1995 (9) TMI 49 - HC - Income Tax

Appropriate Authority, Being Heard, Fair Market Value, Immovable Property By Central Government, Movable Property

Summary

Issues: Challenge to order under section 269UD(1) of the Income-tax Act, 1961 for purchasing property, lack of opportunity for affected parties, compliance with principles of natural justice, sufficiency of notice, significant undervaluation of property, grounds for pre-emptive purchase, non-application of mind by appropriate authority, conformity to norms of section 269UD(1).

Analysis:

The petitioner challenged the order under section 269UD(1) of the Income-tax Act, 1961, regarding the purchase of a property subject to an agreement to sell. The petitioner contended that the order was passed without affording any opportunity to be heard, which is a mandatory requirement under section 269UD. The court emphasized the importance of giving affected parties a reasonable opportunity before taking any action under this provision, as established in previous cases like C. B. Gautam v. Union of India [1993] 199 ITR 530. The failure to provide such an opportunity was deemed sufficient to vitiate the impugned order, leading to its quashing.

Regarding the valuation of the property, the court noted that the appropriate authority must consider all relevant materials before deciding to purchase the property under section 269UD(1). The court highlighted the need for the authority to establish significant undervaluation of the property, indicating an attempt at tax evasion, as prerequisites for pre-emptive purchase. The order must reflect the authority's satisfaction on these grounds, and the presumption of undervaluation being for tax evasion must be rebuttable and supported by evidence.

In this case, the court found that the appropriate authority did not adequately consider the fair market value of the property and failed to provide reasons for the pre-emptive purchase as required by section 269UD(1B). The court also referenced a previous decision in Anagram Finance Ltd. v. Appropriate Authority [1996] 217 ITR 22, emphasizing the objective decision-making process and the necessity to specify grounds for pre-emptive purchase. As the impugned order did not meet these standards and lacked proper application of mind, it was quashed.

Ultimately, the court decided not to refer the matter back to the appropriate authority, and the petition succeeded in quashing the order. The court directed the issuance of necessary certificates, including a no objection certificate, within a specified timeframe. The ruling concluded that the impugned order was invalid and did not conform to the requirements of section 269UD(1), thus warranting its annulment.