2008 (8) TMI 95 - HC - Income Tax

Appropriate authority without giving the petitioners an opportunity of being heard passed orders purchasing the property on behalf of the Central Government SCN issued less than a week before the last date on which final order could be passed - respondents could not take advantage of their own wrong in issuing the SCN belatedly respondents having pre-determined the issue the order is liable to set aside for violation of principles of natural justice

Summary

Issues Involved:
1. Exercise of the right of pre-emptive purchase by the Central Government under Section 269UD(1) of the Income Tax Act.
2. Validity of the order dated 30.3.1998 issued by the Central Government.
3. Application of the Supreme Court judgment in C.B. Gautam v. Union of India.
4. Interpretation of the time limit prescribed under Section 269UD(1) of the Income Tax Act.
5. Compliance with principles of natural justice.

Issue-wise Detailed Analysis:

1. Exercise of the Right of Pre-emptive Purchase:
The case revolves around the Central Government's exercise of the right of pre-emptive purchase under Section 269UD(1) of the Income Tax Act concerning "Rustom Villa," a residential building. The petitioners challenged the order issued on 30.3.1998.

2. Validity of the Order Dated 30.3.1998:
The petitioners argued that the order dated 30.3.1998 was barred by limitation as the period prescribed in C.B. Gautam expired on 28.2.1998. The respondents contended that the period was extended to three months due to an amendment effective from 1.6.1993. The court held that the amendment did not apply to the petitioners' case as the statement in Form 37-I was submitted before the amendment. Consequently, the show-cause notice dated 25.3.1998 and the final order dated 30.3.1998 were barred by limitation.

3. Application of the Supreme Court Judgment in C.B. Gautam:
The Supreme Court in C.B. Gautam mandated that an opportunity to show cause must be provided under Section 269UD(1) as a minimal requirement of natural justice. The court noted that the judgment in C.B. Gautam was a piece of judicial legislation and that the principles of statutory fiction could not be extended to judgments. The court emphasized that the time limit specified in C.B. Gautam of two months could not be construed as having been extended to three months.

4. Interpretation of the Time Limit Prescribed Under Section 269UD(1):
The court examined whether the legal fiction applicable to statutes could be extended to judgments. It concluded that legal fiction requires legislative authority and cannot be created by courts or administrative orders. The court held that the time limit of two months prescribed in C.B. Gautam could not be extended to three months by interpreting the amendment retrospectively.

5. Compliance with Principles of Natural Justice:
The petitioners were denied a reasonable opportunity to submit their objections as the show-cause notice was issued less than a week before the last date for passing the final order. The court observed that the respondents had predetermined the issue by enclosing the earlier order dated 16.2.1990 with the show-cause notice. The court held that the impugned order dated 30.3.1998 violated principles of natural justice and was liable to be set aside.

Conclusion:
The court quashed both the show-cause notice dated 25.3.1998 and the final order dated 30.3.1998, allowing the writ petition without costs. The judgment emphasized the necessity of adhering to the principles of natural justice and the statutory time limits prescribed under the Income Tax Act.