Bombay High Court
Executive Director Mr. Chhaganbhai vs Appropriate Authority on 29 August, 2008
Bench: Anoop V. Mohta, C. L. Pangarkar
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH AT NAGPUR
WRIT PETITION NO. 558 of 1995
Cigeo Construction Company Pvt. Ltd.
a Company registered under the
Companies Act, 1956, through its
Executive Director Mr. Chhaganbhai
Patel, having its registered office at Plot
No. 5/1, Amar Palace, Dhantoli, Nagpur.
.....PETITIONER
...V E R S U S...
1. Appropriate Authority
(Income Tax Department) 4th Floor,
Naure View Building, Near H. K. House,
Ashram Road, Ahemadabad (Gujarat)
2. Union of India, through
Secretary, Ministry of Finance,
New Delhi.
3. Aniruddha Pandurang Welekar,
aged 44 yeas, r/o Jagnath Budhwari,
Ward No. 44, Nagpur.
.....RESPONDENTS
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Mr. M. G. Bhangde, Senior Counsel for the petitioner.
Mr. A. S. Jaiswal, Advocate for the respondent.
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CORAM:- ANOOP V. MOHTA & C. L. PANGARKAR, JJ.
Date of Reserving the Judgment :- August 21, 2008
Date of Pronouncing the Judgment :- August 29, 2008
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2
J U D G M E N T (Per:- Anoop V. Mohta, J.)
1. The petitioner has challenged an order dated 24.02.1995 passed under Section 269 UD (1) of the Income Tax Act (for short "Act") and an order dated 24.02.1995 passed under Section 269 UE of the Act by respondent no. 1, thereby ordered for preemptive purchase under Chapter XXC of the Act and further to deliver possession of property plot no. 19, sheet no. 20/A, ward no. 4, Abhyankar Road, Dhantoli, Nagpur-12.
2. On 24.11.1994 an agreement of Development and sale of plot admeasuring 9708 sq. ft. entered between petitioner and respondent no. 3 for consideration of Rs. 40,00,000/-. Form no. 37-I was submitted by the petitioner and respondent no. 3 as per Rule 48-L of the Act. On 10.02.1995, notice under Section 269 UD (1-A) of the Act was issued to the petitioner and respondent no. 3, whereby the petitioner and respondent no. 3 were asked to remain present for hearing on 21.02.1995. Notice dated 10.2.1995 was received by the ::: Downloaded on - 09/06/2013 13:47:17 ::: 3 petitioner at Nagpur. The petitioner submitted written submission in response to the above notice to the Appropriate Authority, clearly pointing out non-application of mind in issuing notice under Section 269 UD (1-A). The petitioner submitted additional written submissions. The petitioner was heard by the Appropriate Authority at Ahemadabad in absence of respondent no. 3, the transferor. On 24.02.1995 the Appropriate Authority passed order under Section 269 UD (1) and Section 269 UE (2) for preemptive purchase. The instant writ petition is filed by the transferee-petitioner before this Court.
This Court granted stay to the order impugned i.e. order under Section 269 UD (1) and Section 269 UE (2) passed on 24.02.1995.
3. After hearing both the parties, we have also found that a fair market value was not determined by respondent-Authority as required under the law. There is no mention about the fair market value of the property. There is also nothing recorded that apparent consideration is less than the fair market value by 15%. There is force in the submission that unless fair market value of the PUC (Property under ::: Downloaded on - 09/06/2013 13:47:17 ::: 4 Consideration) is determined, there cannot be any declaration with regard to the aspect of under valuation. In Mehta Mody & Company ..vs.. Appropriate Authority and others; 2008 (4) Mh.L.J. 642, it is observed in para 9 as under:-
"9. Having regard to the aforesaid facts and circumstances of the case and after considering all the above submissions it is clear that in this matter the respondent no. 1 had not fixed any "fair market value"
at all. It is vital to note as has been held by this Court i case of Vimal Agrawal vs. Appropriate Authority and others, 210 ITR 16,that it is very essential that the respondent should first determine the "fair market value" of the property in question in the light of the attending circumstances and without determining the fair market value it is not only difficult but impossible to state that the apparent consideration is lower than the market value by 15% or more."
