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1997 Supreme(Cal) 487
High Court Of Calcutta
SAMARESH BANERJEE
VYSYA BANK LTD. - Appellant
Versus
APPROPRIATE AUTHORITY OF INCOME-TAX - Respondent
C. O. 12142 (W) Of 1994
Decided On : 12/24/1997
A.SARKAR, Bhaskar Gupta, D.ROY, J.P.KHAITAN, M.SEAL, P.Jalan, P.K.PAL, R.N.BAJORIA, S.TALUKDAR
Headnote:
INCOME TAX - Chapter XXC - Pre-emptive purchase of immovable property - Order passed by appropriate authority under Section 269ud - Violation of principles of natural justice - Denial of reasonable opportunity of hearing and violation of the principles of natural justice would make the entire proceedings and the order passed therein void and without jurisdiction - Appropriate authority exercised the power under the provisions of the Act not for merely finding out what should be the proper market value of the property in question, but for the purpose of finding out whether any attempt has been made to undervalue the property for the purpose of evading tax - Mere undervaluation simpliciter, therefore, is not enough - Order for compulsory purchase of immovable property under the provisions of Section 269ud requires to be supported by reasons in writing and such reasons must be germane to the object for which Chapter XXC was introduced, namely, to counter attempts to evade tax - Appropriate authority proceeded mechanically for the purpose of finding out whether the fair market value is more than 15 per cent. or higher than the apparent consideration - Appropriate authority while exercising the power under Section 269ud of the Income-tax Act is, therefore, required to keep in mind the aforesaid principles of law laid down by the Supreme Court while examining the material produced by the vendor or the vendee for the purpose of rebutting the presumption which is raised on issuing of the show-cause notice for the purpose of finding out whether there has been a real attempt of tax evasion - Appropriate authority has no further jurisdiction to exercise such power of pre-emptive purchase after the expiry of the period of three months - Vendor is not entitled to interest on the balance amount of consideration money.
Fact of the Case:
The petitioner-bank for the purpose of providing residential accommodation to its officers entered into two agreements with respondent No. 7, Delight Housing Corporation, for purchasing 16 flats which were under construction at premises No. 250, Netaji Subhas Chandra Bose Road, Tollygunj, Calcutta 47. The appropriate authority issued a show-cause notice dated July 15, 1994 (annexure "d" to the first writ petition), alleging that the fair market value of the property on the date of agreement works out to more than 15 per cent, above the apparent consideration and directing the petitioner to show cause as to why the property should not be purchased by the Central Government under the pre-emptive right under Section 269ud (1) of the Income-tax Act on the apparent consideration. The petitioner submitted its reply to the show-cause notice by letter dated July 21, 1994, being annexure "e" to the writ petition contending, inter alia, that the apparent consideration is in consonance with the fair market value of the property ; that the property is being purchased for accommodating the officers of the bank who came to Calcutta for transfer from other branches free of charge and as the bank has entered into an agreement with respondent No. 7 to purchase a number of flats together which were situate away from the main road the same could be obtained by the petitioner at a comparatively cheaper rate. Various other factors were indicated in the said reply on the basis of which according to the petitioner the apparent price is quite reasonable. Similar show-cause notice was also issued to respondent No. 7 who replied to the same giving reasons for justification of the reasonableness of the apparent consideration. In the show-cause notices the respondents never disclosed the reasons for coming to the tentative conclusion nor any materials relied upon by the respondents were disclosed in the show-cause notice or along with the same.
Finding of the Court:
The impugned orders passed in both the cases as well as the entire proceedings are vitiated and the same are liable to be quashed. The appropriate authority has no further jurisdiction to exercise such power of pre-emptive purchase after the expiry of the period of three months. The vendor is not entitled to interest on the balance amount of consideration money.
Issues: Whether the appropriate authority violated the principles of natural justice in passing the impugned order?
Ratio Decidendi: The appropriate authority exercised the power under the provisions of the Act not for merely finding out what should be the proper market value of the property in question, but for the purpose of finding out whether any attempt has been made to undervalue the property for the purpose of evading tax. Mere undervaluation simpliciter, therefore, is not enough. Order for compulsory purchase of immovable property under the provisions of Section 269ud requires to be supported by reasons in writing and such reasons must be germane to the object for which Chapter XXC was introduced, namely, to counter attempts to evade tax. Appropriate authority proceeded mechanically for the purpose of finding out whether the fair market value is more than 15 per cent. or higher than the apparent consideration.
