee the amount specified in the certificate by one or more of the modes mentioned below, in accordance with the rules laid down in the Second Schedule -

(a) attachment and sale of the assessee’s movable property;

(b) attachment and sale of the assessee’s immovable property;

(d) appointing a receiver for the management of the assessee’s movable and immovable properties.

Definition of Property

There is no exhaustive definition of property under any Act. However, property in general is defined as something that is owned either individually or jointly being in the nature of movable i.e. some goods or equipments or immovable i.e. land, building etc.

Movable property

Movable property is generally understood as a property that can be moved from one location to another. It includes all assets of every description that can be moved without damage or permanent alteration to the asset and can be used after removal.

Examples include auto-mobiles, clothes, appliances, machinery, furniture, liquid assets (shares, bonds, deposits and anything else that can be easily converted into cash) and so on.

Attachment Defined

In the context of recovery proceedings and particularly in relation to attachment of properly, ‘attachment’ would mean a seizure by legal process. The power of seizure and sale by legal process is invoked to compel defaulter to fulfil his obligation. The power of seizure by legal process is incorporated in Second Schedule94 to the Act and it may be exercised by an officer specifically empowered by the said schedule.

‘Actual seizure’ explained

The movable properties covered by warrant procedure are attached by ‘actual seizure’, which means taking physical possession. It does not mean application of force or violence on either the defaulter’s property or his person. Actual seizure also includes constructive seizure. Where a warrant of attachment is executed by affixing it to the outer door of the warehouse in which goods belonging to defaulter are stored, it is a case of constructive seizure.

Responsibility of Authorised Officer making Attachment

The attached articles have to be removed either to the office of TRO or to the place where they have to be deposited. As seized property cannot be generally sold before expiry of 15 days from attachment, these are to be kept in safe custody for this period. If attached property is cash, bullion, jewellery, securities or other valuables, TRO has to keep these items in the Departmental strong room wherever available, or in local treasury /RBI/SBI /Subsidiaries of SBI/ authorised banks as per Rule 27 of ITCP Rules. However, cash/coins may be handed over to Assessing Officer through ITCP 15 as per Rule 47 of Second Schedule.

As per Rule 25 of ITCP Rules, other movable property may be kept as under:-

(i) in the custody of an auctioneer or private security company after TRO fixes terms and conditions and remuneration.

(ii) in some iron/steel chest/safe under lock and key in some room of Income-tax office, posting police for protection (like strong room of Investigation Wing) or private security guards. Remuneration will be treated as cost of certificate proceeding (as per Rule 35 of ITCP Rules). This can be done by TRO after discussion with police authorities.

Moveable Property which can be attached

A property held in the name of defaulter or by any other person on behalf of defaulter (acquired from funds of defaulter) may be attached. The term “property” is used in a very wide sense. Even if a property does not belong to the defaulter, any right or power in respect of the same which defaulter may have acquired for his benefit, can be seized and sold as held in the case of Radha Rani v. Vidodamaiyare 45 CWG 245.

Moveable properties liable to attachment

Section 60 of CPC enumerates certain moveable properties liable to attachment. They are given below:-

(i) goods

(ii) money

(iii) bank notes

(iv) cheques

(v) bills of exchange

(vi) hundies

(vii) government securities

(viii) bond or other securities for money

(ix) debts

(x) shares in a corporation

(xi) All other ‘saleable property’ movable immovable belonging to the defaulter or over which, or the profit of which, he has disposing power

Some more examples of properties which can be attached:–

(i) Equity of redemption.

(ii) Right to claim specific performance of a contract to sell land;

(iii) Security deposits;

(iv) Compensation for land acquisition;

(v) Insurance policies which are not assigned;

(vi) Promissory notes;

(vii) Goods in the hands of an agent;

(viii) Money payable by a purchaser where a contract of sale has been executed;

(ix) Utensils used for preparing sweet meats by a shop keeper;

(x) Motor tractors;

(xi) Engines, etc. for running flour mill and for drawing water;

(xii) Priests share in the offerings;

(xiii) Money due from a managing agent;

(xiv) Provident Fund amount after its payment to the defaulter;

(xv) Compensation for jagirdari abolition;

(xvi) Private pensions;

(xvii) Arrears of salary but not future salary;

(xviii) Allowances of government servants which are not specifically exempt;

(xix) The interest of a member in the undivided property of HUF;

(xx) Arrears of maintenance allowances;

(xxi) Goods hypothecated by a defaulter to another party but which after hypothecation continue to be in the possession of the

(xxii) defaulter can be attached by TRO and the State will have priority over amounts due under the hypothecation deed.

(xxiii) Trade Mark

(xxiv) Patents

(xxv) Copyright

Credit balance in the account of a customer of a banker may be attached by the Income-Tax authorities, if the former defaults in making payment of the tax due from him

Section 226 (3) of the Indian Income- Tax Act, 1961, authorizes the Income-Tax Act, 1961, authorities the Income Tax Officer “to require by notice in writing any person from whom money is due or may become due the assessee or any person who holds or may subsequently hold money for a or account of the assessee, to pay to the Income-Tax Officer an amount equal to or less than the amount of such arrears.” Thus, the order of the Income-Tax Officer may attach

(i) any debts due and payable,

(ii) debts due but not payable on the date of the receipt of the notice, and

(iii) any amount received subsequently.

Balances lying in a joint account may also be attached even though the notice is issued on a single account. The share of the joint holders in such account shall be presumed, until contrary in proved, to be equal. Thus the amount to the credit of a joint account may be attached pro rata irrespective of the fact that the joint account is payable to ‘either or survivor’ or otherwise.

This section makes it obligatory for every person to whom such notice is issued to comply with such notice. In case of a banking company, it shall not be necessary for any pass book or deposit receipt or any other document to be produced for the purpose of any entry, endorsement, etc., before payment is made. After making payment as required under this section, the banker shall be fully discharged from his liability to the assessee to the extent of the discharged from his liability to the assessee to the extent of the amount so paid. But if he fails to make payment, he shall be deemed to be an assessee in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realization of such amount. The banker should, therefore, comply with such order. His obligation towards his customer is reduced to that extent.

NOTE

§ A general insurance policy assigned to Insurer Company against a loan etc can be attached.

§ Further, Rule 15 of ITCP Rules, 1962 provides that TRO can attach even property with encumbrance (like assignment).

§ Rule 31 of Second Schedule further provides that even assigned movable property (like insurance policy) in the custody of a court can be attached by TRO by issuing ITCP 10 and the court will decide whether the assignee/any other person will get priority over TRO.

Properties which cannot be attached

As per Rule 10 of Second Schedule, property exempted from attachment in execution of a decree of Civil Court by the CPC shall be exempt from attachment or sale by TRO. Properties which are exempt from attachment are specified in proviso to section 60 of the CPC. Personal effects of a defaulter should not be attached. Provisions of law for attachment of salary are contained in Section 226(2) read with section 60 of CPC. Items which cannot be attached is given below:-

(a) The necessary wearing apparel, cooking vessels, beds and bedding of the judgment debtor, his wife and children and such personal ornaments as in accordance with religious usage, cannot be parted with by any woman;

(b) Tools of artisans and where the judgment debtor is an agriculturist, his implements of husbandry and such cattle and seed grain as may in the opinion of the Court, be necessary to enable him to earn his livelihood as such and such portion of agricultural produce or any class of agricultural produce as may have been declared to be free from liability under the provisions of the next following section;

(d) A mere right to sue for damages;

(e) Any right of personal service;

(g) Stipends and gratuities allowed to pensioner of the Government [or of a local authority or of any other employer] or payable out of any service family pension funds notified in the official gazette by the Central Government or the State Government in this behalf, and political pensions;

(h) Wages of labourers and domestic servants, whether payable in money or in kind;

(i) Salary to the extent of the first [one thousand rupees] and [two thirds of the remainder] [in execution of any other than a decree for maintenance]. [Provided that where any part of such portion of the salary as is liable to attachment has been under attachment, whether continuously or intermittently for a total period of twenty four months, such portion shall be exempt from attachment until the expiry of a further period of twelve months and where such attachment has been in execution of one and same decree, shall after the attachment has continued for a total period of twenty four months, be finally exempt from attachment in execution of that decree]. (ia) One-third of the salary in execution of any decree for maintenance;]

(j) The pay and allowance of persons to whom the Air Force Act, 1950 or the Army Act, 1950 or the Navy Act, 1957, applies;]

(k) All compulsory deposits and other sums in or derived from any fund to which the Provident Funds Act, 1925, for the time being applies in so far as they are declared by the said Act not to be liable to attachment;

(ka) All deposits and other sums in or derived from any fund to which the Public Provident Fund Act, 1968, for the time being applies, in so far as they are declared by the said Act as not to be liable to attachments;

(kb) All money payable under a policy of insurance on the life of the judgment debtor;

(kc) The interest of a lessee of a residential building to which the provisions of law for the time being in force relating to control of rents and accommodation apply.]

(l) Any allowance forming part of the emoluments of any servant of the Government or of any servant of a railway company or local authority which the appropriate Government may by notification in the Official Gazette declare to be exempt from attachment, and subsistence grant of allowance made to any such servant while under suspension;

(m) An expectancy of succession by survivorship or other merely contingent or possible right or interest;

(n) A right to future maintenance;

(o) Any allowance declared by any Indian law, to be exempt from liability to attachment or sale in execution of a decree; and

(p) Where the judgment debtor is a person liable for the payment of land revenue, any movable property which, under any law for the time being applicable to him, is exempt from sale for the recovery of an arrear of such revenue.

TRO must ascertain correct demand before taking coercive measures for Recovery

Before embarking on coercive steps to recover the demand, it is incumbent upon TRO to ascertain the correct figure of outstanding demand. In actual practice, discrepancies are often noticed between the outstanding dues specified in the TRC and the arrears shown to be outstanding as per Assessing Officer’s report. Cases in which correctness of the demand specified in the NOD is not accepted by defaulter, should be marked by TRO to TRI for verification. TRI should carry out the reconciliation and verification and ascertain the correct amount to be recovered.

Persons authorised to attach

The person who will attach and sell is declared in Rule 13 of Second Schedule. It is stated that this “may” (and not “shall”) be done by such person as TRO may direct. It means that TRO himself can do it or he may authorize any other person including TRI under Rule 19A of Schedule II. Therefore, Tax Recovery Inspector, if authorized by TRO, can make attachment but cannot further delegate his power of attachment to his subordinates. At the time of attachment, TRI should be personally present.

Time to start attachment

After drawing of Tax Recovery Certificate (TRC), first step is to issue and serve a notice of demand in ITCP 1. As per Rule 3 of Second Schedule, attachment of movable/immovable property or any other coercive action cannot be taken before expiry of 15 days from the date of service of ITCP 1. In exceptional cases, TRO may attach movable/immovable property before expiry of stipulated fifteen days, by recording reasons if he is satisfied that defaulter may conceal, remove or dispose whole or any part of movable property thereby resulting in delay or obstruction of realization of outstanding demand.

