The main legal point established in the judgment is that the competent authority must have valid reasons and must adhere to procedural requirements before initiating proceedings under section 269C of the Income Tax Act, 1961, and that the proceedings must be conducted in accordance with principles of natural justice.

N.K. Jain, J.

1. Petitioner, by this petition under article 226/227 of the Constitution of India, seeks issuance of appropriate writ to quash proceedings initiated by respondent No. 2, Inspecting Assistant Commissioner of Income Tax, Acquisition Range Bhopal under section 269C of the Income Tax Act, 1961 (hereinafter referred to as 'the Act').

2. Right at the threshold it may be noted that the petitioner has come at the stage of issuance of show-cause notice. As a general rule this court does not interfere at that preliminary stage of issuance of notice and the notice is left free to contest the notice before the authority concerned and seek other remedies by way of appeal and revision, etc., as may be available under the law. However, in the instant case, what is challenged is the very jurisdiction of the competent authority to issue the impugned notice. Further, the way and manner in which proceedings in the case have been conducted by the successive competent authorities, also call for judicial review of those proceedings by this court under article 227.

3. A few relevant facts as unfolded by the pleadings and the documents of the parties are these : Petitioner along with three others namely. Tulsiram Khandelwal, Smt. Ratanbai Khandelwal and Krishna Khandelwal, on 31-10-1980, purchased a house No. 22/3, South Tukoganj, Street No. 1, Indore, from Haji Gularn Ali and his sons for an apparent consideration of Rs. 13.25 lacs through a registered sale deed (Annexure P/1). The sale deed though executed on 31-10-1980, was registered on 1-11-1980. Respondent No. 2 the Competent Authority-appointed by the Central Government under section 269B of the Act, on 23-7-1981, drew up a preliminary notice (Annexure P/3, under sub-section (1) of section 269 and got it published in the Gazette of India on 22-8-1981 (vide Annexure P/2), thus initiating action for acquisition of the aforesaid house under Chapter XX-A of the Act. From this notice it transpires that the competent authority was of the view that the apparent consideration stated in the sale deed was less than the fair market value of the property and that the parties to the transaction have not truly stated the amount of consideration for which the sale was actually made, with a view to evade tax liability . It is from this stage that the proceedings of the case made a curious reading. Having drawn up and published the notice in the Official Gazette on 23-7-1981 and 22-8-1981, the competent authority seemed to have put the case under hibernation for a long period of five years and it was only on 22-8-1986, that notices, as contemplated under sub-section (2) of section 269D, were issued to the transferors and transferees and served on the petitioner on 28-8-1986. The petitioner filed his reply (Annexure P/4) to the notice on 3-9-1986. The matter was heard finally. The petitioner also submitted his written arguments (Annexure P/5) on 30-10-1986. The hearing of the case was thus concluded in October, 1986, but, interestingly, the case file was again sent on long holiday for more than 41/2 years. The file was reopened in May, 1991 and a fresh notice for hearing of the case was issued to the parties on 10-5-1991 (vide Annexure P/6). It is on receipt of this notice that the petitioner has approached this court under article 226/227 of the Constitution seeking quashment of the entire proceedings, inter alia, on the grounds :

(i) that the proceedings are without jurisdiction inasmuch as the competent authority has not, before issuing/publishing notice under sub-section (1) of section 269D, recorded his reasons for doing so as mandated under the two provisos to sub-section (1) of section 269C.

(ii) that no notice under sub-section (2) of section 269D could legally be issued to the petitioner after a lapse of 5 years being contrary to the scheme and the spirit of the law and also violative of the principles of natural justice; and

(iii) that while hearing arguments and concluding the same in O