TMI Blog1997 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... dated November 11, 1994, called upon respondent No. 5 to furnish information/documents referred to therein on or before November 21, 1994. The Homely Co-operative Housing Society Limited, respondent No. 7, furnished the information in their possession to the appropriate authority by letter dated December 1, 1994. The appropriate authority on January 5, 1995, issued notice under subsection (1A) of section 269UD of the Income-tax Act, 1961, to the petitioner and respondent No. 5 setting out therein that the built up area of the flat was 751 sq. ft. and the rate per sq. ft. of built up area as per the agreement works out to Rs. 2,545. Considering the said facts and after an inspection, the appropriate authority had found the rate of the property to be low. Taking those facts into consideration the appropriate authority was of the view that there is significant undervaluation of the subject property. The appropriate authority as such was pleased to issue show-cause notice as to why an order should not be made in accordance with the provisions of section 269UD(1) of the Income-tax Act, 1961. The noticees were requested to attend before the appropriate authority on January 13, 1995, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and a condition was put that if the said amount was directly paid to the society, the said amount was to be transferred to the transferor. The petitioner has approached this court to impugn the said order of purchase. Subsequent to the said order, by letter dated January 18, 1995, the appropriate authority called on the petitioner and the transferor, respondent No. 5, to hand over the possession of the property within 15 days from the receipt of the letter. By letter dated February 28, 1995, an amount of Rs. 11,25,000 was forwarded to the petitioner. By another letter of the same date an amount of Rs. 8,12,500 was forwarded to the transferor, respondent No. 5. This petition was filed on April 6, 1995. The petitioner moved the court on April 19, 1995. On April 25, 1995, pending admission ad interim relief was granted in terms of prayer (e) of the petition, i.e., pending admission ad interim relief not to act on the impugned order dated January 17, 1995. The petitioner was also directed to return the cheque given by the Department within three days from the said date. The petitioner returned the cheque. The petition thereafter came up for admission on several dates when it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. It is pointed out that the property was allowed to be auctioned on May 28, 1996, and possession was given to the auction purchaser on June 27, 1996. The auction purchaser-paid totally an amount of Rs. 25,50,000. Learned counsel relied on the unreported judgments of this court dated June 19/20, 1996, in the case of Ruparel, Brothers (Bombay) P. Ltd. v. Union of India [1997] 226 ITR 172, in Writ Petition No. 1056 of 1995 in the case of A. IV. Properties and Investment Co. Pvt. Ltd. v. W. Hasan, decided on June 26, 1995, and the Division Bench judgment of this court in the case of Primetime Media Services Pvt. Ltd. v. U. V Shahadadpuri [1996] 217 ITR 417. It is further contended that the present case is a completed transaction which calls for no indulgence and further the transferee would have no locus standi to maintain the petition. In support of this proposition learned counsel relied on the judgment in the case of C. B. Gautam v. Union of India [1993] 199 ITR 530 (SC) and the judgment of the Karnataka High Court in the case of Rajata Trust v. Chief CIT [1992] 193 ITR 220. At any rate, it is contended that the order does not suffer from any vice of arbitrariness and/or non-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 4 on a notice of motion taken out by the petitioner. We are unable to agree with the submissions of learned counsel on behalf of respondents Nos. 1 to 4, that as there is a completed transaction, this court should not interfere in the exercise of its writ jurisdiction on the ground that the petitioner has no locus standi. Further the judgment of the Karnataka High Court in the case of Rajata Trust [1992] 193 ITR 220 was considered by this court in Shrichand Raheja [1995] 213 ITR 33. A Division Bench of this court has held that after the judgment of the apex court in C. B. Gautam v. Union of India [1993] 199 ITR 530 the said judgment of the Karnataka High Court is no longer good law and further that the said decision was also not approved by the same High Court in Appropriate Authority v. Mass Traders Pvt. Ltd. [1993] 202 ITR 741. In view of the judgment in C. B. Gautam's case [1993] 199 ITR 530 (SC) this court has upheld the right of the transferee to challenge the order of purchase. The contention of respondents Nos. 1 to 4 on that count has to be rejected. The next point contended on behalf of respondents Nos. 1 to 4 was that in equity the petitioner having chosen not to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. I. of 16,000 sq. ft. and that the units therein had already been disposed of to third parties on ownership basis. In respect of the remaining part of the plot respondents Nos. 7 to 13 therein had invested large amount for erecting a hotel building. It was under those circumstances that the court held that the purpose of continuing the petition was only to take a chance without any stake and without complying with the directions. It is in that context that the said petition was dismissed. In the case of A. N. Properties and Investments Co. Pvt. Ltd., the petition was filed by the transferor. The amount had