Objections to attachment or sale

At any time before the sale, defaulter or his representative can raise an objection that the attached property is exempt under Rule 10 of Second Schedule. However, TRO’s decision in this regard is conclusive as provided in sub-rule (2) of this Rule and as held in the case of Bijli Cotton Mills (under authorized custodian) v. TRO (1975) 101 ITR 624 (All.). At times, a person other than defaulter may claim to be the owner of the articles attached. In these circumstances, the provisions of Rule 28 of the ITCP Rules are applicable. Once the sale is confirmed, it is not open to anybody to raise objection as held in the case of Smt. Shakuntla Devi Bharthiya v. TRO (1978) 117 ITR 255 (All.)

Investigation by TRO on Objections to attachment

(a) Where in execution of a certificate any claim is preferred or any objection is made to the attachment or sale of any property in execution of a certificate, on the ground that such property is not liable to attachment or sale, TRO shall proceed to investigate the claim or objection.

(b) Where the property to which the claim or objection applies has been advertised for sale, TRO may postpone the sale, upon such terms as to security or otherwise, pending investigation.

§ in respect of immovable property on the date of service of notice in ITCP1 and

§ in case of movable property on the date of attachment.

(d) Where, upon the said investigation, TRO is satisfied that, for the reason stated in the claim or objection such property was not in the possession of the defaulter or of some person in trust for him, TRO shall make an order releasing the property, wholly or to such extent as he thinks fit, from attachment or sale.

(e) Where TRO is satisfied that the property, at the said date, in the possession of defaulter was his own property and not on account of any other person, TRO shall disallow the claim.

(f) Where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but subject to the result of such suit, the order of TRO shall be conclusive.

Postponement of Sale on Objection

When TRO decides to investigate the claim made before him against the attachment and proclamation for sale of a property, he may postpone it pending investigation. However, the discretion conferred on TRO by Rule 11(2) to postpone the sale does not authorise him to reject the claim on ground that the terms to which he put the objector for postponing the auction have not been complied with.

Frivolous Claims

Proviso to sub-rule (1) of Rule 11 of Second Schedule is designed to put a stop to frivolous claims which are made with the motive of delaying the proceedings.

Procedure for Attachment of Movable Property

Procedure for attachment of movable properties is provided in Part II of Second Schedule from Rule 20 to Rule 26. For a ready reference, some important rules relating to attachment of different types of movable properties are given below:-

Rule	Type of moveable property	Type of authorization	Type of service	Mode of attachment
20	Moveable property other than (i) Agricultural produce and (ii) those mentioned in section 26 to 29, 31 & 32	Warrant issued by TRO	Warrant to be served on the defaulter	Actual seizure
24	Agricultural produced growing crop/ crop gathered or cut	Warrant issued by TRO	(i) One copy of the warrant to be affixed on the land on which the crop has grown/ on the place where the crop is deposited; and	Deemed to pass in to the possession of TRO
			(ii) One copy to be affixed on the place of residence or business or the place of past residence or business.
26	Debts & shares etc.	Prohibitory order	One copy to be served on the defaulter; one copy to be affixed on some conspicuous part (e.g. notice board) of the office of TRO; one copy to the debtor/ proper officer of the corporation/ person in possession of the movable property concerned.	Prohibited to pay to the defaulter
27	Decree of a civil court	Notice requesting stay of Execution of decree	To the Civil Court	Execution of decree is stayed till TRC is cancelled or TRO applies to the Court to execute decree for applying the net proceed in satisfaction of TRC
28	Share in moveable property	Prohibitory notice	To the defaulter	Prohibiting the defaulter to transfer the shares
29	Salary and allowance of Government servants	According to Rule 48 of order 21 of CPC	To employer	Not to pay attached salary to defaulter
30	Negotiable instruments	Order of attachment	To the TRI	Actual seizure
31	Property in custody of court/public officer	Notice requesting that the property to be held subject to further orders	To the court/public officer	Hold in custody of the court till further order of TRO
32	Defaulter’s interest in partnership property	Order charging share of defaulter partner in the partnership property and profits	To the partnership firm, the defaulter and the other partners of the firm	Shares of defaulter’s in firm’s property is attached

Recovery from defaulter as per the Status

Depending on the status of a defaulter, recovery can be effected from various persons as given below :-

S. No.	Status of defaulter	Person from whom recovery can be made	Legal Provisions involved
1.	HUF	Every person who was a member of the HUF at any time during the relevant previous year	Section 171(6) of the Income Tax Act, 1961
2.	Partnership Firm	Every person who was a Section 188A of partner of the firm at any time during the relevant previous year	Section 188A of the Income Tax Act, 1961
3.	LLP	Every person who was a partner of the LLP at any time during the relevant previous year	Section 167C of the Income Tax Act, 1961
4.	Private Companies	Every person who was a director of the company at any time during the relevant previous year, who is found liable for non recovery of tax due to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.	Section 179(1) of the Income Tax Act, 1961
5.	AOP & BOI	Every person who was a member of AOP or BOI at any time during relevant previous year
6.	Trust	Trust through Managing Trustee

Steps to be followed for attachment

Rules 33 to 36 of Second Schedule [Appendix-2] lay down the prescribed procedure for attachment and it must be strictly followed; otherwise, the entire attachment and subsequent sale are liable to be quashed. The prescribed procedure for attachment of movable property is as follows:

(i) First step is to issue warrant as provided in Rule 20 in Form No. ITCP 2110. This is the second opportunity to defaulter to avoid coercive action (after ITCP1 served earlier).

(ii) Essential ingredients of a warrant are:

(a) it should be in writing;

(b) it should be signed by TRO;

(d) it should state the place where from the movables should be attached;

(e) If the movables to be attached lie in different places, addresses of all such places should be shown in the warrant of attachment.

It must be noted that the order directing the attachment must be specific as to the place from which the seizure has to be made. If the order gives an omnibus authority to attach the movable property, wherever it may be found, the same is illegal (Hari Prasad v. Bailiff, Small Causes Court (1941) 197 IC 8861).

(iii) Next step is to serve warrant on defaulter. As per Rule 21 of Second Schedule, authorised officer shall cause a copy of warrant to be served on defaulter. Service of warrant is a condition precedent to attachment of the properties in question. Warrant should be served on defaulter himself. In case defaulter is available but refuses to receive it, service by affixture as per the CPC may be adopted. If defaulter is not present but any other adult member is present who normally attends to the business of defaulter or belongs to his family, warrant may be served on him. In case such adult member also refuses to receive warrant, it should be served by affixture as per CPC. In case, defaulter is not found traceable on his last known address available in the Income Tax record, warrant should be served by substituted service as per CPC.

(iv) If, after service of a copy of warrant, the certified demand is not paid forthwith, the officer shall proceed to attach the movable property of the defaulter as provided in Rule 22 of Second Schedule.

(v) As per Rule 23 of Second Schedule, TRO will do attachment by actual seizure only between sunrise and sunset and he must be careful to ensure that value of attached property is, as nearly as possible, proximate to the amount specified in the warrant.

(vi) Before effecting attachment, TRO should call two witnesses and defaulter and clearly state that he is commencing attachment. While attaching the articles, TRO should be careful not to attach such articles which are exempt under section 60 of the CPC. An inventory of articles attached should be made and a Panchnama recording the entire proceedings, including the time of commencement should be drawn up in presence of two independent witnesses who should sign the Panchnama as witnesses. After preparing the inventory and Panchnama, copies of the same should be made available to defaulter.

(vii) When stage is set for executing warrant, cash should be first taken up. Generally, the defaulter at this stage tenders cash towards arrears of tax. If he tenders cash available with him, question of attachment of cash does not arise. A receipt for the amount collected must then be given to him and the other movable property should be proceeded against for the recovery of the balance of arrears. If cash is not tendered, it should be attached in the first place.

(viii) To effect the attachment, TRO or authorised officer can break open any inner/outer door/window and enter any building to seize any movable property liable to seizure. He should, however, give sufficient opportunity to the women in the household to withdraw. He cannot break open any almirah, suit case, receptacle, etc. If necessary, TRO may attach (i.e. seize) the said almirah etc. along with contents. Should this become necessary, he may even request the competent authorities to consider invoking section 132 of Income Tax Act, 1961 for this purpose.

(ix) Powers of TRO under Rule 23 of Second Schedule are limited to actual seizure of movable properties and he has no power to search. Powers conferred on TRO are narrower than the powers conferred on Assessing Officer or any authority at the time of search under Section 132 of the Act. At the time of attachment, the objective of TRO is limited to attachment of movable property found in the premises to the extent of amount mentioned in warrant, in view of Rule 34 of Second Schedule.

(x) There is no specific provision under the rules for a proforma of the inventory. However, a proforma is prepared, which may be used. It is advisable to make the inventory an integral part of the Panchnama. While preparing the inventory, a complete description of the articles must be written. Where valuables like diamond, gold jewellery and silver articles are attached, it is necessary to get them valued by an approved valuer in format prescribed for valuation report for Wealth Tax purposes. A copy of inventory should be delivered by the authorized officer to defaulter and another copy should be forwarded to TRO as provided under Rule 33 of Second Schedule118.

(xi) In case of attachment of agricultural produce, provisions of Rule 24 and 25 of Second Schedule should be followed. For this purpose, a copy of ITCP 2 duly filled in should be placed on the land where crop is standing and if it is already cut, on the threshing floor. Another copy should be pasted on the outer door or some other conspicuous part of defaulter’s residence or (with TRO’s permission) the place where he carries on business or where he is known to have resided or carried on business last. By doing this, possession of the said property is deemed to have passed to TRO (Rule 24 of Second Schedule). However, due to its unique nature of quick decay and time necessary for ripening and harvesting, provisions of Rule 25 of Second Schedule are to be followed.

(xii) As per Rule 34 of Second Schedule, attachment by seizure shall not be excessive, i.e., it will be very near to the amount specified in the warrant (ITCP 2).

Difficulty in Attachment

At times, when TRO tries to remove the attached articles from the premises of the defaulter, he may meet with resistance. Whenever he apprehends such eventuality, he should seek Police assistance. In all such cases, a panchnama should be got drawn by two respectable witnesses of the locality. In cases of physical resistance, the written consent of the Pr. CIT/CIT should be obtained for lodging a complaint with the Police.

During the course of attachment, TRO as the attaching official may come across certain practical difficulties. For example, defaulter may refuse to receive a copy of the warrant or to avoid service of the warrant, he may run away from the premises. No hard and fast rule can be laid down as to what should be done in such cases. Normally, in such cases, it is better to affix a copy of the warrant on a conspicuous part of the house of the defaulter, or the business premises and to proceed with the attachment.

