Firm’s Property Auction and Tax Recovery Valid within Limitation, Meeting All Statutory Requirements

ORDER

1. Assessment orders were issued in respect of a partnership firm called M/s RJK Investments in respect of assessment years 2007-08 to 2011-12. The agreed position is that the assessee challenged only the assessment order relating to assessment year 2009-10. The appeal in respect of said assessment year was disposed of by order dated 23.08.2016.

2. Pursuant to the above mentioned assessment orders, demand notices under Sections 156 of the Income-Tax Act, 1961 (the I-T Act) were issued to the assessee and, upon default in discharging the dues, certificates were drawn up by the Tax Recovery Officer (the TRO) under Section 222 of the I-T Act. This was followed by the issuance of notices under Rule 2 of II Schedule of the I-T Act to the defaulting assessee. Thereafter, proceedings for the attachment and sale of the immovable property of the partnership firm were initiated. Proceedings were also initiated for the sale of the immovable property of Jawahar Ayya, a partner of the firm. This was challenged in TASC Jawaahar Ayya v. Pr. CIT [W.P. No. 8101 of 2026], which was disposed of on 06.08.2026. All these writ petitions pertain to the sale of the immovable properties of the partnership firm.

3. In W.P.No.10443 of 2025, one of the partners of the said firm, Mr.S.Venkataramanan, seeks a mandamus for the consideration of his objection letter dated 12.02.2025. In W.P.No.2711 of 2026, said Venkataramanan challenges sale notice dated 18.12.2025 and also seeks a consequential direction to consider objections dated 12.02.2025. W.P.No.1618 of 2026 was filed by another partner, Kamalesh Kumar Sheth, seeking a direction for the sale of the assets described in the petition, which includes lands in S.Nos.127/4 and 72/8 at Pudupakkam Village, Chenglepet Taluk, Kanchipuram District, which are the assets of the partnership firm. The auction purchaser in respect of the land at S.No.72/8 has filed W.P.No.30650 of 2026 for confirmation of the auction sale conducted on 28.01.2026 and for the execution of a sale certificate in his favour. All these writ petitions are disposed of by this common order.

4. The contentions of Mr.Hari Kumar, learned counsel for Mr.S.Venkataramanan, may be summarized as under:

5. The submissions of Ms.Premalatha, learned senior standing counsel, in response to these contentions may be summarized as under:

6. Mr.Ravi Kiran, learned counsel for the auction purchaser and petitioner in W.P.No.30650 of 2026, made the following submissions:

Limitation

7. The first aspect to be dealt with is in relation to limitation. In order dated 06.08.2026 in W.P.No.8101 of 2026 (TASC Jawaahar Ayya(supra), the question of limitation was dealt with extensively in relation to the auction sale of the properties of TASC Jawahar Iyya, one of the partners of M/s RJK

Investments. After dealing with Rule 68B of the II Schedule of the I-T Act in considerable detail, a conclusion was reached that proceedings to enforce the certificates issued in respect of the defaulting assessee were barred by limitation with regard to assessment years 2007-08 and 2008-09, whereas such proceedings were not barred in relation to assessment years 2009-10 to 2011-12. In course of said judgment, the contention relating to retrospective application of the amendment to Rule 68B was also dealt with. Relying on the judgment of the Hon’ble Supreme Court in UOI v. Uttam Steel Ltd. 2015 SCC Online SC 512, it was concluded that the amendment would not apply in cases wherein the period of limitation had expired prior to the entry thereof, whereas it would apply to cases where the original limitation period was alive at the time of entry of the amendment. For said reason, the contention of Mr.Hari Kumar in relation to limitation is rejected.

Non-issuance of notice to individual partners

8. Mr.Hari Kumar contended that it is necessary to issue notices to individual partners before initiating action to enforce and satisfy a certificate under the II schedule. The assessee in this case is M/s RJK Investments. After assessment orders were issued against said assessee, demand notices were issued under Section 156 of the I-T Act demanding payment of dues as per the respective assessment orders. Upon the assessee failing to satisfy such demand within the prescribed 30 day period, the assessee became an assessee in default. Therefore, certificates were drawn up by the TRO under Section 222 of the I-T Act. These certificates were drawn up in the name of the partnership firm. A notice under Rule 2 of the II Schedule is required to be issued to the defaulter and defaulter is defined in Rule 1(b) as meaning “the assessee mentioned in the certificate”. Therefore, notices under Rule 2 of the II Schedule were issued to the partnership firm. Said notices were served on the partnership firm. Because the partnership firm failed to make payment in terms of the Rule 2 notices within the 15 day period prescribed therein, further proceedings to enforce the certificates were taken in compliance with Rule 3. In this context, the question arises as to whether it is necessary to send notice to individual partners.

9. In these cases, the admitted position is that the auction sale relates to two assets of the partnership firm. By virtue of Section 188A of the I-T Act, joint and several liability is imposed on the partners as regards the dues of the firm. All the rules in the II Schedule dealing with issuance of notice in relation to attachment and sale of assets, such as Rules 49 and 53, only provide for notice to the defaulter. By contrast, an application to set aside the sale under Rules 60 and 61 may also be made by a person whose interests are affected by the sale. As noticed in the earlier paragraph, the definition of defaulter is confined to the person mentioned in the certificate. Effectively, unless the expression “defaulter” in Rule 1(b) is read as including partners of a defaulting firm or the certificate mentions the names of individual partners, notices relating to the attachment and sale of the partner’s assets need not be sent to such partner.

