Gujarat High Court
Lily Shavak Doctor And Anr. vs Union Of India And Ors. on 5 May, 1994
Equivalent citations: [1995]212ITR142(GUJ)
Author: M.B. Shah
Bench: M.B. Shah
JUDGMENT M.B. Shah, J.
1. The petitioners who are wife and husband have challenged the order dated February 24, 1994 (annexure "A"), passed by the appropriate authority, Ahmedabad, under section 269UD(1) of the Income-tax Act, 1961.
2. It is the contention of the petitioners that are owners of a plot situated at Baroda and they wanted to develop the said plot in such a manner so that the name of Smt. Dinbai Bamanshah Jal, mother of the first petitioner, is always remembered for all times to come. Under the circumstances, the petitioners agreed to sell the said property to Alkapuri Sindhi Association, a registered charitable trust for a total consideration of Rs. 18,50,000. As the total consideration exceeded a sum of Rs. 10,00,000, the petitioners filled in From No. 37-I on November 4, 1993. On December 13, 1993, the petitioners and the proposed transferees placed their objections on record. The copy of the said objections is produces at annexure "C". However, on January 14, 1994, the appropriate authority issued a notice calling upon the petitioners to show cause as to why the property should not be compulsorily purchased under the provisions of Chapter XX-C of the Act. The petitioners gave a reply on February 7, 1994, wherein it was, inter alia, stated that no other development was possible because the said plot was reserved for local centre under the Town Planning Act. It is contended that in spite of the said written objections, without considering them, the impugned order was passed.
3. At the time of the hearing of the petition, it was contended by learned counsel for the petitioners that the show-cause notice issued by the appropriate authority is absolutely vague and as such it is not a show-cause notice but an empty formality of making a show of issuing show-cause notice has been observed by the appropriate authority.
4. He further submitted that the appropriate authority has not considered the reasons pointed out by the petitions to justify the price specified in the agreement. It is contended that -
(1) the transferee was required to retain the name of the mother of the first petitioner for all times to come on the construction which may be made by the transferee;
(2) irrelevant sale instances are taken into consideration;
(3) the plot was reserved for local centre by the Deputy Town Planner, Baroda City Development Authority, Baroda (VUDA), as per its order dated December 27, 1993.
5. As against this, Mr. Shelat, learned counsel appearing on behalf of the respondents, submitted that the order passed by the authority is in compliance with the principles of natural justice and that this court has no jurisdiction to reappreciate the evidence considered by the authority. He further submitted that the show-cause notice issued by the appropriate authority is proper.
6. In this petition, we will have to deal only with the first contention raised by the petitioners with regard to the validity of the show-cause notice. The show-cause notice dated January 4, 1994, issued by the appropriate authority is produced on record at annexure "D". In the first paragraph, it is mentioned that Form No. 37-I was submitted on November 4, 1993, for the property mentioned in column No. 7 of annexure to the Form. Thereafter, description of the property is mentioned. Paragraphs Nos. 2, 3 and 4 are as under :
"2. The apparent consideration for the same has been declared at Rs. 18,60,000.
3. You are required to show cause as to why the property should not be purchased under the provisions of Chapter XX-C of the Income-tax Act, 1961.
4. Your reply should reach this office latest by 11th January, 1994, at 8.00 p.m. positively by speed post. If you desire personal hearing, you may attend this office on 12th January, 1994, at 10.00 a.m."
7. It is to be noted that Form No. 37-I was submitted by the petitioners on November 4, 1993. Notice was issued on January 4, 1994, wherein the petitioners were asked to submit their reply before January 11, 1994, and if they desired personal hearing, they were asked to remain present on January 12, 1994. The aforesaid notice nowhere states on what ground the appropriate authority has decided to purchase the property under the provisions of Chapter XX-C. It is nowhere stated that there was undervaluation of the apparent consideration specified in the agreement to sell. It is nowhere stated that the appropriate authority was having any material for arriving at the conclusion that there was undervaluation. There is nothing in the show-cause notice to give any indication that the appropriate authority was having any material or was relying upon some sale instances for arriving at the prima facie conclusion that the property was required to be purchased under section 269UD because of undervaluation. The impugned show-cause notice did not give the petitioner any opportunity to contend or point out to the appropriate authority that the apparent consideration specified in the agreement to sell was proper and that there was no undervaluation. Hence, it is apparent that it would not be possible for the petitioners to show any cause why the property should not be purchased.
