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TMI Blog2022 (5) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... e total consideration agreed was Rs.63,00,000/-, i.e., at the rate of about Rs.3,399/- per sq. ft. 2. Petitioner and respondent nos.3 and 4 filed a statement in Form 37-I alongwith copies of the agreement dated 18th February 1991 (the said agreement) for transfer of the said property. In the said form, the consideration for the said property was shown as Rs.63,00,000/-. 3. By an order dated 29th April 1991 passed under Section 269UD(1) of the Income Tax Act, 1961 (the Act), the Appropriate Authority decided to acquire the said property. The said order dated 29th April 1991 (1st Order) was challenged by petitioner in this Court by filing a petition being Writ Petition No.1768 of 1991 (first petition). An interim order dated 12th September 1991 was passed by which direction was given to handover the possession of the said property to respondent nos.1 to 4 therein with certain other directions. The Court also stated, inter alia, that upon petitioner succeeding in the petition, petitioner shall be entitled to the said property upon payment of consideration amount of Rs.60,19,911/- to respondent nos.1 to 4. 4. The first petition came to be disposed by an order dated 16th December 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent no.2 failed to comply with the Court's directions issued vide its order dated 21st October 2008 in the second petition, being Writ Petition No.614 of 1993, by not indicating the fair market value in the Show Cause Notice dated 19th December 2008 and tried to correct the non-compliance by issuing a supplementary notice dated 7th January 2009; (b) notice dated 19th December 2008 issued by respondent no.2 does not indicate as to why the sale rate in the said agreement dated 18th February 1991 is found to be lower; (c) in the notice dated 19th December 2008, non-comparable sale instances of two properties have been cited by respondent no.2 by ignoring the comparable which were correctly considered by the Valuation Officer; (d) for arriving at a fair market value, it is necessary to consider the most comparable instances out of the genuine instances based on the proximity of time, situation, terms; (e) in the impugned order, there is no reference to the three properties compared by the Valuation Officer in 1991; (f) the decision to acquire the said property was taken in 1991. Therefore, the valuation as on that date and what prompted the Appropriate Authority to take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fference is more than 15% will, automatically, lead to the conclusion that there has been undervaluation of property with the motive of evading tax; (m) the right of pre-emptive purchase under Section 269UD of the Act is not a right of pre-emption simpliciter but is a right which can be exercised only in the cases where there is significant undervaluation in agreement of sale with a view to evade tax and the onus of establishing that undervaluation is with a view to evade tax is on the Revenue; (n) even though in C.B. Gautam (Supra), it is stated that the pre-emptive purchase has to be resorted to only if the fair market value of the property concerned is found to be at least 15% more than the apparent consideration, that limit cannot be applied mechanically but a reasonable margin for probable error must be factored. 8. Mr. Sharma submitted as under: (a) petitioner has no locus because petitioner is a transferee and not a transferor. We would reject this submission because this Court has in Kirloskar Power Equipments Ltd. V/s. R.R. Bajoria and Ors. (2007) 291 ITR 150 (Bom) held that the transferee also had a right to have the hearing before a competent Authority and then to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deputation to the Income Tax Department. He assists and values the property of the Appropriate Authority. Therefore, to say that he has no authority is not logical and if he had no authority, we fail to understand why he was asked to inspect the property and permitted to make notes for the official records. In the noting, it is written "VO's recommendation" and VO is, we were informed, Valuation Officer. He has recommended on 22nd April 1991 that the declared value is reasonable. The file thereafter was put up by him to his superior officer, who Mr. Sharma states was the Deputy Commissioner of Income Tax (A.A.). He has also recorded a note on 24th April 1991 that the declared rate is not grossly understated and it may be only marginally low. The said file has been put up to the Appropriate Authority thereafter but there are no notings by the Appropriate Authority that the valuation made by the Executive Engineer or his superior (Deputy Commissioner of Income Tax) was defective or perverse or not valid for any reason. 10. Having said this, in our opinion, as the decision to acquire the property was taken in 1991, this Court has to refer to the documents relevant to that period. Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e comparable given by the Valuation Officer are closer and comparable to the said property. We should mention here that in the said reasons recorded, there are no addition and subtraction of various advantages and disadvantages to the two properties which respondent no.2 has used as comparable. The second property, i.e., Navroze Apartment, the rate is shown as Rs.3,741/- per sq. ft. whereas, the rate for the said property was Rs.3,399/- per sq. ft. In our view, since the difference was only about 9%, respondent no.2 for reasons which are obvious, has in its supplementary show cause notice dated 7th January 2009 read with statement of valuation annexed thereto, resorted to mathematical calculations and by adding and subtracting advantages and disadvantages arrived at a conclusion that there is undervaluation in excess of 15%. This is most improper on the part of respondent no.2. Respondent no.2 has, conveniently, also not resorted to addition or subtraction of various advantages and disadvantages with regard to the said property and only if it had done, perhaps the undervaluation would have been 9% or lesser. 12. Respondent no.2 has not even explained anywhere why they chose the tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxxxxxxxxxxx 13. We have to also note that as held by the Apex Court in C.B. Gautam (Supra), even the limit of 15% prescribed cannot be mechanically applied and the reasonable margin for probable error has to be considered. This Court in Mrs. Amarjit Thapar (Supra) has held that the order of the Appropriate Authority was invalid and void ab initio as there is no positive finding that there was an attempt to evade tax. It will be useful to reproduce the following portions from Mrs. Amarjit Thapar (Supra), which read as under: 33. Where the Appropriate Authority has failed to clearly determine the fair market value and to specify that undervaluation was intended to evade tax and refused to consider the comparable sale instances submitted by the affected party, its action stands vitiated on the face of it see Himmatlal Vadalia v. Union of India. 34. The order of the Appropriate Authority is invalid and void ab initio as there is no positive finding that there was an attempt to evade tax. The apex Court in the case of C.B. Gautam v. Union of India (supra) held that the very historical setting in which the provisions of this chapter were enacted indicates that it was intended to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d April 1991 and the Deputy Commissioner of Income Tax (A.A.) has noted on 24th April 1991 that the said property was not undervalued. The Appropriate Authority (respondent no.2) has not stated in its reasons recorded in 1991 why they did not accept these two reports. The Appropriate Authority (respondent no.2) has not stated anywhere why it was not accepting the three comparables mentioned by VO. The Appropriate Authority (respondent no.2) has not given the basis for comparing "Sea Face Park" and "Navroze Apartment" with the said property, when those two properties were farther away than the three properties used by VO to compare. In any case, the valuation of Navroze Apartment used in the first order dated 29th April 1991 by the Appropriate Authority (respondent no.2) was only about 9% more compared to the said property. The mathematical calculations by adding and subtracting advantages and disadvantages to arrive at a conclusion that there was undervaluation in excess of 15% limit can be stated to be far from being honest. This 15% limit also cannot be applied mechanically but a reasonable margin of error has to be considered. There is also no finding that the undervaluation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment or (b) the SLP or petition to be filed by respondent nos.1 to 4 is dismissed or rejected. 19. From the minutes of the order dated 13th September 1991 filed in the second petition, there is a sum of Rs.1,22,589/- that would become payable to respondent nos.5 to 7 in that petition together with interest thereon at 10% per annum from 13th September 1991 until payment. Mr. Dada states that two out of the three respondents, i.e., respondent nos.5 to 7 are respondent nos.3 and 4 in this petition. They are not before us. Therefore, petitioner to deposit an amount of Rs.1,22,589/- together with interest thereon at 10% per annum from 13th September 1991 until payment/realisation with the Prothonotary and Senior Master who shall invest the same in a fixed deposit with a nationalised bank initially for a period of one year to be renewed year to year unless otherwise ordered. Prothonotary and Senior Master shall also forward a copy of this order to respondent nos.3 and 4 at the address given in the cause title. Mr. Dada states that this amount will be deposited within two weeks from today. Statement accepted. 20. Petition disposed. No order as to costs. 21. Mr. Sharma seeks stay o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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