TMI Blog2022 (5) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Appropriate Authority is palpably erroneous and cannot stand to the scrutiny of law even on merits. Therefore, to recap, the Valuation Officer has noted on 22nd 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 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. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 1. Petitioner is a company registered under the Companies Act, 1956. Petitioner, by an agreement dated 18th February 1991, agreed to purchase from respondent nos.3 and 4 an apartment being Flat No.72 along with two covered car parking situated at a building called Summer Ville, Bhulabhai Desai Road, Mumbai 400 026 admeasuring about 1758 sq. ft. along with 5 shares of Rs.50/- each bearing distinctive nos.66 to 70 under Certificate No.14 issued by New Summer Ville Premises Co-op. Housing Society Limited (the said property). The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,94,560/- and why an order should not be made in accordance with the provisions of Section 269UD (1) of the Act. Petitioner replied to the show cause notice by its Advocate s letter dated 9th January 2009 and tendered the same during the personal hearing on 9th January 2009. At the same time, respondent no.2 passed the impugned order dated 9th January 2009 (the third order) for acquisition of the said property. This order is impugned in this petition. Therefore, this is the third round of litigation in this Court. 7. Mr. Dada submitted as under: (a) respondent 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 ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undervaluation was with a view to evade tax. As held by this Court in Mrs. Amarjit Thapar V/s. S.K. Laul (2007) 298 ITR 336 (Bom.), failure to specify that undervaluation was intended to evade tax and refusal to consider the comparable sale instances submitted by the affected party, the stand of respondents is vitiated; (l) unless the difference in the apparent effective consideration and the market value is more than 15%, the Appropriate Authority cannot assume jurisdiction under Section 269UD of the Act. The same does not also mean that the mere fact that such difference 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the first time by enclosing with the notice issued during the last personal hearing. In fact, this Court had, by its order dated 8th April 2022, called upon respondents to produce its file and also produce the reasons which have been separately recorded as noted in its order dated 29th April 1991 which was never provided earlier. Those reasons were provided to this Court based on our directions. We will deal with those reasons separately. We have also to note that during the hearing, Mr. Sharma stated that the noting was made by the Executive Engineer who is from the Central Public Work Department on 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------ Mr. Taheer Shaikh F1 Rs.37,00,000/- D.O. Rs.36,36,397/- 1336 sq. ft. Rs.2721/- Y.O.C. 1975 1 st Floor, G+20 No Sea View 11. In the order dated 29th April 1991, respondent no.2 has noted in view of the reasons which have been separately recorded in writing, it is decided that the said property is fit for purchase by Central Government . Since those reasons had not been provided ever, as stated earlier, we called upon respondents to produce the reasons so recorded (said reasons). In the said reasons, respondent no.2 has recorded that it has carefully considered the report of Valuation Officer dated 22nd April 1991 and note dated 24th April 1991 of Deputy Commissioner of Income Tax (A.A.). As noted earlier, both these persons have recorded that the declared value was not understated. The said reasons, however, does not mention why the opinion of these two persons have not been accepted. In the said reasons, the Appropriate Authority relies upon two other transactions of sale which from the documents filed are not close to the said property are not comparable. Petitioner has filed in the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on likely to be affected by the order proposed to be made a notice of the action intended to be taken, inform him about the materials on the basis of which the appropriate authority proposes to take action for pre-emptive purchase and give a fair and reasonable opportunity to such person to represent his case and to correct or controvert the material sought to be relied upon against him. Hence, in the show-cause notice under Section 269UD of the Act, provisional conclusions are required to be briefly specified. These provisional conclusions are required to be briefly specified so that the affected persons could correct or controvert the same effectively. If a vague show- cause notice is given without specifying anything as has been done in this case or without specifying the grounds for holding that the property is required to be purchased under Section 269UD of the Act, then it can be held that reasonable opportunity of showing cause has not been given. The transferor and transferee would be totally unaware of the grounds which had prompted the appropriate authority to arrive at prime facie conclusion that the power under Section 269UD(1) of the Act was required to be exercised an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the cases where there is significant undervaluation in agreement of sale with a view to evade tax. The onus of establishing that undervaluation is with a view to evade tax is on the Revenue. No such finding is to be found in the impugned order. 36. In the circumstances, the impugned order passed by the Appropriate Authority is liable to be quashed and set aside holding it to be in breach of principles of natural justice and bad in law. The view taken by the Appropriate Authority is palpably erroneous and cannot stand to the scrutiny of law even on merits. 14. In the case at hand, there is no finding that the undervaluation was intended to evade tax, let alone discharge the onus of establishing that undervaluation was with a view to evade tax. In the impugned order, it is only stated that the transaction under consideration was proposed to take place at a rate lower than the fair market value by more than 15% considering the fair market value determined by the Appropriate Authority. On this ground alone, the impugned order is liable to be quashed and set aside. In our view, the view taken by the Appropriate Authority is palpably erroneous and cannot stand to the scrutin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner s case papers and after perusing the same as to the legality and propriety of the order impugned to set aside and quash the order dated 9th January 2009 passed by respondent no.2; (b) This Hon ble Court in its jurisdiction under Article 226 of the Constitution of India be pleased to issue a Writ of Mandamus and/or any other writ in the nature of mandamus and/or such other order and/or direction, calling upon respondent no.2 to handover the possession of the said property to the petitioner. 17. We hold that petitioner shall be entitled to the said property alongwith the shares in the society upon payment to respondent nos.1 to 4 of consideration of Rs.61,77,411/-. If this amount is not paid within twelve weeks from today, interest thereon at 12% p.a. shall become payable until payment / realisation. Petitioner shall pay all society charges payable at the relevant time, i.e., 1991, together with interest, if any, for getting the shares transferred in its name. 18. The Prothonotary and Senior Master shall refund to respondent nos.1 to 4 the sum of Rs.1,75,500/- deposited during the second petition together with accumulated interest, if any. This amount shall be pai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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