4. It is necessary for the Department to give reasons to the defence and submissions raised by the petitioner before rejecting their case. Mere observation that price of properties in Nagpur are rising ::: Downloaded on - 09/06/2013 13:47:17 ::: 5 rapidly is not sufficient. There is no percentage rise in rates stated and demonstrated on the record to arrive at a conclusion that the apparent consideration is 15% less than the fair market value.
5. Even prior to this, in Barium Chemicals Ltd. & Anr. ..vs..
Company Law Board & Ors.; 1967 SC 195, the Apex Court elaborated the above said position in the following words:-
"The combined reading of S. 269UD (1A) and (1B) of the Act leaves no room of doubt that it is a question of objectively decision-making process by taking into consideration all relevant materials which have come before hearing authority and considering the rival aspects of the matter. Moreover, requirement of law is to specify the grounds on which the order of pre- emptive purchase is made. That obligation does not stop by merely rejecting the submissions made before it. Rejection of submissions made by the vendors or transferee or or person interested in the property, does not lead to consequence that grounds for making pre-
emptive purchase exists. Sine qua non is that the reasons must exist on the material placed before it for supporting the action taken for pre-emptive purchase ::: Downloaded on - 09/06/2013 13:47:17 ::: 6 under S. 269UD of the Act. The order clearly falls short of this requirement."
6. It is clear that the appropriate Authority must come to a definite conclusion that undervaluation is by more than 15% of the fair market value. [Sarwarben Temas Khambata and others ..vs..
Appropriate Authority: ITR 216 850 (Guj)]; [Surya Kiram Association..vs..Appropriate Authorityl (1996) ITR 29 (Guj)]. These two judgments are based upon a Division Bench judgment of the Bombay High Court in Vimal Agarwal ..vs.. Appropriate Authority & Ors.; (1994) 210 ITR 16 (Bom) followed in Mehta Mody and Company (supra) also. In Vimal Agarwal (supra), the observations are as under:-
"15. Moreover, in order to draw inference of undervaluation, it is necessary to determine first the fair market value of the property in question in the light of all the attending circumstances. Without doing so, it is not only difficult but impossible to say that the apparent consideration is lower than the fair market value by 15% or more. The determination of the fair ::: Downloaded on - 09/06/2013 13:47:17 ::: 7 market value must be based on evidence on record. It cannot be a guess work......."
7. We have also noted that there is nothing mentioned about the intention to evade taxes with regard to undervaluation. The reasons and satisfaction of the Department is necessary to arrive at such a conclusion to preemptive purchase of the property.
(Mrs. Amarjit Thapar and others ..vs.. S. K. Laul and others; 2008 298 ITR 336) (Bom); (Kishor Tulsidas Choksi and others ..vs..
Appropriate Authority and another; 2008 298 ITR 228) (Bom).
The respondents-Authority failed to discharge its burden to demonstrate any such intention. There is even no material/proof of the same on the record to justify their action without recording such an intention to evade taxes.
8. Even on merits, we have noted that the respondents-
Authority failed to consider the detail chart and comparative rates given by the petitioner to justify their case. There are no reasons either in show cause notice and/or in the impugned orders while ::: Downloaded on - 09/06/2013 13:47:17 ::: 8 rejecting the details given by the petitioner. The petitioner, in their reply/written submission dated 19.02.1995, elaborated even on merits, which was not properly considered by the Authority before passing the impugned order.
9. In view of this, we are of the view that the impugned orders passed by the appropriate Authority are illegal and invalid as the same were passed without determining a fair market value and proper material on record and without following basics as required and as explained above in various judgments before passing such orders of preemptive purchase.
10. In the result, the writ petition is allowed. The impugned orders of the appropriate Authority are quashed and set aside. Rule is made absolute accordingly. No orders as to costs.
JUDGE JUDGE
kahale
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