10. Only the owner of the property would be directly affected by the sale of his/her property. Illustratively, if the reserve price is low in comparison to fair value or if the property does not fetch a fair market value in course of auction, the person directly affected would be the individual owner of the property. Rules 60 and 61 also enable the defaulter or person affected to apply to set aside the sale subject to compliance with deposit requirements prescribed therein. As with all definition provisions, Rule 1 of the II Schedule contains the qualification “unless the context otherwise requires”. If proceedings were to be initiated against the asset of an individual partner by enforcing such joint and several liability, for reasons aforesaid, I conclude that the context requires that the expression “defaulter” in Rule 1(d) be read as including the individual partner against whose asset(s) recovery measures are proposed to be taken. In support of such construction, it is sufficient to cite Vanguard Fire and General Insurance Co. Ltd. v. Fraser and Ross AIR 1960 SC 971, where the Supreme Court held, in relevant part, as under:

“6. It is well settled that all statutory definitions or abbreviations must be read subject to the qualification variously expressed in the definition clauses which created them and it may be that even where the definition is exhaustive inasmuch as the word defined is said to mean a certain thing, it is possible for the word to have a somewhat different meaning in different sections of the Act depending on the subject or the context. That is why all definitions in statutes generally begin with the qualifying words used in the present case, namely, unless there is anything repugnant in the subject or context. “

11. Hence, insofar as proceedings under the II Schedule relate to measures for the sale of an individual partner’s property, it would certainly become necessary to serve notice on such partner. On the other hand, if the TRO were to proceed against the assets of the firm/assessee-in-default, it is sufficient if the notices contemplated in the II schedule were to be served on the assessee-in-default, and the context does not support a departure from the statutory definition. Keeping in mind these principles, I turn to the facts of these cases.

Whether notices were served?

12. As regards the three assessment years (2009-10 to 2011-12) in relation to which proceedings for auction sale are within the limitation period in Rule 68B, three Rule 2 notices were despatched to the firm on 28.11.2014 and 13.07.2016. The acknowledgment evidences receipt on behalf of the firm. The order of attachment dated 05.05.2015 of the immovable properties of the firm was addressed to the firm and received on behalf of the firm by Mr. Kamalesh Kumar Sheth, Partner, on 15.06.2015. A subsequent attachment was also made on 16.10.2019. The notice for settling the sale proclamation was issued on 10.07.2025. Said notice was addressed to the partnership firm and copies thereof were sent to the three partners. Upon receipt of said notice, Mr.Venkataramanan raised objections on 21.07.2025.

13. The sale proclamation notice was issued on 18.12.2025. Said notice was also addressed to the partnership firm and copies thereof were marked to several persons, including all three partners of the firm. The tracking report from the postal department shows that Mr.Venkataramanan refused to receive the notice. If an application had been filed by Mr. Venkataramanan under Rule 61 instead of approaching this Court, such application would have been rejected unless the amount recoverable had been deposited as a pre-condition and substantial injury was established as a result of non-service or irregularity. Considering these facts, I conclude that it cannot be said that applicable rules in the II schedule or the principles of natural justice were violated even proceeding on the assumption that it was necessary to send notices to individual partners.

Valuation of the properties

14. Both Ms.Premalatha and Mr.Ravi Kiran contended that the guideline value of the firm’s properties is Rs.80,00,000/- per acre. In the affidavit executed by the three partners of M/s RJK Investments on 26.09.2024, the guideline value is recorded as Rs.1,35,000/- per cent, which corresponds to Rs.1,35,00,000/- per acre. It is also stated in said affidavit that the market value is Rs.2,50,000/- per cent. The purchase price in respect of the property admeasuring 26 cents is R.2,36,00,000/- and the purchase price in respect of the property admeasuring 33 cents is Rs.3,11,00,000/-. Thus, the purchase prices are much higher than the guideline value or the market price as per the above affidavit. While Mr.Venkataramanan raises an objection to the effect that the prices were below the fair market value, neither in the objection letter dated 14.02.2025 nor in course of proceedings before this Court was any evidence filed to indicate that the auction sale price was below the fair market value.

15. Referring to the reduction in the reserve price of the land admeasuring 33 cents and the increase in the reserve price of the land admeasuring 26 cents, on comparison of sale notices dated 15.01.2025 and 18.12.2025, Mr.Hari Kumar contended that said revision to the reserve prices indicates that the valuation was improper. In response, it was submitted that by Mr.Ravi Kumar that the two properties are not contiguous by relying on a map. Given the fact that auction sale prices are much higher than the guideline value or even the market price mentioned in the affidavit signed by all three partners, in the context of there being no evidence that these properties were sold below the fair market value, I am unable to accept the contention of Mr.Hari Kumar.

Payments by Mr. Sivakumar and not by auction purchaser

16. Mr.Hari Kumar also contended that all the demand drafts were purchased by Mr.Sivakumar and not by Mr.Sajin Kumar, the auction purchaser, and that this vitiates the auction sale. This contention is completely devoid of merit. All the payments were made by way of demand drafts issued by the ICICI Bank. As long as the earnest money deposit and other payments were made by the bidder/successful auction purchaser as per the terms and conditions of auction sale, it is immaterial that the demand drafts were issued by the issuing bank from and out of the bank account of Mr.Sivakumar. In this regard, it should also be noticed that it is expressly averred that Mr.Sivakumar is the father of Mr.S.Sajin Kumar.

17. For reasons set out above, all the objections raised by Mr.Venkataramanan to the auction sale process are rejected as untenable. Consequently, these writ petitions are disposed of on the following terms: