IMPORTANT POINT
The order of Appropriate Authority in the proceedings arising under Chapter XX-C of Income Tax Act, 1961 was wrongly set aside by High Court. Hence the order made by High Court needs to be set aside and consequently to restore that of Appropriate Authority.

Headnote:Income Tax Act, 1961-Chapter XX-C-Particularly Section 269UD-Pre-emption by Income Tax Deptt. of proposed agreement to sell off immovable property-Agreement to sell 25, Friends colony west at Rs.1.75 crores -Show cause to pre-empt it on ground of under valuation-Supreme Court giving interlocutory order for sale by auction-Whether can be ignored by High Court? (No) Appeals allowed accordingly-Case law referred.
Held : This Court in Appropriate Authority & Anr. v. Sudha Patil (Smt.) & Anr., 1998 (8) SCC 237, held that merely because no appeal is provided for against the order of the Appropriate Authority directing the compulsory acquisition by the Government, the supervisory power of the High Court would not get enlarged nor can the High Court exercise an appellate power while examining the correctness of the conclusion arrived at by such tribunal. On the materials, if two views are possible, even then it would not be possible for the High Court to substitute its conclusion for that of the tribunal. It is trite to say that the proceedings arising under Article 226 of the Constitution is in the nature of judicial review and such review could be only in respect of the process of decision and not the decision itself. In the case on hand, the Appropriate Authority had adopted the comparison of the market sales approach considering the location of the property. The approach of the High Court that in cases where the property is a tenanted property and is being sold the Department cannot adopt the stand of invoking the provisions of Chapter XX-C may not be correct. Having given due deductions towards tenancy arising in respect of the property and on comparison with similar properties situated else where though not tenanted but after discounting for the tenancy if mode of valuation is adopted by the Department, the High Court could not have termed the same as illegal, irrational or arbitrary. The basis of the valuation had been disclosed to the party concerned in the show cause notice in sufficient detail. Even if other records such as the valuation reports were not disclosed or made available may not affect the decision itself. The non-supply of the valuation report itself may not be vital to the case. For in this case the Department has given the details of the report in the show cause notice itself which was issued and other materials having been made available to the party concerned, we do no think that there is justification for the High Court to interfere with the same on that ground. The grievance of the petitioners before the High Court was that not one of the methods but the combination of different methods of valuation such as comparative sales, cost or income or rent or developer s approach should have been adopted. The High Court, in fact, examined the facts, materials and the valuation report of the Appropriate Authority to come to the conclusion that the comparisons made were wrong or otherwise but that was not the procedure to be adopted as indicated in Sudha Patil s case (supra). Thus, the order made by the High Court needs to be set aside. Though, serious arguments have been advanced by the learned counsel appearing for the parties in this Court as to the mode of valuation, nature of the power under Chapter XX-C of the Act, scope of judicial review, the requirements to be taken note of in the valuation and large number of decisions are referred to, we do not think, there is any need for us to advert to the same for the principles stated therein are identical to what we have stated in the course of this order. There is one other factor which is very significant, namely, that this Court having allowed the auction of the property in question ending confirmation of the same and that order having become final, now to allow the order made by the Appropriate Authority to be set aside and to permit the parties to work out in appropriate proceedings for restitution of the property would lead to serious anomalous position. When the transferor without demur allowed the property to be sold pursuant to the orders of this Court and that sale having taken place and this Court having affirmed the same and the proceedings by way of SLP filed under Article 136 of the Constitution coming to an end as having become infructuous, the High Court could not have brushed aside that sale in the manner it has been done. The impact of such decision ought to have taken note of by the High Court. Indeed in K. Basavarajappa v. Tax Recovery Commissioner, Bangalore & Ors., 1996 (11) SCC 632 = 1996 (8) Supreme 366, this Court has held that an agreement to sell creates no interest in the property and in the absence of a decree of specific performance of an agreement even though authorised by the general power of attorney holder of the original owner of the property had no locus standi to move an application for setting aside the auction-sale on offer to deposit full tax dues. If we extend the said principle to the present facts, we find it hardly possible to come to the conclusion the High Court has arrived at. It is possible that the writ proceedings were still pending before the High Court but those writ proceedings were not at the instance of the owner of the subject property and the agreement holder did not have any interest other than that was indicated in the K. Basavarajappa s case. In that view of the matter, we do not think the High Court should have ignored the effect of the same. For the aforesaid reasons, we allow these appeals, set aside the order made by the High Court restore that of the Appropriate Authority in the proceedings arising under Chapter XX-C of the Act. No costs. (Paras 5 to 10)

