1997 (5) TMI 47 - HC - Income Tax

Determination Of Fair Market Value Of Property Immovable Property By Central Government Movable Property

Summary

Issues Involved:
1. Validity of the pre-emptive purchase order under Section 269UD of the Income-tax Act, 1961.
2. Proper valuation and comparison of the property in question.
3. Consideration of relevant factors and evidence in determining the fair market value.

Detailed Analysis:

1. Validity of the Pre-emptive Purchase Order under Section 269UD of the Income-tax Act, 1961:
The petitioners challenged the order dated September 12, 1994, passed under Section 269UD of the Income-tax Act, 1961, which mandated the pre-emptive sale of Plot No. 404, Sector-XVA, Noida, to the Central Government. The petitioners contended that they were not given an opportunity to be heard before the acquisition, leading them to move the court. The court had previously directed the authorities to decide the case after affording a hearing. Despite this, the respondents confirmed the pre-emptive purchase order, which the petitioners argued was based on irrelevant and extraneous materials.

2. Proper Valuation and Comparison of the Property in Question:
The petitioners argued that the valuation of the property was incorrect and illogical, as the Valuation Officer took the date of valuation as December 31, 1991, five months after the agreement date. They contended that the property was valued higher than the actual market price, and the valuation report was biased and based on hearsay. The petitioners provided details of other plots sold during the same period, which fetched lower prices, indicating that the valuation of Plot No. 404 was arbitrary and erroneous. The court noted that the appropriate authority failed to consider comparable plots such as Plot Nos. 80, 238, 210, and 146, which were sold at rates between Rs. 1,800 and Rs. 2,700 per sq. mtr., whereas the petitioners had agreed to purchase Plot No. 404 at Rs. 3,200 per sq. mtr.

3. Consideration of Relevant Factors and Evidence in Determining the Fair Market Value:
The petitioners contended that the appropriate authority did not disclose the survey report or the details of property dealers consulted, making it impossible for them to make proper representations. The court observed that the appropriate authority ignored relevant factors such as location, frontage, road width, transport facilities, and other amenities while determining the fair market value. The court emphasized that the principles of valuation should involve identifying genuine instances, considering proximity in time and situation, and making suitable adjustments for plus and minus factors. The court cited several judgments, including Shrichand Raheja v. S. C Prasad and CWT v. Mrs. Sara Varghese, which highlighted the importance of objective and reasonable valuation based on material evidence. The court concluded that the appropriate authority's order was perverse, as it relied on extraneous considerations and failed to compare comparable properties.

Conclusion:
The court found that the appropriate authority failed to apply established principles of valuation, ignored relevant factors, and relied on irrelevant and extraneous materials. The order of pre-emptive purchase under Section 269UD was deemed misconceived and unwarranted. Consequently, the court quashed the impugned order dated September 12, 1994, and allowed the petition, with no orders as to costs.