Delhi High Court
Dr. Anand Prakash vs Appropriate Authority, Income Tax ... on 7 July, 2006
Equivalent citations: (2006)205CTR(DEL)125, 131(2006)DLT36, [2006]287ITR395(DELHI)
Author: T.S. Thakur
Bench: T.S. Thakur, Shiv Narayan Dhingra
JUDGMENT T.S. Thakur, J.
Page 2569
1. In this petition for a writ of certiorari, the petitioner assails the validity of two separate but similar orders both dated 29th November, 1994 passed by the Appropriate Authority under Section 269UD of the Income-tax Act, 1961 for compulsory purchase of property owned by late Dr. Anand Prakash, comprising two commercial flats bearing No. 512 and 512-A, Hemkunt Tower, New Delhi. The petition also makes a claim for payment of damages for the alleged illegal, arbitrary and mala fide withholding of permission prayed for by the petitioner for the transfer of the said property.
2. The facts giving rise to the filing of the petition may be summarised as under:
3. Late Dr. Anand Prakash was the owner of Flat Nos. 512 and 512-A, Hemkunt Tower, New Delhi. The said flats were initially leased out to a Government of India undertaking but after the tenant vacated the premises, Dr. Prakash decided to sell the same. The petitioner's case is that since he was insisting on payment of the entire consideration for the flats by cheque/bank draft, he found very few takers for his property. He was, therefore, advised by the property dealers to fall in line with the market practice of receiving the sale consideration in the ratio of 60:40 in which 60% of the amount would be paid in white while the rest would be paid under the table in the form of black money. This method, the petitioner was told, would obviate the need for obtaining permission from the Appropriate Authority under Section 269UC of the Income-tax Act, 1961 which would otherwise be necessary if the sale consideration of the flats was more than 10 lakhs. The petition goes on to state that Dr. Prakash refused to fall in line with what was suggested to him as a device for avoiding the straight and the honest method of transferring his property and insisted that he would comply with the provisions of law and accept the consideration for the flats only by cheque or bank draft.
4. The petitioner's efforts to look for a purchaser who was prepared to pay the entire consideration in white, culminated in an agreement to sell between the petitioner and M/s. Pace International @ Rs. 2800/- per sq.ft. of super area plus 50% of transfer charges. Two agreements to sell, one dated 21st June, 1994 and the other dated 5th July, 1994 were accordingly executed Page 2570 between the seller Late Dr. Anand Prakash and the purchaser of the said flats. These were followed by two other agreements executed on 25th July, 1994 and 1st August, 1994 which became necessary as there was some delay in the making of the application for permission under Section 269UD of the Act. An application seeking permission in Form 37(1) of the Income-tax Rules under Section 269UD of the Act was eventually filed before the Appropriate Authority.
5. On 11th August, 1994 a notice was received by the seller Dr. Anand Prakash from the Appropriate Authority seeking certain information and also demanding an inspection of the properties which information was provided and an inspection allowed on 17th August, 1994. This was followed by two show cause notices dated 8/9th November, 1994 received by Dr. Anand Prakash on 11th November, 1994 asking him to appear before the Appropriate Authority to show cause as to why a pre-emptive purchase of the flats in question should not be made under Section 269UD(1) of the Act. In compliance with the said notice, Dr. Prakash appeared before the Appropriate Authority on 16th November, 1994 and made a request for providing him the following:
(i) A copy of the report of the Valuation Officer in respect of the properties in question.
(ii) The details of the instances taken into account by the Appropriate Authority while issuing the show cause notices.
(iii) Inspection of the sale deed of property No. 512, Ansal Tower, 38, Nehru Place, New Delhi relied upon by the Appropriate Authority.