8. It should be noted that issuance of a show-cause notice is not an empty formality. Its purpose is to give a reasonable opportunity to the affected persons to contend that the apparent consideration as per the agreement to sell is the market price or that there is no undervaluation because of peculiar facts. Therefore, before taking any action under section 269UD(1) of the Income-tax Act, the appropriate authority should give to the person likely to be affected by the order proposed to be made a notice of the action intended to be taken, inform him about the material on the basis of which the appropriate authority proposes to take action of pre-emptive purchase and give a fair and reasonable opportunity to such person to represent his case and to correct or controvert the material sought to be relied upon against him. Hence, in the show-cause notice under section 269UD of the Income-tax Act, provisional conclusions are required to be briefly specified. If a vague show-cause notice is given without specifying anything or the grounds for holding that the property is required to be purchased under section 269UD of the Income-tax Act, then it can be held that a reasonable opportunity of showing cause against an order for pre-emptive purchase being made by the appropriate authority was not given, because the transferor and the transferee would be totally unaware of the grounds which prompted the appropriate authority to arrive at a prima facie conclusion that the power under section 269UD(1) of the Income-tax Act was required to be exercised. No doubt issuance of a show-cause notice is the preliminary step which is required to be undertaken before giving opportunity of hearing under section 269UD(1A) of the Income-tax Act. Still, however, in such types of cases, the rules of natural justice require that persons whose property is sought to be compulsorily purchased should know the exact ground on which the proceedings are contemplated to be taken.
9. While considering the contents of a show-cause notice in a matter arising in connection with disciplinary proceedings under the Punjab Civil Services (Punishment and Appeal) Rules, 1952, the Supreme Court has in the case of B. D. Gupta v. State of Haryana, AIR 1972 SC 2472, observed as under (at page 2474) :
"There is nothing, however, in the 'show-cause notice' of October 26, 1966, to indicate clearly that the dissatisfaction of Government with the appellant's reply of December 18, 1956, had nothing to do with charge 1(a). The 'show-cause notice' merely states in vague general terms that the appellant's reply to the charges and allegations was unsatisfactory. Even if we were to assume, though there is no reasonable ground for this assumption, that Government did not have in mind the contents of charge 1(a) while serving this 'show-cause notice', there is nothing in the 'show-cause notice' to give any indication that the particular allegations regarding which the appellant had failed to furnish a satisfactory explanation were referable only to charge 1(b). The notice is vague on other grounds as well. As one reads the first paragraph of the notice, the questions that at once assail one's mind are many : In what way the explanation of the appellant unsatisfactory ? Which part of the appellant's explanation was so unsatisfactory ? On what material did not Government think that the appellant's explanation was unsatisfactory ? It is to our mind essential for a 'show-cause notice' to indicate the precise scope of the notice and also to indicate the points on which the officer concerned is expected to give a reply."
10. In this view of the matter, in our view, the submission of learned counsel for the petitioners that the show-cause notice issued in the present case is a mere empty formality observed by the appropriate authority and the statement made in the show-cause notice is absolutely vague which does not give any opportunity to the petitioners to defend themselves and to point out to the authority that the apparent consideration mentioned in the agreement to sell was the market value of the property, requires to be accepted.
11. In the result, this petition is allowed and the impugned order, annexure "A", passed by the appropriate authority on February 24, 1994, is quashed and set aside. However, it is clarified that it would be open to the appropriate authority to issue a fresh notice and initiate proceedings under section 269UD of the Income-tax Act and to finalise the proceedings and to pass an appropriate order within three months from today, i.e., on or before August 5, 1994. Rule made absolute with no order as to costs.