Calcutta High Court
Man Gobinda Shaw & Ors vs Chief Commissioner Of Income Tax & Ors on 15 February, 2011
Author: Indira Banerjee
Bench: Indira Banerjee
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Order Sheet Serial No........
W.P. 2176 of 2002
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
ORIGINAL SIDE
In the matter of :
MAN GOBINDA SHAW & ORS.
Vs
CHIEF COMMISSIONER OF INCOME TAX & ORS.
Before:
The Hon'ble Justice
INDIRA BANERJEE
Date: 15.02.2011
JUDGMENT
This writ petition has been filed inter alia challenging an order dated 16 th January, 1989, under Section 269-UD (1) of the Income Tax Act, 1961, of preemptive purchase of Premises No.104, Dr. Meghnad Saha Sarani, (previously known as Southern Avenue), Kolkata- 700029.
The petitioners claim themselves to be the successors in interest of Late Kartick Chandra Shaw. According to the petitioners, the said Kartick Chandra Shaw was, during his lifetime, the sole and absolute owner of a plot of land measuring .33 decimals, (that is approximately 1 bigha) in C.S. Dag No.17, Khatian No.44, Mouja Gobindapur, which was later brought under the Calcutta Municipal Corporation and was numbered 104, Southern Avenue, Calcutta-29 (now 104, Dr. Meghnad Saha Sarani, Kolkata- 700029).
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The name of the said Kartick Chandra Shaw was recorded as Raiyat under Bharat Samrat in the record of rights prepared at the time of Cadaestral Settlement. The said Kartick Chandra Shaw died intestate in or about 1945 leaving him surviving his two sons, namely, Narayan Chandra Shaw, since deceased and Man Gobinda Shaw, being the Petitioner No.1 as his only heirs and legal representatives.
The said Narayan Chandra Shaw died on 4 th August, 2002 leaving behind the petitioner Nos.2 to 6 as his only heirs and legal representatives. The petitioners claim to be the absolute owners of the said Premises No.104, Dr. Meghnad Saha Sarani, Kolkata- 700029.
The names of the petitioner No.1 and Narayan Chandra Shaw, since deceased, were mutated as owners of the said premises in the Assessment Records of the Calcutta Municipal Corporation, pursuant to a decree on an Originating Summons being O.S. Suit No.141 of 1985, taken out by the petitioner No.1 and Narayan Chandra Shaw, since deceased, predecessor in interest of the petitioner Nos.2 to 6, in the Original Side of this Court.
On or about 18 th April, 1989 advertisements were issued by the Income Tax Department for auction sale of inter alia the Premises No.104, Dr. Meghnad Saha Sarani, Kolkata- 700029. The petitioners, through their 3 Advocate, sent a letter to the Chief Commissioner of Income Tax, West Bengal, objecting to the auction and seeking requisite details. There was no reply to the aforesaid letter.
When the Originating Summons was taken out, this Court passed an order, holding that Union of India was a necessary and proper party in the proceedings, and directed service of summons on Union of India.
The Income Tax Department was represented through Sri Joydeb Saha, Advocate. According to the petitioners, the petitioners came to learn, to their utter shock and dismay, of a purported order of compulsory acquisition of the said premises under Section 269-UD (1) of the Income Tax Act, 1961. The records relating to the purported compulsory acquisition and consequential auction of the said premises were, however, not sent to this Court.
When the Originating Summons Suit was ultimately disposed of, the Income Tax Department duly appeared. By its order dated 3rd November, 1995 this Court held that the plaintiffs might profitably seek legal opinion on the question of marketability of their title. The legal opinion obtained pursuant to the decree of this Court confirmed that the plaintiffs and/or their predecessors in interest had marketable title over the said premises. 4 The Income Tax Department did not challenge the decree in the Originating Summons suit.
