2004 (5) TMI 30 - HC - Income Tax

Compulsory purchase order passed by the appropriate authority under Chapter XX-C - order passed under section 269UD(1) of the Income-tax Act, 1961, without giving an opportunity of hearing to the petitioner - order passed declining to rectify the wrongful deduction of Rs. 5,06,200 from the total consideration - it is submitted that the orders passed under Chapter XX-C of the Act which are impugned in the petition are liable to be quashed and set aside - We decline to interfere with the orders passed under sections 269UD(1) and 269UJ(1) of the Income-tax Act. However, we direct the respondents to refund the wrongfully deducted amount of Rs. 3,72,500 with interest

Summary

Issues Involved:
1. Violation of principles of natural justice under section 269UD(1) of the Income-tax Act, 1961.
2. Wrongful deduction of Rs. 5,06,200 from the total consideration under section 269UJ of the Income-tax Act.
3. Abrogation of the order under section 269UD(1) due to non-payment of the full consideration within the stipulated time.

Issue-wise Detailed Analysis:

1. Violation of Principles of Natural Justice:
The petitioner contended that the compulsory purchase order under section 269UD(1) was passed without giving an opportunity of hearing, violating the principles of natural justice. The petitioner relied on the Supreme Court decision in C.B. Gautam v. Union of India [1993] 199 ITR 530, which mandates a reasonable opportunity for the parties to show cause before such an order is made. The court, however, held that the transaction between the petitioner and the Central Government was completed before the decision in C.B. Gautam's case. The property was auctioned, and the auction purchaser was put in possession before the writ petition was filed. Hence, the transaction was considered completed, and the principles of natural justice were not violated.

2. Wrongful Deduction of Rs. 5,06,200:
The petitioner argued that the deduction of Rs. 1,33,700 for discounting charges and Rs. 3,72,500 for stamp duty and registration charges was unauthorized. The court upheld the deduction of Rs. 1,33,700 for discounting charges, citing the Supreme Court's approval of the discounting principle in Ramesh Bhai J. Patel v. Union of India [2001] 247 ITR 182. However, the deduction of Rs. 3,72,500 for stamp duty and registration charges was deemed unauthorized, referencing the decision in Polycon Paper Ltd. v. Union of India [2002] 253 ITR 182. The court directed the respondents to refund this amount with interest.

3. Abrogation of the Order Due to Non-payment:
The petitioner claimed that the order under section 269UD(1) stood abrogated as the full consideration was not paid within the stipulated time. The court noted that the apparent consideration was paid on September 27, 1989, except for the disputed amount of Rs. 5,06,200. The court held that the deduction of Rs. 1,33,700 for discounting charges was justified and did not constitute a failure to pay the consideration. Regarding the Rs. 3,72,500 deduction, the court acknowledged it was unauthorized but ruled that setting aside the purchase order was not feasible due to the completed nature of the transaction and the creation of third-party rights.

Conclusion:
The court declined to interfere with the orders under sections 269UD(1) and 269UJ(1) but directed the respondents to refund the wrongfully deducted amount of Rs. 3,72,500 with interest. The writ petition was disposed of accordingly, with no order as to costs.