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2016 (6) TMI 204 - DELHI HIGH COURT

2016 (6) TMI 204 - DELHI HIGH COURT - [2016] 385 ITR 379 - Acquisition of property - The fair market value of the property in question was determined at ₹ 73,72,495/- and since it exceeded the declared consideration by 30.48%, the conditions of Section 269 UD were held to be satisfied. - Rejection of bid - whether the ITD was agreeable to re-auction the property - Held that:- Respondent No. 3 for rejecting the bid of the Petitioners by the order dated 4th October, 2013 by the CCIT are seve .....

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were aware of the interim order dated 14th February 1995 and despite that participated in the auction. Fourthly, it is pointed out that while adjusting the value using the cost inflation index the price of the property in 2013 would be ₹ 5.07 crores. Further using the cost inflation index the original sale consideration worked out to ₹ 2.04 crore in 2013. It is mentioned that the present value on balance consideration using the cost inflation index worked out to ₹ 4,48,65,348. .....

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n terms of Clause 11 of the terms and conditions of the auction. - The only relief that can be granted to the Petitioners is to direct the ITD to return the earnest money to the Petitioners forthwith and in any event not later than four weeks from today. - However, considering that the Petitioners' bid was rejected only in 2013, nearly 18 years after the bid it was first made, it appears to be reasonable to direct the ITD to refund to the Petitioners the earnest money of ₹ 16.25 la .....

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har, J.: 1. Mr. Anand Mehta and Mr. Deepak Mehta have filed this writ petition against the Union of India, through the Ministry of Finance, Department of Revenue (Respondent No. 1), the Central Board of Direct Taxes (CBDT) (Respondent No. 2), the Chief Commissioner of Income Tax-II (CCIT), New Delhi (Respondent No. 3) and the Appropriate Authority, Income Tax Department (ITD) (Respondent No.4), seeking directions to the Respondents to perform and complete all the requisite formalities to confirm .....

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1950. Initially Mr. Raghbir Singh negotiated to purchase the right, title and interest in the whole of the terrace floor with mumty over the ground floor together with 50% undivided share in the plot of land at a total consideration of ₹ 3. 25 lakh. 3. Accordingly, an Agreement to Sell was entered into on 11th July, 1992 between Mr. Raghbir Singh on the one hand and Smt. Vidyawati and her sons on the other. There was some delay in Smt. Vidyawati discharging her obligations. Further negotia .....

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A settlement was entered into between the parties in the pending suit in terms of which Smt. Vidyawati agreed to sell the entire property to Mr. Raghbir Singh for ₹ 56.50 lakh subject to adjustment of ₹ 9.25 lakh already paid by Mr. Raghbir Singh. By an order dated 4th March 1994, the parties were directed by the Court to obtain clearances from the Land and Development Officer (L&DO) and the ITD. Application before the Appropriate Authority 5. In terms of the above order Mr. Rag .....

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for the property in question was shown as ₹ 56.50 lakh. 6. On 8th August, 1994, Respondent No.4 issued a show cause notice ('SCN') under Section 269 UD (1A) of the Act to Mr. Raghbir Singh as well as Smt. Vidyawati and her children. The SCN stated that the apparent consideration of the property in question was understated. The SCN referred to a sale of a property at Hanuman Road, New Delhi measuring 493.40 sq.m, for ₹ 1.60 crore in terms of an Agreement dated 14th March, 1993 .....

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hbir Singh, Respondent No.4 passed an order under Section 269 UD (1) of the Act holding that the sale consideration of ₹ 56.50 lakh did not represent the fair market value of the property and the same was too low. The fair market value of the property in question was determined at ₹ 73,72,495/- and since it exceeded the declared consideration by 30.48%, the conditions of Section 269 UD were held to be satisfied. Accordingly Respondent No.4 passed an order for purchase of the property .....

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as put to public auction by a notice dated 9th February, 1995. The original purchaser's writ petition 9. Before the auction could be held on 15th February 1995, Mr. Raghbir Singh filed WP (C) No. 524/1995 in this Court challenging the auction notice. An order was passed by the Division Bench in the said writ petition on 14th February, 1995 directing inter alia that the sale shall not be confirmed and possession shall not be handed over without further orders from this Court. 10. The Petition .....

