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TMI Blog2006 (2) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Rules, 1962 (in short "the Rules"), to file a statement in Form No. 37-I before the appropriate authority specified under Chapter XX-C. Accordingly, the appellants and the fourth respondent filed Form No. 37-I along with certain documents on October 29, 1987. Thereafter, the appropriate authority passed an order dated December 18, 1987, purported to be under section 269UD(1) of the Act, for pre-emptive purchase of the said property by the Central Government at an amount equal to the apparent consideration. It was stated that the reasons were recorded separately. The said order dated December 18, 1987, was challenged before the Karnataka High Court in W.P. Nos. 247-248 of 1988. The challenge in the writ petitions was to the constitutional validity of Chapter XX-C of the Act with consequential prayer to quash the order dated December 18, 1987. The High Court stayed the order of purchase dated December 18, 1987, on January 7,1988. The interim order of stay was subsequently modified on January 13, 1988, by staying only the delivery of possession under section 269UE and further proceedings pursuant to vesting subject to the condition that the transferees and the transferor sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e against the order for compulsory purchase being made by the appropriate authority. This court further held that the provisions of Chapter XX-C are to be resorted to only where there is significant undervaluation of the immovable property to be sold in the agreement of sale with a view to evading tax and that an order for compulsory purchase under section 269UD is required to be supported by reasons in writing and such reasons must be germane to the object for which Chapter XX-C was introduced in the Income-tax Act, namely, to counter attempts to evade tax. Reading down of section 269UD in the above manner, to uphold its validity, necessitated issue of certain consequential directions. We extract below the relevant portions thereof: "In view of the fact that the object of the provisions of Chapter XX-C is a laudable object, namely, to counter evasion of tax in transactions of sale of immovable property, we consider it necessary to limit the retrospective operation of our judgment in such a manner as not to defeat the acquisitions altogether. We find that if the original time-frame prescribed in Chapter XX-C is rigidly applied, it would not be possible for the appropriate authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titions filed by the appellants were taken up for hearing by the Karnataka High Court after the decision in C.B. Gautam's case [1993] 1 SCC 78; [1993] 199 ITR 530. The only point urged by the appellants at the hearing of the writ petitions was that in the impugned order no reasons were stated, as to on what basis the valuation of the property was arrived at and since the order was non-reasoned without giving opportunities to the appellants the same was liable to be quashed. The stand of the appropriate authority on the other hand was that the decision of this court in C.B. Gautam's case [1993] 1 SCC 78; [1993] 199 ITR 530 was squarely applicable to the facts of the case. It was pointed out that instead of declaring the provision unconstitutional, as it did not provide for grant of an opportunity to the affected persons, the provision was read down and it was held that such a requirement was inbuilt as a part of the principles of natural justice. It was, however, noted in the clarificatory order that whenever the transactions were completed, the property was purchased under pre-emptive right to purchase by the Central Government, and the amount was returned back to the vendor or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the clarificatory order was not applicable to the facts of the case. If any act is done pursuant to the order of the court the same is subject to the result of the writ petitions and it cannot be affected. Reference was made to paragraphs 41, 42, 43 and 46 of C.B. Gautam's case [1993] 1 SCC 78; [1993] 199 ITR 530, in this context. Even if there was any auction sale by the Income-tax Department the principle of lis pendens was clearly applicable. The position would have been the same if there would not have been any interim order, and the final order in the writ petitions would have covered the matter. In response, learned counsel for the auction purchaser submitted that interestingly the prospective vendor had not questioned either the legality of the order dated December 18, 1987, or the judgment of the High Court. In the auction sale the amount that had been paid is Rs. 46 lakhs which was almost triple the amount which was purportedly agreed to be paid originally. The protection given by the interim order that the actions indicated which determined would be subject to the result of the writ petitions were restricted to delivery of the property, which involved the prospective ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r conferred on the party by suitably commanding the party liable to do so. Any opinion to the contrary would lead to unjust if not disastrous consequences. Litigation may turn into a fruitful industry. Though litigation is not gambling yet there is an element of chance in every litigation. Unscrupulous litigants may feel encouraged to approach the courts, persuading the court to pass interlocutory orders favourable to them by making out a prima facie case when the issues are yet to be heard and determined on the merits and if the concept of restitution is excluded from application to interim orders, then the litigant would stand to gain by swallowing the benefits yielding out of the interim order even though the battle has been lost at the end. This cannot be countenanced. We are, therefore, of the opinion that the successful party finally held entitled to a relief assessable in terms of money at the end of the litigation, is entitled to be compensated by award of interest at a suitable reasonable rate for the period for which the interim order of the court withholding the release of money had remained in operation. 29. Once the doctrine of restitution is attracted, the interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent No. 4. The controversy can be looked at from another angle. This court, in Union of India v. Shatabadi Trading and Investment Pvt. Ltd. [2001] 6 SCC 748; [2001] 251 ITR 93, 96, 98, dealt with a somewhat similar issue. In paragraphs 3 and 9 of the judgment it was noted as follows: "3. The High Court admitted the writ petition and granted an interim order of stay restraining the Department to proceed further in the matter. Against the said interim order, a special leave petition was preferred before this court. During the pendency of the proceedings before this court, an order was made on April 25, 1994, directing that the property be auctioned subject to bid confirmation by this court. Auction was held and Smt. Anju Jain, Mr. Vineet Jain and Mr. Manish Jain as the highest bidders of the property offered their bid at Rs. 4.01 crores and permission was sought for confirmation of the same. Various pleadings were raised in those proceedings to the effect that the auction itself was a farce and stage managed by the appropriate authority in collusion with Mr. Vinod Jain and the property was purchased by him in the name of his wife and two sons for Rs. 4.01 crores and that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (sic the purchaser, the appellant therein) had no locus standi to move an application for setting aside the auction-sale on offer to deposit full tax dues. If we extend the said principle to the present facts, we find it hardly possible to come to the conclusion the High Court has arrived at. It is possible that the writ proceedings were still pending before the High Court but those writ proceedings were not at the instance of the owner of the subject property and the agreement-holder did not have any interest other than what was indicated in K. Basavarajappa case [1996] 11 SCC 632. In that view of the matter, we do not think the High Court should have ignored the effect of the same." It is thus clear 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. In view of the factual position noted above, tested in the background of legal principles set out in C.B. Gautam's [1993] 1 SCC 78; [1993] 199 ITR 530 and Shatabadi Trading's cases [2001] 6 SCC 748; [2001] 251 ITR 93 (SC) it is clear that there can be n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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