It has been alleged that after exchange of a lot of correspondence, on or about 27 th September, 2002 the Assistant Commissioner of Income Tax (OSD), Calcutta, being the Appropriate Authority, sent to the petitioners a copy of the order of preemptive purchase under Section 269 UD(1) of the Income Tax Act dated 16th January, 1989 in respect of Premises No.104, Dr. Meghnad Saha Sarani, Kolkata- 700029. The aforesaid order is under challenge in this writ petition.
The writ petition was dismissed by an order dated 9 th October, 2002. The order dated 9 th October, 2002 was, however, set aside by an order dated 24 th June, 2005 of the Division Bench in APOT No.61 of 2003, and the writ petition was remitted to the Single Bench.
The writ petition was again disposed of by an order dated 2 nd August, 2007, whereby the learned Single Bench gave liberty to the writ petitioners to make a representation to the appropriate Income Tax Authorities, with the observation that disputed questions of title cannot be decided by the Writ Court.
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The order dated 2 nd August, 2007 was set aside in appeal by the Division Bench comprising Their Lordships the Hon'ble Justice K.J. Sengupta and the Hon'ble Justice Md. Abdul Ghani by an order dated 15th September, 2009, and the writ petition was again remitted to the Single Bench.
It appears that a deed of transfer was executed by one Bhagya Laxmi Commercial Company and some other companies as well as one Pradip Goenka, purporting to transfer Premises No.104, Dr. Meghnad Saha Sarani, Kolkata- 700029 to certain persons for a sum of Rs.1,02,35,500/-. Form No.37(1) was filed on 28 th November, 1988 under Section 269 of the Income Tax Act, 1961.
On 16 th January, 1989, an order was passed under Section 269 UD directing that the property be purchased by the Central Government for a sum of Rs.1,02,35,500/-, being the amount of the apparent consideration. In terms of the aforesaid order, the Central Government paid Rs.1,02,35,500/- to the alleged transferors and purported to purchase the property.
The petitioners have attempted service on the alleged transferors but in vain. Publications were issued in inter alia the Statesman and Anandabazar, but no one has appeared to contest the proceedings. It 6 appears that a sum of over a crore has been paid to certain fictitious companies with no title to the said premises. Having received Rs.1,02,35,500/- the alleged transferors seem to have vanished.
Dr. Pal, appearing on behalf of the petitioners submitted that the petitioners were all along in occupation of the said Premises No.104, Dr. Meghnad Saha Sarani, Kolkata- 700029. The petitioners were, therefore, entitled to be heard before any order under Section 269UC of the Income Tax Act, 1961, for preemptive purchase could be passed.
Dr. Pal argued that the record of rights prepared in 1929 clearly showed that Kartick Chandra Shaw, father of the petitioner No.1 and grandfather of the petitioner Nos.2 to 6 as tenant under Bharat Samrat. In the mutation records, the petitioner No.1, Man Gobinda Shaw and his brother Narayan Chandra Shaw, since deceased, have been recorded as assessees and have been paying municipal taxes.
Dr. Pal has also referred to an order of the Block Land and Land Revenue Officer and Sub-divisional Land Revenue Officer under Section 14(2) of the West Bengal Land Reforms Act, 1955, as amended, for conversion of the land for construction of house by classification of 'sali' to 'vastu' in favour of Kartick Chandra Shaw, son of late Dhruba Shaw, subject to payment of rent and usual cesses as per the Cess Act. 7
Dr. Pal argued that if the appropriate authority had made any enquiry regarding title to the property, the appropriate authority could have known whose name had been appearing in the record of rights and who was in possession of the property.
An affidavit-in-opposition has been filed by the Assistant Commissioner of Income Tax (OSD) wherein it is stated that the appropriate authority had verified the title of the property before making the preemptive purchase order. The title was verified by M/s. Victor Moses & Co. and no defect was found.
Dr. Pal, however, pointed out that it was only after the preemptive purchase order under Section 269 UD (1) was passed on 16th January, 1989 that a letter dated 1 st February, 1989 was written to M/s. Victor Moses & Co. informing them of purchase of the property by the Government and requesting M/s. Victor Moses & Co. to take suitable action for verification and search in the registration office.