6. These requests were, according to the petitioner, rudely turned down. Time for filing of a reply was also reluctantly granted to the petitioner only up to 21st November, 1994. A reply was accordingly filed by the petitioner on 19th November, 1994 shortly where after came the impugned orders dated 29th November, 1994 by which the Appropriate Authority invoked its powers under Section 269UD(1) of the Income-tax Act, 1961 and purchased the property in question in consideration of the amount disclosed in the applications seeking permission. The possession of the property was pursuant to the said orders taken over by the respondents.
7. The present writ petition was then filed in March 1995. Nearly one year thereafter, the owner Dr. Anand Prakash passed away and was substituted by his widow Smt. Laxmi Anand. It is noteworthy that during the pendency of this petition, the petitioner was paid a sum of Rs. 11,51,400/- and Rs. 13,02,450/- representing the sale consideration of the two flats which amount was directed to be refunded to the Government in terms of the order of this Court dated 19th August, 2004 There was, during the intervening period, some controversy regarding the settlement of the matter on terms which were not, according to the petitioner, correctly recorded necessitating a clarification of the order of this Court dated 22nd November, 2001 by order dated 21st December, 2001. Learned counsel for the parties, however, agreed that nothing really turned on that part of the controversy. The writ petition was, therefore, argued by them on merits.
8. Appearing for the petitioner, Mr. Saurav Prakash contended that the order passed by the Appropriate Authority was in gross violation of the principles Page 2571 of natural justice apart from being wholly misconceived and erroneous in nature. He contended that the Appropriate Authority had not furnished to the petitioner the material used by it for holding that the apparent consideration for the property was understated by more than 15%. He urged that neither a copy of the Valuation Report nor the documents relating to the transaction with which the Appropriate Authority had drawn a comparison had been furnished to the petitioner despite requests made in that regard. He submitted that the denial of the material used against the petitioner prevented the petitioner from effectively defending himself against the proposed action. Reliance in support of that submission was placed by the learned Counsel upon the decisions of the Supreme Court in C.B. Gautam Versus Union of India, , Appropriate Authority Versus Smt. Varshaben Bharatbhai Shah (2001) 166 CTR 373, Ranjit Kumar Banerjee Versus Appropriate Authority (1997) 139 CTR 157, E. Vittal Versus Appropriate Authority (1997) 137 CTR 396 and Vijay Kmar Sharma Versus Appropriate Authority .
9. It was further contended by the learned Counsel that the Appropriate Authority had not made the payment in terms of Section 269UG of the Act and that the deposit allegedly made by it was not appropriate and substantial in compliance with the said requirement especially when the petitioner had not refused to receive the amount payable to him. It was contended that the comparison drawn by the Appropriate Authority between the property sold in the Ansal's building and that owned by the petitioner, was illogical and irrational and that the comparison deliberately and unfairly overlooked certain stark differences affecting the value of the two properties. In particular, it was argued that the Appropriate Authority had ignored that Ansal building was a new building in comparison to Hemkunt Tower where the flats owned by the petitioner were situate. The Authority had also ignored the deficiencies in the Hemkunt Tower. One of these deficiencies was that buildings in Nehru place including 98, Hemkunt Tower did not meet the fire safety requirements. No such buildings, however, existed in Ansal Tower with which the property owned by the petitioner was being compared. It was argued on the authority of the decision in C.B. Gautam's case (supra), that the petitioner was entitled to assail the legality of the order as the compulsory purchase carried a stigma which the petitioner insists, should not attach to his name.
10. On behalf of the respondents, it was argued by Mr. Jolly that there was no illegality in the impugned orders passed by the Appropriate Authority nor was there any violation of the principles of natural justice as alleged. The show cause notice had, according to the learned Counsel, disclosed the particulars of the flat in Ansal Tower with which the property owned by the petitioner was being compared. The non-furnishing of the copy of the document under which the sale transaction in respect of Ansal Towers was finalised was, therefore, inconsequential according to the learned Counsel.
