2013 (8) TMI 42 - HC - Income Tax

Valuation of property - Acquisition of property u/s 269UD(1) - Held that - Appropriate Authority has ignored the directions of this Court with impunity by giving the same reasons in support of acquisition of the said property - Comparison of the two orders would itself indicate that it was a cut and paste job and there is no independent application of mind by the Appropriate Authority while passing the impugned order - All the three properties being relied upon by the Appropriate Authority are not similarly placed - The impugned order gives no reason nor does it disclose the manner in which the value of said property has been arrived at from purchase price of built up premises being relied upon by the Appropriate Authority - The Appropriate Authority has completely ignored the directions of this Court and continued to give the same reasons which this Court had found not good enough to sustain the acquisition of the said property - Appropriate Authority has no other reason to justify its action for passing an order under Section 269UD(1) of the Act and therefore, continues to pass orders giving the same reasons. This itself makes the impugned order unsustainable - Reasons for exercise of preemptive right of purchase under Chapter XXC of the Act cannot be sustained as it is passed without considering the submissions of the petitioners - Decided in favour of Assessee.

Issues Involved:
1. Validity of the order dated 8 July 2011 passed by the Appropriate Authority under Chapter XXC of the Income Tax Act, 1961.
2. Determination of fair market value of the property.
3. Proper calculation of the value of encumbrance of tenancy.
4. Comparability of sale instances relied upon by the Appropriate Authority.
5. Compliance with the directions given by the Court in previous orders dated 10 August 2009 and 6 June 2011.

Issue-wise Detailed Analysis:

1. Validity of the Order Dated 8 July 2011:
The petitioners challenged the order dated 8 July 2011 passed by the Appropriate Authority under Chapter XXC of the Income Tax Act, 1961, which concluded that the property in question was undervalued by more than 15% of its fair market value and thus was acquired by the Central Government. The petitioners argued that the order was passed mechanically, ignoring the specific directions given by the Court in its previous orders dated 10 August 2009 and 6 June 2011.

2. Determination of Fair Market Value:
The Appropriate Authority determined the fair market value of the property to be Rs. 2.12 crores, which was significantly higher than the apparent consideration of Rs. 1.15 crores declared in the agreement dated 18 February 1995. The petitioners contended that the consideration declared was the fair market value, supported by a detailed valuation report dated 5 January 2010 by Dr. Roshan Nanavati, a Government Approved Valuer. The report highlighted that the cost of resettling the tenant would be far in excess of Rs. 4.34 lacs, as the tenant would require 1110 sq. ft. instead of 724 sq. ft. to vacate the property.

3. Proper Calculation of the Value of Encumbrance of Tenancy:
The Court's order dated 10 August 2009 had directed the Appropriate Authority to properly compute the cost of settling the tenant. The petitioners argued that the Appropriate Authority failed to consider the valuation report of Dr. Roshan Nanavati, which indicated that the tenant would demand 33% to 50% more area than currently occupied, along with cash consideration. The impugned order stated that the effective cost of settling the tenant would be Rs. 55.02 lacs, but this was not factored into the fair market value calculation.

4. Comparability of Sale Instances:
The petitioners contended that the three sale instances relied upon by the Appropriate Authority were not comparable as they were situated on the main Sion Trombay Road, which had better commercial viability, whereas the said property was situated off Central Avenue Road with narrow access and a dumping yard behind it. The Court's order dated 10 August 2009 had already concluded that the three properties relied upon by the Appropriate Authority were not similarly placed and directed the Authority to provide good reasons for their comparability. The Appropriate Authority, however, repeated the same reasons in the impugned order, which the Court had previously found insufficient.

5. Compliance with Court Directions:
The Court found that the Appropriate Authority had ignored its directions from the orders dated 10 August 2009 and 6 June 2011. The Court had specifically directed the Appropriate Authority to give good reasons for considering the three sale instances as comparable and to properly calculate the value of the tenancy encumbrance. The impugned order repeated the same reasons without addressing the Court's concerns, leading to the conclusion that the Appropriate Authority had not complied with the Court's directions.

Conclusion:
The Court concluded that the impugned order dated 8 July 2011 was unsustainable as it ignored the directions of the Court and repeated reasons previously found insufficient. The Appropriate Authority failed to justify the acquisition of the property and did not properly consider the expert valuer's report. Given the prolonged duration of the proceedings since 1995 and the repeated failures of the Appropriate Authority to justify its actions, the Court set aside the impugned order and allowed the petition, with no order as to costs.

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