1996 (6) TMI 39 - HC - Income Tax

Issues Involved:
1. Validity of the compulsory purchase order under the Income-tax Act, 1961.
2. Compliance with principles of natural justice.
3. Conduct of the petitioners regarding interim relief and deposit of amounts.
4. Applicability of the Supreme Court's decision in C. B. Gautam v. Union of India.
5. Status of the auction and subsequent developments on the property.
6. Impact of the Urban Land Ceiling Act on the property valuation.

Detailed Analysis:

1. Validity of the Compulsory Purchase Order:
The petitioners challenged the compulsory purchase order dated November 29, 1989, issued by the Appropriate Authority under the Income-tax Act, 1961. The petitioners argued that the order should be quashed based on the Supreme Court's decision in C. B. Gautam v. Union of India, which mandates a hearing before such an order is passed. However, the court noted that the petitioners did not avail themselves of the opportunity to continue the stay by depositing the required amount, indicating a lack of genuine interest in pursuing the matter.

2. Compliance with Principles of Natural Justice:
The petitioners contended that the impugned order violated principles of natural justice as no hearing was given, and a reasoned order was not communicated. The court acknowledged this argument but emphasized that the petitioners' conduct, including their refusal to deposit the required amount for interim relief, undermined their position. The court concluded that the case did not warrant the exercise of writ jurisdiction under Article 226 of the Constitution.

3. Conduct of the Petitioners Regarding Interim Relief and Deposit of Amounts:
The court highlighted several instances where the petitioners failed to comply with court orders requiring the deposit of amounts to continue interim relief. For example, on December 29, 1989, the court granted ad interim relief, which was later vacated on January 31, 1990, due to the petitioners' refusal to abide by the usual conditions. The petitioners also failed to deposit Rs. 1,42,50,000 as directed in the order dated November 26, 1993. This conduct led the court to conclude that the petitioners were not genuinely interested in pursuing the case but were merely taking a chance without any stake.

4. Applicability of the Supreme Court's Decision in C. B. Gautam v. Union of India:
The court examined whether the principles laid down in C. B. Gautam's case applied to the present case. It noted that the Supreme Court had clarified that completed transactions, where possession was taken, and compensation paid without protest, should not be invalidated. The court found that the present case fell within this exception as the possession was handed over voluntarily, and the consideration was accepted without protest.

5. Status of the Auction and Subsequent Developments on the Property:
The property was auctioned on March 23, 1990, and purchased by respondents Nos. 7 to 13 for Rs. 1,42,00,000. The petitioners attended the auction and offered Rs. 1,32,00,000. The court noted that substantial development had taken place on the property, including the construction of a building and sale of units to third parties. Given these developments, the court concluded that the transaction was completed and should not be set aside.

6. Impact of the Urban Land Ceiling Act on the Property Valuation:
The petitioners argued that the property fetched a higher auction price because the restrictions under the Urban Land Ceiling Act were not applicable. However, the court found that the property was purchased with the understanding that it was subject to the provisions of the Urban Land Ceiling Act. The agreed sale consideration of Rs. 50 lakhs was significantly lower than the auction price of Rs. 1,42,50,000, indicating that the apparent consideration was undervalued.

Conclusion:
The court dismissed the petition, holding that the case did not warrant the exercise of writ jurisdiction under Article 226 of the Constitution. The petitioners' conduct and the completed nature of the transaction, as clarified by the Supreme Court in C. B. Gautam's case, were significant factors in the decision. The court also noted that the property was developed and third-party rights were created, further supporting the conclusion that the transaction should not be invalidated. The rule was discharged with no order as to costs.

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