Attached Immovable Property Sale Barred By Limitation As Pre-2019 Three-Year Rule 68B Time Limit Applied

ORDER

1. A proclamation of sale in respect of the property of the petitioner on 10.07.2025 is challenged in this writ petition and the petitioner seeks a consequential direction to release his property from attachment.

2. Assessment orders were issued in respect of a partnership firm called M/s RJK Investments in respect of assessment years 2007-2008 to 2011-2012. The agreed position is that the assessee challenged only the assessment order relating to assessment year 2009-2010. The appeal in respect of said assessment year was disposed of by order dated 23.08.2016.

3. Pursuant to the above mentioned assessment orders, demand notices under Section 156 of the Income Tax Act, 1961 (the I-T Act), were issued to the assessee in default and certificates were drawn up by the tax recovery officer (TRO) under Section 222 of the I-T Act. After issuing notice under Rule 2 of the second schedule, the impugned proclamation of sale was made on 10.07.2025.

4. Learned counsel for the petitioner relied on Rule 68B of the second schedule to the I-T Act to contend that no sale of immovable property shall be made under part III of the second schedule after the expiry of three years from the end of the financial year in which the assessment order was issued. Learned counsel submits that the three year period expired on 31.03.2013 in relation to assessment year 20072008 because the assessment order was issued on 28.12.2009 and the three year period commenced on 01.04.2010 (end of the financial year) and ended on 31.03.2013. As regards assessment year 2008-2009, he submits that the assessment order was issued on 28.12.2010 and the period of limitation expired on 31.03.2014 (i.e. 01.04.2011 to 31.03.2014). As regards assessment year 2009-2010, he submits that the assessment order was issued on 18.03.2014 and that the limitation period under Rule 68B expired on 31.03.2017. As regards assessment year 2010-2011, he submits that the assessment order was issued on 18.03.2016 and that the period of limitation expired on 31.03.2019. Likewise, as regards assessment year 2011-2012, since this assessment order was also issued on 18.03.2016, he submits that the period of limitation under Rule 68B expired on 31.03.2019.

5. Learned counsel contends that the amendment to sub-rule 1 of Rule 68B was made by the Finance Act of 2019 with effect from 01.09.2019. Therefore, he contends that said amendment whereby the limitation period was extended to seven years cannot be retrospectively applied in relation to cases where the period of limitation had elapsed before the entry into force of the amendment.

6. Without prejudice to this contention, as regards assessment year 2009-2010, even if the 7 year period were to be taken into account, he contends that this period expired on 31.03.2024. In this regard, learned counsel submits that the exclusion of the period affected by the COVID 19 pandemic under the order dated 10.01.2022 of the Hon’ble Supreme Court in Cognizance for Extension of Limitation, In re 441 ITR 722 (SC)/Writ Petition (C) No.3 of 2020, applies only to proceedings before quasi-judicial authorities. He contends that the TRO performs administrative functions under the second schedule and that the benefit of the above mentioned order cannot be extended to proceedings conducted by the TRO.

7. In support of these contentions, learned counsel referred to and relied upon the following judgments:

8. Referring to GST Circular No.157/13/2021 dated 20.07.2021, learned counsel submits that said circular refers to an opinion obtained by the GST Council with regard to the applicability of the judgment of the Supreme Court to proceedings before GST authorities. He points that it was concluded that it does not apply to proceedings before tax authorities. Consequently, he contends that the CBDT should have issued specific circulars for extension of time and cannot fall back on the order of the Supreme Court.

9. In response to these contentions, learned Senior Standing Counsel submits that the assessee is the partnership firm, namely, M/s RJK Investments and that as per Section 188A of the I-T Act, joint and several liability is imposed on the partners if the assessee is in default. According to learned counsel, the tax demand relating to assessment years 2007-2008 and 2008-2009 were discharged by the partnership firm. As regards assessment years 2009-2010 to 2011-2012, she submits that the tax demand was not discharged thereby resulting in recovery proceedings under Second Schedule. She also submits that the proceedings became conclusive and final in terms of Rule 68B only after the assessee failed to discharge the demand under the notices of demand. With regard to assessment year 2009-2010, she points out that an appeal was lodged by the assessee and that said appeal was disposed of on 23.08.2016. The relevant financial year, therefore, ended on 31.03.2017. If the three year limitation period were to be computed from said date, she submits that the amendment came into force before the expiry thereof. As a result, she submits further that the seven year limitation period under the amendment applies in relation to assessment year 2009-2010.