Dr. Pal argued that it was thus clear that no enquiry was made before the preemptive purchase order under Section 269UD (1) of the Income Tax Act, 1961. Moreover, M/s. Victor Moses & Co. had sent an interim report 8 on 23 rd February, 1989 which categorically stated that searches were not complete.
A copy of sale deed was produced by the Income Tax authorities, wherefrom it appears that the original title deed in respect of the said premises had been lost and/or misplaced. From the deed it appears that the vendors made it clear that the vendors, their heirs, executors, representatives and assigns would have no liability to indemnify the purchaser or the successor of the purchaser and/or assigns against any losses, damages, costs, charges, expenses by reason of any defect of the title of the vendor.
The original title deed not being traceable, newspaper advertisements should have been issued before making the order of compulsory purchase. Moreover, as argued by Dr. Pal there are serious doubts whether the purported vendors conveyed any marketable title in respect of the property in question to the alleged purchasers.
Relying on the judgment of the Supreme Court in C.B. Gautam vs. Union of India reported in 1999 ITR 530 (547), Dr. Pal argued that the order of preemptive purchase under Section 269 UD (1) could not have, in any case, been passed without giving the petitioners, who were in occupation of the said premises, an opportunity of hearing.
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Moreover, in exercise of power under Section 269 UD(1) the Government could not have purchased properties of doubtful or disputed title or properties with bona fide tenancies and/or burdensome restraints on the user.
Dr. Pal argued that in the instant case, the appropriate authority purported to exercise power to purchase at a price of Rs.1,02,35,500/- without proper enquiry, without ascertaining title and without ascertaining whether there were occupants.
Dr. Pal submitted that it was incumbent upon the appropriate authority to issue show cause notices calling upon the petitioner and other concerned parties to show cause why an order of compulsory purchase of the property should not be passed and to pass such order only after giving the petitioners an opportunity of representation and/or hearing.
In this case, a public auction was announced on 2 nd July, 2004. The auction has been stayed. The respondents have been restrained from initiating any proceeding afresh until further orders. It is submitted that possession is still with the petitioners.
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Dr. Pal submitted that in any case compensation cannot be said to have been paid to the owners, because the alleged vendor is not traceable. The transferors are apparently fictitious bodies. Even on the day on which the order for compulsory acquisition was passed, possession was with the petitioners.
Mr. Som, appearing on behalf of the Revenue submitted that the writ petition was liable to be dismissed on ground of delay, since the same had been filed 13 years after the impugned order of compulsory purchase, which is dated 16 th January, 1989.
Mr. Som further submitted that the respondent authorities had acted bona fide and in accordance with law after necessary enquiry into title. The Revenue had to act with haste having regard to the time limit for an order of compulsory purchase under Section 269 UD (1).
Referring to Section 269 UE (1), Mr. Som submitted that the said premises vested in the Central Government immediately on passing of the order of compulsory acquisition under sub-section (1) of Section 269 UD.
Mr. Som argued that the judgment and order of the Supreme Court in C.B. Gautam (supra) would have no manner of application since the 11 judgment was rendered on 17 th November, 1992, long after the impugned order of compulsory purchase was passed on 16th January, 1989.
Mr. Som finally argued that the provisions of Chapter XX-C, as it stood at the material time, when the order of compulsory purchase dated 16 th January, 1989 was passed, did not cast any obligation on the respondent authorities to give opportunity of hearing to the petitioner or any other occupants at the premises in question.
Relief under Article 226 of the Constitution of India being discretionary, the Courts often decline orders when there is gross delay in approaching Court. However, there being no limitation for initiation of writ proceedings, a good case on merits ought not to be rejected on ground alone of delay.
