1991 (8) TMI 57 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the order dated October 22, 1990.
2. Jurisdiction and power of the appropriate authority under Chapter XX-C of the Income-tax Act, 1961.
3. Compliance with principles of natural justice.
4. Requirement of issuing a "no objection certificate" or exercising the right of pre-emptive purchase.

Issue-wise Detailed Analysis:

1. Validity of the order dated October 22, 1990:
The petitioner challenged the order of the first respondent dated October 22, 1990, asserting that it was incapable of proceeding further either to exercise the right of pre-emptive purchase under section 269UD of the Income-tax Act, 1961, or to issue a "no objection certificate" under section 269UL(1) of the Income-tax Act, 1961. The court found that the first respondent's order was arbitrary and without jurisdiction, as it failed to act within the prescribed time and did not issue a "no objection certificate" or make a pre-emptive purchase.

2. Jurisdiction and power of the appropriate authority under Chapter XX-C of the Income-tax Act, 1961:
The court emphasized that the appropriate authority under Chapter XX-C has limited jurisdiction to determine whether the property is undervalued and, if so, to make a pre-emptive purchase. The court held that the first respondent has no inherent power to question the validity of the agreement between the parties. The authority's role is confined to either granting a "no objection certificate" or proceeding with the purchase if the property is undervalued. The court referenced the decision in Naresh M. Mehta v. Appropriate Authority [1991] 188 ITR 585 (Mad), which held that the law of pre-emption must be strictly construed and that the appropriate authority must act within the prescribed time.

3. Compliance with principles of natural justice:
The court found that the impugned order was passed in violation of the principles of natural justice. The petitioner and respondents Nos. 3 and 4 were not given a proper opportunity to be heard before the order was issued. The court cited the decision in Government of India v. Maxim A. Lobo [1991] 190 ITR 101, which held that an order under section 269UD(1) must be preceded by a hearing to the affected parties. The lack of such a hearing rendered the order invalid.

4. Requirement of issuing a "no objection certificate" or exercising the right of pre-emptive purchase:
The court held that if the appropriate authority does not make a pre-emptive purchase within the prescribed time, it is obligated to issue a "no objection certificate" under section 269UL(3) of the Act. The court directed the first respondent to issue the "no objection certificate" to the petitioner, as the statutory time limit for making a pre-emptive purchase had expired.

Conclusion:
The writ petition was allowed, and the impugned order was quashed. The court directed the first respondent to issue a "no objection certificate" to the petitioner in accordance with the principles laid down in the decision of Kanakaraj J. in Naresh M. Mehta v. Appropriate Authority [1991] 188 ITR 585 (Mad). The court also awarded costs of Rs. 1,000 to the petitioner.