10. As regards assessment years 2010-2011 and 2011-2012, learned senior standing counsel submits that the assessment orders, which were issued on 18.03.2016, became final only upon expiry of the 30 day period specified in the demand notices under Section 156. She relied on the judgment of the Division Bench of the Kerala High Court in K. Kutaguptan v. Canara Bank [2018] 89 taxmann.com 72/253 Taxman 88 (Kerala) in support of this contention. Reckoning said 30 day period, which ended on or about 15.04.2016, she submits that these assessment orders attained finality only in financial year 2016-2017, which ended on 31.03.2017. If the limitation period were to be reckoned from 31.03.2017, learned senior standing counsel contends that, as in the case of assessment year 2009-2010, the seven year limitation period becomes applicable.

11. Learned Senior Standing Counsel submits further that the extension of time granted by the Hon’ble Supreme Court In Re: Cognizance for extension of limitation (supra) applies to all proceedings before quasi-judicial authorities. Relying on Rule 86 of the Second Schedule, which enables filing of an appeal from the order of the TRO, learned Senior Standing Counsel contends that the TRO discharges quasi-judicial functions. She also refers to the definition and functions of a TRO as per Section 2(44) of the I-T Act.

12. Relying on additional documents, she contends that the proclamation of sale in respect of the petitioner’s property was issued on 18.02.2020 and that the sale could not be concluded earlier on account of the Covid-19 pandemic. She also points out that the petitioner had made a request for revaluation of the property and for further time to discharge the liability. Considering all these aspects, learned Senior Standing Counsel submits that the proceedings for sale of the petitioner’s property are within the period of limitation.

13. The assessee in default in this case is M/s RJK Investments, a partnership firm. Five assessment orders were issued against the assessee for assessment years 2007-2008 to 2011-2012. Pursuant thereto, proceedings were initiated under the Second Schedule after a certificate was drawn up in terms of Section 222 of I-T Act. Because these proceedings are against a partner of the firm, it is apposite to set out Section 188A:

” Every person who was, during the previous year, a partner of a firm and the legal representative of any such person who is deceased, shall be jointly and severally liable along with the firm for the amount of tax, penalty or other sum payable by the firm for the assessment year to which such previous year is relevant, and all the provisions of this Act, so far as may be, shall apply to the assessment of such tax or imposition or levy of such penalty or other sum.”

The fact that the petitioner was a partner during the relevant years is not disputed. The principal defence raised by the petitioner is on the ground of limitation. This contention is required to be tested in relation to each assessment year.

14. The assessment orders in respect of the above mentioned assessment years were issued on 28.12.2009 and 28.12.2010, respectively. The agreed position is that no appeals were filed against said assessment orders by the assessee. Rule 68B(1), as it stood during the relevant period, is set out below:

68B. (1) No sale of immovable property shall be made under this Part after the expiry of three years from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under the provisions of section 245-I or, as the case may be, final in terms of the provisions of Chapter XX:

15. From sub-rule (1), it follows that the limitation period for sale of an attached immovable property was three years from the end of the financial year in which the order giving rise to a demand for payment of tax, interest and the like became conclusive or final, as the case may be. Given the fact that no appeals were presented against these orders, at the highest, the three year period is liable to be reckoned from the expiry of thirty days from the date of issuance of the respective notice of demand. Even if computed in this manner, the three year period will be required to be computed from 01.04.2010 as regards assessment year 2007-08 and 01.04.2011 as regards assessment year 2008-09. If so computed, said period expired on 31.03.2013 and 31.03.2014, respectively. Thus, the period of limitation expired before the amendment to Rule 68B(1) came into force on 01.09.2019 and extended the period of limitation to seven years. Consequently, only the original period of limitation of three years applies to these assessment years. The sale has not been completed as on date. Therefore, the sale of the petitioner’s attached property in relation to amounts payable under certificates relating to assessment years 2007-2008 and 2008-2009 are barred by limitation.

16. The assessment order was issued on 18.03.2014. The assessee filed a statutory appeal. Said appeal was decided on 23.08.2016. As per sub-rule (1) of Rule 68B, the period of limitation is required to be computed from the end of the financial year in which the assessment order attained finality. Said financial year ended on 31.03.2017. If a three year period were to be computed from 01.04.2017, said period would have expired on 31.03.2020. Meanwhile, by the Finance Act of 2019, with effect from 01.09.2019, Rule 68B was amended by extending the period of limitation to seven years. The amended Rule 68B is as under:

68B. (1) No sale of immovable property shall be made under this Part after the expiry of seven years_ from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under the provisions of section 245-I or, as the case may be, final in terms of the provisions of Chapter XX:

Provided that the Board may, for reasons to be recorded in writing, extend the aforesaid period for a further period not exceeding three years.

Provided that where the immovable property is required to be re-sold due to the amount of highest bid being less than the reserve price or under the circumstances mentioned in rule 57 or rule 58 or where the sale is set aside under rule 61, the aforesaid period of limitation for the sale of the immovable property shall stand extended by one year.

