2021 (10) TMI 130 - HC - Income Tax

Order u/s 269UD by appropriate authority for purchase by Central Government of immovable property - Default in approval by the Charity Commissioner - HELD THAT - As show cause notice, it is bereft of any materials or details. It does not contain any material to show as to why the appropriate authority felt that an order under Section 269 UD(1) was required to be made. Reply was fled on 22 April 1993 on behalf of the transferor trust and petitioner. In the impugned order the appropriate authority has relied upon a valuation report. Admittedly the same was not provided to petitioner. Moreover, the appropriate authority has given six sale instances but none of these details were provided to petitioner with the show cause notice or at any stage. The appropriate authority has accepted that the Charity Commissioner has accorded his sanction for sale of the said bungalow but the appropriate authority simply dismisses the same by saying that the order passed by the Charity Commissioner only has persuasive effect but is not binding. In the impugned order the appropriate authority says that even if the bungalow had remained unoccupied and required heavy repairs, in its opinion, this could affect the price only marginally, say to the extent of ₹ 100/- per sq.ft. which amount would be sufficient to renovate and beautify the row house. But there is nothing to show how they arrived at the figure of ₹ 100/- per sq.ft. No opportunity was given to petitioner to respond to said renovation cost. It is settled law that issuance of a show-cause notice is not an empty formality. The appropriate authority should give to the person likely to be affected by the order proposed to be made a notice of the action intended to be taken, inform him about the materials on the basis of which the appropriate authority proposes to take action for preemptive purchase and give a fair and reasonable opportunity to such person to represent his case and to correct or controvert the material sought to be relied upon against him Charity Commissioner, under the Bombay Public Trusts Act, is required to give his sanction bearing in mind interest, benefit and protection of the trust. Respondents have not fled any reply. Mr. Kotangale submitted that there was no requirement to give details of the sale instances referred to in paragraph 5 of the impugned order to petitioner because three of the instances are of bungalows in the same complex where the said bungalow is situated and therefore, petitioner should be deemed to be aware of the sale instances - We are not impressed by Shri Kotangale s submissions. First of all, that is not the case of the appropriate authority in the impugned order. Secondly, the appropriate authority is duty bound to give all materials on the basis of which it proposes to take action of pre-emptive purchase. It cannot absolve of its duty and responsibility to give all materials on the basis of which it proposes to take action. It cannot give a vague show cause notice and thereby deprive petitioner of a reasonable opportunity to effectively correct or controvert the material sought to be relied against him. The impugned order dated 28th April, 1993 is hereby quashed and set aside.The appropriate authority is directed to issue no objection certificate under sub-section (1) of Section 269UL of the Act to petitioner within four weeks of receiving a copy of this order

Summary

Issues Involved:
1. Validity of the show-cause notice under Section 269UD(1) of the Income Tax Act.
2. Consideration of the Charity Commissioner’s sanction in the sale of the property.
3. Requirement for the appropriate authority to provide details and materials relied upon for pre-emptive purchase.

Issue-wise Detailed Analysis:

1. Validity of the Show-Cause Notice under Section 269UD(1) of the Income Tax Act:

The petitioner challenged the order dated 28th April 1993, issued by the appropriate authority under Section 269UD(1) of the Income Tax Act, arguing that the show-cause notice was vague and lacked necessary details. The show-cause notice did not specify any materials or details to justify why the appropriate authority felt an order under Section 269UD(1) was required. The Court emphasized that issuing a show-cause notice is not an empty formality; it must provide a reasonable opportunity to the affected persons to present their case. The notice must include provisional conclusions and the grounds for the proposed action to allow the affected parties to correct or controvert the material relied upon. The Court cited the Division Bench of Gujarat High Court in Om Shri Jigar Association vs. The Union of India, which underscored the necessity of a detailed show-cause notice to ensure a fair hearing. The Court concluded that the vague show-cause notice in this case deprived the petitioner of a reasonable opportunity to respond, thus invalidating the notice.

2. Consideration of the Charity Commissioner’s Sanction in the Sale of the Property:

The petitioner argued that the sanction granted by the Charity Commissioner for the sale of the property should have been given due consideration by the appropriate authority. The Charity Commissioner’s approval ensures the reasonableness of the sale agreement, bearing in mind the interest, benefit, and protection of the trust. The Court referred to the Division Bench judgment in Madhukar Sunderlal Sheth and others vs. S.K. Laul, which held that the Charity Commissioner’s sanction is a significant factor that the Income Tax authorities must consider while exercising their power under Section 269UD. The Court criticized the appropriate authority for dismissing the Charity Commissioner’s sanction as merely persuasive and not binding. The appropriate authority failed to provide reasons why the Charity Commissioner’s decision was incorrect, thus undermining the validity of their order.

3. Requirement for the Appropriate Authority to Provide Details and Materials Relied Upon for Pre-Emptive Purchase:

The petitioner contended that the appropriate authority did not provide the valuation report or details of the six sale instances relied upon in the impugned order. The Court held that the appropriate authority is obligated to provide all materials on which it bases its decision for pre-emptive purchase. The failure to provide such details deprived the petitioner of the opportunity to effectively challenge or respond to the material. The Court rejected the respondents’ argument that the petitioner should have been aware of the sale instances, emphasizing that the appropriate authority must explicitly provide all relevant details to ensure a fair hearing.

Conclusion:

The Court quashed and set aside the impugned order dated 28th April 1993. It directed the appropriate authority to issue a ‘no objection certificate’ under Section 269UL(1) of the Act to the petitioner within four weeks. If the appropriate authority no longer existed, the Court’s order itself would serve as the ‘no objection certificate’ for the transfer. The petition was disposed of with no order as to costs.