1996 (6) TMI 81 - HC - Income Tax

Appropriate Authority Movable Property Purchase Of Immovable Property By Central Government Supreme Court

Summary

Issues Involved:
1. Applicability of Chapter XX-C of the Income-tax Act, 1961, to the transaction.
2. Validity of the order of pre-emptive purchase by the Central Government.

Issue-Wise Detailed Analysis:

1. Applicability of Chapter XX-C of the Income-tax Act, 1961, to the Transaction:

The petitioners argued that the transfer of property was completed before Chapter XX-C was made applicable to Hyderabad City, thus making the Chapter inapplicable to the transaction. The vendor agreed to sell the property on May 3, 1988, and a fresh agreement was executed on December 16, 1988. The entire sale consideration was paid by May 31, 1989, and possession was allegedly handed over on the same date. The petitioners filed Form No. 37-I for a "no objection certificate" under Rule 48L of the Income-tax Rules, 1962. The appropriate authority, however, did not accept the plea that possession was handed over before June 1, 1989, and thus did not consider the transaction as a "transfer" within the meaning of Section 269UA(f) of the Act.

The court examined whether the agreement dated May 3, 1988, was relied upon or filed along with Form No. 37-I, noting that only the agreement dated December 16, 1988, was filed. The court also observed that the alleged transfer occurred after Chapter XX-A ceased to apply and before Chapter XX-C was extended to Hyderabad on June 1, 1989. The court found no registered deed of sale and concluded that the possession was not handed over in part performance of the agreement for sale dated December 16, 1988. Consequently, there was no "transfer" before June 1, 1989, making Chapter XX-C applicable to the transaction.

2. Validity of the Order of Pre-emptive Purchase by the Central Government:

The petitioners contended that the appropriate authority did not properly consider comparable sales and failed to take into account the valuation report filed by them. The court noted that the appropriate authority relied on three transactions to determine that the apparent consideration was understated by more than 15%. However, the court found that the property at Sarojini Devi Road, Secunderabad, was in a commercial area and not a comparable sale. The property at Barkatpura was also not considered comparable due to differing locality characteristics.

The court emphasized that the appropriate authority should have furnished copies of the documents relied upon to the petitioners, as their non-provision amounted to a violation of natural justice. The court also noted that the appropriate authority failed to consider a registered sale deed in the same locality (Padmarao Nagar) relied upon by the petitioners, which indicated a higher consideration for a smaller extent of land. The court concluded that the non-consideration of relevant material and the denial of document copies to the petitioners vitiated the proceedings.

Conclusion:

The court quashed the order of the appropriate authority dated May 20, 1994, and allowed the writ petitions, finding that the impugned order was not sustainable in law due to procedural lapses and the failure to provide a fair opportunity to the petitioners.