1994 (9) TMI 7 - HC - Income Tax

Summary

Issues Involved:
1. Reasonable opportunity of being heard.
2. Validity of the show-cause notice.
3. Fair market value assessment.
4. Compliance with principles of natural justice.

Summary:

1. Reasonable Opportunity of Being Heard:
The court examined whether the petitioner was given a reasonable opportunity of being heard before the impugned order of compulsory purchase was made. The Supreme Court in C. B. Gautam v. Union of India [1993] 199 ITR 530 mandated that an opportunity of hearing must be read into the provisions of Chapter XX-C of the Income-tax Act, 1961, and that the parties must be given a reasonable opportunity to show cause against an order for compulsory purchase.

2. Validity of the Show-Cause Notice:
The show-cause notice dated February 25, 1993, issued to the petitioner did not state that the fair market value of the property was 15% more than the apparent consideration nor did it refer to the material on which such an opinion was formed. The notice failed to annex any relevant materials, leaving the petitioner in the dark about the evidence against him.

3. Fair Market Value Assessment:
The appropriate authority estimated the fair market value by increasing the consideration in respect of other plots at a rate of 10% per annum, which the petitioner contended was illegal. The petitioner argued that the fair market value did not exceed the sale consideration by more than 15%, and hence, the purchase by the Central Government could not be ordered.

4. Compliance with Principles of Natural Justice:
The court found that the appropriate authority did not furnish the relevant materials to the petitioner, thus denying him the opportunity to controvert the same. The adjournment of the hearing for a very short period and the change of venue to Lucknow without sufficient notice further depicted a complete disregard of the principles of natural justice.

Conclusion:
The court held that the impugned order was vitiated by the denial of an opportunity of hearing to the petitioner and quashed the order dated March 24, 1993. The court did not find it necessary to go into the question of whether the fair market value assessment was correct, given the procedural lapses. The writ petition was allowed with costs.