Allahabad High Court
Ashok Kumar Sood vs Deputy Commissioner Of Income-Tax And ... on 17 November, 1994
Equivalent citations: (1996)130CTR(ALL)269, [1995]216ITR193(ALL)
Author: A.P. Misra
Bench: A.P. Misra, J.S. Sidhu
JUDGMENT A.P. Misra, J.
1. Heard learned counsel for the petitioner and also the learned standing counsel for the Revenue. On the facts and in the circumstances of the case and also in view of the rules of the court, the present writ petition is being disposed of finally at the stage of admission after the exchange of affidavits.
2. The petitioner seeks the quashing of ordef dated May 12, 1993, annexure-4 to the writ petition by virtue of which respondent No. 1 has rejected the explanation given by the petitioner and applied the formula of Rs. 5,500 per sq. metre for fixing the price of the property of the petitioner.
3. The short facts of the case are that the petitioner entered into an agreement of sale with one Sri Sarv Kanwal Jit Singh, respondent No. 3, for purchasing a residential plot No. 209, measuring an area of 450 sq. metres. The total consideration as agreed between the parties for the said property was Rs. 2,700,000 which comes to Rs. 4,600 per sq. metre. In pursuance of the said agreement, an application was moved before the Income-tax Officer in Forms Nos. 34 and 37-I for getting the required permission. Thereafter, the petitioner was given a show-cause notice by respondent No. 1 stating that he has undervalued the property and, therefore, the Appropriate Authority, Lucknow, proposed to exercise a right of pre-emptive purchase in exercise of the powers as conferred by the Income-tax Act under Chapter XX-C. He further recited some exemplars on the basis of which conclusion was drawn that the market value of the property comes to Rs. 5,500 per sq. metre. Thereafter, the petitioner gave a detailed reply in which certain exemplars were also filed along with the site map repelling the citation of the show-cause notice. It was stated that the citation shown in the show-cause notice is situated just in front of a park and, therefore, their value naturally increases while the petitioner's plot does not have an advantageous position. However, as the vendors were in dire need of money and the petitioner was willing to pay him right through the entire amount at the time of the execution of sale deed. The contention is that exercise of pre-emptive right of purchase made by the respondents by means of the impugned order is illegal and is liable to be set aside. The contention is that even as per the record of the respondents the market value could only be Rs. 5,300 and if that be taken into consideration it would be marginally over 15 per cent. of the market value at which the petitioner (vendee) is purchasing hence the exercise of power is illegal and is liable to be set aside.
4. A preliminary objection has been raised on behalf of the Revenue by learned standing counsel relying on Rajata Trust v. Chief CIT [1992] 193 ITR 220 (Kar). It is urged that a person who had entered into agreement for purchase of property is not a person interested. He cannot object to the purchase by the Central Government. It is not necessary to go into this as the Supreme Court in C. B. Gautam v. Union of India [1993] UPTC 163 ; [1993] 199 ITR 530 has held :
"Compulsory purchase under Section 269UD intending purchaser and intending seller must be given a reasonable opportunity of showing cause before an order for compulsory purchase is made."
5. Coming to the merits of the case, we find, in this case, before having recourse to passing an order under Section 269UD, the respondent has given opportunity to the petitioner by issuance of a show-cause notice dated May 3, 1993, annexure-3, to the writ petition. Hence, the petitioner cannot have any grievance in this regard. The only question remains whether the impugned order passed is valid or not. The respondents, while passing the impugned order dated May 12, 1993, had relied on the four exemplars quoted in the show-cause notice and arrived at the conclusion that the market value of the plot in question is Rs. 5,500 per sq. metre. On the other hand, the contention on behalf of the petitioner is that in order to arrive at the market value mere reliance on the exemplars without examining the situation of the plots would not be justified. The price of a plot in the same area increases or decreases on account of the plots placed. On behalf of the Revenue, reliance has been placed in Om Shri Jigar Association v. Union of India [1994] 209 ITR 608 (Guj). This case, in fact, does not lend support to the Revenue except, where the sale property is undervalued to the extent of 15 per cent. or more, there could be a presumption that it was to evade tax. However, this presumption is rebuttable. In that case, the property was sold after inviting offers from the public at large by advertisement in the newspaper and even after executing the agreement to sell, objections were invited. It is held that the price being lower by more than 15 per cent. of the market value, it cannot be a case of exercise of power under Chapter XX-C.
6. In Smt. Vimla Devi G. Maheshwari v. S. K. Laul [1994] 208 ITR 734 (Bom), it is held that the purchase of immovable property by the Central Government, where the order of purchase was made after considering material on record it cannot be set aside unless the order is perverse. It is true that where an order is passed after taking into consideration the materials on record and after considering the same it cannot be said that the order is perverse or is illegal.
