1998 (2) TMI 99 - HC - Income Tax

Issues Involved:
1. Validity of the agreement to sell the property.
2. Jurisdiction of the appropriate authority under Chapter XX-C of the Income-tax Act, 1961.
3. Time limit for the appropriate authority to act.
4. Issuance of a no-objection certificate.
5. Interpretation of the provisions of Chapter XX-C.

Detailed Analysis:

1. Validity of the Agreement to Sell the Property:
The appropriate authority initially formed an opinion that the plot was subject to certain terms and conditions restraining its alienation for a period of 10 years from the date of completion of construction. The authority concluded that the transferor was estopped from transferring the property due to non-compliance with these terms, rendering the agreement unlawful and void. Consequently, the statement in Form No. 37-I based on this agreement was treated as invalid.

2. Jurisdiction of the Appropriate Authority under Chapter XX-C of the Income-tax Act, 1961:
The petitioners argued that the appropriate authority had only two alternatives under section 269UD of the Act: either to pass an order of pre-emptive purchase or to issue a no-objection certificate. The appropriate authority did not have the jurisdiction to adjudicate upon the validity or legality of the agreement entered into between the parties. The court agreed with this view, emphasizing that the appropriate authority's role is limited to deciding whether the property is undervalued or not and cannot question the validity of the agreement or the title of the vendor.

3. Time Limit for the Appropriate Authority to Act:
The court highlighted that the appropriate authority must act within the prescribed period of two months from the end of the month in which the statement in Form No. 37-I is received. If no order is passed within this time frame, the appropriate authority is statutorily obliged to issue a no-objection certificate. The court noted that the order dated January 22/23, 1990, was void and non-est in law, and the period of two months having elapsed on January 31, 1990, the appropriate authority was required to issue the no-objection certificate.

4. Issuance of a No-Objection Certificate:
The court relied on the Division Bench decision in Tanvi Trading and Credits Pvt. Ltd. v. Appropriate Authority [1991] 188 ITR 623, which was confirmed by the Supreme Court. It was held that if the appropriate authority does not pass an order of purchase within the prescribed time, it must issue a no-objection certificate. The certificate only indicates that the Government is not interested in purchasing the property and does not pronounce on the legality or validity of the transaction.

5. Interpretation of the Provisions of Chapter XX-C:
The court reviewed several decided cases and reiterated that the appropriate authority has only two options: to purchase the property or issue a no-objection certificate. The authority cannot extend the time limit of two months or question the legality of the agreement. The court emphasized that the authority must act within the four corners of the law and cannot assume jurisdiction beyond what is conferred by the Act.

Conclusion:
The court quashed the impugned order dated April 27, 1995, passed by the appropriate authority and directed it to issue a no-objection certificate to the petitioners within four weeks, as the period of two months from the date of filing the statement on October 25, 1989, had already elapsed. The court did not award any costs.

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