VERY IMPORTANT POINT
High Court was wrong in concluding that what was sold by the two sellers to the purchaser was their equal sharea in the said immovable property, that the apparent consideration though Rs. 47 lakhs was in fact less than Rs. 25 lakhs ends each and, therefore, provisions of Chapter XX-C of IT Act, 1961 containing Govt. s right of pre-emptive purchase did not apply. It was the said immovable property which was the subject of transfer and not the undivided equal share, therefore, Chapter XX-C was attracted taking into account total consideration which was more than prescribed 25 lakhs rupees in the Rule 48-K.

Headnote:Income Tax Act, 1961-Chapter XX-C, Sections 269-UC(1), 269-UD and Rule 48-K of IT Rules-Order of pre-emptive purchase-Quashed by Gujarat High Court-Appeal against by Revenue-Difference of opinion in High Courts about valuation of property held by co-owners or joint owners-Agreement for the sale of immovable property by respondents 2 and 3 who had equal shares to respondent 1 for 47 lakh rupees-Chapter applying if consideration was more than 25 lakhs-High Court refused to apply the law of pre-emptive purchase on footing that total consideration if divided in two co-sharers was less than 25 lakhs each-Whether correst?-(No)-High Courts giving this view overruled and Bombay High Court differing was approved-Case remanded for decision afresh.
       Held : What, in our opinion, therefore, has to be seen for the purposes of attracting Chapter XX-C is : what is the property which is the subject matter of transfer and what is the apparent consideration for such transfer. This has to be seen in a real light with due regard to the object of the chapter and not in an artificial or technical manner. If the apparent consideration for the transfer is more than the limit prescribed for the relevant area under Rule 48-K, what has then to be seen is whether the apparent consideration for the property is less than the market value thereof by 15% or more. If so, the notice for pre-emptive purchase can be issued and it is then for the parties to the satisfy the appropriate authority that the apparent consideration is the real consideration for the transfer. (Para 8)
       Now, in the present case, the said agreement is for the sale of the said immovable property. That the equal shares of the second and third respondents therein are to be transferred to the first respondent is a necessary incident of such sale. The parties to the transaction filed Form No. 37-I with the appropriate authority and, correctly, stated that what was being sold was the said immovable property and not the one and half shares of the second and third respondents therein. It also stated, correctly, that the total apparent consideration for the transfer of the said immovable property was Rs. 47 lakhs. This leaves us in no doubt at all that what was to be transferred was the said immovable property and that the consideration for such transfer was the sum of Rs. 47 lakhs. It is of no consequence that the second and third respondents owned the said immovable property as tenants in common or that this is how they had shown their ownership in their income tax returns. We are, therefore, of the opinion that the High Court was in error in concluding that what had been sold by the second and third respondents to the first respondent was their equal share in the said immovable property, that the apparent consideration was, therefore, less than 25 lakhs and that, therefore, the provisions of Chapter XX-C would not apply. (Para 9)
       We should add that even if the agreement of transfer had been so drawn as to show the transfer of the equal shares of the second and third respondents in the said immovable property, our conclusion would have been the same for, looked at realistically, it was the said immovable property which was the subject of the transfer. (Para 10)
       We are of the opinion that the judgments of the Madras, Karnataka, Delhi and Calcutta High Courts referred to above are based on a wrong approach and are erroneous. We approve of the view taken by the Bombay High Court in Jodhram Daulatram Arora s case. (Para 11)
       Held, however, as we have pointed out, it was conceded before the High Court on behalf of the Revenue that all the relevant reports pertaining to the valuation of the said immovable property had not been disclosed to the respondents. We think, in these circumstances, that the matter should go back to the appropriate authority for hearing the matter afresh. It is not, therefore, necessary to deal with the finding of the High Court about perversity. (Para 12)
       Held finally : The appeal is allowed. The judgment and order under appeal is set aside. The matter is remanded to the appropriate authority. The Revenue shall make available to the respondents all the material, including reports, that it relied upon in regard to the valuation of the said immovable property. The appropriate authority shall then hear the parties afresh the pass an appropriate order. It shall do so without taking into account any observation of the High Court in the impugned judgment. In respect of the proceeding upon remand, no objection in regard to limitation may be raised. No order as to costs. (Paras 13 and 14)

JUDGMENT

Bharucha, J.-The Revenue is in appeal by special leave against the judgment and order of a Division Bench of the High Court of Gujarat. The judgment and order was passed on a writ petition filed by the first respondent in the following circumstances.

2. On 12th August, 1995, the second and third respondents entered into an agreement to sell to the first respondent immovable property situated in Ahmedabad for the sum of Rs. 47 lakhs. The appropriate authority of the Revenue came to the conclusion that the apparent consideration in respect of the said immovable property under the said agreement was less than the market value thereof by 15% or more. Accordingly, a notice dated 6th November, 1995 was issued to the respondents to show cause why the said immovable property should not be subject to pre-emptive purchase under Chapter XX-C of the Income Tax Act, 1961. The respondents showed cause, but the order of pre-emptive purchase was made by the appropriate authority. This order was challenged in the writ petition.

3. Before the High Court, it was contended that what had been transferred by the second and third respondents to the first respondent were their equal half shares in the said immovable property and that they owned such equal half shares was indicated in their income tax retuns and in the said agreement, which stated that the earnest money had been paid by two separate cheques to the second and third respondents. The High Court said, "There may be one agreement for transfer of property where the transferors may be co-owners or joint owners. It may be that the share of the transferor is not specified. It may happen that there may be one transferee or more than one. The question to be examined is whether the provisions of Chapter XX-C of the Act would be attracted or not in Andhra Pradesh High Court case where co-owners have agreed to transfer their property rights and each co-owner is to be paid an amount of consideration which is less than the amount specified, i.e., each co-owner transferor will get less than 25 lakhs as per the agreement." The High Court followed the judgment of the Madras High Court in K.V. Kishore & Anr. v. Appropriate Authority & Ors.1. It held that it was in the case before it clear that what was agreed to be transferred was the individual undivided share in the said immovable property and the value of each such share was less than Rs. 25 lakhs. The transferors were co-owners and each co-owner was getting an apparent consideration that was less than the limit prescribed, that is, less than Rs. 25 lakhs. The provisions of Chapter XX-C were not attracted even though the amount that all the co-owners received exceeded Rs. 25 lakhs. Before the High Court, it was not disputed on behalf of the Revenue that all the reports obtained by it in regard to the valuation of the said immovable property had not been supplied to the respondents. For that reason, the High Court came to the conclusion that the principles of natural justice had not been followed. The High Court characterized as perverse a finding of the appropriate authority in regard to the case of the first respondent that no unaccounted money had figured in the sale transaction. For all these reasons, the High Court quashed the order of pre-emptive purchase.s

4. In K.V. Kishore & Anr. v. Appropriate Authority & Ors. (supra) a learned Single Judge of the Madras High Court held, more or less on similar facts, thus :

"After giving deep consideration to these rival submissions, the following facts would clinchingly establish the case in favour of the petitioners. It is not denied or it is not disputed that the original allottee, A. Srinivasan, died in the year 1962. He being a Hindu, governed by the Hindu Succession Act, on his death, his wife and children acquired a vested right to the definite quantified shares in the property left behind by him. As owners of their respective shares, they were competent to enter into a family arrangement which th

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