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Challenge to decision of Appropriate Authority under Income-tax Act for pre-emptive purchase of property; Co-ownership dispute; Allegations of evasion of tax; Violation of principles of natural justice; Determination of fair market value. Analysis: The judgment delivered by the High Court of Gujarat pertained to a challenge against the decision of the Appropriate Authority under the Income-tax Act for the pre-emptive purchase of a property in Pune City. The petitioner, a co-owner, contested the decision made in February 1995, under section 269UD(1) of the Act. The property in question had co-owners, with a developer having entered into an agreement with one of the co-owners. A civil suit for declaration and partition was pending before the Bombay High Court, involving the property's ownership. The petitioner claimed a tenancy right and possession of a portion of the property, emphasizing that their interest was not considered before the property's sale agreement was executed. The petitioner raised four contentions challenging the decision of the Appropriate Authority. Firstly, it was argued that the Authority did not determine the market value of the property at the time of the agreement. Secondly, the petitioner contended that there was no finding that the transaction aimed to evade tax. Thirdly, the petitioner alleged a violation of natural justice principles as they were not heard before the decision. Lastly, it was argued that the effect of an undertaking given to the Bombay High Court regarding property transfer was not adequately considered. The court analyzed the agreement between the co-owners and the developer, highlighting discrepancies in the valuation of the property and the lack of findings on market value and tax evasion. The court referred to previous judgments emphasizing the necessity of determining the fair market value of the property before concluding undervaluation for tax purposes. Citing specific cases, the court reiterated the importance of objective decision-making by the Authority based on relevant materials and grounds specified for pre-emptive purchase. The court found that the order lacked essential findings and did not comply with legal requirements. Consequently, the petition was allowed, and the order for pre-emptive purchase was quashed, directing the issuance of a no objection certificate to the respondents within a specified timeframe. In conclusion, the High Court's judgment addressed the complex issues of property co-ownership, valuation discrepancies, tax evasion allegations, procedural fairness, and legal requirements for pre-emptive purchase decisions under the Income-tax Act. The detailed analysis highlighted the importance of determining fair market value, adherence to legal principles, and the necessity of specific grounds for such decisions, leading to the quashing of the contested order.
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