Page 2572
11. It was further submitted that deposit of the amount in question was made on 29th December, 1994 which was within the outer limit stipulated under Section 269UG of the Act. The deposit was valid according to the learned Counsel as the petitioner had declined to receive the amount. There was, argued Mr. Jolly, no illegality in the order passed by the Appropriate Authority even on merits as the same had taken all relevant aspects into consideration and correctly concluded that there was indeed an understatement in the value of the property owned by the petitioners by 15%. There was, therefore, no room for interference by this Court.
12. We have given our anxious consideration to the submissions made at the bar. The petition must, in our opinion, succeed on the short ground of violation of principles of natural justice by the appropriate authority while passing the impugned order. It is true that the provisions of Section 269 of the Act do not in specific terms provide for the grant of a hearing to the seller or the buyer of the property being compulsorily purchased by the Income Tax Department, but it is equally true that such a requirement has been read into the said provision by the Supreme Court in C.B. Gautam's case (supra). That was a case where the constitutional validity of the provisions of Chapter XX-C of the Act was assailed inter alia on the ground that the said provisions did not afford to the affected parties an opportunity to oppose the proposed compulsory purchase of the property. The apex Court upheld the validity of the enactment holding that the requirement of giving a hearing to the concerned parties particularly the intending purchaser and the intending seller must be read into the said provision and that before an order of compulsory purchase is made under Section 269UD the intending purchaser and the intending seller must be given an opportunity of showing cause against any such order. Applying the said principle to the orders of compulsory purchase, different high courts in the country have held that the requirement of a fair hearing as envisaged by the decision of the Supreme Court in C.B. Gautam's case (supra) would require that the affected parties are furnished copies of the material upon which the appropriate authority proposes to place reliance while making an order under Section 269UD. We may in this regard refer to the decisions of the High Court of Gujarat in CIT versus Bimla Ben Patel 118 ITR 134, the High Court of Allahabad in Vijay Kumar Sharma versus Appropriate Authority 220 ITR 509, the High Court of Andhra Pradesh in I.E. Vittal and Anr. versus Appropriate Authority and Ors. 137 CTR 396 and the High Court of Bombay in N.L. Grover v. Appropriate Authority 223 ITR 572. The Courts have in these pronouncements declared that withholding of the relevant information and material which the appropriate authority proposes to rely upon while making an order will violate the principles of natural justice and vitiates the order of compulsory purchase. A contrary view is not in our opinion logically available. Once it is held that the affected parties are entitled to a hearing before an order of compulsory purchase is made by the appropriate authority, the duty to disclose to the affected parties the material sought to be relied upon will be implicit in any such hearing. A hearing will be no more than a mere ritual if it is not meaningful and effective. It cannot be meaningful and effective unless the affected party knows what precisely is being used against it in the form of documents or information. It is only when Page 2573 documentary and other material collected by the appropriate authority for use against the affected parties is disclosed to such parties that the affected parties can make an effective representation against the same either to show that the material is unworthy of credit or that it is insufficient or irrelevant for the purpose for which it is being used. Suffice it to say that denial of such material would constitute a denial of an opportunity of being heard.
13. The petitioner's case in the present petition is that on 16th November, 1994 when he appeared before the appropriate authority, he demanded a copy of the report of the valuation officer in respect of the properties in question, details of the instances taken into account by the appropriate authority while issuing the show cause notices and an inspection of the sale deed of property No.512, Ansal Tower by reference to which the appropriate authority proposed to hold the sale consideration for the property in dispute to be undervalued. The information and the documents demanded was not however furnished nor was an inspection thereof allowed to the petitioner. A protest in that regard was lodged by the petitioner even in the written submission filed before the appropriate authority on 19th November, 1994. This version remains unrebutted in the present proceedings. It is not the case of the respondents that the documents which the authority relied upon had been furnished to the petitioner. The petitioner has made specific averments in paras 21, 22 and 23 of the petition to the effect that he had demanded a copy of the valuation officer's report and the details of the instances taken into account while issuing the show cause notices as also an inspection of the sale deed for property No. 512, Ansal Tower which details were, according to the petitioner, never furnished and in fact rudely turned down. The respondents have made a evasive denial of the said averments in the following words : ?Show cause notice dated 9.11.94 fixing hearing for 16.11.94 were served on the petitioner on 11.11.94. Hearing on 16.11.94 was, however, adjourned to 22.11.94 on petitioner's request. Thus petitioner was allowed sufficient time to present his case. All other averments are denied. The objections of the petitioner have been discussed in detail in para 3, 4 and 5 of the pre-emptive purchase order i.e. that valuation data prepared by the Valuation Officer is internal exercise by the office of Appropriate Authority and all relevant details thereof have been disclosed to the petitioner in show cause notice.
