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2019 (7) TMI 1501 - HC - Income TaxAcquisition of property by central government - order u/s 269UD - petitioner submitted that since the Government did not pay the apparent sale consideration to the original owner the land would revest in him - HELD THAT - Under Section 269UE(1) of the Act upon the Appropriate Authority passing an order u/s 269UD(1) the land would vest in the Government. The question of payment or tendering the sale consideration would arise later. Since the vesting had taken place before payment of sale consideration the legislature advisedly provided in Section 269UH for revesting of the land in the owner if sale consideration or part thereof was not paid or tendered within the time prescribed. The original purchaser had conveyed his willingness to withdraw the petition and obtain vacant and peaceful possession from the tenants and handover the same to the Department upon release of the consideration of Rs. 1.40 Crores. The Department accepted such proposal under letter dated 15.7.1997 stating that there would be no objection to making such payment if the owner is ready to handover peaceful vacant possession of the land in question. However nothing materialized out of this correspondence. The concept of revesting of the property in the original owner upon the Department failing to tender or deposit the apparent sale consideration cannot be applied in the present case. We cannot lose sight of the fact that the Department has also contributed substantially to this complication. It is an agreed position that after passing the order u/s 269UG the Department took no further steps to safeguard its interest in the land. In the property records there was no indication of the land having vested in the Government. No claim no charge no interest of the Government was recorded in the property records. The least that the Department could have done was to have its name entered in the property records. No doubt that the petitioner society or its members do not have any legal title to the land in question. The erstwhile owner upon being divested of his title could not have passed on any valid title in the developer and in turn the developer could not have passed valid title to the petitioner society. Despite this particularly looking to the inaction on the part of the Income Tax Department in safeguarding its rights in the property by having the appropriate entries made in the property records we are of the opinion that some conciliation has to be found. We would therefore request the CBDT to sympathetically examine these facts and take appropriate decision in terms of its powers u/s 119(2). If the Department had auctioned the property soon after it was acquired u/s 269UD the Department could have reasonably expected to take an additional sum of Rs. 24, 36, 000/- over and above the base figure of Rs. 1.40 Crores which would in any case be paid over to the original owner and the prospective purchasers in their respective shares. Thus the Department would have earned a profit of Rs. 24.36 Lakhs. We have noticed that as per the sale agreement dated 18.7.1994 the purchasers had paid sum of Rs. 14 Lacs to the owner. This amount shall also have to be accounted for since the same must be returned to them. Therefore if the petitioner society agrees to pay a sum of Rs. 39 Lakhs (which would comprise of Rs. 25 Lakhs to be retained by the Department rounded off from Rs. 24.36 Lakhs and Rs. 14 Lakhs to be refunded to the heirs of original purchases) along with simple interest @ 8% p.a. from the date of the order dated 21.10.1994 till actual deposit and a further sum of Rs. 10 Lakhs to the Department (without interest) towards cost of litigation and other costs in our opinion the CBDT should consider whether the ownership of the petitioner society and the possession of the residential units by the members of the society can be regularized. For such purpose the proceedings be placed before the CBDT. If the petitioner society is agreeable to deposit the amounts mentioned above it may indicate the same to the CBDT within a period of four weeks from today. Such declaration would be accompanied by a formal request for regularization of the ownership and possession. The CBDT would dispose of such application preferably within four months of its receipt. If the petitioner do not show such willingness the petition would automatically be dismissed. Original purchasers and / or their heirs must receive a sum of Rs. 14 Lacs they had paid to the owner way back in July 1994. Therefore if the CBDT accepts the request of the society mentioned in the previous paragraph from the amount that the society may deposit with the Income Tax Department the original purchasers and their heirs may be paid over a sum of Rs. 14 Lacs with interest. If the petitioner society does not show willingness to deposit such amount this attempt to find solution will in any way fail and in such circumstances out of the amount of Rs. 1.40 Crores deposited by the Government of India with the Appropriate Authority a sum of Rs. 14 Lacs would be paid over to them with accrued interest. This would be done after due verification of their identity. It would not be necessary to pay any amount to erstwhile owner since he has clearly defrauded the Department as well as indirectly the members of the petitioner society.
Issues Involved:
1. Ownership and title of the land. 2. Validity of the order passed under Section 269UD of the Income Tax Act, 1961. 3. Rights of the Cooperative Housing Society as bona fide purchasers. 4. Actions and inactions of the Income Tax Department. 5. Possible conciliation and resolution. Issue-wise Detailed Analysis: 1. Ownership and Title of the Land: The Cooperative Housing Society claims ownership of the land on which a residential complex is constructed. The Income Tax Department claims ownership of the land by virtue of Section 269UE of the Income Tax Act, 1961. The original owner had agreed to sell the land to prospective purchasers, but the Appropriate Authority under the Act passed an order under Section 269UD, stating that the fair market value was higher than the declared sale consideration. Consequently, the land vested in the Government. 2. Validity of the Order Passed Under Section 269UD: The Appropriate Authority passed an order on 21.10.1994 under Section 269UD, determining that the fair market value of the property was higher than the sale consideration. This order was challenged but later dismissed as the petitioners were not interested in pursuing it further. The Cooperative Housing Society, not being a successor in title or a legal heir of the original petitioners, lacks the locus standi to challenge this order. 3. Rights of the Cooperative Housing Society as Bona Fide Purchasers: The Society claims to be bona fide purchasers without notice, having invested in residential units constructed by M/s. N.I. Developers. However, since the land had vested in the Government in 1994, the original owner had no authority to execute a development agreement in 2004. The Society, therefore, does not have any legal title to the land. 4. Actions and Inactions of the Income Tax Department: The Department did not take steps to safeguard its interest in the land after the order under Section 269UD. No entry of the Government's interest was made in the property records, allowing the original owner to fraudulently execute a development agreement. This inaction contributed to the complications faced by the Society. 5. Possible Conciliation and Resolution: Considering the Department's inaction and the Society's status as bona fide purchasers, a conciliation is proposed. The Society may agree to pay a sum of Rs. 39 Lakhs (comprising Rs. 25 Lakhs to the Department and Rs. 14 Lakhs to the heirs of the original purchasers) along with simple interest and a further sum of Rs. 10 Lakhs towards litigation costs. If the Society agrees, the CBDT should consider regularizing the ownership and possession of the residential units. If the Society does not agree, the petition will be dismissed. Conclusion: The Society lacks legal title to the land, and the original owner had no authority to execute the development agreement. However, due to the Department's inaction, a conciliation involving payment by the Society is proposed to resolve the matter. The CBDT is requested to sympathetically consider this proposal. The petition is disposed of with these directions.
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