IMPORTANT POINT
If there are loopholes or lacunae in the process of reasoning adopted by appropriate authority in determining market value by any method in reaching the conclusion as in the present case i.e. the tenanted property would be vacated soon, the High Court can interfere within the limited scope of Article 226 of the Constitution and Supreme Court will not disturb it under Article 136 appeal.

Headnote:Income Tax Act, 1961-Chapter XX-C-Constitution of India-Articles 226 and 136-Agreement to sell property No. G-4, Maharani Bagh, New Delhi for Rs. 79 lakhs-Show cause by Income Tax Authority to acquire being under valued-Appropriate Authority determines Markets value-Various methods-Comparative sub method or the capitalisation of result-Writ petition-High Court holding action of appropriate action is incorrect-Appeal to Supreme Court-Whether High Court could do so U/A 226 jurisdiction? (Yes)-Appeal dismissed-Case law referred.
Held : The High Court took the view that there is nothing on record to suggest as to what were the special reasons for making a purchase order in respect of wholly tenanted property. Even assuming that there was some justification for the authority to initiate proceedings for the pre-emptive purchase of the property under Chapter XX-C of the Act, the method of valuation of the fair market value had to be just and reasonable. The authority has compared the values of incomparable properties. While considering comparable instances, the instances of tenanted properties had to be taken into consideration and not vacant properties by discounting without any factual or legal basis. While the agreement in relation to property at Maharani Bagh had been entered into in June 1991, the agreement for the property in question was entered into on July 1, 1993. Therefore, there is no basis for adding 24% on the hypothetical basis that there would be increase of 1 per cent every month. In respect of tenancy, the plea taken before the High Court is that the purchaser had mutual terms to get the property vacated from the tenant. While the ground floor tenancy was from the year 1979 and the first floor tenancy was from the year 1967, there is hardly any justification to presume that the tenants would vacate in 5/6 years. The sale instance in respect of property comprises in Section 39-A, Panchsheel Park, which was substantially tenanted without any justification, was not taken into consideration, though rent capitalisation method was applied in that case. Why in respect of one tenanted property rent capitalisation method was applied to work out the fair market value and in the other case land and building method was applied is not clear. It is on this basis the High Court allowed the writ petition before it. It is no doubt true that the scope of interference under Article 226 of the Constitution is very limited, but that is only in the nature of a judicial review of the proceedings and not by way of appeal or revision where the scope of interference is much wider. In cases of the present nature where several methods are available for finding out the value of the property and if one or the other method is adopted by the Department and that may be reasonable, it may not call for any interference. However, if there are loopholes or lacunae in the process of reasoning adopted by that authority in reaching the conclusion as in the present case that the tenanted property would be vacated soon or that the property is close to the vicinity of the situation of the subject property if compared, adopting different methods of valuation, then the parties who appear before the authorities will definitely have a reason to have a heart burn. If one method of valuation is adopted and benefit is given to one party and why that method is not adopted in the other case to reach the conclusion the other way is not clear and in our opinion it is unjustifiable. If in this background the High Court examined the matter and arrived at a conclusion one way or the other, we do not think it is necessary for us to interfere with that finding in a proceeding arising under Article 136 of the Constitution. Hence these appeals shall stand dismissed. No costs. (Paras 4, 5, 6 and 7)

JUDGMENT

Rajendra Babu, J.-The property comprised in No. G-4 (Old No. C-62), Maharani Bagh, New Delhi on a plot measuring about 800 sq. yards was agreed to be sold pursuant to an agreement dated July 1, 1993 for a sale consideration of Rs. 79 lakhs. The property consists of two floors - ground and the first - and is in occupation of the tenants. The agreement provided for symbolic delivery of the possession while it was open to the purchaser to make use of the portion over the roof on the first floor. A application in Form 37(I) was filed Subject property 1st sale instance

Sale agreement Apparent sale Declared land rate works Sale deed dated 9.7.93 consideration out at Rs. 21,821 per sq. 25.6.91, 24 months mt. Value to be increased earlier sale agreement at 1% per month for 24 months 24%

Has no basement 10% to be Thus value to be added is deducted 14% (24%-10%) if 14% is added the land rate of subject property would come to

Rs. 21,821 x 14%

Rs. 24,875 or 25,000 per sq. mt.

Value of land Rs. 1.30 crores

Depreciated value of the structure Rs. 9,35,758

Total value of the subject property Rs. 1,39,33,758

The property is Depreciated value for 6 tenanted years at 8% is calculated Rs. 87,78,267 at : (Rs. 1,39,33,758 x. 63)

(a) Thus the value of the subject property is Rs. 87,78,267

(b) To this rent for 6 years is added Rs. 1,42,092

Has barsati Has no barsati potential of the potential area is 149.90 Rs. 37,27,500 sq. mts

This is 58% more than the apparent consideration of the subject property (Rs. 79,99,390)

Subject property D-18 (known as 2nd sale instance 1-15), Maharani

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2001 Supreme(SC) 1049

Cases Referred (2)