2007 (9) TMI 539 - HC - Income Tax

Restraining the possession of the property - Held that - After identifying instances which provide the index of market value the price reflected therein may be taken as a norm and the value of the land in question may be deduced by making suitable adjustment for the plus and minus factors. We find that the appropriate authority has not addressed itself to these aspects. Similarly there is nothing to show which sale instance was considered as the bench mark to vis-a-vis the subject property. There is only a general observation that the sale instance cited by the appropriate authority are much less one of the tests to be followed in determining the fair market value is the test which would be applicable on the principles adopted while determining the market value in respect of an acquisition under the Land Acquisition Act. In the instant case from the sale instances considered no specific sale was considered for comparison with the subject flat in terms of proximity from the time angle and the proximity from the situation angle. In our opinion on this count also the order is liable to be quashed and set aside. W.P. allowed.

Issues Involved:
1. Violation of principles of natural justice and fair play.
2. Determination of fair market value.
3. Locus standi of the petitioner.
4. Pre-determined mindset of the appropriate authority.

Detailed Analysis:

1. Violation of Principles of Natural Justice and Fair Play:

The petitioners contended that the order passed under section 269UD(1) of the Income-tax Act was in violation of the principles of natural justice and fair play. They argued that the valuation report and the notings of the Inspecting Assistant Commissioner were not made available to them, thus prejudicing their right to show cause. The court noted that the Supreme Court in C. B. Gautam v. UOI [1993] 199 ITR 530 had emphasized the need for a reasonable opportunity for the parties to show cause. The court observed that the failure to furnish the relevant documents relied upon by the appropriate authority rendered the order arbitrary and contrary to the principles of natural justice and fair play, thus necessitating the setting aside of the impugned order.

2. Determination of Fair Market Value:

The petitioners argued that the respondents did not determine the fair market value of the flat, which is essential for raising a presumption of tax evasion due to undervaluation. The court reiterated the Supreme Court's directive in C. B. Gautam [1993] 199 ITR 530, emphasizing the need to determine the fair market value to raise a rebuttable presumption of tax evasion. The court found that the appropriate authority did not address the relevant factors and reasons for determining the fair market value and did not provide a basis for comparing the subject property with the sale instances. Consequently, the order was liable to be quashed on this ground as well.

3. Locus Standi of the Petitioner:

The respondents raised a preliminary objection regarding the locus standi of the petitioners to maintain the petition. The court referred to its earlier judgment in S. Krishnan v. U. V. Shahadadpuri [1999] 240 ITR 274, which upheld the right of the transferee to challenge the order of purchase. The court reaffirmed that the petitioners had the locus standi to maintain the petition, rejecting the preliminary objection.

4. Pre-determined Mindset of the Appropriate Authority:

The petitioners contended that the annexation of the previous order to the show-cause notice indicated a pre-determined mindset of the appropriate authority. The court referred to the judgment in Karsanbhai Patel in Writ Petition No. 568 of 1993 and Mrs. Nirmal Laxminarayan Grover v. Appropriate Authority [1997] 223 ITR 572 (Bom) Nagpur Bench, which had considered similar issues. However, the court concluded that this contention was not available as a ground for setting aside the order, as the primary reasons for quashing the order were the violations of principles of natural justice and the failure to determine the fair market value.

Conclusion:

For the reasons stated, the court allowed the petition, making the rule absolute in terms of prayer clauses (a) and (b), and set aside the impugned order with no order as to costs.

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