Back
1994 Supreme(All) 799
High Court of Allahabad
A.P. Misra & J.S. Sidhu, JJ.
Ashok Kumar Sood
Vs.
Deputy Commissioner of Income-Tax and other
Decided On : 17.11.1994
The pre-emptive purchase provisions of Chapter XX-C of the Income-tax Act do not confer an unfettered discretion on the appropriate authority and cannot be regarded as conferring arbitrary or unfettered discretion.
Headnote:
INCOME TAX - PRE-EMPTIVE PURCHASE - SECTION 269UD - UNDERVALUATION - MARKET VALUE - CONSIDERATION OF MATERIAL ON RECORD - REBUTTABLE PRESUMPTION - ILLEGALITY.
Fact of the Case:
The petitioner entered into an agreement to purchase a residential plot for Rs. 2,700,000, which comes to Rs. 4,600 per sq. metre. The Income-tax Officer issued a show-cause notice alleging undervaluation and proposed to exercise the right of pre-emptive purchase at Rs. 5,500 per sq. metre. The petitioner challenged the order, contending that the undervaluation was marginal and did not warrant pre-emptive purchase.
Finding of the Court:
The court held that the impugned order was illegal as the respondents failed to consider their own record of the market value arrived at by a team of engineers, which was Rs. 5,300 per sq. metre. The court also held that the undervaluation of 0.25% from 15% was not significant enough to constitute an attempt to evade tax.
Issues: 1. Whether the respondents' order for pre-emptive purchase was valid. 2. Whether the undervaluation of the property was significant enough to constitute an attempt to evade tax.
Ratio Decidendi: 1. The court held that the respondents' order was illegal as they failed to consider their own record of the market value arrived at by a team of engineers. 2. The court held that the undervaluation of 0.25% from 15% was not significant enough to constitute an attempt to evade tax.
Final Decision: The court quashed the impugned order and directed the respondents to pass a fresh order in light of the observations made by the court.
A.P. Misra, J.
1. Heard learned counsel for the petitioner and also the learned standing counsel for the Revenue. On the facts and in the circumstances of the case and also in view of the rules of the court, the present writ petition is being disposed of finally at the stage of admission after the exchange of affidavits.
2. The petitioner seeks the quashing of order dated May 12, 1993, annexure-4 to the writ petition by virtue of which respondent No. 1 has rejected the explanation given by the petitioner and applied the formula of Rs. 5,500 per sq. metre for fixing the price of the property of the petitioner.
The short facts of the case are that the petitioner entered into an agreement of sale with one Sri Sarv Kanwal Jit Singh, respondent No. 3, for purchasing a residential plot No. 209, measuring an area of 450 sq. metres. The total consideration as agreed between the parties for the said property was Rs. 2,700,000 which comes to Rs. 4,600 per sq. metre. In pursuance of the said agreement, an application was moved before the Income-tax Officer in Forms Nos. 34 and 37-I for getting the required permission. Thereafter, the petitioner was given a show-cause notice by respondent No. 1 stating that he has undervalued the property and, therefore, the Appropriate Authority, Lucknow, proposed to exercise a right of pre-emptive purchase in exercise of the powers as conferred by the Income-tax Act under Chapter XX-C. He further recited some exemplars on the basis of which conclusion was drawn that the market value of the property comes to Rs. 5,500 per sq. metre. Thereafter, the petitioner gave a detailed reply in which certain exemplars were also filed along with the site map repelling the citation of the show-cause notice. It was stated that the citation shown in the show-cause notice is situated just in front of a park and, therefore, their value naturally increases while the petitioner's plot does not have an advantageous position. However, as the vendors were in dire need of money and the petitioner was willing to pay him right through the entire amount at the time of the execution of sale deed. The contention is that exercise of pre-emptive right of purchase made by the respondents by means of the impugned order is illegal and is liable to be set aside. The contention is that even as per the record of the respondents the market value could only be Rs. 5,300 and if that be taken into consideration it would be marginally over 15 per cent. of the market value at which the petitioner (vendee) is purchasing hence the exercise of power is illegal and is liable to be set aside.
3. A preliminary objection has been raised on behalf of the Revenue by learned standing counsel relying on Rajata Trust vs. Chief CIT [1992] 193 ITR 220 (Kar). It is urged that a person who had entered into agreement for purchase of property is not a person interested. He cannot object to the purchase by the Central Government. It is not necessary to go into this as the Supreme Court in C.B. Gautam vs. Union of India [1993] UPTC 163; [1993] 199 ITR 530 has held:-
"Compulsory purchase under Section 269UD intending purchaser and intending seller must be given a reasonable opportunity of showing cause before an order for compulsory purchase is made."
4. Coming to the merits of the case, we find, in this case, before having recourse to passing an order under Section 269UD, the respondent has given opportunity to the petitioner by issuance of a show-cause notice dated May 3, 1993, annexure-3, to the writ petition. Hence, the petitioner cannot have any grievance in this regard. The only question remains whether the impugned order passed is valid or not. The respondents, while passing the impugned order dated May 12, 1993, had relied on the four exemplars quoted in the show-cause notice and arrived at the conclusion that the market value of the plot in question is Rs. 5,500 per sq. metre. On the other hand, the contention on behalf of the petitioner is that in or
