2004 (4) TMI 58 - HC - Income Tax

Order by appropriate authority for purchase of immovable property - we are of the view that the aspect that the petitioners are only agreement-holder and that they do not have any interest in the property cannot be ignored, particularly in a case like this where the owner made a statement before this court that he does not desire to challenge the acquisition and that he accepts the same and as a matter of fact the vendor did accept the compensation from the Income-tax Department without any demur or protest - The petitioners were not in a position to deposit the price of the flat. No interim relief was granted to the petitioners. They filed this writ petition as a chance litigation. - For all these reasons, we are satisfied that the petitioners are not entitled to any relief in extraordinary jurisdiction.

Summary

Issues Involved:
1. Constitutional validity of Chapter XX-C of the Income-tax Act.
2. Applicability of Chapter XX-C to the subject sale agreement.
3. Issuance of no objection certificate under section 269UL(2) of the Income-tax Act.
4. Locus standi of the petitioners to challenge the order under section 269UD.
5. Compliance with principles of natural justice in the pre-emptive purchase order.

Detailed Analysis:

1. Constitutional Validity of Chapter XX-C of the Income-tax Act:
The petitioners challenged the constitutional validity of Chapter XX-C of the Income-tax Act. The Supreme Court in C. B. Gautam v. Union of India [1993] 199 ITR 530 upheld the constitutional validity of Chapter XX-C by reading into it the requirement of giving a reasonable opportunity of being heard before an order of compulsory acquisition is made. The Supreme Court observed that the provisions of Chapter XX-C were intended to counter tax evasion by significant under-valuation of immovable property. The powers of compulsory purchase were to be used only where there was a significant under-valuation of the property by 15% or more. The Supreme Court emphasized that reasons for such acquisition must be germane to the object for which the Chapter was introduced, and the requirement of giving reasonable opportunity of being heard was necessary to prevent arbitrary action by the appropriate authority.

2. Applicability of Chapter XX-C to the Subject Sale Agreement:
The petitioners argued that Chapter XX-C should not be made applicable to the subject sale agreement. The court noted that the agreement for sale was entered into on July 29, 1987, and Form No. 37-I was filed on July 31, 1987. The appropriate authority passed the order of pre-emptive purchase on September 23, 1987. The Supreme Court's judgment in C. B. Gautam [1993] 199 ITR 530, which required a reasonable opportunity of being heard, was delivered after these events. The court concluded that the transaction of compulsory acquisition was completed in all respects before the Supreme Court's judgment, and thus, the exception carved out in C. B. Gautam applied, making the order valid despite the lack of an opportunity to be heard.

3. Issuance of No Objection Certificate under Section 269UL(2):
The petitioners prayed for a direction to issue a no objection certificate under section 269UL(2) of the Income-tax Act. The court did not find merit in this prayer, as the transaction of compulsory acquisition was completed before the Supreme Court's judgment in C. B. Gautam, and the appropriate authority had already taken possession and paid compensation to the owner.

4. Locus Standi of the Petitioners to Challenge the Order under Section 269UD:
The petitioners' locus standi to challenge the order under section 269UD was questioned. The court referred to the Supreme Court's decision in Shatabadi Trading and Investment Pvt. Ltd. [2001] 251 ITR 93, which held that an agreement to sell creates no interest in the property. The court concluded that the petitioners, being only agreement-holders, did not have the locus standi to challenge the order, especially when the owner accepted the compensation without protest and did not challenge the acquisition.

5. Compliance with Principles of Natural Justice:
The petitioners contended that the order of acquisition was illegal as no opportunity of being heard was given. The court acknowledged that the Supreme Court in C. B. Gautam mandated a reasonable opportunity of being heard. However, it held that since the transaction was completed before the Supreme Court's judgment, the exception carved out in C. B. Gautam applied, and the lack of an opportunity to be heard did not invalidate the order. The court noted that possession was taken, and compensation was paid and accepted without protest, thus completing the transaction.

Conclusion:
The court dismissed the writ petition, holding that the transaction of compulsory acquisition was completed before the Supreme Court's judgment in C. B. Gautam, and the exception carved out in that case applied. The petitioners, being only agreement-holders, did not have the locus standi to challenge the order, and the principles of natural justice were not violated in a manner that would invalidate the completed transaction. The writ petition was dismissed with no order as to costs.