The main legal point established in the judgment is that the competent authority must have valid reasons and record them in writing before initiating proceedings under Section 269C of the Income-tax Act, 1961. Additionally, the court emphasized the importance of adhering to the principles of natural justice in conducting such proceedings.

N.K. Jain J.

1. The petitioner, by this petition under Article 226/227 of the Constitution of India, seeks issuance of an appropriate writ to quash the proceedings initiated by respondent No. 2--Inspecting Assistant Commissioner of Income-tax, Acquisition Range, Bhopal--under Section 269C of the Income-tax Act, 1961 (for short "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 noticee 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 :

4. The petitioner along with three others, namely, Tulsiram Khandelwal, Smt. Ratanbai Khandelwal and Krishna Khandelwal, on October 31, 1980, purchased a house No. 22/3, South Tukoganj, Street No. 1, Indore, from Haji Gulam Ali and his sons for an apparent consideration of Rs. 13.25 lakhs through a registered sale deed (annexure P/1). The sale deed though executed on October 31, 1980, was registered on November 1, 1980. Respondent No. 2-the competent authority-appointed by the Central Government under Section 269B of the Act, on July 23, 1981, drew up a preliminary notice (annexure P/3) under Sub-section (1) of Section 269D and got it published in the Gazette of India on August 22, 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 make curious reading. Having drawn up and published the notice in the Official Gazette on July 23, 1981, and August 22, 1981, the competent authority seemed to have put the case under hibernation for a long period of five years and it was only on August 22, 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 August 28, 1986. The petitioner filed his reply (annexure P/4) to the notice on September 3, 1986. The matter was heard finally. The petitioner also submitted his written arguments (annexure P/5) on October 30, 1986. The hearing of the case was thus concluded in October, 1986, but, interestingly, the case file was again sent on a long holiday for more than 4 1/2 years. The file was reopened in May, 1991, and a fresh notice for hearing of the case was issued to the parties on May 10, 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 subsection (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 five years, being contrary to the scheme and the spirit of the law and also violative of the principles of