TMI Blog2009 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... nt no.1. Mr. S.F. Dastoor, Senior Advocate with Mr. Nilesh Joshi Ms. Aasifa Khan for respondent nos.3(i) and 3(ii). JUDGMENT D.G. Karnik, J. - By this petition, the petitioners challenge the order dated 22nd May 1995 passed by the respondent no.2 - appropriate authority constituted under Chapter XXC of the Income Tax Act, 1961 acquiring the property bearing plot no.70P, Suburban Scheme III, Chembur Garden, Chembur (for short "the said property"). 2. The respondent no.3, who is represented by his legal representatives, was the owner of the said property. By an agreement of sale dated 10th February 1995, the respondent no.3 agreed to sell the said property to the petitioners for a total consideration of Rs. 1,15,00,000/to be paid in two installments, that is to say Rs. 11,50,000/paid at the time of the agreement and the balance of Rs. 1,03,50,000/to be paid at the time of the sale which was to be completed within 4 months. In accordance with the provisions of Chapter XXC of the Income Tax Act (for short "the I.T. Act"), the petitioners and the respondent no.3 filed a statement in Form No.37I as required under section 269UC of the I.T. Act. After notice to the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of obtaining possession from the tenant before they could develop the said property. Taking into consideration that cost, the market value of the said property was considerably reduced and the agreed price was not less than the market price by over 15% which was prerequisite for passing an order for compulsory acquisition of the said property. Mr. Kaka, thirdly, submitted that the sale instances relied upon by the appropriate authority were not comparable as they were sale instances of builtup commercial units/apartments while the said property was an open land with single storied structure wholly in occupation of a tenant. The sale instances relied upon by the appropriate authority were of the properties which were abutting the main SionTrombay Road while the property in question was situated in an interior area at a distance of about 3 km. from the properties of which sale instances were relied upon by the Department. The sales were therefore not comparable and were irrelevant for determining market value of the said property. He further submitted that the respondents had pointed out several sale instances of comparable properties or properties situated near the said property wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration was to be paid by the respondent nos.1 and 2. In support, he referred to and relied upon two decisions of the Supreme Court in Rajlaxmi Narayanan v. Margaret K. Gandhi, 1993 (Vol. 201) ITR 681 and Appropriate Authority v. R. Shanmuganathan, 287 ITR 558. 6. We have perused copies of the impugned order, the agreement of sale, declaration made by the petitioners and the respondent no.3 in Form No.37I, report of the valuation officer attached to the office of the respondent no.2 - appropriate authority, and the objections raised by the petitioners before the appropriate authority, which are annexed to the petition. We have also perused the affidavit in reply filed by Mr. Anup Agarwal, Deputy Commissioner of Income Tax opposing the petition. 7. In case of C.B. Gautam's (supra), the Supreme Court has held that only when there is a significant undervaluation in the agreement of sale, that is to say where the apparent consideration falls short of the fair market value by 15% or more, then only the order for compulsory acquisition of the property can be made. We would therefore be required to consider whether the finding arrived at by the respondent no.2 that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the owners would have to negotiate and offer much more area to the tenant. He further pointed out that without removal of the tenant, it was not possible to develop the property at all as the structure in possession of the tenant was in the middle of the said property which could not be developed without demolishing the existing structure. The tenant was also defacto in possession of the entire open land though there was a dispute whether he had a right to occupy the open space as a tenant or otherwise. Such a tenant would be also required to be compensated not only for the structure of which he was a lawful tenant, but also for the area of the open land in his possession. The tenant would thus demand much bigger area in the redeveloped property. Mr. Kaka put before us the three probabilities of the petitioners being required to give 1500 sq. ft. or 1250 sq. ft. or 1000 sq. ft. area to the tenant and submitted that if any one of these probabilities was taken into consideration, the value of accommodating a tenant arrived at Rs.4,34,400/by the appropriate authority was abysmally low. We see considerable force in the contention of Mr. Kaka. We also notice that the appropriate auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty was acquired under section 169UD of the I.T. Act and on auction the property was sold at Rs.5,076/per sq. ft. on 26th April 1995. For passing the order of acquisition u/s 269UD of I.T. Act, the I.T. Department had determined its fair market value at Rs.3,700/per sq. ft. of FSI as on 24th February 1995. Thus, according to the Department, the fair market value of the property in case no.16669 was Rs.3,700/per sq. ft. on 24th February 1995 which very close to the date of agreement in the present case which is dated 10th February 1995. In para 9(v) of the impugned order, the respondent no.1 has stated that the valuation officer has determined the value for the balance FSI of the said property at Rs.3,836/per sq. ft. of FSI, which is higher than the market value of the property at sale instance case no. 16669 at Rs. 3,700/per sq. ft. of FSI. The appropriate authority has not given good reasons why it did not consider this instance to be comparable. 11. We are satisfied that the order of the appropriate authority suffers from following vices: (i) The value of encumbrance of the tenancy has not been property calculated by the appropriate authority. (ii) The appropriate auth ..... 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