2006 (12) TMI 93 - HC - Income Tax

Summary

Issues Involved:
1. Comparison of the subject property with Malar Hospitals' property.
2. Consideration of longstanding tenants in the property.
3. Loss of original title deeds of the property.
4. Reliance on other comparative sale instances without notice.
5. Consideration of the guideline value of the property.
6. Abrogation of the purchase order under sections 269UG and 269UH due to non-payment within the stipulated time.
7. Consideration of a subsequent sale deed at a lower rate.

Detailed Analysis:

1. Comparison of the subject property with Malar Hospitals' property:
The Appropriate Authority compared the subject property with Malar Hospitals' property, which was sold for Rs. 68 lakhs for 6.3 grounds. The Authority added 9% for the nine-month gap between the sales, fixing the market value at Rs. 11.33 lakhs per ground. The subject property was valued at Rs. 54.21 lakhs, while the apparent consideration was Rs. 30,52,891, indicating a 77.60% undervaluation. The court found that the comparison was flawed as the Malar Hospitals' property had a higher Floor Space Index (FSI) potential and other advantages not available to the subject property. The frontage of the subject property was also less, affecting its development potential and value.

2. Consideration of longstanding tenants in the property:
The appellants argued that the presence of longstanding tenants and the efforts to evict them were not properly considered. The court acknowledged that while the property was free from tenancy at the time of the sale agreement, the efforts to evict tenants and demolish the existing structure were relevant factors that could affect the property's value.

3. Loss of original title deeds of the property:
The appellants claimed that the loss of original title deeds by Indian Bank was not adequately considered. The court agreed that the absence of original title deeds is a significant factor that would diminish the property's value, despite the legal opinion clearing the title.

4. Reliance on other comparative sale instances without notice:
The Appropriate Authority relied on two other sale instances (Door No. 47, 1st Main Road, Gandhi Nagar, and Door No. 12, 1st Main Road, Kasturibha Nagar) without notifying the appellants, violating the principles of natural justice. The court found this to be a significant oversight, as the appellants were not given an opportunity to address these comparisons.

5. Consideration of the guideline value of the property:
The appellants argued that the guideline value was not considered. The court noted that while the guideline value is for registration purposes and not necessarily reflective of the market value, the appellants' grievance on this point was not upheld.

6. Abrogation of the purchase order under sections 269UG and 269UH due to non-payment within the stipulated time:
The court emphasized that under sections 269UG and 269UH, the consideration must be tendered within one month from the end of the month in which the property vests in the Central Government. Failure to do so results in the purchase order being abrogated, and the property re-vests in the transferor. The court found that the consideration was not tendered within the stipulated time, leading to the abrogation of the purchase order.

7. Consideration of a subsequent sale deed at a lower rate:
The appellants presented a subsequent sale deed from 1992, showing a lower rate of Rs. 6.09 lakhs per ground for a property on the same road. The court accepted this as additional evidence, demonstrating that the Malar Hospitals' property was not a suitable comparison and that the subject property's sale consideration was reasonable.

Conclusion:
The court set aside the common order of the learned single judge and quashed the pre-emptive purchase order passed by the Appropriate Authority, Income-tax Department. The writ appeals were allowed, and the court emphasized the importance of considering all relevant factors, including FSI, tenancy issues, loss of title deeds, and adherence to statutory provisions regarding the tendering of consideration.