If someone objects under Rule 11 of Second Schedule against attachment of movable property on the ground that the objector and not the defaulter was having interest in it as well as possessing it and such possession or interest was not in the manner provided in Sections. 65, 159, 171, 177, etc. but in his own capacity and hence the attachment was wrong; on receipt of such objection, TRO has to examine whether there is any truth in the objection or it is simply to delay/obstruct the process of attachment and sale. For such examination, he can cause enquiry and call for books of accounts, other documents and witnesses. If he is satisfied that such objection petition was merely a ploy to delay/obstruct the recovery process, he will reject such objection by passing a speaking order, giving reasons for decision. If he does not reject the objection, TRO has to withdraw attachment after recording reasons.

Attachment of Movable Property Depending upon its Custody (in custody of defaulter or in custody of others):

For the purpose of attachment, movable property can be divided into two types :-

(1) Property in the custody of defaulter and

(2) Property not in the custody of defaulter.

Attachment of movable property in the possession of defaulter is to be done by actual seizure. For this, first step for TRO is to issue warrant in ITCP 2 to a officer (i.e. Tax Recovery Inspector) authorizing him to attach property of defaulter and then such officer shall serve a copy of warrant on defaulter. On service of such warrant, defaulter has to pay the demand and interest at the very time of service of ITCP 2 on defaulter and in case of failure to pay, attachment by actual seizure of movable property, shall begin immediately.

Attachment of movable property in the custody of others is to be done by serving prohibitory orders. Since such properties are not in the custody of defaulter, their custodians are prohibited from allowing defaulter to enjoy any benefit from it or exercising the right as owner by serving the prohibitory order on them.

Procedure for attachment of such properties is given below:-

(1) Property in the custody of defaulter

(a) Attachment of debt

A debt may be defined as a certain sum due from one person to another under a deed or under simple contract, written or oral. Essential requisites of a debt are as under:-

(i) an ascertained or readily calculable amount;

(ii) an absolute, unqualified and present liability with the obligation to pay forthwith or in future; and

(iii) the obligation must have accrued and must be subsisting and should not be merely accruing.

In case of attachment of a debt, TRO should issue ITCP 3 to the debtor prohibiting him from paying to defaulter and also to defaulter prohibiting him from receiving it if he plans to sell the debt by auction. In the alternate, he should issue notice under section 226(3) to the debtor.

The location of the debt will be where the debtor resides, or, if the debt had been contracted to be paid elsewhere, then the place of payment. If the location of the debt is outside the jurisdiction of TRO attaching the debt, the prohibitory order (ITCP No. 3) should not be served on the debtor by the said TRO. After issuing the prohibitory order to defaulter, TRO must transfer the certificate proceedings to TRO having jurisdiction over the situation of the debt.

Attachment of a debt does not prevent defaulter from suing his debtor or from taking any other steps necessary for recovery of debt. But he is not entitled to receive a payment from his debtor unless the tax for which attachment was made is first cleared.

If debt is due to defaulter jointly with one or more persons, the entire debt cannot be attached under Rule 26 and only the part of the debt relating to defaulter should be attached under this Rule.

Salaries of employees (other than employees of Government or local authority) will also come under the term ‘debt due’, and will have to be dealt with under Rule 26(1)(a). The attachment should be made as and when salaries become due, whether it be from month to month or otherwise. The non-attachable portion of the salary is laid down in Rule 10 of Second Schedule read with proviso to section 60 of CPC Exemption contemplated by Rule 10 of Second Schedule does not apply to arrears of salary. Dearness allowance is part of the salary and it should be taken into account in calculating the amount which is attachable under Rule 26(1)(a) read with Rule 10 of Second Schedule provided there is no statutory provision specifically exempting the Dearness Allowance from attachment. Deductions to be made on account of Provident Fund (P.F.) and Income-tax should be paid from the non-attachable portion of the salary. The sum standing to the credit of a subscriber to P.F. is not a debt which can be attached. But once the P.F. money is paid out by the employer to the employee, it loses the character of compulsory deposit and it may be attached. Government Securities and Annuity Deposits of the defaulter held by the Reserve Bank of India should be attached in the manner prescribed by Instruction No 400 dated 01.04.1972 of the Board.

(b) Attachment of shares

For attaching shares, an order in ITCP 4 should be issued both to defaulter and Principal-Officer of the company prohibiting them from making any transfer of shares. A copy of the prohibitory order shall also be affixed on the notice board of TRO.

The company in which defaulter holds shares need not necessarily be located in territorial jurisdiction of TRO. What is required is that at the time of attachment, the share should stand in the name of defaulter in the books of the company. A deed of transfer executed by a defaulter will have no effect on attachment if the deed is defective.

(c) Attachment of other movable property

For attachment of movable property (other than debts and shares) not in the possession of defaulter (except property in the custody of court), TRO has to issue ITCP 5 to such person who is in immediate possession of the property prohibiting him from delivering the said property to any other person

In case of movable property not in possession of defaulter such as pledged articles, an order in ITCP 5 should be served on a person who is custodian of such property. For instance in case of a pledged property, it should be served on the person who holds the property. A copy of the said order should also be served on defaulter prohibiting him from receiving the property.

In all the three types of attachments mentioned above, affixing of a copy of the prohibitory order on the notice board of TRO is a mandatory requirement which should be strictly complied with. It has been held that there is no attachment if there is a failure to affix a copy of the order in TRO’s office.

(2) Attachment of other movable properties not in possession of defaulter

(a) Attachment of decree of a Court:-

It is to be done by TRO by issuing ITCP 6 to the Court. Rule 27(3) of Second Schedule makes TRO the deemed holder of decree and it gives him the eligibility to apply to the court for execution of decree in the same manner as that of a decree-holder, namely, defaulter. For this, TRO has to seek legal advice from the Ministry of Law (MOL) and then ask MOL for opinion and appointment of a lawyer from their panel for filing application for execution of the decree. In this way, defaulter’s property will be sold to raise money equal to decreed amount.

(b) Salary of an employee of government or local authority:-

Salary income of such assessee is attached under Rule 29 of Second Scheduled by serving ITCP8131 duly filled in on the person responsible for payment of salary to the defaulter employee. As per Rule 29, the attachment will be as per Rule 48 of order-XXI of CPC which provides that “…the officer or other person whose duty it is to disburse the same shall withhold and remit to the Court the amount due under the order, or the monthly instalments as the case may be ......”. Therefore for attaching salary of such assesses, provision of Rule 48 of CPC should be followed. Though Rule 29 of Second Schedule is very much under the sub-heading “Part-II : Attachment and sale of movable property,” it is because of Rule 48 of Order-XXI of CPC that salary, recovery from salary unlike other movable property, is not required to be made by public auction.

A copy of this order shall be served on the disbursing Officer. A copy of this order may also be served on the Government servant concerned so that he can also know that his salary is kept under attachment. Rule 29 of Second Schedule applies to attachment of salary of employees of Government or a local authority. A Member of a Legislature is not a Public Officer holding Office of Profit under the President and his salary cannot be attached under this rule.

(c) Attachment of negotiable instrument:-

Rule 30 of Second Schedule lays down that negotiable instruments shall be attached by actual seizure by serving ITCP 9 on the person who has custody of such instruments. A negotiable instrument means a promissory note, or a bill of exchange including Hundi, or cheque payable either to order or bearer. The holder of the instrument can claim payment on it. Its title is passed on from one person to another by endorsement or delivery. A deposit receipt is not a negotiable instrument. It is only a document evidencing the debt due to the defaulter. A copy of the attachment order along with inventory of seized negotiable instruments should be handed over to the defaulter. Panchnama must also be drawn up.

(d) Attachment of property in the custody of a court/public officer

Attachment of such property is done under Rule 31 by issuing ITCP 10 to the court or to the Public Officer. For getting the custody of such property, help of lawyer on departmental panel may be taken to file a prayer before the court or the Public Officer. The term Public Officer has been defined in Section 2(17) of the CPC. The court or the Public Officer need not necessarily be within the jurisdiction of TRO attaching the property. It is essential that, at the time of the attachment, the defaulters’ property must be in the custody of the court or the Public Officer. Where the Court has already passed a rateable distribution order, it cannot be attached. Under Rule 31, once a notice is sent to Court, attachment of the property of defaulter in custody of Court takes effect and Court is required to hold property subject to further order from TRO. An attachment made before the money has reached the Public Officer is invalid. Money deposited by a contractor with

Public Works Department as security for due performance of the contract and sums due for work done but retained till completion of contract are debts due to the contractor and can be attached under this rule. Attachment of property in the hands of a Receiver or Official Assignee cannot be done without the leave of the court. Where, however, the defaulter is entitled to receive dividends from the Receiver/Official Assignee, the same can be attached under Rule 31, as such an attachment does not in any way interfere with the administration of the insolvent’s estate.

Attachment under Rule 31 may give rise to the question of priorities among the creditors including the Government. As between the unsecured creditors and Government debts, the latter takes precedence over the former. There is no difference in this respect between Income tax and any other tax due to a State such as Sales Tax. It is not necessary that the state should have obtained a decree on its claim, because its claim rests on the well established principle that Crown debts are entitled to priority. Arrears of Income tax are recoverable in preference to other debts even without effecting an attachment of the defaulter’s property. Under the Constitution, Income tax dues have priority over debts due to unsecured creditors. The State has priority not only over the debts already due before the insolvency of the defaulter but also over those debts which might become due after the defaulter is declared insolvent. An Income tax demand created after the adjudication order will also have priority. But this priority exists only so long as the assets remain the property of the judgment debtor. Where an order for rateable distribution is made, the title of the judgment debtor to the fund in court is extinguished and with that the right of the Government to proceed against it must cease.

(e) Share or interest in Movable Property:-

Rule 28 of Second Schedule136 provides for attachment of share or interest in movable property belonging to the defaulter and others in co-ownership. Such a share or interest cannot be attached by actual seizure. A provision has, therefore, been made for constructive seizure by service of notice to the defaulter in form ITCP 7.

(f) Attachment of defaulter’s interest in partnership property:-

Rule 32 of Second Schedule deals with attachment of partnership property. The interest of a partner in firm or LLP business is movable property. Any such interest of defaulter partner in the business of firm or LLP is to be attached by serving notice in ITCP 11. A copy of this order of attachment should be served on the firm as well as the defaulter partner.

Responsibility of Authorised Officer making Attachment

The attached articles have to be removed either to the office of TRO or to the place where they have to be deposited. As seized property cannot be generally sold before expiry of 15 days from attachment, these are to be kept in safe custody for this period. If attached property is cash, bullion, jewellery, securities or other valuables, TRO has to keep these items in the Departmental strong room wherever available, or in local treasury /RBI/SBI /Subsidiaries of SBI/ authorised banks as per Rule 27 of ITCP Rules. However, cash/coins may be handed over to A.O. through ITCP 15 as per Rule 47 of Second Schedule.

As per Rule 25 of ITCP Rules, other movable property may be kept as under:- (i) in the custody of an auctioneer or private security company after TRO fixes terms and conditions and remuneration.

(ii) in some iron/steel chest/safe under lock and key in some room of Income-tax office, posting police for protection (like strong room of Investigation Wing) or private security guards. Remuneration will be treated as cost of certificate proceeding (as per Rule 35 of ITCP Rules). This can be done by TRO after discussion with police authorities.

