1991 (12) TMI 16 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the Form No. 37-I statement under Section 269UC of the Income-tax Act.
2. Authority of the appellant to refuse issuing a no objection certificate under Section 269UL.
3. Alleged defects in the property and its impact on the transaction.
4. Jurisdiction of the appropriate authority to adjudicate the legality of the transaction.
5. Applicability of the doctrine of tax evasion and tax planning.
6. The necessity for a fresh opportunity for the appellant to reconsider the order.

Detailed Analysis:

1. Validity of the Form No. 37-I Statement:
The respondent submitted Form No. 37-I as required under Section 269UC of the Income-tax Act for the sale of property. The appellant rejected this statement on May 17, 1990, citing defects, specifically an alleged unauthorized sub-division of the property. The appellant claimed that the partition would result in an impractical and harmful division, making access difficult. The respondent and the vendor refuted this, asserting the marketability and legality of the property.

2. Authority to Refuse Issuing a No Objection Certificate:
The appellant's rejection of the no objection certificate was based on the alleged defects and the artificial bifurcation of the property. The court highlighted that under Section 269UL(3), if no order is passed within the prescribed time, a certificate must be issued. The court emphasized that the appellant should either exercise the right to purchase the property with all its defects or issue the certificate of no objection.

3. Alleged Defects in the Property:
The appellant argued that the property was artificially bifurcated to avoid interference by authorities under Chapter XX-C of the Income-tax Act. The court found no merit in this argument, as the appellant did not provide evidence of undervaluation of the property agreed to be sold. The court noted that the appellant's focus was on the previously sold portion, not the current transaction.

4. Jurisdiction to Adjudicate Legality of the Transaction:
The court referenced several precedents, including Kelvin Jute Co. Ltd. v. Appropriate Authority and Tanvi Trading and Credits P. Ltd. v. Appropriate Authority, to assert that the appropriate authority's jurisdiction is limited to deciding whether to purchase the property or issue a no objection certificate. The authority cannot adjudicate the legality or validity of the transaction.

5. Doctrine of Tax Evasion and Tax Planning:
The appellant cited McDowell and Co. Ltd. v. CTO to argue against tax evasion through dubious methods. However, the court found no evidence or allegation of tax evasion in this case. The court reiterated that Chapter XX-C was introduced to curb tax evasion through undervaluation, but no such undervaluation was proven here.

6. Necessity for a Fresh Opportunity:
The appellant requested a fresh opportunity to reconsider the order. The court rejected this, noting that the appellant had already concluded its inability to purchase the property. Additionally, the statutory period for making such an order had expired, and the writ petition was filed after this period.

Conclusion:
The court dismissed the writ appeal, affirming the decision to allow the writ petition. The appellant's refusal to issue a no objection certificate was deemed unjustified, and the court emphasized the limited jurisdiction of the appropriate authority under Chapter XX-C. The appellant's arguments regarding tax evasion and the need for a fresh opportunity were also dismissed. The court's decision was based on strict adherence to the statutory provisions and precedents, ensuring that the respondent's rights were protected within the framework of the law.