1995 (12) TMI 8 - HC - Income Tax

Acquisition Proceedings Assessment Proceedings High Court Movable Property Purchase Of Immovable Property By Central Government

Summary

Issues Involved:

(a) Clerical spelling mistake in the name of payee in the cheque.
(b) Discrepancy in payment between transferors and transferees.
(c) Reasonableness of the purchase order based on valuation.

Issue-wise Detailed Analysis:

(a) Clerical Spelling Mistake in the Name of Payee in the Cheque:

The petitioners argued that the compulsory purchase order should be abrogated due to a clerical error in the cheque drawn by the Central Government, where the name of the payee was incorrectly spelled as "Prime Reality Ltd." instead of "Prima Realty." The court found no merit in this contention, stating that the cheque was sent by speed post on May 31, 1995, which was within the stipulated time. The error was corrected promptly after the petitioners raised an objection, and a corrected cheque was handed over on June 22, 1995. The court emphasized that section 269UG of the Income-tax Act requires consideration to be "tendered," which was fulfilled in this case. The court held that a bona fide clerical mistake does not abrogate the purchase order, as the object of section 269UG is to ensure timely payment to the person deprived of the property.

(b) Discrepancy in Payment Between Transferors and Transferees:

The petitioners contended that the purchase order should be abrogated because they received Rs. 60 lakhs instead of Rs. 66 lakhs, and there was an excess payment to the heirs of Dr. Rao. The court noted that the total consideration payable was Rs. 3,28,84,384, with the discounted value being Rs. 3,58,84,384. The court found that the Central Government had tendered the entire amount as per the purchase order, and the discrepancy arose due to the complex nature of the family arrangement and apportionment of shares. The court held that section 269UG(2) and (3) provide mechanisms for resolving disputes regarding apportionment, and the excess amount received by one branch of the family does not abrogate the purchase order. The court emphasized that the full consideration amount was tendered, and the transferors had agreed to return the excess amount to the transferees.

(c) Reasonableness of the Purchase Order Based on Valuation:

The petitioners argued that the purchase order was perverse as it was based on irrelevant and incomparable sale instances. They contended that the appropriate authority did not consider relevant factors such as the cost of construction, interest cost, and other administrative costs. The court held that the valuation principles under Chapter XX-C of the Income-tax Act are akin to acquisition proceedings and not to taxation laws. The court noted that the appropriate authority had considered relevant factors, including the location, frontage, transport facilities, and potentiality of the land. The court found that the sale instance of Atur Park was a valid comparable sale instance, providing an index of market prices. The court rejected the petitioners' reliance on the sale instance of Janki Niwas, noting significant differences in the nature of the transactions and the properties involved. The court concluded that the appropriate authority had adopted a reasonable method of valuation, and the purchase order was not based on extraneous factors.

Conclusion:

The court dismissed the writ petition, finding no merit in the contentions raised by the petitioners. The court held that the clerical error in the cheque did not abrogate the purchase order, the full consideration amount was tendered as required, and the valuation method adopted by the appropriate authority was reasonable. The court directed the respondents not to auction the property for two months and to revalidate the cheque for Rs. 60 lakhs within 15 days.