JUDGMENT

Rajendra Babu, J.-In respect of property comprised in 25, Friends Colony West, New-Delhi [hereinafter referred to as the subject property ], an agreement was entered into to sell for a consideration of Rs. 1.75 crores on 1.2.1991. On 4.2.1991, the intended seller and the purchaser filed Form 37-I for issuance of "No Objection Certificate . However, on 18.4.1991, a purchase order was passed by the Appropriate Authority and on the same day, the owner of the land was directed to surrender the possession of the subject property. In that regard, a writ petition was preferred before the High Court and on March 1, 1993, that writ petition was allowed in the light of the decision of this Court in C.B. Gautam v. Union of India1. Subsequent to the decision in the said writ petition decided by the High Court a show cause notice had been issued disclosing the following facts:

"In the case of subject property, the apparent consideration is Rs. 1,75,00,000. The plot area is 3595.32 sq. mts. including 830.95 sq. mtrs. Declared as excess land under ULCR Act. The net plot area comes to Rs.3595.32 - 830.95 = 2764.37 sq. mtrs. If salvage value of Rs. 1,64,445 is considered, the achieved land rate works out to Rs. 1,75,00,000 - 1,64,445 = 1,73,35,555 divided by 2764.37 = Rs. 6271 per sq. mtr. We may compare the sale instance of property at 60, Friends Colony (East) which was agreed to be sold on December 5, 1990 for apparent consideration of Rs. 2.65 crores. If the depreciated value of structure of sale instance is taken at Rs. 11,60,000 the land rate per sq, mtr. works out to Rs. 2,65,00,000 (-) 11,60,000 = 2,53,40,000 divided by 1173.91 = Rs.21,586. If adjustment on account of time gap of +2%, side open + 10%, potential for basement + 10% in the sale instance and nearness to railway track - 5% and size of plot - 5% is taken into account, the rate per sq. mtr. works out to Rs. 24,180. This gives land value of subject property as Rs. 2764.37 x 24180 = Rs. 6.68 crores. In view of the fact that the subject property is tenanted, its value is deferred for 5 years at 8% interest and the present value would work out to Rs. 4.55 crores to which Rs. 1,64,000 salvage value is to be added. This brings value of the subject property to Rs. 4.564 crores which is 160% above the apparent consideration."

2. The intended transferor and the transferee raised several contentions before the Appropriate Authority for not proceeding with the said show cause notice. The principal ground is that the difference between the sale consideration and the fair market value does not exceed 15 per cent if the various circumstances surrounding the sale are taken note of. Even assuming that there is such a difference between the apparent sale consideration and the fair market value beyond 15 per cent it would not automatically prove that there was an under-valuation so as to attract the provisions of Section 269UD of the Income Tax Act, 1961 [hereinafter referred to as the Act ]. It was contended that the apparent sale consideration of the property in question is higher than the fair market value if determined by an appropriate norm, method or standard. There were several compelling circumstances set out in the affidavit filed by the transferor which existed under which the property was sold at Rs.1.75 crores considering the best/maximum price he could get for a tenanted property. Even otherwise, the facts would disclose that the transferor sold the property for Rs.1.75 crores particularly when he was getting a rental income of the property to the extent of Rs. 4,000 per month and he was residing in a tenanted (sic) (rented) house where he was paying about Rs. 8,000/- per month as rent and he had no other house in Delhi and no business premises wherein he could carry on his business and that he was also paying very heavily for more than Rs. 14,000/ per month as rent for the business premises and was in dire need of finances to carry on his business gainf

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2001 Supreme(SC) 1082

IMPORTANT POINTThe order of Appropriate Authority in the proceedings arising under Chapter XX-C of Income Tax Act, 1961 was wrongly set aside by High Court. Hence the order made by High Court needs to be set aside and consequently to restore that of Appropriate Authority.

Cases Referred (3)

IMPORTANT POINT
The order of Appropriate Authority in the proceedings arising under Chapter XX-C of Income Tax Act, 1961 was wrongly set aside by High Court. Hence the order made by High Court needs to be set aside and consequently to restore that of Appropriate Authority.