2009 (6) TMI 593 - HC - Income Tax

Fair market value - section 269UD - purchase of the property belonging to petitioners - Development agreements - constructs and give - to be provided with alternative accommodation till the said flat could be ready and given to them - Held that - the Appropriate Authority gave conflicting and contrary findings in respect of the net apparent consideration and the fair market value to be paid by the Government. It shows non-application of mind by the Appropriate Authority in passing the impugned order. - the impugned orders passed by the Appropriate Authority under section 269UD cannot be sustained. However, in our considered opinion, it will be appropriate to remand the matter back to the Appropriate Authority for hearing the matters afresh by permitting both sides to produce addi- tional material, if any, and to take a final decision on the show-cause notices.

Issues Involved:
1. Validity of the order under section 269UD(1) of the Income-tax Act, 1961.
2. Determination of the fair market value of the property.
3. Consideration of relevant transactions for valuation.
4. Alleged non-application of mind by the Appropriate Authority.
5. Remand for fresh hearing and disposal.

Issue-wise Detailed Analysis:

1. Validity of the order under section 269UD(1) of the Income-tax Act, 1961:
The petitioners challenged the order passed under section 269UD(1) by the Appropriate Authority for the purchase of the property. The Appropriate Authority had directed the purchase of the property shares of petitioners Nos. 1 and 2 for Rs. 18,70,340 and Rs. 18,68,430 respectively. The petitioners contested these orders, arguing that the consideration as per their agreement was not less than the market value.

2. Determination of the fair market value of the property:
The Appropriate Authority issued a show-cause notice stating that the consideration in the agreement was much less than the market value, citing three different transactions as benchmarks. The petitioners provided a detailed reply, arguing that the transactions cited were not comparable due to differences in location and nature of the properties. They contended that their agreed consideration was higher than the market value, calculated at Rs. 1,017 per sq. ft. of FSI, while the valuation report showed Rs. 932 per sq. ft. of FSI.

3. Consideration of relevant transactions for valuation:
The Appropriate Authority relied on three transactions from Brindavan Park Co-op. Housing Society Ltd., Deonar, and a property at Chembur, assessing rates between Rs. 1,476 and Rs. 1,749 per sq. ft. of FSI. The petitioners argued that these properties were not comparable due to different locations and characteristics. They cited four other transactions to support their valuation, emphasizing that their property was not in a prime location and had different development constraints.

4. Alleged non-application of mind by the Appropriate Authority:
The court found that the Appropriate Authority did not properly consider the transactions cited by the petitioners, particularly one from Deonar Farm Road, Chembur, which was relevant. The court noted conflicting findings in the valuation report and the order, indicating non-application of mind by the Appropriate Authority. The court emphasized the need for valid reasons and data to justify the fair market value determination.

5. Remand for fresh hearing and disposal:
The court set aside the impugned orders dated August 30, 1994, and remanded the matter back to the Appropriate Authority for fresh hearing and disposal. Both parties were allowed to submit additional material, including the sanctioned development plan. The petitioners were directed to appear before the Appropriate Authority on July 6, 2009, and the matter was to be decided within four months from their appearance.

Conclusion:
The court found that the Appropriate Authority did not adequately consider relevant transactions and provided conflicting findings, indicating non-application of mind. The matter was remanded for fresh consideration, allowing both parties to submit additional evidence.

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