2006 (2) TMI 75 - SC - Income Tax

Purchase of Immovable Property - held that the requirement relating to hearing read into the provisions of section 269UD by this court will not apply to transactions which have become final or transactions where the Department has already auctioned the acquired property - as the property which is the subject matter of the compulsory purchase u/s 269UD had already been sold by public auction and as there was no challenge by the owner of the property, appeal is dismissed

Issues Involved:
1. Validity of the order for pre-emptive purchase of the property by the Central Government under section 269UD(1) of the Income-tax Act.
2. Compliance with principles of natural justice in the pre-emptive purchase process.
3. Impact of the Supreme Court's decision in C.B. Gautam v. UOI on the case.
4. Effect of the interim orders and subsequent auction on the rights of the parties involved.
5. Applicability of the doctrine of restitution and the principle of actus curiae neminem gravabit.

Detailed Analysis:

1. Validity of the Order for Pre-emptive Purchase:
The appellants challenged the order dated December 18, 1987, passed under section 269UD(1) of the Income-tax Act for the pre-emptive purchase of the property by the Central Government. The High Court initially stayed the order but later vacated the stay, allowing the Income-tax Department to take possession of the property and conduct an auction.

2. Compliance with Principles of Natural Justice:
The appellants argued that the order was non-reasoned and that they were not given an opportunity to present their case, thus violating the principles of natural justice. The High Court noted that the reasons for the order were recorded separately but were not supplied to the appellants, which amounted to a denial of natural justice. However, the High Court held that due to the clarificatory order in C.B. Gautam's case, the appellants were not entitled to relief as the transaction had already been completed.

3. Impact of the Supreme Court's Decision in C.B. Gautam v. UOI:
The Supreme Court in C.B. Gautam v. UOI upheld the constitutional validity of Chapter XX-C of the Income-tax Act but mandated that the intending purchaser and seller must be given a reasonable opportunity to show cause against the order for compulsory purchase. The Court also stated that completed transactions where compensation was paid and accepted without protest would not be invalidated. This decision was crucial as it provided the legal framework for the appellants' case.

4. Effect of the Interim Orders and Subsequent Auction:
The High Court's interim order protected the appellants to some extent, but the subsequent vacating of the stay allowed the Department to auction the property. The auction was conducted, and the highest bid of Rs. 46 lakhs was accepted. The appellants argued that the principle of lis pendens applied, and the auction should be subject to the final outcome of the writ petitions. However, the Court held that the appellants had acquiesced in the auction by seeking a refund of the advance payment, thus waiving their rights to challenge the auction.

5. Applicability of the Doctrine of Restitution and Actus Curiae Neminem Gravabit:
The doctrine of restitution and the principle that an act of the court shall prejudice no man (actus curiae neminem gravabit) were discussed. The Court noted that any act done pursuant to a court order should not cause prejudice to any party. However, in this case, the Court found that the appellants had not been impoverished by the auction as they had sought and received a refund of their advance payment. The Court also referred to the decision in Union of India v. Shatabadi Trading and Investment Pvt. Ltd., which held that the requirement of hearing read into section 269UD would not apply to transactions already completed or where the property had been auctioned.

Conclusion:
The Supreme Court dismissed the appeals, holding that the property had already been sold by public auction before the decision in C.B. Gautam's case and that there was no challenge by the owner of the property. The principles of natural justice and the doctrine of restitution did not warrant interference in the completed transaction. The appeals were thus dismissed with no costs.

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