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IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR & VIBHU BAKHRU, JJ.
ANAND MEHTA & ANR. – Petitioners
Versus
UNION OF INDIA & ORS. – Respondents
W.P. (C) 2097/2013
Decided On : 03-06-2016
Public Auction - Property Sale - Income Tax Act, 1961, Section 269 UD (1A) - The court upheld the rejection of the petitioner's bid at a public auction for a property sale, citing the absence of a confirmed sale and the authority's right to reject bids. The court directed the Income Tax Department to refund the earnest money deposited by the petitioners with interest.
Fact of the Case:
The petitioners participated in a public auction for the sale of a property but their bid was rejected by the Income Tax Department. The petitioners sought confirmation of the sale in their favor, citing their readiness to pay the balance amount.
Finding of the Court:
The court found that the petitioners' bid was never confirmed, and therefore, they had no vested right to demand the property's transfer. The court upheld the rejection of the bid and directed the Income Tax Department to refund the earnest money with interest to the petitioners.
Issues: The main issue was the rejection of the petitioners' bid at a public auction and their demand for the property's transfer based on their bid.
Ratio Decidendi: The court relied on the legal principle that the acceptance of a bid and the deposit of earnest money do not constitute a concluded contract for the transfer of property. The court also emphasized the authority's right to reject bids and the absence of a confirmed sale in the petitioners' favor.
Final Decision: The court directed the Income Tax Department to refund the earnest money deposited by the petitioners with interest, as their bid was rejected and the sale was never confirmed in their favor.
S. MURALIDHAR, J.
1. Mr. Anand Mehta and Mr. Deepak Mehta have filed this writ petition against the Union of India, through the Ministry of Finance, Department of Revenue (Respondent No. 1), the Central Board of Direct Taxes (CBDT) (Respondent No. 2), the Chief Commissioner of Income Tax-II (CCIT), New Delhi (Respondent No. 3) and the Appropriate Authority, Income Tax Department (ITD) (Respondent No.4), seeking directions to the Respondents to perform and complete all the requisite formalities to confirm the sale of property at No. 27, Bazar Lane, New Delhi-110001 (hereafter referred to as the property in question) in favour of the Petitioners.
Background facts
2. The background facts are that one Mr. Raghbir Singh, a resident of Model Town, Ludhiana, decided to acquire a residential property in Delhi on ownership basis. He approached Smt. Vidyawati and her sons for that purpose. Smt. Vidyawati owned the property in question having acquired it under a registered Gift Deed in October, 1950. Initially Mr. Raghbir Singh negotiated to purchase the right, title and interest in the whole of the terrace floor with mumty over the ground floor together with 50% undivided share in the plot of land at a total consideration of Rs. 3. 25 lakh.
3. Accordingly, an Agreement to Sell was entered into on 11th July, 1992 between Mr. Raghbir Singh on the one hand and Smt. Vidyawati and her sons on the other. There was some delay in Smt. Vidyawati discharging her obligations. Further negotiations between the parties aimed at selling the entire property to Mr. Raghbir Singh were not successful. Instead Smt Vidyawati offered the rear portion to Mr. Raghbir Singh for a total consideration of Rs. 7.50 lakh and in acceptance thereof he had paid Rs. 3 lakh to Smt. Vidyawati.
4. However with Smt. Vidyawati again defaulting in performing her obligation to sell the rear portion, Mr. Raghbir Singh filed Suit No. 1209/1993 in this Court praying for a perpetual and mandatory injunction. A settlement was entered into between the parties in the pending suit in terms of which Smt. Vidyawati agreed to sell the entire property to Mr. Raghbir Singh for Rs. 56.50 lakh subject to adjustment of Rs. 9.25 lakh already paid by Mr. Raghbir Singh. By an order dated 4th March 1994, the parties were directed by the Court to obtain clearances from the Land and Development Officer (L&DO) and the ITD.
Application before the Appropriate Authority
5. In terms of the above order Mr. Raghbir Singh filed an application on 20th May, 1994, before Respondent No.4 under Chapter XX-C of the Income Tax Act, 1961 (the Act) in Form No. 37-I seeking clearance for the purchase of the property in question along with the Agreement to Sell dated 10th May, 1994. Meanwhile an appeal filed by Smt. Vidyawati was dismissed by the Division Bench of this Court on 28th April, 1994. In the statement filed by Smt. Vidyawati and her children before Respondent No.4, the apparent consideration for the property in question was shown as Rs. 56.50 lakh.
6. On 8th August, 1994, Respondent No.4 issued a show cause notice (SCN) under Section 269 UD (1A) of the Act to Mr. Raghbir Singh as well as Smt. Vidyawati and her children. The SCN stated that the apparent consideration of the property in question was understated. The SCN referred to a sale of a property at Hanuman Road, New Delhi measuring 493.40 sq.m, for Rs. 1.60 crore in terms of an Agreement dated 14th March, 1993. After making adjustment to the sale price, accounting for a time gap of 14 months and for FAR, the fair market value of the property in question was arrived at Rs. 73,72,000 which was 30.47% above the apparent consideration of Rs. 56.50 lakh. The SCN, therefore, gave an opportunity to the parties of being heard and to show cause why a pre-emptive purchase order under Section 269 UD (1) of the Act should not be passed.
Order of pre-emptive purchase
7. After hearing the purchaser Mr. Raghbir Singh, Respondent No.4 passed an order under S
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