Under sub-section (2) of Section 269-UD, the Appropriate Authority was obliged to cause a copy of its order under sub-section (1) of Section 269-UD in respect of the said premises to be served on the transferor, the person in occupation of the immovable property, if the transferor was not in occupation thereof, the transferee and on every other person whom the appropriate authority knew to be interested in the property. The appropriate authority was thus statutorily obliged to ascertain who were the 12 occupants of the said premises and serve copies of the order of compulsory acquisition on such occupiers.
In view of the decree in the Originating Summons Suit and the legal opinion obtained pursuant to the decree, there can be no doubt that the petitioners are 'persons interested' even assuming that their title can be disputed. The petitioners were statutorily entitled to get copies of the order of compulsory acquisition. There is a categorical assertion in the writ petition that the order of compulsory purchase was served on the petitioner on or about 27th September, 2002. The respondent authorities have not been able to dispel the aforesaid assertion. The writ petition has been filed soon thereafter. The order having been served as late as in 2002, it cannot be contended that the writ application ought to be rejected on the ground of delay.
In any case, earlier this writ petition had twice been disposed of. The orders disposing of the writ petition were set aside in appeal and the writ petition remanded to the Single Bench for hearing on merits.
By its judgment and order dated 29th June, 2005 in APOT 61 of 2003 the Division Bench inter alia held as follows:
"It appears the writ petition was not entertained on sole ground that the matter involves dispute regarding title to 13 immovable property which can be efficaciously decided in a civil suit. It is true that such question can be better decided in a civil suit but disposal of the present proceeding requires decision as to whether the respondent authorities complied with all requirements for acquisition of the disputed property and whether the petitioners were required to be heard before such acquisition.
In our opinion such matter can be effectively decided in the writ proceeding and the same should be head on merit granting parties opportunity to produce further materials. Materials already available show such requirement. The petitioners have brought papers to show the ownership and possession in the disputed property whereas the respondent produced enquiry report by Solicitors on title of the proposed vendors. Respondents challenged petitioners' title contending that records-of-right show only possession and petitioners challenged respondents' continued stating that said enquiry was started after the purchase order and it was not included by a final report on proper verification and the interim report relying on xerox copies cannot be held acceptable.
Only on findings on above facts the law argued can be applied. If the petitioners are held owners they are entitled to notice and opportunity of hearing before the purchase. If the registered conveyances are produced to show title of the proposed vendors, the petitioners may have to go to civil court for appropriate relief.
In above view of the findings and as sufficient materials are not available before this Court for final decision on merit the appeal is allowed and the impugned order is set aside. The writ petition may be now decided on merit granting the parties opportunity to file affidavits. No costs."
In APOT No.505 of 2007, another Division Bench inter alia held:
"In our opinion, when the Division Bench earlier found that the dispute canvassed in the writ petition could effectively be decided by the writ court then it should have been decided by the that court alone, and with respect we observe that the learned Trial Judge should not have relegated the matter to the appropriate authority for undertaking an exercise which is 14 required to be done by the learned Trial Judge. It seems to us that the learned Trial Judge thought that post-decisional hearing would be suffice for the parties, and will put and end to the matter. We are unable to share with the thought of the learned Trial Judge. The challenge was against the order of the preemptive purchase passed by the appropriate authority under Section 269-UD on various grounds and the observation of the Division Bench is clear guidance in which direction this matter should have been decided. The learned Trial Judge had no option but to decide the matter with all efforts, if necessary, by witness action. It is settled position of law that the writ court's power is very vast and wide and if necessary, any dispute can be resolved within the parameters of the judicial review with or without any witness action. Whether the witness action is necessary or not, is not the thought of this court. We are, therefore, of the view that the order relegating the matter to the appropriate authority by the learned Trial Judge is not sustainable in law as it is completely contrary to the directions and wishes of the Division Bench."
In view of the order dated 24 th June, 2005 in APOT No.61 of 2003 and the order dated 15 th September, 2009 of the Division Bench in APOT No.505 of 2007, it is no longer open to the Single Bench to reject the writ application on the ground of delay.
In view of the Division Bench judgments referred to above, this Bench is obliged to decide the writ petition on merits. The judgments of the Division Bench, referred to above, have assumed finality, the same not having been interfered with by any higher forum.
