2001 (10) TMI 35 - HC - Income Tax

Summary

Issues Involved:
1. Challenge to the valuation of immovable property by the Income-tax Department.
2. Consistency and comparability of multiple valuations.
3. Basis and foundation of the valuation.
4. Violation of principles of natural justice.
5. Jurisdiction of the writ court in valuation matters.
6. Time frame for valuation under section 269UD(1) of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Challenge to the valuation of immovable property by the Income-tax Department:
The petitioner challenged the valuation made by the Income-tax Department under section 269UD(1) of the Income-tax Act, 1961, for a property located at Meredith Street, Calcutta. The valuation was disputed due to inconsistencies in three separate valuations conducted by different authorities within the department.

2. Consistency and comparability of multiple valuations:
The first valuation dated May 28, 1997, concluded that the Effective Apparent Consideration (EAC) of Rs. 38.45 lakhs was 11.81% below the Fair Market Value (FMV). The second valuation dated July 18, 1997, found the EAC to be 62.47% below the FMV. The third valuation indicated the EAC was 40% below the FMV. The court found the first valuation inappropriate and noted inconsistencies among the valuations.

3. Basis and foundation of the valuation:
The valuations were criticized for being based on the 1995 valuation of a commercial building (Magnet House) on Chittaranjan Avenue, which was not comparable to the residential property in question. The court agreed with the argument that commercial and residential properties in different localities should not be compared. The court found the third valuation ambiguous as it compared commercial and residential properties.

4. Violation of principles of natural justice:
The transferees argued that the valuation process violated principles of natural justice, particularly due to the refusal to provide records of the Magnet House valuation. The court noted that the absence of the transferor and contractor at the valuation meeting was wrongly interpreted as an attempt to hide material facts, affecting the transferees adversely.

5. Jurisdiction of the writ court in valuation matters:
The court discussed whether it could intervene in valuation matters, noting that it could interfere if the valuation was perverse, capricious, or based on extraneous considerations. The court referenced previous judgments to support its stance that it could set aside valuations if they violated principles of natural justice or were otherwise infirm.

6. Time frame for valuation under section 269UD(1) of the Income-tax Act:
Section 269UD(1) requires the appropriate authority to make an order for the purchase of immovable property within three months of receiving the relevant statement. The court noted that all valuations were made within this statutory period. However, it emphasized that if the valuation was found to be improper, the court could not order a fresh valuation beyond the statutory period.

Conclusion:
The court concluded that the valuations were inconsistent and based on improper comparisons. It held that the transferees were victims of circumstances due to the absence of the transferor and contractor. The court directed the appropriate authority to conduct a fresh valuation within one month, considering comparable residential properties, and set aside all previous valuations. The writ petition was disposed of with no order as to costs.