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TMI Blog2005 (5) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of appropriate authority is dismissed - - - - - Dated:- 25-5-2005 - Judge(s) : R. GURURAJAN. JUDGMENT R. Gururajan J.- These petitions are directed against the orders at annexure G in No. AA/Bng/5(35)7/89-90 of 1993, annexure G1 in No. AA/Bng/5(35)7/89-90 of 1993 and annexure F in No. AA/Bng/5(35)7/89-90 of 1993, issued by the first respondent. The petitioner wants a direction directing the Appropriate Authority, the first respondent, to issue no objection certificate and to return the bank guarantee of Rs. 2.85 crores to the petitioner for cancellation. The facts in brief are as follows: The petitioner is a private limited company. It has entered into two agreements on May 22,1989, with the second and third respondents, viz., Mrs. Aimai N. Irani and Mr. Darius N. Irani, through their power of attorney, Mr. Godrez K. Irani, for the purchase of their respective shares in the ratio of 3:1 of the property bearing Nos. 4 and 5, situated at Infantry Road, Bangalore, for a consideration of Rs. 1,38,04,850 and Rs. 46,01,475, i.e., for a total consideration of Rs. 1,84,06,825. Two forms in Form No. 37-I prescribed under rule 48L of the Income-tax Rules, 1962, duly filled in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The writ appeals were allowed. Order dated July 25, 1989, passed by the first respondent was quashed not for reasons stated in the judgment of the learned single judge but for the reasons set out in the judgment of the Division Bench. The order of the Division Bench is at annexure E to these petitions. Special leave petitions were filed and the Supreme Court ordered notice to both in respect of the admission and in respect of the interim orders in the case on hand. In the meanwhile, the first respondent issued notice calling upon the petitioner as to why the property bearing Municipal Nos. 4 and 5 (new Nos. 9 and 11), Infantry Road, should not be acquired. The petitioner filed Writ Petition No. 17478 of 1993. Interim order was declined. Extension of time was sought for before the Division Bench. The same was declined. A detailed reply to the show-cause notice was sent to the first respondent. Thereafter, the first respondent ordered compulsory purchase in terms of his order dated June 14, 1993 and also in terms of the letter dated June 14, 1993, issued under section 269UE(2) of the Act. They are at annexures G and G1. The Supreme Court disposed of the civil appeals before it v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner, and Sri Seshachala, learned counsel, appears for the Department. Sri Sarangan, learned senior counsel for the petitioner, took me through the material on record to contend that the impugned orders require interference by this court. Learned counsel refers to earlier proceedings in the case on hand. He says that during the pendency of the SLP, orders were passed by the respondents and the Supreme Court disposed of the SLP by directing the petitioner to take all contentions available to the petitioners in terms of the SLP. Learned counsel, therefore, says that this court has to take into consideration all aspects of the matter in the light of the judgment of the Supreme Court. Learned counsel also complains of inadequate opportunity in the matter. He refers to material on record to say that a reasonable opportunity was not provided to the petitioner in the matter. Coming to the merits of the matter, learned counsel would argue that the facts as narrated by the authorities are not to be taken into consideration for the purpose of compulsory purchase in terms of the impugned order. He refers to me several case laws in support of his submissions. In addition, he would s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re that the petitioner has entered into two agreements on May 22, 1989, with Mrs. Aimai N. Irani, the second respondent herein and Mr. Darius N. Irani, the third respondent herein, for purchase of their respective shares in the ratio of 1:3 in the property bearing Nos. 4 and 5, Infantry Road, Bangalore, for a consideration of Rs. 1,38,04,850 and Rs. 46,01,475. Form No. 37-I prescribed under section 269UD of the Act duly filled in by the transferors and the transferee was filed before the Appropriate Authority. The first respondent, after inspecting the property and after recording the reasons by two separate orders passed by it, ordered purchase of the property by the Central Government. The first respondent passed orders under section 269UD(1) of the Act on July 25, 1989. Aggrieved by the said orders, the petitioner filed Writ Petitions Nos. 14319 and 14320 of 1989. The petitioner also has challenged the provision of Chapter XX-C of the Act. The petitioner further says that the third respondent being a citizen of the USA requires approval of the Reserve Bank of India to sell his interest in the property. An application was filed before the Reserve Bank of India which approved the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand in the way of the consideration of these points in the proceedings taken hereafter even in the High Court by the appellant while challenging the Appropriate Authority's order dated June 14, 1993. Learned counsel also submitted that the appellant would be filing a writ petition challenging the order dated June 14, 1993, made by the Appropriate Authority in the Karnataka High Court within a period of eight weeks. If that is done, the bank guarantee furnished by the appellant pursuant to the interim orders of this court shall continue till then and thereafter be subject to further directions by the High Court. For the aforesaid period of eight weeks, the respondents shall not take any action for auctioning the property