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TMI Blog2004 (4) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... f this writ petition filed on October 6, 1987, seek to challenge the said order of pre-emptive purchase passed on September 23, 1987, by the appropriate authority. Inter alia, the petitioners have challenged the constitutional validity of Chapter XX-C of the Income-tax Act and alternatively it is prayed that Chapter XX-C may not be made applicable to the subject sale agreement. The petitioners have also prayed that the first respondent be directed to issue no objection certificate for the purpose of the provisions contained in section 269UL(2) of the Income-tax Act, 1961. Rule was issued in the writ petition on October 7,1987. The order of admission and refusal to grant interim relief reads thus: "Respondent No. 3 states that he does not desire to challenge the acquisition and that he accepts the same and that he will return back the amounts received from the petitioners the moment he receives the amounts from respondents Nos. 1 and 2. In view of the fact that a number of other such petitions have been admitted in this petition also rule is issued. However, in view of the above statements no interim relief." It is not in dispute before us that possession of the subject propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961, in a case where the vendor does not desire to challenge the compulsory acquisition, learned counsel submitted that in a large number of cases where the vendor had not challenged the compulsory acquisition of the property under Chapter XX-C of the Income-tax Act, 1961, or where the vendor has accepted the order of compulsory acquisition of the property, the view has been taken that the intending purchaser has locus to challenge the legality and the correctness of the order of compulsory purchase. Mr. M. I. Sethna, learned senior counsel for the Revenue, submitted that the Department does not intend to raise the issue of the petitioners' locus in maintaining the writ petition. He, however, submitted that the transaction of compulsory acquisition having been completed in all respects prior to the judgment of the Supreme Court in C. B. Gautam [1993] 199 ITR 530, the present case is covered by the exception carved out in C. B. Gautam [1993] 199 ITR 530 (SC) and even if it be held that the impugned order suffers from infirmity being in violation of the principles of natural justice, the petitioners are not entitled to any relief in the extraordinary jurisdiction. Mr. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being) used only in cases where, in an agreement to sell an immovable property to which the provisions of that Chapter apply, there is a significant under-valuation of the property by 15 per cent, or more. If the appropriate authority is satisfied that the apparent consideration shown in the agreement for sale is less than the market value by 15 per cent, or more, it may draw a presumption that this under-valuation has been done with a view to evading tax. Such a presumption, however, is rebuttable and the intending seller or purchaser can lead evidence to rebut it. The Supreme Court held that the reasons for such acquisition which are required by section 269UD to be in writing must be germane to the object for which the Chapter was introduced. The Supreme Court held that the provision of pre-emptive purchase for apparent consideration by the Government of immovable property proposed to be transferred does not confer arbitrary or unfettered discretion on the appropriate authority to compulsorily purchase immovable properties. The Supreme Court read into the relevant provisions the requirement of giving reasonable opportunity of being heard before the order of compulsory acquisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might similarly be other genuine reasons which might have led the seller to agree to sell the property to a particular purchaser at less than the market value even in cases where the purchaser might not be his relative. Unless an intending purchaser or intending seller is given an opportunity to show cause against the proposed order for compulsory purchase, he would not be in a position to rebut the presumption of tax evasion and to give an interpretation to the provisions which would lead to such a result would be utterly unwarranted. The very fact that an imputation of tax evasion arises where an order for compulsory purchase is made and such an imputation casts a slur on the parties to the agreement to sell leads to the conclusion that, before such an imputation can be made against the parties concerned, they must be given an opportunity to show cause that the under-valuation in the agreement for sale was not with a view to evade tax. Although Chapter XX-C does not contain any express provision for the affected parties being given an opportunity to be heard before an order for purchase is made under section 269UD, not to read the requirement of such an opportunity would be to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case, that the statement in Form No. 37-I submitted by the petitioner as set out earlier shall be treated as if it were submitted on the date of the signing of this judgment. Thereafter, if the appropriate authority considers it fit, it may issue a show cause notice calling upon the petitioner and other concerned parties to show cause why an order for compulsory purchase of the property in question should not be made under the provisions of sub-section (1) of section 269UD and give a reasonable opportunity to the petitioner and such other concerned parties to show cause against such an order being made. In view of the limited time-frame, this will have to be done with a sense of urgency. If, after such an opportunity is given, the appropriate authority so considers it fit, it may hold an inquiry, even though summary in nature, and may pass an order for compulsory purchase by the Central Government of the property in question under section 269UD(1). The