already been paid to the transferor. On behalf of the Union of India, it was contended that if the auction had to be withheld then the amount should be returned forthwith. On behalf of the petitioners, the court was informed that the petitioners were not willing to return the amount. It is in those circumstances the court observed that the court would refuse to tolerate a situation where the auction purchaser would be at peril of not knowing what would be result of the petition. It is in those circumstances that interim relief prayed was rejected. In the case of Primetime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition should be dismissed on this count must be rejected. That brings us to the question of non-application of mind. This point has been seriously debated for a considerable length of time. After the judgment of the apex court in the case of C. B. Gautam [1993] 199 ITR 530, the apex court has made it clear that reasonable opportunity should be given to the transferor and the transferee to represent against the show-cause notice. In other words the show-cause notice should not be an empty formality. The appropriate authority while issuing the show-cause notice must act on the material before it. The material must disclose that the property is being sold for an amount considerably less than the market value in order to evade tax and that such evasion is at least to the extent of 15 per cent. of the prevailing market rates. The authority must, therefore, disclose the material and further has to consider the explanation given by the transferor or transferee. The appropriate authority has also to consider the material produced by the transferor or transferee and has to give reasons as to why the material produced by the transferor or transferee has to be rejected. It is further the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the site inspection. The aspect is being set out as the petitioner has produced a report of a registered valuer giving the value of the flat and also its conditions. The contention of the petitioner that the mosaic flooring are uneven having cracks and due for replacement and that there was seepage from the external walls find no place in the order nor the contention of the petitioner that the roof was leaking and required repairs. The petitioner had filed detailed representations against each of the three sale instances cited by the appropriate authority in the show-cause notice, In so far as Bezolla Commercial Complex (Case No. 15352) it was contended by the petitioner that the complex was around seven years old with various facilities. Some of the most reputed companies had their showrooms and offices in the said building. It was situated on the main Sion-Trombay Road and the surrounding area was also commercial and as such the comparison of the sale instance in Bezolla Commercial Complex would not be proper. Similarly, in the case of Kaumudi Building (Case No. 16462) it was pointed out that the same was also a commercial building and the municipal authorities for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May, 1996, was approximately Rs. 3,395 per sq. ft. of built up area. The petitioner had also relied on the rates of property previously in the locality at the relevant time as shown in the Accommodation Times which showed rates at Chembur for residential premises ranging between Rs. 1,200 to Rs. 3,000 per sq. ft. and for commercial premises between Rs. 2,000 to Rs. 8,500 per sq. ft. Similarly, reliance was placed upon an extract from the Journal of Institution of Valuers, which showed that at the relevant time the rates at Ghatkopar ranged between Rs. 1,900 and Rs. 3,500 per sq. ft. for residential premises and Rs. 2,000 to Rs. 8,000 per sq. ft. for commercial premises. He has further relied upon the chart prepared by the stamp duty authorities which adopted the rate of Rs. 1,300 to Rs. 1,800 per sq. ft. In so far as the comparable sales are concerned, the appropriate authority held that no two properties are on all fours and the instances were cited not for comparable sales, but to indicate the trend of prices in the market in the vicinity of the subject property around that time. So far as Kaumudi building is concerned, one of the sale instances cited, the appropriate authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elates to the building constructed in 1966. The appropriate authority failed to consider that the building in which the flat in question was constructed in the year 1972. The appropriate authority itself had taken the price factor into consideration in respect of building constructed in the year 1989 to find out the trend. The rejection, therefore, on the second count also discloses total non-application of mind on the part of the authority inasmuch as the case of six years difference would be more comparable than a market trend of a newly constructed building of a posh locality 17 years thereafter. Case No. 15127 has been rejected as a case where the building is yet to be constructed. In the written submissions filed by the petitioner Case No. 15127 had been shown as Flat No. 34, 3rd floor, Swastik Park, Chembur, Bombay-400 071. What the said reasoning discloses is that the case number given might have been mistaken. However, the flat which was sold was clearly identified. Yet, the appropriate authority chose not to make any attempt to ascertain the dates or seek further explanation from the petitioner. In fact the petitioner's plea for further time was rejected. In other words, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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