in question." In the light of the order of the Supreme Court, the present writ petitions are filed raising several contentions. I have already referred to the arguments and the points were framed for consideration. Right of the petitioner: Sri Seshachala, learned counsel for the Department, would say that the petitioner has no legal right and it cannot maintain these petitions. He says that the facts in the case on hand would show that the petitioner is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgments what is clear to this court is that there must be a subsisting right available to the petitioner. Since an agreement-holder in this case does not have any substantial right in terms of the judgment of the apex court, it is not possible for this court to grant any relief to the petitioner in the given set of circumstances." It is no doubt true that an agreement-holder does not have a substantial right as held by courts of law. What cannot be forgotten in the case on hand is that the petitioner has suffered an adverse order at the hands of the appellate court in Writ Appeals Nos. 2164 and 2165 of 1992. When that order was challenged in the Supreme Court, the Supreme Court has made it very clear that it would be open to the appellant to raise all points, including those raised before it, for consideration while challenging the order dated June 14, 1993. The Supreme Court further ruled that the points which had been raised in those appeals shall be treated as open for consideration in the proceedings taken by the appellant for challenging the order dated June 14, 1993. In the light of the order of the Supreme Court, I cannot dispose of these writ petitions only on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: "Proceedings arising under article 226 of the Constitution of India are in the nature of judicial review and such review can be only in respect of the process of decision and not the decision itself. Merely because no appeal is provided against an order of the Appropriate Authority under section 269UD of the Income-tax Act, 1961, directing pre-emptive purchase by the Central Government, the supervisory power of the High Court would not get enlarged; nor can the High Court exercise an appellate power while examining the correctness of the conclusion arrived at by the authority." In CIT v. Smt. Vimlaben Bhagwandas Patel [1979] 118 ITR 134, the Gujarat High Court observed as follows: "In fixing the fair market value of immovable property, it would not be safe to import wholly the principles enunciated by the courts in ascertaining the market value while determining the amount of compensation for acquisition of a property or land since the perspective of acquisition under the Land Acquisition Act and that under Chapter XX-A of the Income-tax Act are different. In the perspective of acquisition proceedings under Chapter XX-A of the Income-tax Act, which are penal provisions hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir market value by at least 15 per cent. (c) The consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of the tax liability of the transferor or the concealment of any income, money or assets by the transferee. When the said conditions exist, the competent authority is required to take further ministerial steps for initiating the proceedings as follows: (a) he has to record his reasons for initiating the proceedings; (b) he has to issue a notice under section 269D to be published in the Official Gazette." In CIT v. P.I. George [1988] 171 ITR 620, the Kerala High Court has ruled that: (i) on the facts and circumstances of the case, the Tribunal was justified in interfering with the valuation adopted by the Wealth-tax Officer; (ii) the Tribunal was justified in directing that an average between the values assessed by the land and building method and the rent capitalisation method should be taken for arriving at the market value of the jointly owned property; (iii) the Tribunal had held that in their experience and knowledge, conditions in Ernakulam had not dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment with a view to realise a larger sum by the sale thereof at a subsequent point of time. The object for which the provision was introduced must never be lost sight of. It is meant to prevent the evasion of tax by parties to real estate transactions by failing to disclose the true price for which the property is bought or sold. The measure with reference to which the value is to be treated is the market value. Merely because the Act does not define 'market value' and does not lay down the guidelines as to how to arrive at the market value, the Appropriate Authority cannot utilise this situation and decide any figure of its choice as the market value. The determination must be by adopting a fair and objective standard, and that fairness and objectivity should be evident from the order that the authority makes. It is convenient for the Appropriate Authority to take one instance which had occurred within a reasonable time from the date of the agreement and hold that the amount so arrived at is the market value. Mere convenience cannot be a justification for claiming a particular value as the market value. The exercise has to go much deeper and has to cover a wider area." The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re there is a significant undervaluation of the property to the extent of 15 per cent, or more in the agreement of sale, as evidenced by the apparent consideration being lower than the fair market value by 15 per cent, or more. Although, a presumption of an attempt to evade tax may be raised by the Appropriate Authority concerned in a case where the aforesaid circumstances are established, such a presumption is rebuttable and this would necessarily imply that the concerned parties must have an opportunity to show cause as to why such a presumption should not be drawn. Moreover, in a given transaction of an agreement to sell, there might be several bona fide considerations which might induce a seller to sell his immovable property at less than what might be considered to be its fair market value. For example, he might be in immediate need of money and unable to wait till a buyer is found who is willing to pay the fair market value for the property. There might be some dispute as to the title to the immovable property as a result of which it might have to be sold at a price lower than the fair market value or there might be a subsisting lease in favour of the intending purchaser. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority v. R.C. Chawla [2001] 249 ITR 450 has ruled as under: "The well known principle of administrative law is that, if a relevant factor is ignored, the order of the administrative authority becomes vitiated. Where the Appropriate Authority passed an order under section 269UD of the Income-tax Act, 1961, for pre-emptive purchase by the Central Government of certain immovable property proposed to be transferred on the ground that its value had been understated in the agreement of the parties by more than 15 per cent, of the fair market value, but, in arriving at the fair market value, the Appropriate Authority had ignored the factor that the property was under litigation and the civil court had issued an injunction restraining the sale, transfer or parting with possession of the property." The court has ultimately ruled that the order of pre-emptive purchase was vitiated for failure on the part of the competent authority to take into account the important factor as regards pending litigation, which could not be ignored while determining the fair market value of the property. From all these judgments, what is clear to this court is that Chapter XX-C was enacted to arrest an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order on September 28, 2004. I have noticed in the said order that both learned counsel wanted to end the long-drawn litigation between the parties and they would make their submissions in the matter on the merits also. I also gave opportunity to both counsel to file any other additional material, if they have, so that I shall consider all the materials with a view to end the long pending dispute between the parries in their own interest. In those circumstances, long arguments were addressed by the parties and detailed written arguments were filed by learned counsel for the parties. Therefore, I have no hesitation to rule that substantial justice has been done to the petitioner in the matter of hearing. Let me see now the merits of the matter. Sri Sarangan, learned counsel for the petitioner, would place an argument that the authority is wrong in not accepting the case of the petitioner. According to him, comparisons are incomparable in character. His submission was that the threat of litigation was not considered at all in the case on hand. Learned counsel also would argue that the Reserve Bank of India's approval was totally ignored by the authority. He would further say tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for sale by an agreement dated April 14, 1989; that the land area was 14,200 square feet with an old building having plinth area of 4,598 square feet; that the said property does not have frontage on Infantry Road except for a small passage having the width of 20 feet. The authority further notices in its order that after taking into account the salvage value of the building, the land rate for the said property No. 6, Infantry Road, worked out to Rs. 457 per square feet; that even with the disadvantages stated above, the land rate of Rs. 457 per square feet was considered too low as compared to the land rates prevailing in the locality and hence the property was purchased. The authority has further noticed that the land rate in the first belt would work out to Rs. 4/3 x 457, and that while this land rate of Rs. 609 per square feet is appropriate for an intermediate site located on Infantry Road, the land for the corner plot of land was under consideration. The authority has further held that the rate of the property bearing Nos. 4 and 5, Infantry Road, ought to have been Rs. 670 per square feet. The authority, at para. 10 of its order, has noticed that the property at No. 10, In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e records that the property in question is a corner plot at the junction of Queen's Road and Infantry Road. The authority after noticing the comparability has come to the conclusion that the rate at Rs. 422 per square feet cannot be said to be reasonable rate in the case on hand. The authority after referring to the other properties in Infantry Road has come to the conclusion that the consideration is low and it is more than 15 per cent, in terms of the apex court rulings. Comparison in terms of the facts as noticed above, makes it clear that the property purchased is below the normal rate not requiring my interference. The argument of minute dissection of comparability is not acceptable to me since the law is fairly well-settled that judicial review is with regard to the process and not with regard to the decision. So long as the decision is based on facts and so long as relevant material facts are taken into consideration and irrelevant materials are omitted, this court cannot sit in appeal over such fact-finding orders in terms of the law declared by this court as well as by the Supreme Court. I cannot but refer to the decision of C.B. Gautam's case [1993] 199 ITR 530 (SC) and a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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