The object of the Income Tax Act, 1961, as stated in its preamble is to consolidate and amend the law relating to Income Tax and Super Tax. The said Act has been enacted inter alia for imposition and realization of taxes 15 on receipts and/or deemed receipts which constitute income and/or are statutorily deemed to be income. The said Act also contains deterrent and/or penal provisions to prevent evasion of taxes inter alia by penalization of the evader.
Chapter XX-C of the Income Tax Act, 1961 consisting of Sections 269 U to 269 UO was inserted by the Finance Act, 1986, which came into force with effect from 1 st October, 1986 vide Notification No. SO 480(E) dated 7th October, 1986.
Ordinarily, if the consideration for transfer of immovable property, as shown in the transfer agreement is substantially less than its actual market value, it may be presumed that the property has been undervalued to evade tax. The object of Chapter XX-C was to prevent tax evasion by undervaluation of immovable property in an agreement for transfer.
The said Chapter, and in particular Section 269 UC, as it stood at the material time, imposed restrictions on transfer of immovable property by providing that no transfer of any immovable property of a value exceeding Rs.5,00,000 or such other amount as might be prescribed could be effective, except after an agreement for transfer in writing between the person who intended to transfer and the person to whom the immovable property was 16 proposed to be transferred at least 3 months before the intended date of transfer.
The agreement in writing was further required to be reduced in the form of a statement in the prescribed form and furnished in duplicate to the appropriate authority. Section 269 UD inter alia provided as follows:
"269-UD. Order by appropriate authority for purchase by Central Government of immovable property.--(1) The appropriate authority, after the receipt of the statement under sub-section (3) of Section 269-UC in respect of any immovable property, may, notwithstanding anything contained in any other law or any instrument or any arrangement for the time being in force, and for reasons to be recorded in writing, make an order for the purchase by the Central Government of such immovable property at an amount equal to the amount of apparent consideration:
Provided that no such order shall be made in respect of any immovable property after the expiration of a period of two months from the end of the month in which the statement referred to in Section 269-UC in respect of such property is received by the appropriate authority:
Provided further .........
(2) The appropriate authority shall cause a copy of its order under sub-section (1) in respect of any immovable property to be served on the transferor, the person in occupation of the immovable property if the transferor is not in occupation thereof, the transferee, and on every other person whom the appropriate authority knows to be interested in the property."
The Appropriate Authority constituted under Section 269 UB is to examine whether any immovable property of the value specified in Section 269 UC has been undervalued in the agreement for transfer and if so, to 17 acquire the immovable property on behalf of the Central Government, at the apparent consideration.
Prior to 17 th November, 1992, Section 269 UE (1) provided that where an order under sub-section (1) of Section 269 UD was made by the Appropriate Authority, in respect of any immovable property, such property would, on the date of such order, vest in the Central Government, free from all encumbrances. However, in the case of C.B. Gautam (supra) the Supreme Court struck down the part of Section 269 UE (1) which provided for vesting free of encumbrances. After amendment by the Finance Act, 1993, the said Section provides for vesting in terms of the agreement for transfer referred to in sub-section (1) of Section 269 UC.
Section 269 UA defines agreement for transfer to mean an agreement, whether registered under the Registration Act, 1908 or not, for the transfer of any immovable property. An agreement for transfer can only be executed by a person with marketable title to the immovable property. An agreement to transfer executed by a person who does not have a marketable title is in itself null and void and of no effect.
On a combined reading of Sections 269 UA to 269 UO it is patently clear that right of preemptive purchase under Section 269 UD(1) can only be exercised where there is a valid agreement for transfer between a person 18 who intends to transfer the immovable property and the person to whom it is proposed to be transferred. An agreement executed by a person who does not have any marketable title to the property, is no agreement in the eye of law.
An order of compulsory acquisition on the basis of an agreement executed by any person without marketable title is not binding on the real owners and/or others with marketable right, title and/or interest, who have had no role.
