1995 (4) TMI 19 - HC - Income Tax

Summary

Issues Involved:
1. Reasonable opportunity of being heard.
2. Consideration of agricultural land conversion costs.
3. Compliance with the Urban Land (Ceiling and Regulation) Act.
4. Comparison with sale instance properties.
5. Allegation of understatement of consideration by more than 15%.
6. Requirement of tax evasion intent for exercising power.

Detailed Analysis:

1. Reasonable Opportunity of Being Heard:
The court addressed the petitioners' contention that they were not given a reasonable opportunity to be heard. The petitioners received the notice on February 16, 1995, and filed replies on February 21 and 22, 1995. The court found that the time given was adequate considering the urgency and relevant provisions of the Act. Hence, this contention was rejected.

2. Consideration of Agricultural Land Conversion Costs:
The petitioners argued that the property was agricultural land and that conversion costs should be considered. The appropriate authority acknowledged this but noted that the petitioners did not specify the conversion costs. The court held that the authority should have formed an opinion based on available materials, including conversion costs, and found that the authority's opinion was not bona fide and in accordance with law.

3. Compliance with the Urban Land (Ceiling and Regulation) Act:
The petitioners contended that permission under the Urban Land Ceiling Act was required for non-agricultural use. The appropriate authority conceded this legal requirement but treated it as a mere formality. The court disagreed, stating that no evidence was provided to show that exemption under sections 20/21 of the Urban Land Ceiling Act was a mere formality. The court found the authority's reasoning flawed and not reflective of the land's value.

4. Comparison with Sale Instance Properties:
The petitioners argued that the sale instance property was a small plot and not comparable to the larger plot under consideration. The court noted that the appropriate authority allowed a 15% deduction but still found an understatement of consideration. The court found that the authority erred by not properly considering the differences in plot sizes and the fact that the sale instance property was included in a Final Town Planning Scheme whereas the property under consideration was not.

5. Allegation of Understatement of Consideration by More Than 15%:
The appropriate authority alleged that the consideration was understated by more than 15%. The court found that the authority did not adequately consider the conversion costs and compliance with the Urban Land Ceiling Act. The court noted that the authority's opinion was not based on a thorough analysis of all relevant factors, making the order contrary to law.

6. Requirement of Tax Evasion Intent for Exercising Power:
The petitioners argued that there was no allegation of tax evasion intent, which is a condition precedent for exercising power under section 269UD(1) of the Income-tax Act. The court did not specifically address this issue but focused on the authority's failure to properly consider relevant factors and the flawed comparison with the sale instance property.

Conclusion:
The court concluded that the appropriate authority committed an error of law apparent on the face of the record by not considering relevant factors and taking into account irrelevant considerations. The impugned order dated February 23, 1995, was quashed and set aside. The respondent was directed to complete the necessary formalities, including issuing a clearance certificate, within six weeks. The petition was allowed with no order as to costs.