Where heavy articles such as iron safes, steel-almirahs or any item of delicate or fragile nature are attached, it may not be economical or may be risky to get them transported to the office, then in such cases, TRI may, with the permission of TRO, leave the attached articles in custody of defaulter till they are sold. Under Rule 26 of ITCP Rules, the attaching officer or the custody officer, with the previous approval of TRO, may entrust, subject to his right of supervision, the attached movable property to the defaulter on his executing a duly stamped bond (Sapurdnama) in Form No. ITCP 23 which may be so verified as the circumstances of each case may require. The stamp duty varies according to the value of the property, the minimum being Rs. 250. In cases where the articles are very valuable, it will be advisable to require the defaulter to furnish a surety bond executed by two solvent persons in addition to Sapurdnama144. Once the articles are left in the custody of the defaulter on his executing a Sapurdnama, TRO has no power to lock up the doors of the room in which the articles are deposited

Wherever and however kept, as per Rule 23 of Second Schedule, TRO shall be responsible for due custody of the seized property. However, (a) when the property seized is prone to quick decay or (b) when expenses of keeping it in custody are likely to exceed its value, TRO may sell it at once (Proviso to Rule 23 of Second Schedule).

TRO is personally responsible for the safe custody of the articles attached by him. The effect of making an attachment under this Rule is to transfer the possession in the attachment property from the defaulter to TRO, whether the latter takes custody of such property or not - Teeka and Others v. State of UP 1962 (1) SCR 75. TRO or Authorised Officer who has made attachment should be very careful in upkeep of the movable properties till they are sold. If, however, the goods get damaged or destroyed due to negligence of the officer having custody, he shall be liable for damages for the loss sustained – (New Hindustan Bank Ltd. v. Amritsar Pathankot Transport Ltd. AIR 1958 PH 248. Therefore, TRO shall personally ensure that the articles are safely brought to TRO’s office or to the place where the Department has made arrangements for their safe custody. Perishable articles such as milk and milk products, eggs, fruits, vegetables, etc. should be sold at once.

Deterrent Effect of Attachment

Attachment of movable properties has effect of dispossesses defaulter from his property in full view of other people and it creates tremendous psychological impact on defaulter. Thus, apart from monetary impact, it also has a tactical impact and may prompt defaulter to come forward to pay the certified demand.

Expenses on attachment

All expenses connected with attachment, maintenance and custody and removal of movable property are recoverable from defaulter - vide Rule 35 of the ITCP Rules. The expenses incurred on the removal of the articles to the place aforesaid are to be defrayed by the defaulter himself. If he refuses to do so, the cash attached, if any, may be utilized for defraying the expenses.

Part II of Schedule II to the Income-tax Act, 1961

PART II

ATTACHMENT AND SALE OF MOVABLE PROPERTY

Attachment

Warrant

20. Except as otherwise provided in this Schedule, when any movable property is to be attached, the officer shall be furnished by the Tax Recovery Officer (or other officer empowered by him in that behalf) a warrant in writing and signed with his name specifying the name of the defaulter and the amount to be realised.

Service of copy of warrant

21. The officer shall cause a copy of the warrant to be served on the defaulter.

Attachment

22. If, after service of the copy of the warrant, the amount is not paid forthwith, the officer shall proceed to attach the movable property of the defaulter.

Property in defaulter’s possession

23 Where the property to be attached is movable property (other than agricultural produce) in the possession of the defaulter, the attachment shall be made by actual seizure, and the officer shall keep the property in his own custody or the custody of one of his subordinates and shall be responsible for due custody thereof:

PROVIDED that when the property seized is subject to speedy and natural decay or when the expense of keeping it in custody is likely to exceed its value, the officer may sell it at once.

Agricultural produce

24. Where the property to be attached is agricultural produce the attachment shall be made by affixing a copy of the warrant of attachment—

(a) where such produce is growing crop, - on the land on which such crop has grown, or

(b) where such produce has been cut or gathered, - on the threshing floor or place for treading out grain or the like, or fodder-stack, on or in which it is deposited,

and another copy on the outer door or on some other conspicuous part of the house in which the defaulter ordinarily resides, or with the leave of the Tax Recovery Officer, on the outer door or on some other conspicuous part of the house in which he carries on business or personally works for gain, or in which he is known to have last resided or carried on business or personally worked for gain. The produce shall, thereupon, be deemed to have passed into the possession of the Tax Recovery Officer.

Provisions as to agricultural produce under attachment

25. (1) Where agricultural produce is attached, the Tax Recovery Officer shall make such arrangements for the custody, watching, tending, cutting and gathering thereof as he may deem sufficient; and he shall have power to defray the cost of such arrangements.

(2) Subject to such conditions as may be imposed by the Tax Recovery Officer in this behalf, either in the order of attachment or in any subsequent order, the defaulter may tend, cut, gather and store the produce and do any other act necessary for maturing or preserving it; and, if the defaulter fails to do all or any of such acts, any person appointed by the Tax Recovery Officer in this behalf may, subject to the like conditions, do all or any of such acts, and the costs incurred by such person shall be recoverable from the defaulter as if they were included in the certificate.

(3) Agricultural produce attached as a growing crop shall not be deemed to have ceased to be under attachment or to require reattachment merely because it has been severed from the soil.

(4) Where an order for the attachment of a growing crop has been made at a considerable time before the crop is likely to be fit to be cut or gathered, the Tax Recovery Officer may suspend the execution of the order for such time as he thinks fit, and may, in his discretion, make a further order prohibiting the removal of the crop pending the execution of the order of attachment.

(5) A growing crop which from its nature does not admit of being stored shall not be attached under this rule at any time less than twenty days before the time at which it is likely to be fit to be cut or gathered.

Debts and shares, etc.

26. (1) In the case of—

(a) a debt not secured by a negotiable instrument,

(b) a share in a corporation, or

(c) other movable property not in the possession of the defaulter except property deposited in, or in the custody of, any court, the attachment shall be made by a written order prohibiting, -

(i) in the case of the debt - the creditor from recovering the debt and the debtor from making payment thereof until the further order of the Tax Recovery Officer;

(ii) in the case of the share - the person in whose name the share may be standing from transferring the same or receiving any dividend thereon;

(iii) in the case of the other movable property (except as aforesaid) - the person in possession of the same from giving it over to the defaulter.

(2) A copy of such order shall be affixed on some conspicuous part of the office of the Tax Recovery Officer, and another copy shall be sent, in the case of the debt, to the debtor, in the case of the share, to the proper officer of the corporation, and in the case of the other movable property (except as aforesaid), to the person in possession of the same.

(3) A debtor prohibited under clause (i) of sub-rule (1) may pay the amount of his debt to the Tax Recovery Officer, and such payment shall discharge him as effectually as payment to the party entitled to receive the same.

Attachment of decree

27. (1) The attachment of a decree of a civil court for the payment of money or for sale in enforcement of a mortgage or charge shall be made by the issue to the civil court of a notice requesting the civil court to stay the execution of the decree unless and until—

(i) the Tax Recovery Officer cancels the notice, or

(ii) the Tax Recovery Officer or the defaulter applies to the court receiving such notice to execute the decree.

(2) Where a civil court receives an application under clause (ii) of sub-rule (1), it shall, on the application of the Tax Recovery Officer or the defaulter and subject to the provisions of the Code of Civil Procedure, 1908 (5 of 1908), proceed to execute the attached decree and apply the net proceeds in satisfaction of the certificate.

(3) The Tax Recovery Officer shall be deemed to be the representative of the holder of the attached decree, and to be entitled to execute such attached decree in any manner lawful for the holder thereof.

Share in movable property

28. Where the property to be attached consists of the share or interest of the defaulter in movable property belonging to him and another as co-owners, the attachment shall be made by a notice to the defaulter prohibiting him from transferring the share or interest or charging it in any way.

Salary of Government servants

29. Attachment of the salary or allowances of servants of the Government or a local authority may be made in the manner provided by rule 48 of Order 21 of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908), and the provisions of the said rule shall, for the purposes of this rule, apply subject to such modifications as may be necessary.

Attachment of negotiable instrument

30. Where the property is a negotiable instrument not deposited in a court nor in the custody of a public officer, the attachment shall be made by actual seizure, and the instrument shall be brought before the Tax Recovery Officer and held subject to his orders.

Attachment of property in custody of court or public officer

31. Where the property to be attached is in the custody of any court or public officer, the attachment shall be made by a notice to such court or officer, requesting that such property, and any interest or dividend becoming payable thereon, may be held subject to the further orders of the Tax Recovery Officer by whom the notice is issued:

PROVIDED that, where such property is in the custody of a court, any question of title or priority arising between the Tax Recovery Officer and any other person, not being the defaulter, claiming to be interested in such property by virtue of any assignment, attachment or otherwise, shall be determined by such court.

Attachment of partnership property

32. (1) Where the property to be attached consists of an interest of the defaulter, being a partner, in the partnership property, the Tax Recovery Officer may make an order charging the share of such partner in the partnership property and profits with payment of the amount due under the certificate, and may, by the same or subsequent order, appoint a receiver of the share of such partner in the profits, whether already declared or accruing and of any other money which may become due to him in respect of the partnership, and direct accounts and inquiries and make an order for the sale of such interest or such other order as the circumstances of the case may require.

(2) The other persons shall be at liberty at any time to redeem the interest charged or, in the case of a sale being directed, to purchase the same.

Inventory

33. In the case of attachment of movable property by actual seizure, the officer shall, after attachment of the property, prepare an inventory of all the property attached, specifying in it the place where it is lodged or kept, and shall forward the same to the Tax Recovery Officer and a copy of the inventory shall be delivered by the officer to the defaulter.

Attachment not to be excessive

34. The attachment by seizure shall not be excessive, that is to say, the property attached shall be as nearly as possible proportionate to the amount specified in the warrant.

Seizure between sunrise and sunset

35. Attachment by seizure shall be made after sunrise and before sunset and not otherwise.

Power to break open doors, etc.

36. The officer may break open any inner or outer door or window of any building and enter any building in order to seize any movable property if the officer has reasonable grounds to believe that such building contains movable property liable to seizure under the warrant and the officer has notified his authority and intention of breaking open if admission is not given. He shall, however, give all reasonable opportunity to women to withdraw.

Sale

Sale

37. The Tax Recovery Officer may direct that any movable property attached under this Schedule or such portion thereof as may seem necessary to satisfy the certificate shall be sold.

Issue of proclamation

38. When any sale of movable property is ordered by the Tax Recovery Officer, the Tax Recovery Officer shall issue a proclamation, in the language of the district, of the intended sale, specifying the time and place of sale and whether the sale is subject to confirmation or not.

Proclamation how made

39. (1) Such proclamation shall be made by beat of drum or other customary mode,—

(a) in the case of property attached by actual seizure—

(i) in the village in which the property was seized, or, if the property was seized in a town or city, then, in the locality in which it was seized; and

(ii) at such other places as the Tax Recovery Officer may direct;

(b) in the case of property attached otherwise than by actual seizure, in such places, if any, as the Tax Recovery Officer may direct.

