Geeta Navin Shah and Others vs Appropriate Authority and Others

S. Radhakrishnan, J.—In this petition, the challenge is to the order dated 26-2-1993 passed by the Appropriate Authority u/s 269UD(1) of the Income Tax Act, 1961 (''the Act'' for short) whereby flat No. 1 Building Rekha No. 2, 46, B.G. Kher Marg, Mumbai-400006 (''property in question- for short) is sought to be purchased by the Appropriate Authority under Chapter XX-C of the Act.

The facts relevant for the purpose of the present petition are that by an agreement dated 22-5-1987 the petitioners agreed to purchase from the respondent the property in question for a lump sum price of Rs. 21,00,000. On an application made in Form No. 37-1 the Appropriate Authority under the Act passed an order on 20-8-1987 purporting to purchase the said property without giving any opportunity of hearing to the petitioners.

Aggrieved by the said order dated 20-8-1987, the petitioners filed a writ petition bearing No. 2926 of 1987. On 18-12-1992 the said purchase order was quashed and set aside by this Court and the matter was remanded back for issuance of a fresh show-cause notice and that the petitioner ought to be heard before the order is passed.

Thereafter on 30-12-1992 a show-cause notice was issued by the respondent to the petitioners (and they) were called upon to show cause as to why the property in question agreed to be purchased by the petitioners should not be purchased u/s 269UD(1) of the Act. In the said show-cause notice, the Appropriate Authority relied upon four sale instances in the neighbouring buildings to establish that the property in question was undervalued by 15 per cent of the fair market value.

The petitioners filed written submissions on 21-1-1993 and further written submissions on 9-2-1993, whereby a specific request was made for furnishing the valuation report and the other material relied on by the first respondent, in the said show-cause notice. However, the valuation report and the other material relied upon by the authorities were never furnished to the petitioners.

By the impugned order dated 26-2-1993 the Appropriate Authority again purported to purchase the property in question. Challenging the said order, the present petition is filed.

Mr. K.B. Bhujale, learned Counsel appearing on behalf of the petitioners submitted that the impugned order dated 26-2-1993 suffers from serious infirmities and is liable to be quashed and set aside, because, firstly, the Appropriate Authority has not determined the fair market value of the property in question so as to arrive at a conclusion that there is any undervaluation to the extent of 15 per cent or more of the fair market value. Secondly, It is contended that the impugned order passed without furnishing particulars and details relating to the sale instances set out in the show-cause notice, is in breach of the principles of natural justice. Thirdly, it is contended that even if the average sale prices of the sale instances set out in the show-cause notice are taken as the fair market value, there is no undervaluation to the extent of 15 per cent as enunciated by the Apex Court in the case o C.B. Gautam Vs. Union of India and Others, . Fourthly, Mr. K.B. Bhujale relied on the judgment in the case of Vimal Agarwal Vs. Appropriate Authority and others, wherein it was held that an order passed merely on the basis of sale instances given by the Appropriate Authority without considering sale instances referred to by the aggrieved parties and setting out reasons for not acting upon them is not a proper and valid order. Comparable sale instance on 29-9-1986 in adjacent building Dev Darshan when first respondent had approved the rate has been ignored. Lastly, Mr. K.B. Bhujale submitted that the sale instance pointed out by the petitioners has not been considered by the Appropriate Authority. For all the aforesaid reasons, Mr. K.B. Bhujale submitted that the impugned order is liable to be quashed and set aside.

Mr. Asokan, learned Counsel appearing on behalf of the revenue submitted that prior to the decision of this Court in the case of Vimal Agarwal v. Appropriate Authority and Ors. (supra) there was no practice of determining the fair market value. Mr. Asokan further submitted that the objections raised by the petitioners have in fact been considered in the impugned order and, therefore, no fault can be found with the said order. Accordingly, Mr. Asokan submitted that there is no merit in the petition and the same is liable to be dismissed.

We have carefully considered the rival submissions. The Apex Court in the case of C.B. Goutam (supra) has held that the provisions of Chapter XX-C can be resorted to only when there is a significant undervaluation to the extent of 15 per cent or more of the fair market value with a view to evade tax. As held by this Court in the case of Vimal Agarwal (supra) this necessary to first determine the fair market value of the property in question in the light of the attending circumstances. This Court has further held that without determining the fair market value, it is not only difficult but impossible to say that the apparent consideration is lower than the fair market value by 15 per cent. In the present case, admittedly, the fair market value of the property in question is not determined and, therefore, purchase of the property in question on the footing that there is undervaluation to the extent of 15 per cent of the fair market value has to be held to be without any basis, and the order is liable to be quashed and set aside.

It is pertinent to note that the property in question is situated at Rekha building whereas the sale instances relied upon in the impugned order are not situated in vicinity of the building or in other equally posh and comparable localities. These properties are neither similar nor prima-facie comparable. This disparity in the location has not been considered in the impugned order in spite of specific objections raised by the petitioners in that behalf.

Moreover, the impugned order has been made in flagrant violation of the principles of natural justice as before passing the impugned order, the Appropriate Authority has neither given the documents relating to the sale instances referred to in the show-cause notice, nor in the impugned order, the Appropriate Authority has referred to the sale instance pointed by the petitioners in their reply to the show-cause notice. In these circumstances, the grievance of the petitioners that the impugned order suffers from serious infirmities deserves acceptance.

The impugned order is ex facie vitiated by non-application of mind and failure to consider relevant materials in as much as it purports to record a finding of undervaluation by comparing Rekha building and its flats with demonstrably incomparable luxurious buildings like Elcid, Cara Grande and II Pallazo.

For all the aforesaid reasons, we are of the opinion, that the impugned order cannot be sustained.

Accordingly, the petition is allowed. Rule is made absolute, however, with no order as to costs.