Gujarat High Court
Hunaida Jamnagarwala And Anr. vs Appropriate Authority And Anr. on 26 June, 1995
Equivalent citations: [1996]217ITR679(GUJ)
Author: C.K. Thakker
Bench: C.K. Thakker
JUDGMENT C.K. Thakker, J.
1. Learned counsel for the petitioners seeks permission to delete the name of respondent No. 2 Permission granted. Respondent No. 1 - appropriate authority, will now be the sole respondent.
2. This petition is filed for quashing and setting aside the order at annexure-A dated March 30, 1995, passed by the respondent-appropriate authority under the Income-tax Act, 1961 (hereinafter referred to as "the Act").
3. It is the case of the petitioners that one Nizamuddin Balubhai Virani owned a flat situated at Kumar Corner Co-operative Housing Society Limited, Pune (hereinafter referred to as "the property under consideration" and/or "P.U.C."). According to the petitioner, the property under consideration was 13 years old and constructed at the time when the F. S. I. available in respect of the said area was 6:1 resulting in a lot of congestion. The petitioners were in need of residential premises for their own use. It is the assertion of the petitioners that the talk of purchase of the property under consideration took place between vendor and vendee in the beginning of October, 1994, and an amount of Rs. Two lakhs had already been paid by the petitioners by a cheque dated October 8, 1994, as the token amount payable under the arrangement. An agreement to sell, according to the petitioners, was prepared in the month of October, 1994, but the formal agreement could be executed only on December 1, 1994. It was for the total consideration of Rs. 20,30,000. Since the total consideration exceeded Rs. 10 lakhs, the parties had to fill in Form No. 37-I in accordance with the provisions of section 269UC of the Act on December 15, 1994. The appropriate authority issued a show-cause notice on March 15, 1995, under section 269UD(1A) of the Act, inter alia, alleging that the apparent and discounted consideration of the property under consideration appeared understated by more than 15 per cent. The appropriate authority was, therefore, satisfied that it was a fit case to issue notice and the transferor and transferee were called upon to show cause as to why an order under section 269UD(1) of the Act should not be made against them. They were called upon to remain present before the appropriate authority on March 21, 1995, at 3.30 p. m. failing which it was mentioned that the appropriate authority would pass an appropriate order.
4. The petitioners submitted two replies, inter alia, contending that the rate of the instance property on which reliance was placed by the appropriate authority could not be considered as comparable to arrive at the market value of the property under consideration. Objections were raised by the petitioners to the effect that the property under consideration was 13 year old building, whereas the sale instance property was a new building. The property under consideration required repairing and there was leakage on the terrace. The property under consideration was situated in a highly congested area as compared to the sale instance property which was away from such congestion. Parking facility was available to the property under consideration which was available to the sale instance property. The deal of the property under consideration was finalised in the first week of October, 1994, while the sale instance property's deal was finalised on December 30, 1994. The property under consideration was situated on the sixth floor, while the sale instance property was situated on the second floor. Three instance have been cited by the petitioners comparable to the property under consideration by pointing out that in those cases, the appropriate authority itself had accepted the apparent consideration, which was much lower than the consideration of the property under consideration. Two more instances were also cited in which flats were sold in the very society where the property under consideration was situated and the rate was much lower as compared to the rate of the sale instance property.
5. After considering the replies submitted by the petitioners, the appropriate authority passed the impugned order in exercise of the powers under section 269UD(1) of the Act, which is impugned in the present petition. The appropriate authority gave two reasons in paragraph 4, which reads as under :
"4. We have carefully considered the submissions made by the transferor and the transferee and the same are dealt with as under :
(1) The first sale instance relied upon by the transferor and transferee is of May, 1994. The rate of flat has increased considerably since then. Moreover, in the said flat, there is no proper ventilation, construction was very bad and poor and the titles of each flat purchaser is to be perfected. Hence, this sale instance property is not comparable. The second sale instance relied upon has access from rear side of the building through narrow staircase. The date of agreement is of August, 1994, and the rate of flat has increased considerably since then. Therefore, it is not comparable with the property under consideration. The third sale instance property relied upon is of March, 1994, and price rise during this period is to be considered. Moreover, the property under consideration flat is much superior to sale instance property. Moreover, in sale instance property flats, there is no proper ventilation and surrounding area is very noisy and, hence, it is not comparable with the property under consideration.
