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Issues:
1. Pre-emptive purchase of property by Revenue based on alleged undervaluation. 2. Dispute regarding market value and alleged intention to evade income tax. 3. Determination of market value by appropriate authority. 4. Legal provisions and criteria for pre-emptive purchase under the Income-tax Act. 5. Requirement of firm factual foundation for determining undervaluation. 6. Judicial precedent emphasizing notice, hearing, and rational basis for decisions. 7. Evaluation of factors considered in determining market value and undervaluation. 8. Justifiability of additions to property value by the appropriate authority. 9. Reliability and objectivity of factors influencing the determination of market value. 10. Judicial review of the impugned order directing pre-emptive purchase. Analysis: The High Court of Madras addressed a case involving the pre-emptive purchase of a petitioner's property by the Revenue, alleging undervaluation based on a comparison of market values. The petitioner's property, with a stated consideration of Rs. 67,50,000 for 4 grounds and 1,555 sq. ft., was subject to a show-cause notice citing a nearby property sale as a basis for undervaluation. The notice claimed a 15% higher value for the petitioner's property due to its location on a main road compared to the nearby property on a dead-end cross road, without clear justification for the 15% addition. The Court emphasized that the determination of market value for pre-emptive purchase must be based on objective criteria and comparable instances of sale to avoid arbitrariness. Referring to the Income-tax Act, the Court highlighted the need for a rational foundation of fact in assessing undervaluation to prevent unwarranted government interference in property transactions. The judgment cited the Supreme Court's stance on the integrity of parties in such cases, emphasizing the right to notice and a brief hearing to establish a fair market value. Regarding the factors considered in determining undervaluation, the Court critiqued the arbitrary 15% addition to the property value without concrete reasoning. It stressed that any addition to the recorded value must be justifiable, and in case of doubt, the benefit should favor the property owner and purchaser over the Revenue. The Court found the engineer's opinion, blindly adopted by the authority, unreliable for deeming the transaction as undervalued, leading to the annulment of the pre-emptive purchase order due to lack of a rational and objective basis for the decision. In conclusion, the Court set aside the impugned order for pre-emptive purchase, emphasizing the necessity of a firm factual foundation and objective criteria in determining undervaluation to prevent arbitrary government actions. The judgment highlighted the importance of a fair and transparent process in assessing market value to uphold the integrity of property transactions and avoid unwarranted interference by the Revenue.
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