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TMI Blog2012 (1) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... chase the rights, title and interest in the whole of the terrace floor with mumty over the ground floor in the residential building owned by Vidyawati. These rights were to be acquired by him together with 50% undivided share in the plot of land underneath the building. The total consideration was Rs. 3,25,000/-. An agreement to sell was accordingly entered into on 11.7.1992 between the petitioner on the one hand and Vidyawati and her sons on the other. 2. The petitioner thereafter paid the consideration of Rs.3,25,000/- undertaken to be paid by him to Vidyawati. It is claimed that she delivered vacant possession of the terrace floor in part performance of the agreement and undertook to execute and register the sale deed in favour of the petitioner and also to obtain all requisite permissions from the authorities. It is alleged that there was some delay by Vidyawati in discharging her obligations under the agreement to sell. At one point of time it appears that Vidyawati and her sons had offered to sell the entire property to the petitioner for a total consideration of Rs.53,50,000/-. However, this did not materialise. Instead, Vidyawati offered the rear side portion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 10.12.1993. After noticing the course of events and the various negotiations and settlements agreed upon between the parties the Division Bench dismissed the appeal by order dated 28.04.1994. Vidyawati then filed an application before the Single Judge under Sections 152 and 153 of the CPC and in the course of the proceedings before the learned Single Judge submitted that the agreement to sell between them and the petitioner had been executed, that the provisions of Chapter XX-C of the Act were complied with and the permission to sell the property was expected to be received within two months. They also stated that public notice regarding the loss of original title deed in respect of the property had already been issued. Thus, the litigation between the parties came to an end. 6. As already noted, on 20.5.1994, a statement to the appropriate authority was filed in Form-37 I under Section 269 UC of the Act by the petitioner. The statement was also signed by the transferors namely, Vidyawati and her children. In the statement the "apparent consideration" for transfer of the property was shown at Rs.56,50,000/-. On 8th August, 1994, the appropriate authority issued show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority the sale consideration of Rs.56,50,000/- did not represent the fair market value of the property and was too low. They referred to a similar property located at No.20, Hanuman Road, New Delhi which was sold for Rs.1,60,000,00/- on 14.3.1993 and observed that after making appropriate adjustments to the same for time difference and FAR, the fair market the value of the property at No.27, Bazar Lane, Bengali Market, New Delhi came to Rs.73,72,495/- as against the sale consideration of Rs.56,50,000/- and since the difference between these two figures was 30.48%, the conditions of Section 269UD were satisfied. Accordingly, the appropriate authority ordered the purchase of the property for an amount equal to the sale consideration stated in the document. 10. On receipt of the order passed by the appropriate authority under Section 269 UD(1), the petitioner moved an application dated 13.9.1994 before the said authority under Section 269 UJ of the Act which provides for rectification of mistakes apparent from the record in the order of the appropriate authority. There was also another application filed by him before the appropriate authority pointing out certain errors in the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94. 13. The appropriate authority considered the claims raised by the petitioner in the aforesaid two letters and after giving the transferors as well as the petitioner an opportunity of being heard on 6.10.1994 held that there was nothing on record to suggest that there was an agreement to sell entered into between the parties in June, 1992 for the purchase of the entire property for Rs.56,50,000/-, and even assuming that there was such an agreement, it was never acted upon and was superseded by another agreement to sell dated 11th July, 1992 for the transfer of the terrace floor only. It was held that merely because the assessee had claimed to have paid Rs.9,25,000/- up to 14.11.1992, it does not go to prove conclusively that there was any agreement to sell for the entire property in June, 1992. It was pointed out by the appropriate authority that the reason for the petitioner making a payment of Rs.3,00,000/- in cash to the transferors on 4.6.1992 was not known. As regards the claim of the petitioner for deduction of 15% from the value arrived at by the appropriate authority on account of situation and potentiality differences and another 15% for litigation and title def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e difficult which is also a negative factor to be taken into account, but ignored by the appropriate authority; (e) In the case of C.B.Gautam v. Union of India, (1993) 199 ITR 530 it was held by the Supreme Court that there has to be a finding of understatement of the sale consideration and the said finding should be recorded in order to justify the pre-emptive purchase of the property under Chapter XXC of the Act. There is no such finding of understatement in the present case. The impugned order is bad in law for this reason alone. 16. On behalf of the appropriate authority and the Income Tax Department who are respondent Nos. 1 and 2 in the writ petition, it was contended by the learned standing counsel that in C.B.Gautam's case (supra) the Supreme Court only envisaged an opportunity to be given to the parties likely to be affected by the preemptive purchase and it was not laid down that it was incumbent upon the appropriate authority to show, as a fact, that there was understatement of the sale consideration. The submission, therefore, is that the absence of a definite finding of understatement of the sale consideration in the impugned order does not make it bad in law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters through mediation. However, after some attempts it was reported to us that they failed and the parties could not reach any consensus. 