(2) A copy of the proclamation shall also be affixed in a conspicuous part of the office of the Tax Recovery Officer.

Sale after fifteen days

40. Except where the property is subject to speedy and natural decay or when the expense of keeping it in custody is likely to exceed its value, no sale of movable property under this Schedule shall, without the consent in writing of the defaulter, take place until after the expiry of at least fifteen days calculated from the date on which a copy of the sale proclamation was affixed in the office of the Tax Recovery Officer.

Sale of agricultural produce

41. (1) Where the property to be sold is agricultural produce, the sale shall be held,—

(a) if such produce is a growing crop - on or near the land on which such crop has grown, or

(b) if such produce has been cut or gathered—at or near the threshing floor or place for treading out grain or the like, or fodder-stack, on or in which it is deposited:

PROVIDED that the Tax Recovery Officer may direct the sale to be held at the nearest place of public resort, if he is of opinion that the produce is thereby likely to sell to greater advantage.

(2) Where, on the produce being put up for sale,—

(a) a fair price, in the estimation of the person holding the sale, is not offered for it, and

(b) the owner of the produce, or a person authorised to act on his behalf, applies to have the sale postponed till the next day or, if a market is held at the place of sale, the next market day,

the sale shall be postponed accordingly, and shall be then completed, whatever price may be offered for the produce.

Special provisions relating to growing crops

42. (1) Where the property to be sold is a growing crop and the crop from its nature admits of being stored but has not yet been stored, the day of the sale shall be so fixed as to admit of the crop being made ready for storing before the arrival of such day, and the sale shall not be held until the crop has been cut or gathered and is ready for storing.

(2) Where the crop from its nature does not admit of being stored or can be sold to a greater advantage in an unripe stage (e.g., as green wheat), it may be sold before it is cut and gathered, and the purchaser shall be entitled to enter on the land, and to do all that is necessary for the purpose of tending or cutting or gathering the crop.

Sale to be by auction

43. The property shall be sold by public auction in one or more lots as the officer may consider advisable, and if the amount to be realised by sale is satisfied by the sale of a portion of the property, the sale shall be immediately stopped with respect to the remainder of the lots.

Sale by public auction

44. (1) Where movable property is sold by public auction, the price of each lot shall be paid at the time of sale or as soon after as the officer holding the sale directs and in default of payment, the property shall forthwith be resold.

(2) On payment of the purchase-money, the officer holding the sale shall grant a certificate specifying the property purchased, the price paid and the name of the purchaser, and the sale shall become absolute.

(3) Where the movable property to be sold is a share in goods belonging to the defaulter and a co-owner, and two or more persons, of whom one is such co-owner, respectively bid the same sum for such property or for any lot, the bidding shall be deemed to be the bidding of the co-owner.

Irregularity not to vitiate sale, but any person injured may sue

45. No irregularity in publishing or conducting the sale of movable property shall vitiate the sale, but any person sustaining substantial injury by reason of such irregularity at the hand of any other person may institute a suit in a civil court against him for compensation, or (if such other person is the purchaser) for the recovery of the specific property and for compensation in default of such recovery.

Negotiable instruments and shares in a corporation

46. Notwithstanding anything contained in this Schedule, where the property to be sold is a negotiable instrument or a share in a corporation, the Tax Recovery Officer may, instead of directing the sale to be made by public auction, authorise the sale of such instrument or share through a broker.

Order for payment of coin or currency notes to the Assessing Officer

47. Where the property attached is current coin or currency notes, the Tax Recovery Officer may, at any time during the continuance of the attachment, direct that such coins or notes shall be credited to the Central Government and the amount so credited shall be dealt with in the manner specified in rule 8.

APPENDIX-13

PANCHNAMA

(for movable property)

Panchnama drawn by the Panchs, in the presence of Shri.__________________________. T.R.I. of the Office of the Tax Recovery Officer, during the course of the execution proceeds of Warrant or Notice in Form No._______________in the case of _____________ of _________________________, who is a defaulter for non- payment of arrears of Income-tax etc., in the file No. ________________________ sport at House No. ___________________ Street No. _____________ of ________________________ at the time __________________ M. on ________________ 20

S. No.

Name of panch & Father’s Name

Address

Age

Case Profession

We, the above mentioned Panch on being called by the above said Shri________________________ T.R.I., of the Office of the Tax Recovery Officer, ______________gathered here today at the place of H. No. _____________________ Sr. No.______________of learned that Shri/M/s. __________________________ is a defaulter for non-payment of Income-tax etc., arrears to the extent of Rs.____________for the assessment year_______________________and consequently the Tax Recovery Officer,____________________________ has issued a warrant of attachment of movable property of the defaulter in the form of ITCP-2 in the name of Shri___________________________T.R., on date _________________ No.______________ and the warrant is to be executed on or before date ______________________ And in execution thereof Shri ___________________________ the holder of the warrant, today entered the premises of warrant on Shri ______________________ at _______________________ M., and after the service of warrant on Shri __________________________ demanded the payment of the arrears and on its non-payment, attached movable properties as detailed in the inventory attached to this Panchnama between the hours _______ M. and ______M. in our presence.

We also hereby stated that during the execution proceedings ___________________________________________ ___________________________________________ (to be filled in case of occurrence of any incidence)

Therefore, we solemnly, declare that the facts of the Panchnama mentioned herein are true & correct to the best of our observations & knowledge.

Dated Time

Drawn before me.

T.R.O.

APPENDIX–17

TERMS & CONDITIONS OF SALE OF BY PUBLIC AUCTION

General

1. The particulars mentioned in the sale proclamation have been stated to the best of the information of this office but this office shall not be answerable for any error, misstatement or omission in the proclamation of sale.

2. So far known to this office there are no claims, liabilities or encumbrances.

3. So far known to this office there fire no arrears of Municipal tax or other taxes but if there are any, if the auction price obtained what is due from the defaulter to the Income-tax department then from out of the excess amount such Municipal tax arrears etc., will be paid but if there is no excess, such taxes will not be paid by the department and the purchaser of the property has to take the property subject to payment of taxes.

4. The amount by which each bidding is to be increased shall be determined by the Inspector conducting the sale. In the event of any dispute arising as to the amount of bid, or as to the bidder, the lot shall at once be again put to auction.

5. The property will be normally sold in the same order in which they have been shown in the proclamation of sale.

6. Each bidder should be qualified to bid at the auction.

7. Any bidder if he is bidding in behalf of a third party should exhibit an authority letter issued to him by the said third party.

8. Each bidder should clearly state the name & address of himself, if he is bidding for himself or the name & address of a third party on whose behalf he is bidding.

9. There is a reserve price fixed and if the highest bid is less than this reserve price even though the Inspector conducting auction might have knocked down in favour of the highest bidder the Tax Recovery Officer in his discretion may decline to accept such bid.

10. If the price offered appears to be clearly inadequate also the Tax Recovery Officer may decline to accept the bid.

11. The Inspector conducting the sale shall have the discretion to adjourn the sale for any reason subject to the provisions of the Second Schedule to the Income-tax Act, 1961. There is no necessity for fresh proclamation sale to be issued if the adjournment is for a period of not more than 30 days.

12. 2% of the purchase price upto Rs. 1,000/- and 1% of the purchase price for the amount exceeding Rs. 1,000/- will be collected from the purchaser as poundage. This will be the only extra expenses to be incurred by the purchaser.

13. Two or more persons also can join together and bid but they should declare their specific shares at the time of auction. In the absence it will be deemed they have equal shares. Only one sale certificate will be issued in case of immovable property. However, in their joint names. If the names & shares are mentioned such persons get right for that share in the property.

14. The Inspector conducting the auction may insist on a suitable deposit amount by all the bidders who are taking part in the auction. The deposit amount in the case of the successful bidder will be adjusted towards the bid amount, In the case of unsuccessful bidders, the deposit amount will be returned at the close of the auction.

15. All the bidders should note that in case the full amount of arrears due for which the proclamation of sale has been given is paid before the conclusion of the auction, the auction will automatically become cancelled. On no account the bidders can claim any costs, expenses or other compensation for their having attended and participated in the auction. Similarly, in case there is any stay from any authority including the Court, the auction will be postponed or cancelled without any further notice and the persons participating in the auction cannot claim any damages etc., for such postponement.

16. Presence in the auction or participation in the bid shall be deemed to be an acceptance of the conditions specified here.

17. The Inspector conducting the auction reserves the right to prevent any individual from participating in the bid if he is satisfied that such an individual’s presence may impede the progress of the auction.

Further Terms & Conditions of sale by Public Auction of Movable Property

1. The entire price shall be paid at the time of the sale or as soon thereafter as the Inspector conducting the auction directs and in default of payment the property shall forthwith will again be put up for auction,

2. After the payment of the price the article will be handed over on the spot and a certificate of sale will be issued by the Inspector.

3. The goods will be sold on the assumption that the bidders have inspected the lots and have known that they are buying whether they have actually inspected them or not, and no complaints as to the quality, quantity, size, measurements, breakage, number, weights, etc., of the goods will be entertained from the buyers by weight or number and the purchaser fails to obtain delivery of the whole or a portion of the goods sold, he shall not be entitled to make any claim other than for proportionate refund of the value of the undelivered quantity. He shall not be entitled to claim any damage, loss or profit, interest or compensation, on any account.

4. The goods sold will have to be removed by the buyer from the place of the storage within the period permitted by the Inspector conducting the auction. The purchaser will have to make his own arrangements for the transport and he will not be entitled to claim any facility or assistance for transport from this department.

5. The goods, shall remain in every respect at the risk of the buyer from the time of acceptance of his bid and the department shall not be under any liability for the safe custody or preservation thereof from that date.

APPENDIX-21

FORM NO. I.T.C.P. 1

[See rule 2 of Second Schedule to the Income-tax Act, 1961]

Notice of demand to the defaulter

Office of the TRO ________________

Dated the ________________

To ____________________ (GIR/PAN)

_____________________

1. *This is to certify that a sum of Rs. _______________ has become due from you on _______________ in the status of __________ details of which are given on the reverse. Whereas a certificate bearing serial number_________ dated_________ has been forwarded by the Tax Recovery Officer ___________________________________________ for the recovery of

(name of the place)

the sum of Rs. ________ details of which are given on the reverse [and the said Tax Recovery Officer has sent a certified copy of the said certificate to the undersigned under sub-section (2) of section 223 of the Income-tax Act, 1961] specifying a sum of Rs. _________ which is to be recovered from you.

2. You are hereby directed to pay the above sum within 15 days of the receipt of this notice failing which the recovery shall be made in accordance with the provisions of section 222 to section 232 of the Income-tax Act, 1961 and the Second Schedule to the said Act and the rules made thereunder.

