2018 (9) TMI 227 - HC - Income Tax

Valuation being made on incomparable basis - method of valuation - Tenancy rights - Did the authorities take extraneous materials into consideration while passing the impugned order ? - To what relief or reliefs are the parties entitled to ? - Held that - None of the authorities cited with regard to valuation postulates that, the appropriate authority must value a property on rental basis when it doubts the tenancy. In the present case, the tenancy itself has been doubted in the impugned order. There are good reasons for doubting the tenancy. The respondent no. 4 and 5 are the owners. As owners they had entered into an agreement to sell the flat to the petitioner. The petitioner was and still is in possession and occupation of the flat. At the time of the agreement for purchasing the flat, the petitioner was in employment of the respondent no. 6. The respondent no. 6 is the tenant. The petitioner had superannuated from service with effect from January 1, 2007. In the event the petitioner is allowed to purchase the flat, then, it will remain in possession. The flat will have a tenancy without the tenant being in possession. The petitioner is no longer the employee of the respondent no. 6 since January 1, 2007. Appropriate authority had sufficient reasons not to recognize the tenancy. An impugned order is required to be adjudged on the basis of the reasons contained therein. However, it is permissible to consider the materials placed before the appropriate authority to decide whether the view expressed in the impugned order is sustainable or not. A Writ Court needs not interfere with the view expressed in an impugned order, if such view is plausible on the basis of the materials made available. It is not called upon to be an appellate authority even if there is no provision for appeal against the impugned order. As discussed above, I find no infirmity in the view expressed by the appropriate authority questioning the tenancy. No infirmity in the view expressed by the appropriate authority questioning the tenancy. at the time of valuing the property, the appropriate authority can consider an encumbrance to have been created for the purpose of defeating the provisions of Chapter XX-C of the Act of 1961 and value the property as if the same was without such encumbrance. None of the authorities cited, disallows such a course of action. All the authorities cited with regard to deployment of the rental method for the purpose of valuation are on a fact situation where, the tenancy was not doubted. Authorities of Court are not be read as statues. Deviation of any fact scenario can affect the applicability of the ratio of the cited authority on the subject matter to be decided. In view of the discussions above, it cannot be said that the appropriate authority took extraneous materials into consideration while passing the impugned order. The second issue is answered in the negative and against the petitioner.

Summary

Issues Involved:
1. Is the impugned order vitiated by breach of principles of natural justice?
2. Did the authorities take extraneous materials into consideration while passing the impugned order?
3. To what relief or reliefs are the parties entitled?

Issue-wise Detailed Analysis:

1. Breach of Principles of Natural Justice:
The petitioner contended that the impugned order suffered from a breach of principles of natural justice as sufficient time was not afforded to reply to the show-cause notice. The show-cause notice dated July 21, 1993, was received on July 26, 1993, and the petitioner was given a hearing on July 27, 1993. The petitioner argued that the authorities did not furnish the valuation reports noted in the documents produced before the competent authority, to which the petitioner was entitled. However, it was noted that the petitioner did not seek an adjournment or raise any issue regarding the short or inadequate time for the hearing. The court found that there was no breach of the principles of natural justice as the petitioner proceeded with the hearing without raising any such issues. The first issue was therefore answered in the negative and against the petitioner.

2. Consideration of Extraneous Materials:
The petitioner argued that the valuation was made on an incomparable basis, comparing the subject flat with non-tenanted flats, and that the entire premises were mortgaged with UCO Bank. It was also highlighted that there was pending litigation and that the petitioner had no right or interest in the flat as he was neither a tenant nor a sub-tenant. The impugned order addressed these contentions, noting that the agreement for purchase stated the sale was free from all encumbrances, thus any mortgage with UCO Bank would not affect the petitioner. The order also considered the subsisting tenancy and the fact that the petitioner, an employee of the tenant, was in possession of the flat. The court found that the appropriate authority had sufficient reasons not to recognize the tenancy, as the tenancy was doubted due to the petitioner being in possession and occupation of the flat while being an employee of the tenant. The court concluded that the appropriate authority did not take extraneous materials into consideration while passing the impugned order. The second issue was answered in the negative and against the petitioner.

3. Reliefs Entitled to the Parties:
The court held that no relief could be granted to the petitioner. The valuation report, which was provided to the petitioner, calculated the fair market value of the property by considering two flats in the same locality and making necessary adjustments. The court acknowledged that the appropriate authority could consider an encumbrance to have been created for the purpose of defeating the provisions of Chapter XX-C of the Income Tax Act, 1961, and value the property as if it were without such encumbrance. The third issue was answered accordingly, and the writ petition was dismissed with no order as to costs.

Conclusion:
The writ petition was dismissed on all counts. The court found no breach of principles of natural justice, no consideration of extraneous materials, and no reliefs could be granted to the petitioner.