Thus, before making any order for compulsory purchase, the Appropriate Authority is obliged to ascertain whether the persons claiming themselves to be transferors have marketable title. Necessary searches would have to be carried out and the proposed acquisition publicized for objections from persons claiming title, whether or not there is any mandatory requirement as otherwise there would be great risk involved in the compulsory purchase. Precautionary measures are mandatory, even though the actual measures that might be taken are discretionary.
The order of acquisition dated 16th January, 1989 has apparently been passed by the appropriate authority without any enquiry into the title to the property. The Appropriate Authority has been negligent and has abdicated its essential duty. It is on record that original title deeds were missing. It is 19 a matter of record that the petitioners and/or their predecessor in interest were recorded as Raiyats under Bharat Samrat. There was no intermediary landlord. The petitioners were apparently in occupation. Yet the petitioners and/or their predecessors in interest were not given any opportunity of hearing. There was not even any newspaper insertion. The order of compulsory purchase dated 16th January, 1989 under Section 269 UD of the Income Tax Act, 1961 is, therefore, not sustainable in the eye of law.
In C.B. Gautam (supra) the Supreme Court held that before an order of compulsory purchase is made under Section 269-UD, those persons likely to be prejudicially affected should be given a reasonable opportunity of showing cause against the proposed order for compulsory purchase.
In C.B. Gautam (supra) the Supreme Court has interpreted and declared law relating to compulsory acquisition of immovable property as contained in Chapter XX-C from the inception, when the aforesaid Rules of natural justice are to be read into Section 269 UD from the very inception when the said Section was inserted.
Moreover, in C.B. Gautam (supra), the Supreme Court itself clarified that as far as completed transactions were concerned, that is, where after the order for compulsory purchase, possession had been taken over and compensation paid to the owner of the property and accepted without 20 protest, those transactions need not be invalidated. The same position would prevail where public auction had already been held and third party interests had intervened.
In other cases, the statement in Form 37 (1) submitted by the parties to the transfer was to be treated as if it was submitted on the date of signing of the judgment in C.B. Gautam (supra). Thereafter if the appropriate authority considered it fit, it might issue a show-cause notice calling upon the concerned parties to show cause. In view of the limited time frame this would have to be done with the sense of urgency. In the instant case it cannot be said that transaction have been completed, so far as the petitioners are concerned.
On a miscellaneous application moved by the Union of India for certain clarification, the Supreme Court directed that in cases pending before the Supreme Court and High Courts, the time frame for affording a hearing would have to be reckoned from the date of actual disposal of the matters. In case of matters not agitated in Court but pending before the authorities. Form 37 I would be deemed to have been filed on 17 th November, 1992, being the date of the judgment in C.B. Gautam (supra).
If after reasonable opportunity to show cause the Appropriate Authority so considered fit it hold an enquiry, even though summary in nature and might pass an order for compulsory acquisition by the Government.
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Having regard to the proposition of law laid down by the Supreme Court in C.B. Gautam (supra) this Court cannot but hold that the petitioners were entitled to opportunity of hearing, before any order of compulsory purchase could be made. It is reiterated at the cost of repetition that there are ample materials on record to show that the petitioners were persons interested. The appropriate authority was obliged to give the petitioners opportunity of hearing.
Even after the judgment in C.B. Gautam (supra) the petitioners and/or their predecessors in interest were not given any hearing. As the case of the property in question was not in Court, on the date on which the judgment in C.B. Gautam (supra) was delivered, the date of the said judgment was to be deemed to be the date of filing Form 37 1A. This has not been done. The time to pass a fresh order has lapsed. The Department may, however, take necessary steps against the so-called transferors for recovery of the amounts paid to them with interest.
The impugned order of compulsory purchase dated 16th January, 1989, which is in flagrant violation of all principles of natural justice, is not sustainable in law and the same is set aside and quashed.
The writ petition is disposed of accordingly.
(Indira Banerjee, J.)