2006 (10) TMI 112 - HC - Income Tax

Summary

Issues involved:
Challenge to order under section 269UD(1) of the Income-tax Act, 1961 regarding compulsory acquisition for undervaluation under Chapter XX-C.

Analysis:
The petitioners, owners of a plot of land, challenged an order of compulsory acquisition for alleged undervaluation under the Income-tax Act, 1961. The petitioners entered into a development agreement for a part of the land at a specific rate per square foot. They received a show-cause notice regarding the alleged undervaluation, citing a nearby property as a comparable instance. The petitioners contested the acquisition order, arguing that the notice did not disclose the basis for concluding undervaluation, as required by precedent judgments. The court considered previous rulings emphasizing the need for disclosure of material forming the basis of undervaluation conclusions in the show-cause notice. The authority's failure to provide such information was deemed a violation of the petitioners' right to defend against the acquisition. The court held that the order lacked merit and set it aside, emphasizing the authority's obligation to disclose the basis for undervaluation in the notice to enable a fair defense.

Conclusion:
The High Court ruled in favor of the petitioners, setting aside the order of compulsory acquisition due to insufficient disclosure of the basis for undervaluation in the show-cause notice. The court highlighted the authority's duty to provide necessary information to enable parties to defend against such actions. The judgment underscored the importance of procedural fairness and the right to a proper defense in matters of compulsory acquisition for undervaluation under the Income-tax Act, 1961.