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g the above facts to the notice of the High Court and make a request for orders that the bid may be confirmed. It was added that it was only after the bid was confirmed that the ITD would seek the balance amount of ₹ 1,23,50,000 from the Petitioners. 11. Meanwhile, the Petitioners filed CM No. 5410/1995 in the pending WP (C) No. 524/1995, seeking intervention. According to the Petitioners despite requesting Respondent No.4 to communicate to them the convenient date on which they could comp .....

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ailed judgment, a Division Bench of this Court dismissed WP (C) No. 524/1995. The Division Bench negatived the submission of Mr. Raghbir Singh that Respondent No.4 had erred in determining the value of the property at ₹ 73,72,000. The Court also noted the submissions of the interveners, i.e., the Petitioners herein in para 26 of the said judgment as under: 26. Even if it is accepted that the appropriate authority is wrong in estimating 1 % per month as the increase in the value of the prop .....

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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. .....

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be made; Therefore, even if there is some excessiveness in making such adjustments which may merit some moderation/reduction, still the gap of 30.48% is too large to be bridged. There is no plausible explanation for such a large gap. We do not see on what basis or material it is contended by the petitioner that the whole gap of 30.48% would get wiped out or shortened to less than 15% even if some downward adjustment is required to be made for the time gap and FAR. We are, therefore, unable to ho .....

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eration could be completed. However, there was no response received to the said letters. 15. Meanwhile a Special Leave Petition (SLP) was filed in the Supreme Court by Mr. Raghbir Singh against the order dated 5th January, 2012 and the SLP was dismissed by the Supreme Court on 5th November, 2012. By a letter dated 27th November, 2012, Respondent No.4 was informed by the Petitioners of the dismissal of the above SLP and that with the said order all disputes relating to the property in question ha .....

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and inter alia the Court noted the submission of the Petitioners that the Petitioner is ready and willing to pay the balance amount to complete the sale. On 15th July, 2013, the Court directed the Respondents to produce the official records including the file in which letter dated 11.10.2004 was dealt with and examined. On 15th July 2013, the Respondents were further directed to specifically examine and address arguments on the question whether they had accepted the request of the Petitioner or .....

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of one week why his bid should be accepted. Re-list on 18th November, 2013. Counter affidavit of the Department 17. Meanwhile a counter affidavit was filed by Respondent Nos. 2, 3 & 4 in which inter alia it was contended that by the letter dated 11th October, 2004, the Petitioners had sought refund of the earnest money and, therefore, had foregone, the claim over the property in question. The said letter was annexed as Annexure P-1. In the said letter, the Petitioners pointed out that despi .....

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ds letter dated 11th October 2004, it is stated that the Petitioners had expressed displeasure over the sale not being confirmed and the property in question not being transferred in their favour despite a lapse of more than 9 years and, therefore, the Petitioners had conditionally offered that the earnest money deposited be refunded with interest in view of continuing lapses of the Respondents. It is pointed out that the said letter was discussed in the order dated 4th August, 2011 in W.P.(C) 5 .....

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ot object to the Petitioners being allowed to intervene by the Court by the order dated 2nd November, 2011. The fact that mediation was also ordered had to be taken as an acknowledgement by the Respondents of the Petitioners' subsisting right and interest in the property in question. This was further recorded in para 17 of this Court's order dated 5th January, 2012 while dismissing Mr. Raghbir's Singh's writ petition. Petitioners' bid rejected 20. During the course of hearing .....

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oners to make a representation within a period of one week why his bid should be accepted. Re-list on 18th November, 2013. 21. Pursuant thereto the Petitioners made a representation on 13th September, 2013. On 4th October 2013, the CCIT passed an order stating that the confirmation of the sale of the property in question in favour of the Petitioners will severely harm the interests of the Department and further that a re-auction was required to discover the correct market price and protect the i .....

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was rejected and it was directed that the earnest money of ₹ 16.25 lakh deposited should be refunded to them in terms of Clause 11 of the terms and conditions of sale by auction. 22. With a view to challenging the aforementioned order dated 4th October, 2013, the Petitioners filed CM No. 17081/2013 seeking permission to amend the present writ petition. This application was allowed by the Court by the order dated 19th December, 2013. Thereafter the amended writ petition was filed. By order .....

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ce the above offer the CCIT and revert on the next date. 24. At the hearing on 16th May 2016, the Court was informed that the above offer was not acceptable to the Department. Thereafter the arguments were heard and orders were reserved. Submissions of counsel for the Petitioners 25. Mr. Sandeep Sethi, learned Senior Advocate appearing for the Petitioners, submitted that there was no justification in the ITD seeking to cancel the bid by the decision dated 4th October 2013 and to now contend that .....