(2) In computing the period of limitation under sub-rule (1), the period—

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation for the sale of the immovable property is less than 180 days, such remaining period shall be extended to 180 days and the aforesaid period of limitation shall be deemed to be extended accordingly.

(3) Where any immovable property has been attached under this Part before the 1st day of June, 1992, and the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has also become conclusive or final before the said date, that date shall be deemed to be the date on which the said order has become conclusive or, as the case may be, final.

(4) Where the sale of immovable property is not made in accordance with the provisions of sub-rule (1), the attachment order in relation to the said property shall be deemed to have been vacated on the expiry of the time of limitation specified under this rule.]

17. In this connection, the next question that falls for consideration is whether the extended period of seven years, pursuant to Finance Act, 2019 becomes applicable. The law of limitation is generally considered as procedural law which applies retrospectively. This is, however, subject to a qualification. In support of this settled proposition, it is unnecessary to multiply authorities and sufficient to cite Union of India v. Uttam Steel Ltd. 2015 SCC OnLine SC 512 , where it was held as under:

“10. We have heard the learned counsel for the parties and Shri Bagaria, the learned amicus curiae at some length. There is no doubt whatsoever that a period of limitation being procedural or adjectival law would ordinarily be retrospective in nature. This, however, is with one proviso super added which is that the claim made under the amended provision should not itself have been a dead claim in the sense that it was time-barred before an amending Act with a larger period of limitation comes into force. A number of judgments of this Court have recognised the aforesaid proposition:”

18. Thus, if the period of limitation had expired as on the date of entry into force of the amendment, the amended period cannot be made applicable. This was the case in relation to assessment years 2007-2008 and 2008-2009. As discussed above, as regards assessment year 20092010, the period of limitation under pre-amended Rule 68B would have expired on 31.03.2020. Prior thereto, the amendment took effect from 01.09.2019. Therefore, the amended time limit of seven years is applicable in respect of this assessment year. If the limitation period of seven years were to be applied, it would extend up to 31.03.2024. Since the sale has not taken place as on date, even said period is insufficient. Learned Senior Standing Counsel, however, contends that the extension granted by the Supreme Court is applicable. I turn to this aspect next.

19. During the period impacted by the Covid-19 pandemic, the Hon’ble Supreme Court directed that the period running from 15.03.2020 to 28.02.2022 shall stand excluded for purposes of computing applicable periods of limitation under any general or special law in respect of all judicial or quasi-judicial proceedings. Learned counsel for the petitioner contended that this order does not apply to proceedings undertaken by the TRO and that such proceedings are administrative or executive proceedings and not quasi-judicial proceedings. This contention was countered by learned senior standing counsel. He also relied inter alia on the judgments in Gupthas Constructions and Punjab Carbonic to contend that this order applies only to litigants and not to authorities. Dealing with the latter contention first, there is nothing in the order of the Supreme Court to the effect that it applies only to litigants and not to authorities. Taking such a position does not, in any case, withstand close scrutiny. In the specific factual context of a time limit for sale of an attached immovable property by the TRO, if such sale were to be proceeded with during the Covid-19 pandemic, it would be difficult for bidders to participate. Consequently, it is likely that the property would not be sold or the property may be sold at a lower than market price. This would affect both the owner of the property and the Income Tax Department. For these reasons, I am unable to endorse the view of the Andhra Pradesh High Court in Gupthas Constructions and Punjab Carbonic. The larger question about the nature of functions undertaken by the TRO and whether they qualify as quasi-judicial still remains to be considered.

20. Under Rule 2, the TRO is required to serve a notice on the defaulter after a certificate is drawn up under Section 222 of the I-T Act requiring the defaulter to pay the amount specified in the certificate within 15 days. As per Rule 3, no action may be taken for the execution of the certificate until the 15 day notice period expires. Under Rule 11, the TRO is vested with limited powers of investigation and his decision under said rule may be challenged in a civil suit.

21. Part III of the Second Schedule deals with attachment and sale of immovable property. Under Rule 49, the order of attachment is required to be served on the defaulter. Under Rule 53, a proclamation of sale is required to be drawn up after issuing notice to the defaulter and providing the opportunities listed in clauses (a) to (d) of said rule. Under Rule 60, the defaulter or any person whose interests are affected by the sale has the right to apply to the TRO within thirty days from the date of sale to set aside the sale by depositing the amount specified in the proclamation of sale and by agreeing to pay penalty to the purchaser. The purchaser has the right to apply to set aside the sale on the ground that the defaulter has no saleable interest in the property under Rule 62.

