2004 (2) TMI 25 - HC - Income Tax

Order passed by the Appropriate Authority, Ahmedabad, under section 269UD(1) for compulsorily purchasing the piece and parcel of land petitioner submits that both the show cause notices neither disclose the reasons why the Appropriate Authority has reached a prima facie or tentative conclusion that the transaction has been undervalued and that there has been an attempt to evade the tax nor do they disclose the material on the basis of which such a tentative conclusion has been reached by the Appropriate Authority - we quash and set aside the show cause notices and the consequent orders passed under section 269UD(1) and hold them to be bad, illegal and in breach of the principles of natural justice.

Summary

Issues:
Challenge to validity of show cause notices under section 269UD(1) of the Income-tax Act, 1961.

Analysis:
The judgment of the High Court of BOMBAY was delivered by V.C. DAGA J. The petitions challenged the common order passed by the Appropriate Authority in Ahmedabad under section 269UD(1) of the Income-tax Act, 1961, for the compulsory purchase of a piece of land in Pune. The challenge was primarily based on the validity of the show cause notices issued by the Appropriate Authority to the petitioners. The notices were found to be vague and contrary to established legal principles. The petitioners argued that the notices did not disclose the reasons for the Authority's tentative conclusion of undervaluation and tax evasion, nor did they provide the material supporting such a conclusion. The petitioners cited previous judgments, including one by the Supreme Court, to support their contention that the notices were defective and in breach of natural justice.

The respondents attempted to defend the notices and the orders but were unable to do so effectively in light of the previous judicial scrutiny and judgments. The High Court examined the impugned notices and found them to be identical to those previously quashed by the Division Bench of the court and affirmed by the apex court. Consequently, the High Court quashed and set aside the show cause notices and the orders passed under section 269UD(1), deeming them as bad, illegal, and in violation of natural justice principles. The judgment emphasized that the disposal of the petitions would automatically end the interim orders, and both petitions were allowed with no order as to costs.

In conclusion, the High Court's judgment focused on the inadequacy of the show cause notices issued by the Appropriate Authority, highlighting the importance of disclosing reasons and supporting material for tentative conclusions of undervaluation and tax evasion. The decision to quash the notices and orders was based on established legal precedents and principles of natural justice, as upheld in previous court judgments.