(2) The sale instance property of Kumar Corner quoted is below Rs. 10 lakhs and hence the appropriate authority cannot exercise the power of pre-emptive purchase under Chapter XX-C of the Income-tax Act, 1961, and, hence, the same is not comparable. The contention regarding F. S. I. is also not accepted as it has no concern with the rate of B. U. A. The contention regarding old building and leakage, etc., is correct and for this purpose 14 per cent. deduction is allowed to sale instance property even then there is an understatement by more than 15 per cent. The contention regarding traffic jam is also not acceptable because social gathering is occasion and the flat owner will get such facilities nearby and, therefore, it is not disadvantageous but advantageous to the property under consideration. The contention that there is delay in finalisation of deal is not acceptable, because in 'Kaveri' Building was under construction and there was uncertainty about the possession of flats to the purchaser."
6. Mr. Soparkar, learned counsel for the petitioners, raised a number of contentions. He submitted that there is an error apparent on the face of the record committed by the appropriate authority in not taking into account the relevant and germane considerations and in relying upon the instance, which cannot be said to be comparable. He further submitted that the appropriate authority also committed an error of law in ignoring the sale instances on which reliance was placed by the petitioners and in giving too much importance to transactions of sale instance property. It was also urged that without there being and evidence and/or material on record, the appropriate authority held that there was understatement of consideration to the extent of more than 15 per cent. Mr. Thakor, on the other hand, supported the order passed by the appropriate authority. He submitted that in bona fide exercise of the power conferred under section 269UD of the Act and after considering the entire materials on record, the appropriate authority was satisfied that there was difference of apparent and actual consideration and hence the impugned order was passed which cannot be said to be illegal and contrary to law.
7. In our opinion, the contentions raised by learned counsel for the petitioners are well-founded and the petition requires to be allowed. Looking to the order passed by the appropriate authority, it is clear that heavy reliance was placed by the appropriate authority on sale instance property sold on December 30, 1994. The petitioners, on the other hand, placed reliance on sale instance in March, 1994, May, 1994, and August, 1994. The appropriate authority rejected the above sale instances on the ground that there had been considerable increase since March, May and August, 1994. In our opinion, the contention of learned counsel for the petitioners is well-founded that if there considerable increase in price during March, May and August, 1994, the same consideration should have weighed with the appropriate authority qua sale instance property also. By not taking into account the price increase in the case of sale instance property and in rejecting the sale instances put forward by the petitioners, an error apparent on the face of the record has been committed by the appropriate authority. The order, therefore, requires to be quashed and set aside on the ground that relevant sale instances have not been considered by the authority.
8. There are additional grounds also from which it can be said that the impugned order is contrary to law. It is the assertion of the petitioner which is not disputed that the talk of purchase took place in the beginning of October, 1994. It was agreed between the parties and as a token of arrangement, a cheque of Rs. 2 lakhs was paid to the vendor on October 8, 1994, though the formal agreement was entered into between the parties on December 1, 1994. The appropriate authority has not stated anything regarding the said assertion of the petitioners. In view of the fact that a cheque was issued on October, 1994, for Rs. 2 lakhs there is some substance in what the petitioners have contended and in that case the authority ought to have considered that ground and ought to have recorded a necessary finding.
