TMI Blog2001 (11) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to consider the petitioner's application exhibit P-6 afresh and pass appropriate orders in accordance with law. The writ petitioners are husband and wife. They are promoters of a private limited company by name Palm Court Hotels Private Limited, a company incorporated as a private limited company by the certificate of incorporation No. 09-8831 of 1995. The petitioners are the only shareholders of the company. The main object of the company is to construct buildings for hotels and to carry on business of hotels. The petitioners who are promoters and directors of the company decided to set up a three star category hotel complex at Ravipuram in Kochi in the property mentioned hereinbefore. They approached the Kerala State Industrial Development Corporation Limited (in short "the KSIDC") for financial assistance. The Kerala State Industrial Development Corporation vide its letter dated April 13, 1998, sanctioned a term loan of Rs. 250 lakhs to the company for setting up a three star category hotel complex on certain terms and conditions. A sanction letter also stated that the Kerala State Industrial Development Corporation's disbursement would commence only after the company com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d off M. G. Road on the eastem side of M. G. Road. The distance from M. G. Road to the property is 70 metre. The locality is residential and commercial mixed. Multistoreyed apartments are existing nearby this property. The potential for commercial development is very high due to its location in the nucleus of Cochin city, the commercial capital of Kerala. The land rate works out to Rs.2,16,100 per cent. (without considering the cost of piles already driven). This is also comparable with the following instances: In the File No. AA/CHN/9(6)12 of 1997-98 for the sale of the property situated at Survey No. 995/1, Part of Ernakulam Village on Kurusupally Road, Ernakulam South, the land rate works out to Rs.4,35,811 per sq. ft. situated about 300 metres from the property under consideration towards south." The appropriate authority noticed undervaluation of the property, therefore drew a presumption that undervaluation of the property was done with a view to evade tax. The appropriate authority therefore proposed to pass an order for pre-emptive purchase of the schedule property under section 269UD(1) of the Income-tax Act, 1961, for Rs.66,99,100 which is the discounted value of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptable to the appropriate authority. They passed order on February 26, 1999, directing the transferor/transferee or any other person who may be in possession of the said property to surrender and deliver vacant possession of the scheduled property to the appropriate authority within 15 days from the date of receipt of the order. Another letter dated March 3, 1999, was also served on the petitioners as well as to the company by the appropriate authority to surrender or deliver possession of the immovable property. Challenging those proceedings, a writ petition has been filed. The learned single judge quashed the impugned order and directed the appropriate authority to con sider the matter afresh, against which both the petitioners and the appropriate authority have filed appeals. When the matter came up for hearing we heard counsel on either side at length. Counsel appearing for the petitioner, Sri Pathrose Mathai, submitted that the appropriate authority has committed a grave error in passing the order of pre-emptive purchase under section 269UD(1) of the Income-tax Act, 1961, and also drawing a presumption that the transaction entered into between the petitioner and the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that in order to appreciate the true character of the transaction, the appropriate authority or for that matter the court can lift the corporate veil and examine the real purpose of the transaction. Counsel submitted that if the object and purpose was to evade tax and to generate black money they could have sold the property in the open market for a higher price. This is a case where the parties agreed for the transfer of the property for a price so as to avail of loan from the Kerala State Industrial Development Corporation which would show the bona fide nature of the transaction. Counsel submitted that the learned single judge ought to have given a direction to the appropriate authority to issue a no objection certificate for the transfer of the property. Counsel also submitted that exhibits P-7, P-9 and P-11 orders are bad in law since they are issued in violation of natural justice. Counsel submitted that the appropriate authority has failed to take into consideration the relevant materials and relied upon irrelevant materials while issuing the impugned orders. Counsel submitted that the orders were issued by the appropriate authority placing reliance on the engineeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red and the principle that no man can make a profit out of himself should be invoked. Counsel submitted that the order was passed not in violation of any principles of natural justice. Counsel submitted that the materials relied on, especially, the engineering report clearly stated in the show-cause notice itself and that no prejudice has been caused to the petitioners. Placing reliance on the decision of the apex court in Union of India v. Shatabadi Trading and Investment (P) Ltd. [2001] 251 ITR 93 counsel submitted that this court sitting under article 226 of the Constitution of India shall not sit in judgment over the order passed by the appropriate authority which was made on the basis of relevant materials. We may at the outset indicate that counsel on either side relied upon the decision of the apex court in C. B. Gautam's case [1993] 199 ITR 530 to bring home their rival contentions. Before we examine the rival contentions it is profitable to refer to certain passages of the said decision for our purpose. The apex court was considering the validity of the various provisions in Chapter XX-C inserted in the Income-tax Act, 1961, by the Finance Act, 1986. While considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e against the parties concerned, they must be given an opportunity to show cause that the undervaluation in the agreement for sale was not with a view to evade tax." We have to examine the issue raised in this case in the light of the above-mentioned principle laid down by the apex court. Chapter XX-C of the Income-tax Act consisting of section 269U to 269UO was inserted in the Income-tax Act by the Finance Act, 1986, with effect from October 1, 1986. Many of the provisions of the earlier Chapter XX-A were found to be unworkable and the task of satisfactory determination of the fair market value of the property in question was also found to be difficult. This Chapter defines what is agreement for transfer under section 269UA(a). Section 269UA(b) defines apparent consideration. Section 269UC deals with restrictions on transfer of immovable property subject to certain conditions. This section makes it obligatory that any transfer of property of such value as mentioned above should be preceded by an agreement reduced to writing in the form of a statement in Form No. 37-1 and should be furnished to the appropriate authority. Form No. 37-1 must be filed before the transfer is effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Finance Act, 1993, with effect from November 17, 1992. At the same time sub-section (1A) reads as follows; "(1A) Before making an order under sub-section (1), the appropriate authority shall give a reasonable opportunity of being heard to the transferor, the person in occupation of the immovable property if the transferor is not in occupation of the property, the transferee and to every other person whom the appropriate authority knows to be interested in the property." It was inserted by the Finance Act, 1993, with effect from November 17, 1992. The provisions of Chapter XX-C relate to the purchase by the Central Government of immovable properties in certain cases of transfer that the apparent consideration is less than the real consideration. All the same there are various exceptions as pointed out by the apex court in C. B. Gautam's case [1993] 199 ITR 530. There might be genuine reasons which might have led the seller to agree to sell the property to a particular purchaser at less than the market value even in cases where the purchaser might not be his relative. If there is undervaluation of property although a presumption could be drawn that there is attempt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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