7. The question only arises whether there is non-consideration of material on record, misconstruction and misreading of documents in arriving at the conclusion or wrong application of law which may constitute a ground for setting aside the said order. In the present case, the petitioner specifically averred in paragraph 6 of the writ petition that the petitioner on enquiry from the office of respondent No. 2 came to know . that a team of engineers who went from the office of the respondent assessed the property at the rate of Rs. 5,300 per sq. metre but respondent No. 1 did not disclose this fact while arriving at the conclusion that the market value is Rs. 5,500 per sq. metre. However, the contention of the petitioner is that in spite of the fact that the respondent has accepted that the property is not facing the park, and on the other side of the road there are multi-storeyed buildings which have a large number of flats and, therefore, the privacy of the single storeyed building is clearly disturbed, this fact has not been considered by the said authority in arriving at the price. It is not necessary to go into the question on the factual statement. The statement is averred in paragraph 6 of the writ petition by the petitioner that on the records of the respondents, a team, of engineers fixed the market value at Rs. 5,300 per sq. metre and if 15 per cent. is increased to the price as mentioned in the agreement to sell which is Rs. 4,600 per sq. metre, the rate would come to Rs. 5,290, that is to say, marginally undervaluation by about 0.25 per cent.
8. In C. B. Gautam v. Union of India [1993] 199 ITR 530 (SC), it was held that pre-emptive purchase provisions of the Chapter do not confer an unfettered discretion on the appropriate authority and, hence, cannot be regarded as conferring arbitrary or unfettered discretion. It further held (at page 546) :
" The very historical setting in which the provisions of Chapter XX-C were enacted suggests that it was intended to be resorted to only in cases where there is an attempt at tax evasion by significant undervaluation of immovable property agreed to be sold. .... the powers of compulsory purchase conferred under the provisions of Chapter XX-C of the Income-tax Act are being used and intended to be used only in cases where in an agreement to sell an immovable property in an urban area to which the provisions of the said Chapter apply, there is a significant undervaluation of the property concerned, namely, of 15 per cent. or more. If the appropriate authority concerned is satisfied that, in an agreement to sell immovable property in such areas as set out earlier, the apparent consideration shown in the agreement for sale is less than the fair market value by 15 per cent. or more, it may draw a presumption that this undervaluation has been done with a view to evade tax, of course, such a presumption is rebuttable and the intended seller or purchaser can lead evidence to rebut such a presumption. Moreover, an order for compulsory purchase of immovable property under the provisions of Section 269UD requires to be supported by reasons in writing and such reasons must be germane to the object for which Chapter XX-C was introduced in the Income-tax Act, namely, to counter attempts to evade tax. "
9. This decision holds that if there is a significant undervaluation of the property concerned, namely, of 15 per cent. or more and if the appropriate authority is satisfied that in an agreement to sell immovable property in such areas, the consideration shown in the agreement for sale is less than the fair market value, a presumption may be drawn that there is undervaluation with a view to evade tax, However, such presumption is rebuttable and the intended seller or purchaser can lead evidence to rebut such a presumption.
10. Applying the said principle to the facts of the present case first we have to scrutinise whether by the impugned order any illegality has been committed by the respondents or not in arriving at a figure of Rs. 5,500 per sq. metre. We make it clear that this court will not interfere unless the illegality committed is perverse or the said authority has failed to consider the relevant material on record or has misconstrued the document in arriving at the conclusion. Admittedly, in paragraph 6 of the writ petition, the petitioner has averred that the price of the market value arrived at by a team of engineers of the respondent was Rs. 5,300 per sq. metre and this fact has not been denied in the counter-affidavit. Hence, we find that the respondents have not taken into consideration their own record of the market value arrived at by the said team of engineers. Therefore, it would be a case of non-application of mind.
11. It is significant that, while arriving at the market value, two different considerations have to be made, one when the market value is fixed under the Land Acquisition Act and the other under Section 269UD of the Income-tax Act. In the earlier case, the compulsory acquisition is for a public purpose for which the market value is paid while the latter case is a case, where the property is sold by undervaluing in order to evade tax and the acquisition is made under Chapter XX-C of the Income-tax Act. Thus, in the latter case, for finding the market value, mere exemplars may not be sufficient but the authority has to scrutinise the evidence keeping in view whether such transaction on which valuation has been put, by undervaluing is such as was to evade tax. It has to take into consideration further factors as observed in the case of C. B. Gautam v. Union of India [1993] 199 ITR 530 (SC). Thus, even where the valuation given is under-valued, by more than 15 per cent., then the presumption may be drawn that it may be for the purpose of evading tax. However, it is rebuttable. It would depend on the facts of each case. It may be that even if the property is undervalued, the record may suggest that undervaluation is not for evading the tax. Then the pre-emptive purchase of the property under Section 269UD of the Income-tax Act would be illegal.
12. On the basis of these premises, as given by the Supreme Court and as we have observed above, we find, as held earlier, that on the records of the respondents themselves their own engineers have recorded that the market value of the property is Rs. 5,300 per sq. metre which has not been considered by the respondents. In case that price is accepted to be the true market price then it would be marginal undervaluation to the extent of 0.25 per cent. from 15 per cent., as shown by the petitioner in the sale deed. Hence, this undervaluation price from 15 per cent. would only be 0.25 per cent. which on the facts and circumstances of the case cannot be considered as amounting to undervaluation of the property for the purpose of evading tax. Accordingly, the impugned order dated May 12, 1993, annexure-4, to the writ petition is hereby quashed and we direct the said authority to pass a fresh order in the light of the observations made by us and taking into consideration the aforesaid engineers' report, preferably within a period of three months from the date a certified copy of this order is filed before the said authority.
13. With the aforesaid observations, the present writ petition is disposed of finally.
14. A certified copy of this order shall be supplied to learned counsel for the petitioner on payment of the usual charges within three weeks.