3. In addition to the sums aforesaid, you will also be liable for,–

(a) such interest as is payable in accordance with sub-section (2) of section 220 of the said Act for the period commencing immediately after the issue of this notice.

(b) all costs, charges, and expenses incurred in respect of the services of this notice and of warrants and other processes and all other proceedings taken for realising the arrears.

SEAL Tax Recovery Officer

*Score out whichever paragraph is not applicable.

DETAILS OF AMOUNT IN ARREARS

Rupees

Assessment year

Regular

Advance

Provisional

1. Income Tax

2. Surcharge

3. Additional tax u/s 143

4. Penalty u/s __________

5. Interest u/s __________

6. Fine u/s 131__________

7. Any other sum (give details)

8. Interest u/s 220(2) from the day when amount become due;

9. Total:

APPENXIX-22

FORM NO. I.T.C.P. 2

[See rule 20 of the Second Schedule to the Income-tax Act, 1961]

Warrant of attachment of movable property

Office of the Tax Recovery Officer,

____________________________

__________________________

*Whereas certificate No._____________ dated _____________ has been [drawn up by the undersigned], ________________________ against __________________________ and the sum of

[defaulter]

Rs. ______________ as noted below, is due from him in respect of the said certificate;

*Whereas certificate No_________________dated ________________ had been forwarded by the [Tax Recovery} Officer ____________________ to the [undersigned] ___________________________________ against ____________________ for the recovery of an

[defaulter]

amount of Rs. _____________ and the said Tax Recovery Officer has sent to the undersigned a certified copy of the said certificate under section 223(2) of the Income-tax Act, 1961, specifying that an amount of Rs. ______________ is to be recovered from the defaulter and the sum of Rs. _____________ as noted below, is due from him in respect of the said certificate;

Rs. P.

Certificate amount/specified amount —

Cost and charges —

Interest —

Total

And whereas the said sum of Rs.____________ has not been paid in satisfaction of the said certificate;

date of the issue of this warrant and Rs._____ for the cost of executing this process, to proceed to attach the movable property of the said defaulter [and where necessary, the movable property which is included in the defaulter’s property by virtue of the Explanation to sub-section (1) of section 222 of the Income-tax Act, 1961] and to hold the same until further orders from the undersigned.

You are further directed to return this warrant on or before the ____day of ____20 _____ with an endorsement certifying the day on which and the manner in which it has been executed, or the reason why it has not been executed.

Given under my hand and seal at ______________ this __________ day of_______

(SEAL) Tax Recovery Officer

* Score out whichever paragraph is not applicable.

APPENDIX - 22

FORM NO. I.T.C.P. 2

[See rule 20 of the Second Schedule to the Income-tax Act, 1961]

Warrant of attachment of movable property

Office of the Tax Recovery Officer,

____________________________

To __________________________

__________________________

*Whereas certificate No._____________ dated _____________ has been [drawn up by the undersigned], ________________________ against __________________________ and the sum of

[defaulter]

Rs. ______________ as noted below, is due from him in respect of the said certificate;

[defaulter]

amount of Rs. _____________and the said Tax Recovery Officer has sent to the undersigned a certified copy of the said certificate under section 223(2) of the Income-tax Act, 1961, specifying that an amount of Rs. ______________ is to be recovered from the defaulter and the sum of Rs. _____________ as noted below, is due from him in respect of the said certificate;

Rs. P.

Certificate amount/specified amount —

Cost and charges —

Interest —

Total

And whereas the said sum of Rs.____________ has not been paid in satisfaction of the said certificate;

This is to direct you to serve a copy of this warrant on the defaulter and, unless after such service the said defaulter pays forthwith the said sum of Rs.________ together with interest at [the rate of one and one-half per cent, for every month or part of a month] on Rs. ________ from the date of the issue of this warrant and Rs._____ for the cost of executing this process, to proceed to attach the movable property of the said defaulter [and where necessary, the movable property which is included in the defaulter’s property by virtue of the Explanation to sub-section (1) of section 222 of the Income-tax Act, 1961] and to hold the same until further orders from the undersigned.

Given under my hand and seal at ______________ this __________ day of_______

(SEAL) Tax Recovery Officer

* Score out whichever paragraph is not applicable.

APPENDIX-24

FORM NO. I.T.C.P. 3

[See rule 26(1)(i) of the Second Schedule to the Income-tax act, 1961]

Prohibitory order where the property consists of debts not secured by negotiable Instruments

Office of the Tax Recovery Officer,

____________________________

______________________

*Whereas ________________ has failed to pay the arrears due from

[defaulter]

him in respect of certificate No. ____________ dated _____ [drawn up by the undersigned], ___________________ amounting to Rs.________ and the interest payable under section 220(2) of the Income-tax Act, 1961, for the period commencing immediately after the said date;

*Whereas ________________ has failed to pay the arrears due from

[defaulter]

him in respect of certificate No. dated __________ forwarded by the [Tax Recovery] Officer, _________________ to the (undersigned), __________ amounting to Rs. ______ 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.____ is to be recovered from the defaulter;

It is ordered that +_______________________________ be, and is

[name of creditor]

hereby prohibited and restrained, until the further order of the undersigned, from receiving from you a certain debt alleged now to be due from you to+________________________________________________________

[name of creditor]

And that you, the said ____________ be, and you are hereby, prohibited and restrained, until the further order of the undersigned, from making payment of the said debt or any part thereof, to any person, whomsoever or otherwise than to the undersigned.

Given under my hand and seal at __________this _________ day of________

(SEAL) Tax Recovery Officer

*score out whichever paragraph is not applicable.

+Fill in the name of the defaulter, and where the property consisting of the debt is included in the defaulter’s property by virtue of the Explanation to sub-section (1) of section 222 of the Income-tax Act, 1961, fill in the name of the person referred to in that Explanation.

APPENDIX-24

FORM NO. I.T.C.P. 4

[See rule 26(1)(ii) of the Second Schedule to the Income-tax Act, 1961]

Prohibitory order where the property consists of shares in a corporation

Office of the Tax Recovery Officer,

_______________________________

(1) ________________________

(2) _______________________

[Principal Officer]

________________________

[Name of corporation]

*Whereas __________________________________ has failed to pay

[defaulter)

the arrears due from him in respect of certificate No. ____________ dated ________________ [drawn up by the undersigned], ____________________ amounting to Rs. __________ and the interest payable under section 220(2) of the Income-tax Act, 1961, for the period commencing immediately after the said date;

*Whereas __________________________________ had failed to pay

[defaulter]

the arrears due from him in respect of certificate No. _________________ dated _____________ forwarded by the [Tax Recovery] Officer ___________ to the [undersigned], amounting to Rs.__________ 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._________ is to be recovered from the defaulter;

It is ordered that you, No. (1) above mentioned, be, and you are hereby, prohibited and restrained, until the further order of the undersigned, from making any transfer of the shares in the aforesaid corporation standing in your name or from receiving payment of any dividends thereon.+ It may be noted that the property consisting of shares is included in the defaulter’s property by virtue of the Explanation to sub-section (1) of section 222 of the Income-tax Act, 1961.

And, that you, No.(2) above mentioned, are hereby prohibited and restrained, until the further order of the undersigned, from permitting any such transfer or making any such payment.

Given under my hand and seal at _______________ this __________ day of

(SEAL) Tax Recovery Officer

* Score out whichever paragraph is not applicable.

+ Score out portion in italics, if not applicable.

APPENDIX-25

FORM NO. I.T.C.P. 5

[See rule 26(l)(iii) of the Second Schedule to the Income-tax Act, 1961]

Prohibitory order where the property to be attached consists of movable property to which the defaulter is entitled subject to a lien or right of some other person to the immediate possession thereof

Office of the Tax Recovery Officer,

____________________________

To ____________________

*Whereas ____________________________________________ has failed to pay the

[defaulter]

arrears

due from him in respect of certificate No. ______________ dated _________ [drawn up by the undersigned] ____________________ amounting to Rs._____________ and the interest payable under section 220(2) of the Income-tax Act, 1961, for the period commencing immediately after the said date;

*Whereas __________________________________ had failed to pay [defaulter] the arrears due from him in respect of certificate No._________ dated ______ forwarded by the [Tax Recovery] Officer ___________to the [undersigned] ___________ amounting to Rs. ____________ 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. ________ is to be recovered from the defaulter;

It is ordered that + ________________________________________

[name of person entitled to property]

prohibited and restrained, until the further order of the undersigned, from receiving from you namely _______________ the following property in the possession of the said +_______________ that is to say: to which the said + ___________ is entitled, subject to your claim of immediate possession thereof,

And that you are hereby prohibited and restrained, until the further order of the undersigned, from delivering the said property to any person or persons whomsoever.

Given under my hand and seal at__________ this _____day of

(SEAL) Tax Recovery Officer.

* Score out whichever paragraph is not applicable.

+Fill in the name of the defaulter, and where the movable property is included in the defaulter’s property by virtue of the Explanation to subsection (1) of section 222 of the Income-tax Act, 1961, fill in the name of the person referred to in that Explanation.

APPENDIX 26

FORM NO. I.T.C.P. 6

[See rule 27 of the Second Schedule to the Income-tax Act, 1961]

Notice of attachment of a decree of a civil court

Office of the Tax Recovery Officer,

____________________________

Dated__________________

The Judge of the Court of_______________

Sir,

*Whereas ______________________________has failed to pay the arrears due from him

[defaulter]

in respect of certificate No._________________dated________________ [drawn up by the undersigned]_______________amounting to Rs._________________and the interest payable under section 220(2) of the Income-tax Act, 1961, for the period commencing immediately after the said date;

*Whereas __________________________________ had failed to pay the arrears due

[defaulter]

from him in respect of certificate No. _______________ dated __________________ forwarded by the [Tax Recovery] Officer ______________ to the [undersigned] ______________ amounting to Rs.__ 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.__________is to be recovered from the defaulter;

And whereas the undersigned in exercise of his powers under the Second Schedule to the said Act, desires to proceed with attachment of a decree of ______________ Court dated the ________ day of _________, made in suit No. _________ of _____________ wherein _________ was the plaintiff and +_______________ was the defendant and which decree is pending execution in your

Court;

You are therefore requested to stay the execution of the said decree unless and until:-

(i) the undersigned cancels this notice; or (ii) the Income-tax Officer_______or the above mentioned defaulter applies to your to execute the decree.

Yours faithfully,

(SEAL) Tax Recovery Officer.

* Score out whichever paragraph is not applicable.

APPENDIX 27

FORM NO. I.T.C.P. 7

[See rule 28 of the Second Schedule to the Income-tax Act, 1961]

Notice of attachment where the property consists of a share or interest in movable property

Office of the Tax Recovery Officer,

____________________________

To: _____________________

*Whereas you have not paid the arrears amounting to Rs.__________ payable by you in respect of certificate No. _________ dated _________ [drawn up by the undersigned] __________________ and the interest payable under section 220(2) of the Income-tax Act, 1961, for the period commencing immediately after the said date;

*Whereas ___________________________________ has not paid the arrears amounting

[defaulter]

to Rs.__________ payable by him in respect of certificate No. ________ dated __________ forwarded by the [Tax Recovery] Officer ________ to the [undersigned], _________________ 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.___________ is to be recovered from the defaulter.