19. On a careful consideration of the matter in the light of the facts and the rival contentions, we are not able to accept the submissions of the petitioner. The first contention of Mr. Syali, ld. senior counsel for the petitioner, that the appropriate authority has ignored the encumbrances, suits and disputes with regard to the subject property while determining the fair market value thereof at the figure of Rs.73,72,495/- is without merit. It has to be noted that the disputes and suits in this case were between the transferors and the petitioner, to which we have made a brief reference earlier. The disputes and suits were not between the transferors and third parties. Mr. Syali's contention could have possibly been accepted if the disputes were between the transferors and third parties with regard to the subject property and the petitioner had come forward to purchase the property despite such disputes and suits. In that case it was possible for the petitioner to contend that such pending disputes and suits had a depressing effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In fact, it could with equal force be argued that nearness to the railway station is an advantage. Be that as it may, what particular disadvantage the property was put to because of the nearness of the railway track has not been made clear by the petitioner. The only objection is that the noise caused by the frequent passing of the trains will have an impact on the fair market value of the subject property. But that would be minimal and would perhaps be outweighed by various other advantages which the subject property may be enjoying. In any case, the disadvantage, if any, caused by the nearness to the railway track, in our opinion would have only very minimal effect, if at all, on the fair market value of the property. It cannot be to such an extent that the fair market value determined by the appropriate authority can be said to be wholly arbitrary. This contention of the petitioner is also rejected. 22. The fourth submission that there were nine transferors involved in the property which made negotiations and agreements with them more difficult is a limb of the first argument to the effect that there were various encumbrances, suits and disputes between the transferors and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice, did not make any submission on merits regarding the under-statement of the apparent consideration in respect of the subject property despite being informed of the sale instance on which the appropriate authority proposed to rely. The petitioner has not thus made any attempt to rebut the allegation of under-statement of the sale consideration. Although a presumption of an attempt to evade tax may be raised by the appropriate authority concerned in a case where the aforesaid circumstances are established, it was held in Gautam's case (supra) that such a assumption is rebuttable and it would necessarily imply that the intending purchaser and the intending seller must be given an opportunity to show cause as to why such a assumption should not be drawn. In our understanding of the judgment, what is required to be done by the appropriate authority is to indicate the circumstances which could give rise to the assumption that there was an understatement of the sale consideration in the document of sale due to difference in the valuation and the apparent sale consideration. Thereafter, it is incumbent upon the appropriate authority to give an opportunity to the concerned partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for 14 months between the sale instance, which was on 14.3.1993 and the date of sale of the subject property, which was 10.5.1994. After making suitable adjustments for the time gap and for FAR, the land rate was calculated at Rs.41,372.74 sq.mts for the subject property. This gave a fair market value of Rs.73,50,695/- for the subject property, applying the said rate to 177.67 sq.mts. After making minor adjustments for the salvage value, the fair market value of the subject property was taken at Rs.73,72,495/-, which was higher than the apparent sale consideration by 30.48%. It was only after establishing these facts that the transferors and the petitioner were given an opportunity of hearing as envisaged in C B Gautam's case (supra). There was thus full compliance with the requirements laid down in the aforesaid judgment both substantively and procedurally. The objections raised by the petitioner in the course of the hearing before the appropriate authority have also been considered by them fairly and objectively. 25. In the course of his submissions Mr. Syali, learned counsel for the petitioner drew our attention to the snapshots depicting the location of the property un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % per month as the increase in the value of the property and in making an upward adjustment of 14% for the time gap of 14 months between the date of sale of the sale instance and the date of sale of the subject property, all that can be said is only that the assumption of increase in the market value of 1% per month is too high. It cannot be said that between March, 1993 and May, 1994 there could have been no increase at all in the market value of the properties in Delhi and more particularly in the prime and upmarket Bengali Market area. So far as the adjustment for FAR is concerned, this is a factor which every purchaser of property would take into consideration for the purpose of assessing the potential of the property. Even while fixing the sale price, it is not uncommon for the sellers of immoveable properties in metropolitan cities to fix the reserve price in such a manner that it takes into account the FAR potential. Land is scarce and is limited in supply. In metropolitan cities such as Delhi, the pressure on land is very high. No willing buyer or willing seller of vacant land or land with existing building thereon would ignore the FAR potential of the land. Prices are fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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