appropriate authority will have to decide whether an inquiry is called for in the facts and circumstances of the case after the show cause notice is issued. We are fortified in giving a somewhat limited retrospect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directions contained in the judgment within the time-frame stipulated therein. The second aspect relates to matters pending before the authorities which, though not pending before courts, do not also admit of application of the principles consistent with the statutory limit. After hearing the learned Solicitor-General, we are satisfied that the problems and difficulties envisaged, in practical terms, are real and require to be provided for. The first aspect arises out of the limited retrospectivity imported by the judgment. The judgment provides that: 'In order to avoid that situation and, yet to ensure that no injustice is caused to the petitioner, we order, in the facts and circumstances of the case, that the statement in Form 37-I submitted by the petitioner as set out earlier shall be treated as if it were submitted on the date of signing of this judgment.' The learned Solicitor-General points out that, in the cases where petitions are yet pending in this court as well as in the various High Courts, the above direction becomes unworkable inasmuch as the interim orders subsisting in those petitions disable the authorities from carrying out the directions contained in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive purchase was made by the appropriate authority in exercise of its powers under section 269UD on September 23, 1987. The petitioners filed writ petition before this court on October 6, 1987. The writ petition came up for admission on October 7, 1987. The statement was made by the vendor (respondent No. 3) at that time that he was not desirous of challenging the acquisition and that he accepts the compulsory acquisition. He also made a statement that as soon as he receives the consideration from the Department, he would return back the amount received from the petitioners. On October 7, 1987, though the Division Bench issued rule, it refused interim relief. As a result of refusal to grant interim relief in favour of the petitioners, there was no impediment for the Department in law in proceeding ahead under Chapter XX-C and completing the transaction of compulsory acquisition. As a result thereof, possession of the subject property was taken by the Department on October 14, 1987, from the petitioners. The vendor was paid the amount of compensation (apparent consideration of Rs. 35,00,000) on October 29, 1987. Not only that thereafter the Department put the subject property to pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 993] 199 ITR 530 no interim relief was granted to the petitioners. It appears from the available material and more so from the affidavit of the first petitioner herself filed in Notice of Motion No. 43 of 1993 that the petitioners were alive to the situation that, in the matters of pre-emptive purchase, this court was issuing rule and granting interim relief on terms and conditions that the person challenging the order of compulsory acquisition was required to pay the entire amount of the sale consideration. The petitioners were not possessed of sufficient financial means to deposit the consideration of the agreement as it is the petitioners' own case that they were depending on raising the funds from the sale of other flat, namely, Avanti, which was in their occupation and which they agreed to sell. The facts would, thus, show that, though the petitioners filed the writ petition in challenging the acquisition order, as a matter of fact they were not desirous of any interim relief and they were satisfied when this court refused to grant interim relief on the basis of the statement of the owner that he would return the consideration to the petitioners as soon as the compensation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shrichand Raheja [1995] 213 ITR 33 (Bom), Ruparel Brothers (Bombay) Pvt. Ltd. [1997] 226 ITR 172 (Bom) and Home Builders relied upon by learned counsel for the petitioners also have no application in the facts of the present case. As already indicated by us what was necessary for completion of the transaction after the order of pre-emptive purchase was passed by the appropriate authority was (i) taking over possession, and (ii) payment of compensation to the owner and receipt thereof by the owner without protest. All these things took place in the year 1987 itself immediately after interim relief was refused to the petitioners. Not only that, thereafter the property was put to auction and the auction sale has been confirmed in favour of respondent No. 4, though subject to the decision of the writ petition. We have, though, held that the transaction was completed in the present case before the judgment of the Supreme Court in C. B. Gautam [1993] 199 ITR 530 and, therefore, the infraction of principles of natural justice cannot be said to invalidate the order of pre-emptive purchase, yet, we would like to deal with the aspect of locus of the petitioners in challenging the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sell creates no interest in the property and in the absence of a decree of specific performance of an agreement even though authorised by the general power of attorney holder of the original owner of the property 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's case [1997] 223 ITR 297 (SC). In that view of the matter, we do not think the High Court should have ignored the effect of the same." Applying the aforesaid ratio of the Supreme Court as stated in Shatabadi Trading and Investment Pvt. Ltd. [2001] 251 ITR 93, we are of the view that the aspect that the petitioners are only agreement-holder and that they do not have any interest in the property cannot be ignored, particularly in a case like this where the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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