2005 (5) TMI 44 - HC - Income Tax

Orders under section 269UD(1) - petitioner also has challenged the provision of Chapter XX-C Purchase Of Immovable Property By Central Government - In the impugned order, the Appropriate authority has noticed that the net consideration of the property comes to Rs. 1,82,76,325 and the land rate works out to Rs. 422 per square foot. As per the Corporation Development Plan, the property is located in Zone B and considering the width of the roads abutting the property, the permissible floor area ratio is 1.75 for commercial land. The authority further notices that the property is situated on a corner plot of land with frontage on two important wide roads, and that the apparent consideration at the rate of Rs. 422 per square foot is very low - Taking into consideration all these materials available on record, the authority has passed an adverse order holding that the market value of the property under transfer was definitely in excess of Rs. 747 per square foot at the time when the agreement was entered into. petition against order of appropriate authority is dismissed

Issues Involved:
1. History of the case
2. Right of the petitioner
3. Question of law on the subject
4. Merits of the matter

Detailed Analysis:

1. History of the Case:
The petitioner, a private limited company, entered into two agreements on May 22, 1989, with the second and third respondents for the purchase of property on Infantry Road, Bangalore. The agreements were filed in Form No. 37-I under rule 48L of the Income-tax Rules, 1962. The first respondent, after inspection, ordered the purchase of the property by the Central Government under section 269UD(1) of the Income-tax Act, 1961, on July 25, 1989. The petitioner challenged these orders in Writ Petitions Nos. 14319 and 14320 of 1989. The Division Bench allowed the writ appeals filed by the first respondent, quashing the order dated July 25, 1989. The Supreme Court, in its judgment dated September 24, 1993, allowed the petitioner to challenge the order dated June 14, 1993, made by the Appropriate Authority in appropriate proceedings. The petitioner filed the present writ petitions challenging these orders.

2. Right of the Petitioner:
The Department argued that the petitioner, being only an agreement-holder, had no substantial right to maintain these petitions, citing the Supreme Court judgment in DLF Universal Ltd. v. Appropriate Authority [2000] 243 ITR 730. However, the court noted that the Supreme Court had allowed the petitioner to raise all points in challenging the order dated June 14, 1993. Therefore, despite the argument that an agreement-holder has no substantial right, the court deemed it proper to consider the case on its merits in light of the Supreme Court's judgment.

3. Question of Law on the Subject:
The court considered the impact of section 269UD of the Act. Various judgments were cited to highlight that Chapter XX-C of the Income-tax Act was enacted to prevent tax evasion through significant undervaluation of immovable property. The Supreme Court in C.B. Gautam v. Union of India [1993] 199 ITR 530 (SC) ruled that the provisions of Chapter XX-C could be resorted to only where there is significant undervaluation of the property by 15 percent or more. The presumption of tax evasion is rebuttable, and the parties must be given an opportunity to show cause. The High Court can interfere only if relevant factors are ignored by the authority, but it cannot sit in appeal over the findings.

4. Merits of the Matter:
The petitioner argued that the authority did not consider the threat of litigation and the Reserve Bank of India's approval. The authority had compared the property with other properties in and around Infantry Road, concluding that the apparent consideration was very low. The court found that the authority had taken into consideration various transactions and the belting method, concluding that the market value of the property was definitely in excess of Rs. 747 per square foot. The court ruled that the Reserve Bank of India's approval does not preclude re-examination under section 269UD of the Act and that the threat of litigation was only an apprehension. The court noted that the judicial review is concerned with the process, not the decision itself, and found no material irregularity or illegality in the authority's order.

Conclusion:
The writ petitions were rejected, and the court ruled that any adjustments between the parties in terms of the interim directions should be worked out in a manner known to law.

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