2003 (5) TMI 25 - HC - Income Tax

Petitioners pray for quashing of an order passed by the appropriate authority under Chapter XX-C and a direction to the said authority to grant no objection certificate under section 269UL(3) - On a statement being filed under section 269UC of the Act, the appropriate authority has two options available to it, namely, (i) either to purchase a property by exercising the right of preemptive purchase by making an order under section 269UD; or (ii) if it is not inclined to purchase the property, to issue a no objection certificate . It has no third option Thus it is held that, it cannot also go into the question of validity of the agreement to transfer the property or the legality of the transaction or the title of the vendor Petition is allowed

Summary

Issues:
1. Jurisdiction of appropriate authority to question legality of agreement to sell.
2. Obligation of appropriate authority to issue "no objection certificate" within specified time limit.
3. Scope of appropriate authority's decision-making while dealing with statement under Chapter XX-C of the Income-tax Act, 1961.

Jurisdiction of Appropriate Authority to Question Legality of Agreement to Sell:
The petitioners sought the quashing of an order passed by the appropriate authority under Chapter XX-C of the Income-tax Act, 1961, and a direction to grant a "no objection certificate." The petitioners argued that the appropriate authority had no jurisdiction to assess the legality or validity of the agreement to sell between the parties. The High Court held that the appropriate authority's role is limited to determining whether the property is undervalued and cannot extend to questioning the validity of the agreement or the legality of the transaction. Citing previous judgments, the Court emphasized that the appropriate authority's scope is restricted to specific considerations and cannot delve into broader legal issues related to the transaction.

Obligation of Appropriate Authority to Issue "No Objection Certificate" Within Specified Time Limit:
The petitioners contended that since the two-month period from the date of filing the application had elapsed, the appropriate authority was obligated to issue the necessary "no objection certificate." The Court referred to the provisions of the Income-tax Act, specifying a time limit for the appropriate authority to act. It noted that if no order is passed within the prescribed time frame, it automatically necessitates the issuance of a certificate under the relevant section. Therefore, the Court held that the appropriate authority must adhere to the statutory time limits and issue the "no objection certificate" as required by law.

Scope of Appropriate Authority's Decision-Making Under Chapter XX-C:
The High Court reiterated the principles established in previous judgments regarding the appropriate authority's decision-making process under Chapter XX-C of the Income-tax Act. It highlighted that upon receiving a statement under the relevant section, the appropriate authority has two options: either to purchase the property or to issue a "no objection certificate." The Court emphasized that the appropriate authority cannot question the validity of the agreement, the legality of the transaction, or the title of the vendor. By clarifying the limited scope of the appropriate authority's powers, the Court underscored the importance of adhering to the statutory provisions and established legal principles in such matters.

In conclusion, the High Court allowed the writ petition, quashed the impugned order, and directed the appropriate authority to issue a "no objection certificate" to the petitioners within a specified timeframe. The Court's decision was based on the established legal principles governing the jurisdiction and obligations of the appropriate authority under Chapter XX-C of the Income-tax Act, emphasizing the need for strict adherence to statutory provisions and limitations on the authority's decision-making powers.