22. Considering these provisions and the nature of functions carried out by the TRO, I conclude that these functions affect the rights and liabilities of parties. Therefore, these functions qualify as quasi-judicial functions. As a corollary, I further conclude that the extension of time under the order of the Supreme Court is applicable to proceedings before the TRO. In effect, the period running from 15.03.2020 to 28.02.2022 shall stand excluded for purposes of computing the period of limitation. If limitation were to be recomputed by excluding this period, it will result in the addition of about two years. In other words, the period of limitation would have ended on 31.03.2026 but for a development dealt with in the next paragraph.

23. The petitioner had approached this Court and obtained a status quo order on 27.02.2026 in relation to further proceedings pursuant to the proclamation of sale. This pre-dates the expiry of the period of limitation. In terms of sub-rule (2) of Rule 68B, the period during which proceedings for attachment or sale of the immovable property are stayed by an order of injunction by any Court is required to be excluded and under the proviso, if the remaining period after such exclusion is less than 180 days, the period of limitation is required to be extended to 180 days. As a result, the revenue has about six months to conclude the sale in relation to assessment year 2009-2010.

24. The assessment orders in relation to these two years were issued on 18.03.2016. Appeals were not filed in respect of these years. After the assessment orders were issued, notices of demand under Section 156 of the I-T Act were issued to the assessee on the same date and notices under Rule 2 of the second schedule were issued after the certificates were drawn up on 13.07.2016. Under Section 220(1) of the IT Act, the amount specified in a notice of demand is required to be paid within 30 days from the service of the notice and, under sub-section (4) thereof, the assessee shall be deemed to be in default if the amount demanded under the notice of demand is not paid within the time limit specified therein. In those circumstances, a certificate is drawn up in terms of Section 222. Proceedings under the Second Schedule are taken pursuant thereto subject to a default in complying with a Rule 2 notice.

25. Referring to the text of Rule 68B, learned counsel for the petitioner contended that the limitation period is liable to be computed from the date of the order giving rise to the demand unless the matter were to be carried in appeal under Chapter XX-A or be the subject of settlement proceedings under Section 245 of I-T Act. Since neither of these situations is applicable, he contends that limitation cannot be computed from the expiry of the 30 day period under the relevant notices of demand. Countering this contention, learned senior standing counsel submits that the order does not become conclusive or final until the 30 day period expires. This aspect warrants close consideration because it has a material impact on the question of limitation.

26. Sub-Section (2) of Section 249 of the I-T Act, which falls within chapter XX, prescribes the limitation period of 30 days from the date of service of the notice of demand for an appeal against an assessment order. When read with Section 220(4), it becomes clear that the assessee or the partners of the firm (as per Section 188A) cannot be categorised as assessees in default unless said period expires.

27. It should also be recognised that proceedings under the Second Schedule are akin to execution proceedings under the Code of Civil Procedure. Said proceedings are contingent on the drawing up of a certificate under Section 222. Such certificate cannot be drawn up unless the assessee is in default in terms of Section 220(4). Action for the enforcement of the certificate cannot be taken under Rules 2 and 3 until the 15 day notice period after receipt of the Rule 2 notice has expired. Considering all these aspects, endorsing the position in Kutaguptan, I conclude that the limitation period under Rule 68B(1) is liable to be construed as running from the date of expiry of the notice period under the relevant notice of demand or the limitation period for filing an appeal, both of which are coterminous. Although it is possible for an assessee to apply for condonation of delay, in cases where no appeal is filed, the cutoff would be the ordinary limitation period of 30 days.

28. If the period of limitation in respect of assessment years 20102011 and 2011-2012 were to be computed from the date of expiry of the period of limitation, said 30 day period expired in April 2016 and the relevant financial year ended on 31.03.2017. If the three year limitation period, which was applicable then, were to to be computed from 01.04.2017, said limitation period would have expired on 31.03.2020. Prior thereto, the amendment extending the limitation period became effective from 01.09.2019. As a corollary, the extended period would apply. Said extended period would have run from 01.04.2017 to 31.03.2024, but for the Supreme Court exclusion of the period from 15.03.2020 to 28.02.2022. Effectively, excluding said two years, the limitation period would have run up to 31.03.2026. For reasons discussed earlier in relation to assessment year 2009-2010, the revenue is also entitled to the benefit of further extension due to the status quo order obtained on 27.02.2026 as per Rule 86B(2).

29. In the result, the proceedings for sale of the petitioner’s immovable property are within the period of limitation for assessment years 2009-2010 to 2011-2012, but barred by limitation for the two earlier assessment years. Consequently, the proclamation of sale is valid in relation to the certificates pertaining to the above mentioned assessment years, and the property is not liable to be released from attachment. The writ petition stands disposed of on these terms. Consequently, connected miscellaneous petitions are closed. There shall be no order as to costs.