It is hereby ordered that you +___________ be, and are hereby, prohibited and restrained, until the further order of the undersigned, from transferring or charging in any way your share or interest in the undermentioned items of movable property, belonging to you and _________ and _________ as co-owners.

Given under my hand and seal at _______this_______ day of________

(SEAL) Tax Recovery Officer

* Score out whichever paragraph is not applicable.

+ Fill in the name of the defaulter, and where the movable property is included in the defaulter’s property by virtue of the Explanation to subsection (1) of section 222 of the Income-tax Act, 1961, fill in the name of the person referred to in that Explanation.

APPENDIX 28

FORM NO. I.T.C.P. 8

[See rule 29 of the Second Schedule to the Income-tax Act, 1961]

Order to attach salary or allowances of servants of Government or local authority

Office of the Tax Recovery Officer

___________________________

To _______________________

*Whereas ________________________________________ has not paid the arrears

[defaulter]

amounting to Rs.___________ in respect of certificate No. ____________ dated ________ [drawn up by the undersigned] __________________ and the interest payable under section 220(2) of the Income-tax Act, 1961;

Whereas _________________________________________ has not paid the arrears

[defaulter]

amounting to Rs.___________ payable by him in respect of certificate No. ________ dated ___________ forwarded by the [Tax Recovery] Officer _______ to the [undersigned], ________________ 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. ___________ is to be recovered from the defaulter

And whereas the said______________ is a _______________________ [office held by defaulter] receiving his salary and allowances at your hands;

You are hereby required to withhold the sum of Rs. _______________ from the salary of the said ________________ in monthly instalments of ______________ and to remit the said sum in monthly instalments to the undersigned.

Given under my hand and seal at this ________ day of ______________

(SEAL) Tax Recovery Officer

* Score out whichever paragraph is not applicable.

APPENDIX 29

FORM NO. I.T.C.P. 9

[See rule 30 of the Second Schedule to the Income-tax Act, 1961]

Order of attachment of negotiable instrument

Office of the Tax Recovery Officer

___________________________

To (Attaching Officer) _________________

Whereas the undersigned has passed on the __________ day of 20 _______an order for the attachment of the undermentioned property. *which is included in the property of ______________________________

[defaulter]

by virtue of the Explanation to sub-section (1) of section 222 of the Income-tax Act, 1961, in the course of proceedings for the recovery of arrears due from ____________________________________ in respect of certificate No._____________

[defaulter]

dated ______________ [drawn up by the undersigned] the Tax Recovery Officer to the undersigned under section 223(2) of the Income-tax Act, 1961;

You are hereby directed to seize the said property, and bring the same before me and hold the same subject to my orders.

DETAILS OF PROPERTY

Given under my hand and seal at____________this____________day of____________

(SEAL) Tax Recovery Officer

* Score out portion in italics, if not applicable.

APPENDIX 30

FORM NO. I.T.C.P. 10

[See rule 31 of the Second Schedule to the Income-tax Act, 1961]

Notice of attachment of movable property in the custody of a court or public officer

Office of the Tax Recovery Officer

__________________________

Dated __________________

To __________________________

Sir,

Whereas ____________________________________ has [defaulter]

not paid the arrears amounting to Rs.______________ in respect of certificate No. __________ dated ____________ [drawn up by the undersigned/ *forwarded by the Tax Recovery Officer] _______ and the interest payable under section 220(2) of the Income-tax Act, 1961 and the said Tax Recovery Officer has sent to the undersigned a certified copy of the said certificate under section 223(2) of the Income-tax Act, 1961, specifying that an amount of Rs. _________ is to be recovered by the undersigned from the defaulter; and the undersigned desires to attach sums of moneys or other property, *which is included in the defaulters, property by virtue of the Explanation to sub-section (1) of section 222 of the Income-tax Act, 1961, now in your custody +;

I request that you will hold the said money or property and any interest or dividend becoming payable thereon subject to the further order of the undersigned.

Yours faithfully,

Tax Recovery Officer

Notes:

* Score out portion in italics, if not applicable.

+ Here state how the money or property is understood to be in the hands of the Court or the public officer addressed, on what account and other available details.

APPENDIX 33

FORM NO. I.T.C.P. 13

[See rule 38 and rule 52(2) of the Second Schedule to the Income-tax Act, 1961]

Proclamation of sale

Office of the Tax Recovery Officer,

*Whereas the [undersigned has drawn up] the certificate No. _______ dated _________ for the recovery of the sum of Rs. __________ from __________________________________________

[defaulter]

which sum is recoverable together with interest in accordance with section 220(2) of the Income-tax Act, 1961 and the costs, charges and expenses of the proceedings for the recovery thereof;

*Whereas the [Tax Recovery Officer] ________________ had forwarded the certificate No. ____________ dated ____________ to the [undersigned], _________ for the recovery of the sum of Rs. ___________ from __________________________________________________ and whereas

[defaulter]

the said Tax Recovery Officer has sent to the undersigned on the _________ day of _________ 20 ________ a certified copy of the certificate under section 223(2) of the Income-tax act, 1961, specifying that an amount of Rs. __________ is to be recovered from the defaulter, which sum is recoverable together with interest in accordance with section 220(2) of the said Act and the costs, charges and expenses of the proceedings for the recovery thereof;

And whereas the undersigned has ordered the sale of the attached property mentioned in the annexed schedule in satisfaction of the said certificate;

And whereas on the ___________ day of___________ 20_________ (the date fixed for the sale) there will be due thereunder a sum of Rs.____________ including costs and interest;

Notice is hereby given that, in the absence of any order of postponement, the said property shall be sold by ___________________ by public auction at ________________ A.M./P.M. on the said _____________________________ day of 20_____ at ____________________ [place]

The sale will be of the property of the defaulter above named/+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, as mentioned in the schedule below; and the liabilities and claims attaching to the said property, so far as they have been ascertained, are those specified in the schedule against each lot.

The property will be put up for sale in the lots specified in the schedule. If the amount to be realised by sale is satisfied by the sale of a portion of the property, the sale shall be immediately stopped with respect to the remainder. The sale will also be stopped if, before any lot is knocked down, the arrears mentioned in the said certificate, interest payable under section 220(2) of the Income-tax Act, 1961, and costs (including the costs of the sale) are tendered to the officer conducting the sale or proof is given to his satisfaction that the amount of such arrears, interest and costs has been paid to the undersigned.

At the sale, the public generally are invited to bid either personally or by duly authorised agent. No officer or other person, having any duty to perform in connection with this sale shall, however, either directly or indirectly bid for, acquire or attempt to acquire any interest in the property sold.

The sale shall be subject to the conditions prescribed in the Second Schedule to the Income-tax Act, 1961, and the rules made thereunder and to the following further conditions:-

(i) The particulars specified in the annexed schedule have been stated to the best of the information of the undersigned, but the undersigned shall not be answerable for any error, mis-statement or omission in this proclamation.

# (ii) The reserve price below which the property shall not be sold is Rs.___________

(iii) The amounts by which biddings are to be increased shall be determined by the officer conducting the sale. In the event of any dispute arising as to the amount bid, or as to the bidder, the lot shall at once be again put up to auction.

(iv) The highest bidder shall be declared to be the purchaser of any let provided always that he is legally qualified to bid and provided further that *the amount bid by him is not less than the reserve price *it shall be in the discretion of the undersigned to decline acceptance of the highest bid when the price offered appears so clearly inadequate as to make it inadvisable to do so.

(v) For reasons recorded, it shall be in the discretion of the officer conducting the sale to adjourn it subject always to the provisions of the Second Schedule to the Income-tax Act, 1961.

(vi) In the case of movable property, the price of each lot shall be paid at the time of sale or as soon after as the officer holding the sale directs, and in default of payment, the property shall forthwith be again put up and resold.

(vii) In the case of immovable property, the person declared to be the purchaser shall pay immediately after such declaration, a deposit of twenty-five per cent on the amount of his purchase money to the officer conducting the sale and, in default of such deposit, the property shall forthwith be put up again and resold. The full amount of the purchase money payable shall be paid by the purchaser to the undersigned on or before the 15th day from the date of the sale of the property, exclusive of such day, or if the 15th day be a Sunday or other holiday, then on the first office day after the 15th day. In default of payment within the period mentioned above, the property shall be resold, after the issue of fresh proclamation of sale. The deposit, after defraying the expenses of the sale, may, if the undersigned thinks fit, be forfeited to the Government and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may subsequently be sold.

SCHEDULE OF PROPERTY

No. of lots

Description of Property to be sold with the names of the other co- owners where the property belongs to the defaulter and any other persons as co-owners

Revenue assessed upon the property or any part thereof

Details of any encumbrances to which the property is laible

Claims, if any, been put forward to the property, any other known particulars bearing on its nature and value

Given under my hand and seal at______ this _______ day of

(SEAL) Tax Recovery Officer

* Score out whichever paragraph/portion is not applicable.

+ Score out the portion in italics, if not applicable.

# Applies only in the case of auction of immovable property where a reserve price is fixed.

APPENDIX 34

FORM NO. I.T.C.P. 14

[See rule 44(2) of the Second Schedule to the Income-tax Act, 1961]

Certificate of sale of movable property

This is to certify that Shri ____________________________________ purchased for Rs.________ the undermentioned movable property.* which is included in the property of_________________________ _____ by virtue of the Explanation to sub-section (1) of section 222 of the Income-tax Act, 1961, at a sale by public auction on the _______ day of_________ in execution of certificate No. ______________ dated _______________ [drawn up by the undersigned for recovery of arrears from ________ or drawn up by the Tax Recovery Officer], ________________, a certified copy of which certificate has been sent by the said Tax Recovery Officer to the undersigned under section 223(2) of the said Act specifying that an amount of Rs.__________________ remains to be recovered from __________________

SPECIFICATION OF PROPERTY

Given under my hand and seal at______ this _______ day of ______________

(SEAL) Officer holding the sale

* Score out portion in italics, if not applicable.

CBDT Letter F. No. 275129/2020-IT(B), Dated 19.01.2021

Office Memorandum

Subject: Clarification regarding approval for attachment provided in the Order dated 19th October, 2020 issued under section 119 of the Income-tax Act, 1961 - Regarding

Reference is made to Board’s Order under section 119 of the Income-tax Act, 1961 issued vide F. No. 275/2912020-(lT(B) dated 19th October, 2020 (copy enclosed) wherein, at Para 2 the provision of approval for attachment of movable or immovable property by Assessing Officer or Tax Recovery Officers (TRO) is mentioned. In this regard, the undersigned is directed to clarify that the prior approval of Pr. CIT/Pr. DIT/CIT/DIT concerned shall be required for requisition under section 226(2) and issuance of notice under section 226(3) of the Income-tax Act, 1961.

