2001 (11) TMI 55 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the order u/s 269UD(1) of the Income-tax Act, 1961, for pre-emptive purchase of immovable property.
2. Issuance of a writ of mandamus for a no objection certificate u/s 269UL of the Income-tax Act.
3. Alleged violation of principles of natural justice.

Summary:

1. Validity of the Order u/s 269UD(1):
The appeals challenge the order by the Income-tax Department u/s 269UD(1) for pre-emptive purchase of property by the Central Government. The petitioners, promoters of Palm Court Hotels Pvt. Ltd., intended to transfer property to the company to secure a loan from KSIDC. The appropriate authority found the apparent consideration in Form No. 37-I to be significantly below market value, suggesting tax evasion. Despite the petitioners' explanation of unique circumstances necessitating the transfer, the authority ordered pre-emptive purchase. The court examined the principles laid down in C. B. Gautam v. Union of India [1993] 199 ITR 530, emphasizing the need for a reasonable opportunity to rebut the presumption of tax evasion. The court found the authority's decision to be based on relevant materials but highlighted the necessity of considering the unique circumstances of the case.

2. Issuance of a Writ of Mandamus:
The petitioners sought a writ of mandamus for a no objection certificate u/s 269UL. The court upheld the learned single judge's decision to quash the impugned order and directed the appropriate authority to reconsider the application afresh. However, the court refrained from issuing a direct order for a no objection certificate, emphasizing that the appropriate authority must first re-evaluate the case considering the unique circumstances and materials provided by the petitioners.

3. Alleged Violation of Principles of Natural Justice:
The court found merit in the petitioners' contention that the principles of natural justice were violated, as the engineering report and other relied-upon documents were not furnished to them. The court stressed that the opportunity of being heard must be adequate and effective, not a mere formality. The non-observance of natural justice principles led to arbitrariness, infringing Article 14 of the Constitution. Consequently, the court directed the appropriate authority to supply the petitioners with the relevant materials and reconsider the matter within two months.

Conclusion:
Both appeals were disposed of with directions to the appropriate authority to reconsider the matter in light of the court's observations, ensuring compliance with principles of natural justice and providing the petitioners with all relevant materials.