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Judgment
S. Radhakrishnan, J.—In this petition, the challenge is to the Order dated 24-2-1993 passed by the Appropriate Authority u/s 269UD(1) of the Income Tax Act, 1961 (hereinafter referred ti as ''the Act''), whereby flat No. 302 of Green Gate Premises Co-operative Housing Society Ltd. situate at 693, Perry Cross Road, Bandra, Bombay-400 050, 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 19-11-1987 the petitioners agreed to purchase from the respondent No. 5 and respondent No. 6 the flat No. 302 of the Green Gate Co-operative Housing Society ("the said flat") for an aggregate consideration of Rs. 20,00,000. Accordingly, Rs. 50,000 was paid by the petitioner on 11-11-1987, as earnest money and on the 23-11-1987 the petitioner paid the balance amount of Rs. 19,50,000 and received possession of the flat. The price worked out to Rs. 1,558 per sq. ft. for built-up area. On 23rd November, itself the petitioners and the transferor (respondent No. 5 and respondent No. 6) filed an application in Form No. 37-I in respect of the transfer of the said flat with the Appropriate Authority. On 29th December petitioners received a notice from Appropriate Authority.
On the 2-1-1988, M/s Dilip Kulkarni & Associates, architects and interior designers examined the flat and gave an estimate of the repair works to be carried out on the said flat. On 5-1-1988 the petitioners replied to the Appropriate Authority enclosing letter of M/s Dilip Kulkarni & Associates. Moreover in the said letter petitioner cited the instance of flat No. 11 in the neighbouring Pericot Building, 22A, Perry Cross Road, Bandra, Bombay 400 050 which was sold for Rs. 14,30,000, i.e., Rs. 1,392 per sq. ft. (sale in August, 1987) and had been issued a no objection certificate by the Appropriate Authority. Thereafter on 27-1-1988, Appropriate Authority passed an impugned order u/s 269UD(1), directing the purchase of the said flat by Union of India at amount equal to the apparent consideration of the said flat without giving any opportunity of hearing to the petitioner.
Aggrieved by the said order, the petitioners filed a writ petition bearing No. 361 of 1988. The said writ petition was admitted by this Court on 24-2-1988. On 16-12-1992, purchase order dated 27-1-1987 was quashed and set aside by this Court following the judgment of the Supreme Court in C.B. Gautam Vs. Union of India and Others, and the respondents were directed to give a fresh show-cause notice and then to hear the petitioner.
Thereafter a notice dated 30-12-1992 was issued to the petitioners by the Appropriate Authority annexing reasons recorded by the Appropriate Authority in the order dated 27-1-1987 and fixed hearing on 13-1-1993. The petitioner, through her advocate, replied to the Appropriate Authority''s notice dated 18-1-1993 and stated that the three sale instances cited by the Appropriate Authority are not applicable in the instant case. Moreover the petitioners requested the Appropriate Authority to furnish them a copy of the notings of Inspecting Assistant Commissioner and valuation report relied upon by the Appropriate Authority in the said show-cause notice. The reply further pointed out that the Appropriate Authority has not determined the fair market value. Besides, the sale instance in White Rose building proves that the apparent consideration shown by the petitioner is within the 15 per cent differential margin, declared as permissible by the Supreme Court. Moreover it was stated that the sale instances cited by the petitioner in their reply letter dated 5-1-1988 ought to have been taken into account. It also brought to notice that petitioner''s flat required repairing which was estimated to be Rs. 1,38,120 as given by M/s Dilip Kulkarni & Associates. Through a letter dated 20-1-1993 A.K. Lal, advocate of the petitioners, cited 4 instances of auction sale conducted by the Appropriate Authority, Metropolitan, Bel Air, Hill Top buildings in the vicinity of petitioner''s flat. A.K. Lal in his letter dated 1-2-1993, referred to flat bearing No. 404 of Green Gate Co-operative Housing Society, sold on the 20-4-1991, for Rs. 22,60,000 at the rate of Rs. 2,342 per sq. ft. justifying thus the purchase of the said flat by the petitioner for Rs. 20,00,000 on 18-11-1987.
By the impugned order dated 24-2-1993 the Appropriate Authority (respondent No. 2 and respondent No. 4) purported to purchase the property in question. Challenging the said order, the present petition is filed. During the pendency of the writ petition, in view of the stay granted by this Court, no further action has been taken to implement the impugned order dated 24-2-1993.
Mr. Mistry, learned Counsel appearing on behalf of the petitioners submitted that the impugned order dated 24-2-1993 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 of the fair market value. Secondly, it is contended that the impugned order passed without furnishing particulars and details relating to the sale instances, is in breach of the principles of natural justice. Thirdly, it is contended that in one of the sale instances set out by the Appropriate Authority the differential rate is not more that 15 per cent and is thus in accordance with the acceptable margin established by the Supreme Court in the case of C.B. Gautam (supra). Fourthly, it was submitted that the sale instances pointed out by the petitioner has not been considered by the Appropriate Authority. Lastly, the Appropriate Authority did not furnish to the petitioner, the valuation report and Inspecting Assistant Commissioner notings which were strongly relied upon in the show-cause notice, though demanded by the petitioner. For all the aforesaid reasons, Mr. Mistry, the learned Counsel for the petitioner 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 Vs. Appropriate Authority and others, , 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. Gautam (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 of the fair market value with a view to evade tax. As held by this Court in the case of Vimal Agarwal (supra) it is 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.
Moreover, before passing the impugned order, the Appropriate Authority has neither given the documents and other details and particulars 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 as clearly violative of principles of natural justice deserves acceptance.
Moreover, the show-cause notice issued by the Appropriate Authority was based on the order dated 27-1-1988 which was already set aside by this Court. This clearly exposes the predetermined approach of the Appropriate Authority.
Admittedly, the petitioner was not furnished with the valuation report and Inspecting Assistant Commissioner notings relied upon by the Appropriate Authority in the show-cause notice, though demanded by the petitioner.
For all the aforesaid reasons, we are clearly of the opinion that the impugned order cannot be sustained and we have no option but to quash and set aside the same which is passed u/s 269UD(1) of the Act.
Accordingly, the petition is allowed. Rule is made absolute in terms of prayer clauses (a) and (b), however, with no order as to costs.