(Mahesh Kumar)

Director (IT-Budget), CBDT

CBDT Instruction No. 1937, Dated 25.03.1996

Subject : Information of movable and immovable assets of the assessee Collection of information during assessment proceedings.

It has come to the notice of the Board that the lack of sufficient information about the movable and immovable assets of an assessee has often resulted in delay in recovery of outstanding demand.

2. It has, therefore, been decided that in all cases selected for scrutiny, other than salary cases, the Assessing Officer shall obtain from the assessee the particulars of assets including name and address of debtors, bank accounts Bank deposits etc. The information may be obtained under the provisions of Section 142(1) of the Income-tax Act and may be utilised for early recovery of tax dues.

CBDT Instruction No 400, Dated 01.04.1972

Subject : Attachment of Government Securities - Notices Issued by the Income-tax Officers under Sections 46(5A) and 226(3) of the Income-tax Act, 1922/1961 - Instructions Regarding

The Board desire that notices under sections 46(5A) and 226(3) should not be issued on the Bank to attach the principal or face value of the Government securities.

The securities themselves can be attached by the Tax Recovery Officer in exercise of the powers conferred on him.

Assessing Officer raised huge tax demand upon assessee and in meantime bank account including cash credit account of assessee had been attached by income tax authorities, in view of decision of Madras High Court in case of K.M. Adam v. ITO (1958) 33 ITR 26, cash credit account of assessee could not be attached and it was entitled to be discharged

Assessing Officer passed assessment order on assessee and raised huge tax demand upon it - Against assessment order, assessee filed appeal before Commissioner (Appeals). In meantime, Assessing Officer by order passed under section 220(6) required assessee to pay 50 per cent of total demand. Commissioner rejected request of assessee for staying demand. Immediately thereafter, bank account including cash credit account of assessee had been attached by income tax authorities. Madras in K M Adam v. ITO (1958) 33 ITR 26 (Mad.), it was held that the loan fund cannot be said to be a debt to a bank to the customer nor could it be said to be money on account of the customer, and hence it cannot be attached. In view of decision of Madras High Court rendered in case of K.M. Adam v. ITO (supra), cash credit account of assessee could not be attached by income tax authorities and it was entitled to be discharged. Commissioner (Appeals) was to be declared to dispose of appeal of assessee immediately and other bank account of assessee would continue to remain attached till disposal of appeal. [Partly in favour of assessee] (Related Assessment year : 2011-12) - P. C. Chandra & Sons (India) Ltd. v. DCIT (2015) 373 ITR 223 : 235 Taxman 144 : 63 taxmann.com 38 (Cal.)]

Basic distinction between attachment of movable property and immovable property

The basic distinction between attachment of movable property and immovable property is that in the former case application of physical possession is necessary and in the latter it is not so. The attachment of movable property is legally effected only by actual seizure and possession. – [B. Venkatadri Reddy v. P.A. Vanajakshi 2005(1) ALT 640]

Notice under section 226(3) can be issued to banks for attaching fixed deposits of assessee-defaulter before the maturity date of fixed deposit

The petitioner-bank had the fixed deposit of the assessee in default which in accordance with the contract entered into with them was payable at a later date. The department issued notices under section 226(3) to the petitioner-bank attaching fixed deposit receipts of the assessees on account of non-payment of income-tax dues by them.

On writ, the petitioner-bank challenged the validity of the notices on the ground that the petitioner was not obliged to make the payment of said fixed deposits before their maturity:

Fixed deposits are normally payable after the expiry of the period specified in the receipts itself. The banker becomes a debtor of the assessee-in-default the moment fixed deposit receipt is obtained. Normally the payment of fixed deposit receipt is made on the due dates. But on forgoing interest or paying lesser rate of interest, the bankers generally permit customers to withdraw the amount of fixed deposits before the maturity date. The fixed deposit receipt is not a negotiable instrument, but could be assigned with the concurrence of the bank in favour of other persons. Attachment of the amount in the fixed deposit can be made by the income-tax authorities under the proviso to section 226(3). There should be an obligation on the person on whom notice is served to pay money to the assessee, i.e., the subsisting relationship of a debtor and creditor is sine qua non for the exercise of the power under the section. Relationship of the petitioner-bank and the assessee was that of a debtor and creditor and, therefore, the ITO had jurisdiction to attach the amount of fixed deposit receipts irrespective of the fact that the amount was payable at a later period, as on the date of service of notice the relationship of the bank and the assessee as that of debtor and creditor could not be denied.

Though the contract is entered by the assessee while obtaining the deposit receipt for receiving the money at a later date, yet for the sake of reputation of the bank or for the facility of the assessee or otherwise payment is made before the maturity of the deposit receipt. The department steps in the shoes of the assessee and can claim payment even before its maturity. Even, the production of such receipt, deposit receipt, is not required in terms of section 226(3)(iv). In these circumstances, the respondent had the jurisdiction to attach the fixed deposit receipts and the bank was under obligation to make the payment of the amount even before the maturity of the fixed deposit receipt. According to the instructions which are issued by the Reserve Bank from time-to-time, if a depositor wants to encash the fixed deposit receipt before its maturity, the bank is bound to refund the amount with lesser interest as is permissible looking to the time involved. Thus, the notice issued under section 266 could not be considered bad in law. The fixed deposit receipts, however, should remain attached. Vysya Bank Ltd. v. JCIT (2000) 241 ITR 178 : 158 CTR 60 : 109 Taxman 106 (Karn.)]

Salary of a third party who is debtor of an assessee can not be attached and recovered as an arrear of tax under section 226(2)

The petitioner's husband was being assessed under the Act and had some outstanding tax liability. The husband had advanced certain amount to the petitioner. The respondent-Assistant Commissioner served a notice under section 226(3) on the petitioner asking her to pay dues of her husband, which petitioner agreed to pay in instalments. The petitioner later on failed to pay the dues of her husband. The Assistant Commissioner then issued notices to the employers of the petitioner stating that notices under section 226(3) had been earlier issued to the petitioner and she had failed to discharge her liabilities; therefore, she was deemed to be an assessee in default and was personally liable to pay the outstanding demand of her husband; so her salary which was paid by the employers was attached under section 226(2). On reference:

Reading section 226(3)(x), it is apparent that the Legislature has not provided that from the debtor of the assessee under section 226(3)(x) the arrears of tax can be recovered under section 226(2). On the contrary, there is a specific provision that it is to be recovered as provided under sections 222 to 225. If the contention of the revenue that once the debtor of the assessee is deemed to be an assessee in default, his salary can also be attached as provided under section 226(2) is accepted, then the relevant part of the sentence 'in the manner as provided in sections 222 to 225' in section 226(3)(x) would be redundant. The Legislature would have stopped only by providing that—in such cases further proceedings may be taken against him for the realisation of the amount as if it were an arrear of tax due from him - and the second part ‘in the manner provided in sections 222 to 225’ was not necessary.

Not only this, it is further clear that the Legislature has made two specific deeming provisions,, namely - (i) if the persons to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Assessing Officer or Tax Recovery Officer, he shall be deemed to be an assessee in default in respect of the amount specified in the notice. The liability of such person is limited to the extent of the amount specified in the notice; and (ii) the amount specified in the notice can be realised from such person as if it were an arrear of tax due from him.

After making these two deeming provisions, the Legislature provided that from such a person, the amount specified in the notice can be recovered in the manner provided in sections 222 to 225. It is nowhere provided that the debtor of the assessee who is deemed to be an assessee in default should be deemed to be an assessee in default to all intents and purposes of the Act. Such a person would be deemed to be an assessee in default for a limited purpose. From him only the amount specified in the notice and not the entire amount of arrear of tax due could be recovered by following the procedure under sections 222 to 225. There is no provision that salary of a third party who is a debtor of the assessee can be attached and recovered 'as an arrear of tax'. Thus, the notices issued by the authority were illegal and contrary to the provisions of section 226 of the Act. (Related Assessment year : 1987-88) – [Smt. Tejal R. Amin v. ACIT (1994) 208 ITR 103 : 119 CTR 47 : 75 Taxman 543 (Guj.)]

Time of attachment

Referring to Section 62 of CPC which speaks that an attachment of movable property can be made after sunrise and before sunset and the exact time of sunrise or sunset will vary with the month of every year. It is not the law that the attachment should be made at or before 6:00 PM or 6:30 PM. – [Tika Ram v. State AIR 1960 All 453]

On application of ITO, District Munsif ordered payment of income-tax dues, outstandings against judgment debtor, from out of sale proceeds of certain moveable properties belonging to said judgment debtor attached in execution of money decree obtained by petitioner - Crown has right of priority in payment of debts due to it – Since debt in question represented money due to Crown under Act and demand of ITO was not open to question, conclusion arrived at District Munsif was correct

Section 222 of the Income-tax Act, 1961 [Corresponding to section 46(2) of the Indian Income-tax Act, 1922] – The petitioner obtained a money decree against ‘G’ and in execution thereof attached certain moveable properties belonging to the judgment debtor and brought them to sale. ‘G’, under an order of assessment, was required to pay certain sum by way of income-tax. Before the sale of those properties, the ITO filed an application in the Court asking for an order directing the payment to him from the sale proceeds when the sale took place of the amount due to government by ‘G’. The sale in execution was in due course carried out. After reserving the amount required for the costs of execution the District Munsif ordered the balance to be paid out to the ITO. On revision petition:

Section 46 of the 1922 Act does not profess to be exhaustive and it cannot without express words to that effect take away from the Crown the right of enforcing payment by any other method open to it. Therefore, section 46 of the 1922 Act does not impose a bar to an application of the nature made in the instant case.

The argument that a private person is governed by the provisions of the Civil Procedure Code and as there is nothing in the Code which places the Crown in a different position the procedure there contemplated must be followed, could not be agreed with. This argument ignored the special position of the Crown, the special circumstances and the court’s inherent powers. It cannot be denied that the Crown has the right of priority in payment of debts due to it. It is a right which has always existed and has been repeatedly recognised in India. If the Crown is entitled, as it is, to prior payment over all unsecured creditors the position of secured creditors does not arise. There is no reason why the Crown should not be allowed to apply to the Court for an order directing its debt to be paid out of money in Court belonging to the debtor, without having to file a suit. Of course it must be a debt which is not disputed or is indisputable. In the instant case the debt represented money due to the Crown under the Income-tax Act and the demand of the ITO was not open to question.

The Court must pay money in its hands out to the person entitled to it. The right to payment being indisputable, justice requires that it should be paid out to the Crown and formal application for payment has been made. It seemed that both right and convenience demand that the Court should exercise its inherent power.

For these reasons it was held that the District Munsif came to the correct conclusion and his order should not be disturbed. The petition would be dismissed with costs. [In favour of the revenue] -[Manickam Chettiar v. ITO (1938) 6 ITR 180 (Mad.)]

INCOME TAX

Wednesday, 12 October 2022

Attachment and Sale of Movable Property under the provisions of Income Tax Law

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