2004 (2) TMI 17 - HC - Income Tax

Petition is directed against the order passed under section 269UD(1) as well as order passed by the appropriate authority whereby application filed by the petitioners for withdrawal of Form No. 37-I was rejected. - The procedure adopted by the appropriate authority in order to hold that the land of the petitioner is undervalued by 15 per cent and more in view of the fair market value demonstrated by the sale instance is neither inconsistent with the scheme of the Act nor invalid in law and therefore the contention of learned counsel for the petitioners in this regard is misconceived and devoid of substance - The petition is dismissed

Issues Involved:
1. Validity of the order under section 269UD(1) of the Income-tax Act, 1961.
2. Rejection of the application for withdrawal of Form No. 37-I.
3. Alleged undervaluation of the property and its comparison with other properties.
4. Consideration of distress sale and encumbrances.
5. Procedural aspects and compliance with legal requirements.

Detailed Analysis:

1. Validity of the order under section 269UD(1) of the Income-tax Act, 1961:
The petition challenges the order dated July 29, 1994, under section 269UD(1) of the Income-tax Act, 1961, which was passed for pre-emptive purchase of the property. The court noted that the appropriate authority must record a finding that the property was undervalued by more than 15% with a view to evade tax. The court observed that the show cause notice issued on July 8, 1994, mentioned that the property was sold for Rs. 184 per square foot of F.S.I., whereas a comparable property in Hanuman Nagar was sold for Rs. 283 per square foot of F.S.I. This indicated a significant undervaluation of more than 15%. The court held that the appropriate authority had followed the procedure and considered the material on record, including the petitioners' explanations, before passing the order. Therefore, the order under section 269UD(1) was valid.

2. Rejection of the application for withdrawal of Form No. 37-I:
The petitioners' application for withdrawal of Form No. 37-I was rejected by the appropriate authority on April 11, 1997. The court noted that Form No. 37-I is a statutory requirement under section 269UC of the Income-tax Act, which mandates that details of the transfer of immovable property must be provided. The court observed that the petitioners had failed to provide necessary details in Form No. 37-I, such as encumbrances and compelling circumstances for the sale. Therefore, the rejection of the application for withdrawal of Form No. 37-I was justified.

3. Alleged undervaluation of the property and its comparison with other properties:
The court examined the contention that the property was not undervalued and that the comparison with the property in Hanuman Nagar was inappropriate. The court noted that the appropriate authority had compared the property in question with a similar property in Hanuman Nagar, which was sold for Rs. 283 per square foot of F.S.I. The court held that the properties were comparable, considering their proximity and characteristics. The court also noted that the petitioners' property was sold for Rs. 184 per square foot of F.S.I., indicating a significant undervaluation. The court rejected the petitioners' argument that the properties were not comparable due to differences in F.S.I. and location.

4. Consideration of distress sale and encumbrances:
The petitioners argued that the sale was a distress sale due to various encumbrances, including unpaid liabilities and a pending recovery suit by the Bank of Maharashtra. The court observed that the petitioners had failed to provide details of these encumbrances in Form No. 37-I and had not substantiated their claims with evidence. The court held that the appropriate authority could not consider these aspects in the absence of necessary details and documentation. Therefore, the contention that the sale was a distress sale was not accepted.

5. Procedural aspects and compliance with legal requirements:
The court examined whether the appropriate authority had followed the procedure laid down under Chapter XX-C of the Income-tax Act. The court noted that the appropriate authority had issued a show cause notice, considered the petitioners' reply, and compared the transaction with a comparable sale instance before passing the order. The court held that the procedure adopted by the appropriate authority was consistent with the legal requirements and the principles laid down by the apex court in C.B. Gautam v. Union of India [1993] 199 ITR 530. The court also noted that the appropriate authority had provided reasons for rejecting the petitioners' objections and had not acted arbitrarily.

Conclusion:
The court dismissed the petition, holding that the order under section 269UD(1) of the Income-tax Act was valid and that the appropriate authority had followed the procedure and legal requirements. The court also upheld the rejection of the application for withdrawal of Form No. 37-I and found no merit in the petitioners' contentions regarding undervaluation, distress sale, and procedural lapses. The rule was discharged with no order as to costs.

← Previous Next →