Final Decision: Both the writ applications succeed. The impugned orders of pre-emptive purchase passed by the appropriate authority dated July 29, 1994, and September 28, 1994, passed in each of the proceedings, is hereby set aside. The appropriate authority is directed to issue the requisite "no-objection certificate" by January 31, 1998. The possession of the flats which is now with respondent No. 7 shall also be handed over to the writ petitioners by respondent No. 7 on payment of the balance amount of the consideration money. Respondent No. 7 will also furnish accounts to the writ petitioners relating to cost incurred by respondent No. 7 towards maintenance of such flats possession of which is handed back to respondent No. 7 under the order of the court and towards payment of municipal taxes and the writ petitioners shall pay such amount to respondent No. 7 within the month from the date of furnishing such accounts. Both writ applications are thus disposed of. There will be no order as to costs.
( 1 ) IN both the writ petitions, which have been heard analogously, the petitioner-bank has challenged an order passed by the Appropriate Authority of Income-tax, Calcutta, under Section 269ud (1) of the Income-tax Act, 1961.
( 2 ) AS it appears from the pleadings, the petitioner bank for the purpose of providing residential accommodation to its officers entered into two agreements with respondent No. 7, Delight Housing Corporation, for purchasing 16 flats which were under construction at premises No. 250, Netaji Subhas Chandra Bose Road, Tollygunj, Calcutta 47. One agreement was for purchasing eight flats on the first and second floor on the super built up area basis for a total consideration of Rs. 39,10,130, and for car parking space which was entered between the parties on April 21, 1994. 25 per cent, of the consideration, namely, Rs. 9,96,282. 50, was paid at the time of execution of the first agreement and further sum of Rs. 25,00,000 was paid leaving a balance of Rs. 4,86,847. 50 and the possession of the said eight flats was also given to the bank.
( 3 ) THE said agreement is the subject-matter of the first Writ Petition No. C. O. 8664 (W) of 1994. The agreement for purchasing the remaining eight flats on the third and fourth floor and car parking of the said building was entered into with respondent No. 7 on May 27, 1994, which provided for a total consideration of Rs. 39,10,130 out of which the petitioner paid a sum of Rs. 9,77,532. 50 being 25 per cent, of the total consideration on the date of execution and the balance sum of Rs. 27,37,091 was payable in two instalments at the time of taking possession and Rs. 1,95,506. 50 was payable at the time of conveyance. Possession of the said flats, however, was not given to the petitioner. The said agreement is the subject-matter of the second writ petition being C. 0. No. 12142{w) of 1994.
( 4 ) IN terms of the requirement of Chapter XXC of the Income-tax Act, the petitioner and respondent No. 7 filed Form No. 37-1 in respect of the agreement dated April 21, 1994, and officers of respondent No. 1 inspected the premises and required copies of various documents which were duly submitted by the petitioner and respondent No. 7.
( 5 ) RESPONDENT No. 1 thereafter issued a show-cause notice dated July 15, 1994 (annexure "d" to the first writ petition), alleging that the fair market value of the property on the date of agreement works out to more than 15 per cent, above the apparent consideration and directing the petitioner to show cause as to why the property should not be purchased by the Central Government under the pre-emptive right under Section 269ud (1) of the Income-tax Act on the apparent consideration. The petitioner submitted its reply to the show-cause notice by letter dated July 21, 1994, being annexure "e" to the writ petition contending, inter alia, that the apparent consideration is in consonance with the fair market value of the property ; that the property is being purchased for accommodating the officers of the bank who came to Calcutta for transfer from other branches free of charge and as the bank has entered into an agreement with respondent No. 7 to purchase a number of flats together which were situate away from the main road the same could be obtained by the petitioner at a comparatively cheaper rate. Various other factors were indicated in the said reply on the basis of which according to the petitioner the apparent price is quite reasonable.
( 6 ) THE officers of the petitioner also appeared before respondent No. 1 at the hearing which first took place on July 22, 1994, in the course of which the petitioner was asked to produce material of any sale transaction in the concerned area and, accordingly, the petitioner after ascertaining the same communicated the same by its letter dated July 23, 1994.
( 7 ) SIMILAR show-cause notice was also issued to respondent No. 7 who replied to the same giving reasons for justification of
