TMI Blog2007 (6) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... option to purchase the said property, however, without furnishing any material or reason in support of its intention to purchase. The petitioners, on December 23, 1992, replied to the show-cause notice and requested the appropriate authority to furnish material relied upon by them in support of their belief. The petitioners at the time of hearing on December 24, 1992, reiterated their contention and, thereafter, again wrote a letter to the said authority dated January 6, 1993, requesting for disclosure of the reasons and grounds on which the property was proposed to be acquired. On January 28, 1993, the petitioners received the impugned order dated January 15, 1993, without any reply to their repeated demands seeking reasons and grounds for proposed action. Being aggrieved by the aforesaid order, the petitioners filed this writ petition on February 8, 1993, under article 226 of the Constitution of India. The writ petition was admitted, but no interim relief was granted. However, liberty in favour of the petitioners, to move for any other appropriate interim order, in the event of changed circumstances, was reserved. The appropriate authority appears to have issued letter date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to be widely canvassed by Mr. Ashokan. This decision basically revolves around the peculiar facts found in that particular case; wherein the petitioners were not in a position to deposit the purchase price as such no interim relief was granted in favour of the petitioners at the time of admission of the petition. The vendor had accepted the consideration without any demur or protest. The vendor made the statement before the court that he did not desire to challenge the acquisition. The transaction in question was completed much prior to the decision of the Supreme Court in the case of C.B. Gautam v. Union of India [1993] 199 ITR 530. The Division Bench basically relied on the paragraph of the said judgment delivered in the case of C.B. Gautam [1993] 199 ITR 530, which reads as under: "We may clarify that, as far as completed transactions are concerned, namely, where, after the order for compulsory purchase under section 269UD of the Income-tax Act was made and possession has been taken over, compensation was paid to the owner of the property and accepted without protest, we see no reason to upset those transactions and hence, nothing we have said in the judgment will invali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose to refer at the appropriate stage of the judgment. Mr. Ashokan, learned counsel for respondents Nos. 1 to 5 tried to support the impugned order on the merits. Consideration: Having heard the rival parties, the petitioners, in our considered view, deserve to succeed on all counts. Firstly, there is no understatement of consideration, which would be clear from the following data: "The appropriate authority has determined the market value at Rs. 3,400 per sq. ft. of which 85 per cent. would constitute Rs. 2,890 per sq. ft. The total consideration agreed was Rs. 64,00,000 as such actual BUA is 1991.10 sq. ft. with a garage. The value of the garage as per the petitioners is Rs. 1,00,000; whereas Rs. 2,00,000 as per the appropriate authority. The consideration of house as per the petitioners is Rs. 63,00,000; whereas Rs. 62,00,000 as per the appropriate authority. The discounted consideration as per the petitioners is Rs. 61,88,227; whereas Rs. 60,88,227 as per the appropriate authority. The calculations, if made, the rate of consideration as per the petitioners would be Rs. 3,164; whereas Rs. 3,114 as per the appropriate authority. Based on this, the discounted rate as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge: 2,00,000 --------- 71,60,000 Add: Estimated cost of construction 5,62,388 of 1,249 sq. ft. FSI --------- 77,22,388 --------- Therefore, the rate per sq. ft. of BUA would be- 77,22,388 ---------- = Rs. 2,376 3,249.85 If this rate is considered by the appropriate authority for auctioning the said property as reasonable, then there can be no justification for the appropriate authority to hold that there was understatement of the consideration in the case of the petitioners; where the rate fixed was more than Rs. 3,000 per sq. ft. Thus, there is absolutely no justification to conclude that there was understatement of consideration. Apart from the above, the show-cause notice dated December 17, 1992, issued by the appropriate authority on the face of it, is illegal and invalid as it does not disclose as to how the tentative or prima facie conclusion was arrived at by the appropriate authority that the said property was significantly undervalued. The sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been arrived by the appropriate authority together with all relevant materials must be disclosed in the show-cause notice by the appropriate authority, in consonance with the principles of natural justice. Non-disclosure of material to be used against the concerned parties in the matter of compulsory purchase of property and denial of opportunity to the concerned parties result in vitiating the order under section 269UD(1) of the Act [Ch. Kamala v. Appropriate Authority [1999] 240 ITR 63 (Mad)]. In the case of Musthafa Ummer v. Appropriate Authority [2002] 254 ITR 134 (Ker), the property of the petitioners was sought to be purchased by the Government on the ground that its apparent consideration for transfer was less than the real consideration but the report of the engineering department as well as the documents relied upon by the appropriate authority were not furnished to the petitioners, as such the order of purchase of the property was set aside for want of proper opportunity to the petitioners. The impugned order passed by the appropriate authority dated January 15, 1993, is solely based on the calculation of additional FSI of 1,249.75 sq. ft. as per the resolution of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the provisions of this Chapter were enacted indicates that it was intended to be resorted to only in cases where there is an attempt to evade tax by significant undervaluation of immovable property agreed to be sold. In the case of Mrs. Nirmal Laxminarayan Grover [1997] 223 ITR 572, this court held that recourse to compulsory purchase of the immovable property; under Chapter XX-C of the Act should be taken only in clear cases of gross undervaluation from which the inference must clearly flow that it is done for evasion of taxes. In view of the judgment of the Supreme Court in C.B. Gautam [1993] 199 ITR 530, unless the difference in the apparent effective consideration and the market value is more than 15 per cent., the appropriate authority cannot assume jurisdiction under section 269UD of the Act. The same does not mean that the mere fact that such difference is more than 15 per cent. will, automatically, lead to the conclusion that there has been undervaluation of property with the motive of evading tax. In Vimal Agarwal's case [1994] 210 ITR 16, this court has reiterated that the right of pre-emptive purchase under section 269UD is not a right of pre-emption simplicite ..... 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