9. Again, in our opinion, the appropriate authority has committed an error of law in not placing reliance on two instances in which flats were sold in the very society in which the property under consideration was situated. The appropriate authority did not consider the sale instances observing that "the sale instance property of Kumar Corner quoted is below Rs. 10 lakhs and hence the appropriate authority cannot exercise the power of pre-emptive purchase under Chapter XX-C of the Income-tax Act, 1961, and hence the same is not comparable." We are of the opinion that the approach of the appropriate authority is not in accordance with law. In our opinion, the question is not as to whether the appropriate authority can exercise the power of pre-emptive purchase under the Act or not, but the question is as to whether or not, the sale instance is comparable. If in the same society a float is sold, by no stretch of imagination, it can be said that the sale instance is not a comparable one. Similarly, we are of the view that the appropriate authority was not right in ignoring the fact that the F. S. I. available to the sale instance property. It is indeed, less than the F. S. I. available to the sale instance property. It is indeed, one of the important circumstances which ought to have been considered by the appropriate authority.
10. We are also surprised that one the one hand, the appropriate authority did not place reliance on the sale instances relied upon by the petitioners on the ground that the construction was very bad and poor, but, on the other hand, it admitted that even in the property under consideration the construction was old one and there was leakage, etc. The appropriate authority observed in the impugned order that the contention of the petitioners was correct and for that purpose deduction of 14 per cent. was allowed to sale instance property, but even then there was understatement by more than 15 per cent. Now, there is nothing on record as to how and on what basis such deduction of 14 per cent. was allowed. Similarly, the contention of learned counsel for the petitioners is well-founded, when he argued that the appropriate authority has erred in observing that traffic jam cannot be said to be a negative factor because the social gathering is an occasion and the flat owner will get such facilities nearby, and, therefore, it is not disadvantage but advantage to the property under consideration. We also must observe that we failed to understand as to how the traffic jam and social gathering would be an advantage to the property under consideration. In any case, there is nothing on record and the order passed the appropriate authority is conspicuously silent as to how, by a "traffic jam" and by "social gathering" the property under consideration would be in advantageous position. Hence, the said ground also cannot be upheld.
11. Apart from the above grounds, in our opinion, Mr. Soparkar, is right in submitting that the satisfaction as contemplated by section 269UD must be based on objective facts. There must be evidence and material to arrive at the conclusion and satisfaction. Rejection of the sale instances and/or grounds and/or reasons put forth by the party is one thing. At the most, it can be said to be a negative finding for not accepting the case of the transferor/transferee. But the law requires something more. In our opinion, it is incumbent upon the appropriate authority to come to a positive and definite conclusion that the property was undervalued. A similar question arose before us a Special Civil Application No. 869 of 1995 decided by us on January (March (? ) 30, 1995 - Anagram Finance Ltd. v. Appropriate Authority [1996] 217 ITR 22 (Guj). Considering the relevant provisions of the Act as also the decision of the Supreme Court in Barium Chemicals Ltd. v. Company Law Board [1966] 36 Comp Cas 639; AIR 1967 SC 295, we observed as under (at page 28 of 217 ITR) :
"A combined reading of section 269UD(1A) and (1B) of the Act leaves on room for doubt that it is a question of objective decision-making process by taking into consideration all the relevant materials which have come before the hearing authority and considering the rival aspects of the matter. Moreover, the 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 the transferee or the person interested in the property, does not lead to a consequence that grounds for making pre-emptive purchase exists. The sine qua non is that the reasons must exist on the material placed before it, for supporting the action taken for pre-emptive purchase under section 269UD of the Act. The order clearly falls short of this requirement."
12. In our opinion, the point is concluded by the above decision also. Since no satisfaction has been arrived at by the respondent on the basis of objective facts and on reasons have been recorded for coming to a positive conclusion as to why there was difference of more than 15 per cent., the order cannot be said to be in accordance with law and must be quashed and set aside.
13. For the foregoing reasons, the petition requires to be allowed and is accordingly allowed. The impugned order dated March 30, 1995, passed by the respondent-appropriate authority at annexure-A is hereby quashed and set aside. The respondent is directed to complete necessary formalities within a period of six weeks from the date of receipt of the order of the court including issuance of clearance certificate. Rule made absolute. No order as to costs.