14. It is therefore clear that the respondents do not claim to have furnished to the petitioner the information and documents demanded by the petitioner before passing the impugned orders. Such being the position, we have no hesitation in holding that the documents relied upon by the prescribed authority were denied to the petitioner thereby violating the principles of natural justice.
Page 2574
15. The next question then is whether we ought to remand the matter back for a proper hearing by the appropriate authority as was done by the Supreme Court in Appropriate Authority and CIT v. Varshaben Bharatbhai Shah and Ors. . That was a case where the validity of an order was questioned before a Division Bench of the High Court of Gujarat who allowed the said petition and quashed the order of compulsory purchase inter alia on the ground that the affected parties had not been afforded a fair opportunity to oppose the proposed action. The Supreme Court had, keeping in view the facts and circumstances of that case, remitted the matter back to the appropriate authority for a fresh hearing after the affected parties were furnished the material including reports relied upon by the appropriate authority. A similar order in the present case may not be entirely justified having regard to the extent of the property involved, the nature of the controversy and the extent of alleged under valuation as also the supervening circumstances including the death of the petitioner during the pendency of the proceedings. The property in the instant case comprises two flats, which were according to the appropriate authority being sold for an apparent consideration of Rs. 13,02,450/- against a value of Rs. 16,57,510/- determined by the appropriate authority in the case of Flat No. 512-A, Hemkunt Tower. In the case of flat No. 512, Hemkunt Tower, the sale was for an apparent consideration of Rs.11,51,400/- against a value of Rs.14,65,798/- determined by the appropriate authority. This value had been determined by the appropriate authority by reference to a flat situate in a building in Ansal Tower, a copy of the sale deed whereof was neither furnished to the petitioner nor produced in the course of these proceedings. There is no other material which the appropriate authority has assembled to justify its conclusion that the alleged under valuation was to the extent of 22%. The petitioner's case that the flats in Ansal Tower had a definite advantage over those being sold by the petitioner on account of a serious deficiency in the building where the petitioner's flat was situate cannot be brushed aside lightly. The petitioner has in this regard relied upon reports stating that buildings in Nehru Place do not meet the fire safety requirements. These buildings included 98, Hemkunt Building where the petitioner's flat was situate but does not include Ansal Tower in which the flat being compared for purposes of compulsory purchase is located. It is also not in dispute that Hemkunt Tower where the petitioner's flats were located was about 20 years old, having been constructed in the year 1970 whereas Ansal Tower with which the said flats were being compared is a new construction. We need not dilate on this aspect and others which the petitioner has pointed out including the reputation of the builders who have raised the said structures. All that we need say is that the facts and circumstances of the case do not in our opinion justify a fresh round of proceedings by the appropriate authority and resultant litigation which has remained pending for over 10 years now. It is, in our opinion, time that we give a quietus to the entire controversy. Chapter XX-C of the Income Tax Act, it is noteworthy, has been deleted from the statute book with the result that no compulsory purchases are permissible post deletion of the said provisions.
Page 2575
16. In the result, this petition succeeds and is hereby allowed. The impugned orders of compulsory purchase passed by the appropriate authority shall stand quashed. In the light of what is stated earlier, we do not find any room for grant of any relief in the nature of damages claimed by the petitioner. The parties shall bear their own costs.