2007 (6) TMI 153 - HC - Income Tax

Order of dept. u/s 269UD(1) passed pursuant to any defective SCN is illegal violation of natural justice as particulars relied upon by revenue never furnished to petitioner hence order passed of purchase of impugned immovable property by central govt. on account of under valuation is set aside

Summary

Issues:
Challenge to order under Section 269UD(1) of the Income Tax Act - No Objection Certificate - Consideration determination - Loss compensation by Central Government - Injunction against possession - Violation of principles of natural justice - Incorrect rate determination - Understatement of consideration - Comparable transactions consideration - Material not furnished to Petitioners - Market value determination - Attempt to evade tax presumption - Validity of the impugned order.

Analysis:

1. Challenge to Order under Section 269UD(1) of the Income Tax Act:
The Petitioners challenged the order dated 24th February, 1993, passed by the Commissioner of Income Tax under Section 269UD(1) of the Income Tax Act. They sought a direction for a 'No Objection Certificate' and determination of consideration for the transaction. The Petitioners also requested compensation for the loss caused and an injunction against further proceedings for possession based on the impugned order.

2. Violation of Principles of Natural Justice:
The Petitioners contended that the show cause notice issued was actually a pre-determined order, violating principles of natural justice. They argued that the Respondents failed to provide all relevant materials and particulars, as demanded by the Petitioners, thereby compromising the fairness of the proceedings.

3. Incorrect Rate Determination and Understatement of Consideration:
The Petitioners challenged the rate determination of Rs.3124/- per sq.ft., arguing that the correct rate should have been Rs.3325/- per sq.ft. They claimed that after including additional costs, the rate should have been higher. The Petitioners asserted that there was no understatement of consideration and that the transactions relied upon by the Respondent were not valid bases for comparison.

4. Comparable Transactions Consideration and Material Not Furnished:
The Petitioners argued that the comparable transactions in Gazdar Apartments, proving no understatement of consideration, were not considered. They contended that the material and information regarding transactions relied upon by the Appropriate Authority were not furnished to them, despite demands made in their reply.

5. Market Value Determination and Attempt to Evade Tax Presumption:
The Petitioners claimed that the market value of the property was not determined, and the order was based on an observation of low apparent consideration. They argued that there was no valid basis for presuming an attempt to evade tax, as there was no positive finding to support such a claim.

6. Judicial Precedent and Quashing of Impugned Order:
Referring to a judgment of the Court in a similar case, the Court held that the impugned order was liable to be quashed and set aside. The Court found that the order was not in accordance with basic principles of natural justice, as it was pre-determined and essential materials were not provided to the Petitioners.

In conclusion, the Court quashed and set aside the impugned order dated 24th February, 1993, based on the violation of natural justice principles, incorrect rate determination, failure to furnish essential materials, and lack of evidence supporting an attempt to evade tax.