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ive from the auction purchaser, the remaining part of bid money, namely ₹ 1,23,50,000/-. Reference was also made to an order of the Supreme Court dated 19th September, 1994 in SLP No. 6040/1994 (Appropriate Authority v. Shatabdi Trading & Investment). Mr. Sethi submitted that the Petitioners had always been ready and willing to pay the balance amount and it was only on account of the pendency of CWP No. 524 /1995 that the Petitioners were unable to pay the balance amount and get posses .....

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el for the Revenue 27. Countering the above submissions, Mr. Shivpuri, learned Senior Standing Counsel for the Revenue pointed out that there was no vested right in the Petitioners to demand that the property should be transferred in their favour since there was no formal acceptance of their bid. He placed reliance on the decision in U.P. Avas Evam Vikas Parishad v. Om Prakash Sharma 2013 (6) SCALE 202 and the decision of this Court in Gulmarg Restaurant v. Delhi Development Authority 119 (2005) .....

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77; 1.40 crore was far higher than the reserve price of ₹ 65 lakh. Secondly, in compliance with the terms and conditions of the auction, the Petitioners deposited, way back on 15th February 1995, a sum of ₹ 16.25 lakh constituting 25% of the reserve price. The third factor is that the Petitioners went before the authorities and then came to this Court expressing willingness to tender the balance sum of ₹ 1,23,75,000/-. It is only on account of the pendency of the writ petition .....

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ed in their favour. The legal position as regards the rights of successful bidders at a public auction has been explained by the Supreme Court in U.P. Avas Evam Vikas Parishad (supra). There the public auction was held on 11th March, 1977 and the plaintiff Om Prakash Sharma was the highest bidder having quoted a sum of ₹ 1,31,500/- for the plot that was auctioned. He also deposited ₹ 26,500/- constituting 20% of the bid amount as earnest money. However, the Supreme Court observed tha .....

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itive bids offered by interested persons in response to notice inviting tenders in a transparent manner and free from hidden agenda. One cannot challenge the terms and conditions of the tender except on the abovestated ground, the reason being the terms of the invitation to tender are in the realm of the contract. No bidder is entitled as a matter of right to insist the authority inviting tenders to enter into further negotiations unless the terms and conditions of notice so provided for such ne .....

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eferred to the decision in Rajasthan Housing Board v. G.S. Investments (2007) 1 SCC 477, in which the Supreme Court disapproved an order of the High Court which had issued a direction which virtually amounted to confirmation of the auction, which according to the Supreme Court was not the function of the High Court. 29.4 The Supreme Court in U.P. Avas Evam Vikas Parishad (supra) held that in the absence of acceptance of the bid, there was no concluded contract in respect of the plot in question. .....

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al AIR 1999 SC 1256, where the Supreme Court held that the initial acceptance of the bid and the deposit of 25% of the bid amount did not constitute transfer of property and that DDA could not be compelled to finalise and deliver possession to the bidder after a lapse of 14 years or in the alternative to allot another plot even though the disability attached with the plot had since ceased to exist on the date of the petition. It was explained that auction was only an invitation to offer. The Pet .....

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, the bidders, in fact, requested for refund of the earnest money along with interest @ 12% per annum. Thirdly, although the ITD had requested the Court to confirm the sale, the Court did not. In its order dated 27th September 2012, the Court enquired whether the ITD was agreeable to re-auction the property. The CCIT contends that the Petitioners were aware of the interim order dated 14th February 1995 and despite that participated in the auction. Fourthly, it is pointed out that while adjusting .....

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terms of which the CCIT has a right to reject any bid. Reference is also made to Clause 15 of the terms and conditions of the auction under which a bidder is required to pay 25% of the bid amount, i.e. ₹ 35 lakh, within thirty days, i.e. by 16th March, 1995. The CCIT concludes that the earnest money ought to be refunded to the Petitioners in terms of Clause 11 of the terms and conditions of the auction. 32. Clauses 11 to 15 of the terms and conditions of the auction read as under: 11. The .....

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ely after the close of the auction of the property in question. 13. The successful bidder whose bid has been accepted shall immediately pay as earnest money a sum equivalent to 25% of the Reserve Price by A/C Payee Bank Draft in favour of the Zonal Accounts Officer, New Delhi drawn on any Scheduled Bank in Delhi/New Delhi on the property being knocked down in his favour in the auction. He should confirm in writing and under his signature that he has purchased the property in the auction on the t .....

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