9911796707
TMI Blog1998 (2) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... 96. All the cheques were drawn on Allahabad Bank. The said amounts were paid as advance. The property consisting of a building with ground floor and first floor admeasuring 4819 sq. ft. plinth area constructed in an area of 1156 sq. yards or 967 sq. meters and is bounded by North : Nala and 59 wide Road No. 58 ; South : Plot No. 1153 ; East : Plot No. 1144 and West : Plot No., 1141. The agreement of sale was dated May 27, 1996, and it was registered in the office of the Sub-Registrar, Banjara Hills, Hyderabad. The second petitioner is a non-resident Indian and settled with her son in the USA. She got the property as legatee under a will dated October 1, 1973, executed by her husband, the late Sri Pulla Reddy. The first and second petitioners filed a joint statement in Form No. 37-I under section 269UC to the appropriate authority on June 6, 1996. The defects pointed out by the first respondent were rectified on September 12, 1996. On November 4/22, 1996, the appropriate authority, the first respondent, issued a notice directing the second petitioner and the first petitioner to show cause as to why an order under section 269UD(1) should not be passed for pre-emptive purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hills, Hyderabad, in respect of which Form No. 37-I was filed by one Shri Prannath Talwar proposing to sell the land to one R. S. Raju and the rate comes to Rs. 4,927 per sq. yd and the agreement was executed on April 25, 1996, whereas the agreement in the present case is dated May 27, 1996. (iii) Similarly, one G. K. Raju proposed to sell a residential property with building at Plot No. 1363, road No. 45, Jubilee Hills, Hyderabad, to one Mrs. Anuradha Jayant Sridhaya. This agreement was dated June 7, 1994, but the rate per sq. yard came to Rs. 2,428. (iv) HUDA made auction sales of several sites in Jubilee Hills area and the auction's minimum value per square yard came to Rs. 2,510 and the rates went up to Rs. 4,510 per sq. yard. (v) The market value guidelines fixed by the State Government show that the rate in Road No. 58, Jubilee Hills area is Rs. 2,500 per sq. yard. To the above show-cause notice the first and the second petitioners filed their reply which is as follows : 1. That Smt. K. Sarala Reddy is a non-resident Indian residing in USA. 2. That the agreement of sale dated May 27, 1996, for the sale of the property bearing Plot No. 1143, D. No. 8-2-293/82/A/11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 where the sale price of the property is lower than the price at which the disputed property is sold to which we would refer at a later stage. The instances given by the petitioners are as follows : (a) Road No. 63 Plot No. 1254-A admeasuring 700 sq. yards was sold in April, 1996, by D. Madhavi vide registered document No. 909 of 1996 for a total consideration of Rs. 9,10,000, thus working out to Rs. 1,300 per sq. yard. This plot is very close by and behind Plot No. 1250-A on Road No. 62. (b) Plot No. 1305 admeasuring 750 sq. yards in Road No. 65 sold in April, 1996, by Mrs. Saroja Rao for a consideration of Rs. 17,00,000 thus working out to Rs. 2,266 per sq. yard. Road No. 65 is a sub-road to Road No. 62. (c) Plot No. 1252 admeasuring 747.5 sq. yds on Road No. 65 sold by Mrs. Snehalata vide document No. 1420 of 1996 in May, 1996 for a total consideration of Rs. 10,67,000 thus working out to Rs. 1,428 per sq. yard. (d) Plot No. 1187 admeasuring 1104 sq. yards on Road No. 45 was sold in January 1996, by one Mr. Syed Asif for a total consideration of Rs. 18,50,000 thus working out to Rs. 1,676 per sq. yard under a registered document No. 175 of 1996. (e) Plot No. 1127 on R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paragraph as it is in toto : "The transferor/transferee have claimed that there is another instance of sale of Plot No. 1127 which is on Road No. 58, it is seen that the said property has a plinth area of 984 sq. yds which was sold by Mrs. Sucharitha Reddy and Mr. G. V. Mohan Reddy to Sri. G. Girish V. Reddy (File No. AA/Hyd/11(26) 02/94-95) for a consideration of Rs. 30 lakhs. The date of agreement was November 29, 1994. As per the engineering report the land rate comes to Rs. 849 per sq. yd. The contention of the transferor/transferee cannot be accepted because the date of agreement of this sale was November 29, 1994, whereas the date of agreement in the present transaction is May 27, 1996. Thus, there is a wide time gap between these transactions by more than one year and six months. During this period, there has been a sharp price rise in the market value of the properties in Jubilee Hills. The rate prevailed as on November 29, 1994, cannot be compared with the rate prevailing as on May 27, 1996. Moreover, the transferor in this case is an NRI. Therefore, this case cannot be compared with the case which is under consideration". (emphasis supplied) From the narration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the provisions of the said Chapter apply, there is significant undervaluation of the property concerned, namely, of 15 per cent. or more. If the appropriate authority concerned is satisfied that, in an agreement to sell immovable property in such areas as set out earlier, the apparent consideration shown in the agreement for sale is less than the fair market value by 15 per cent. or more, it may draw a presumption that this undervaluation has been done with a view to evade tax. Of course, such a presumption is rebuttable and the intended seller or purchaser can lead evidence to rebut such a presumption. Moreover, an order for compulsory purchase of immovable property under the provisions of section 269UD requires 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. The conclusion 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 evade tax finds support from the decision of this court in the case of K. P. Varghes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e." The learned judges also pointed out the necessity for giving reasons before an order of pre-emptive purchase is made. In other words, from the above it is clear that before pre-emptive purchase is made under Chapter XX-C it is necessary that principles of natural justice should be complied with. In the present case, it has been complied with. Therefore, there cannot be any complaint on that ground. According to the Supreme Court, Chapter XX-C only refers to whether there is 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. If there is undervaluation of the property to the extent of 15 per cent. or more as evidenced by the apparent consideration being lower than the fair market value by 15 per cent. or more, the Revenue is entitled to draw a presumption of an attempt to evade tax which is a rebuttable presumption. In order to rebut the presumption, it is necessary that the petitioners should be given a reasonable opportunity of hearing. Therefore, we have to see whether in mentioning Rs. 36 lakhs as considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transferor is also a non-resident Indian treating it as a comparable sale for the purpose of ascertaining the fair market value and determine the apparent consideration as lower than 15 per cent. of the fair market value. The appropriate authority is adopting inconsistent stands. He is adopting double standards for the purpose of determining the fair market value and apparent consideration. Therefore, the transaction in road No. 62 is not relevant and cannot be taken as the basis for the purpose of ascertaining the fair market value and for the purpose of determining the apparent consideration being lower than the fair market value by 15 per cent. of the disputed property. If the transaction in road No. 62 is excluded, the other transaction relied upon by the appropriate authority is the sale of property in road No. 45. There is no evidence as to the distance between the property in road No. 45 and the property in road No. 58, namely, the disputed property. According to the map furnished along with the material papers, it appears, that the distance would be 2 kms if not more than 2 kms. Apart from that plot No. 1369 in road No. 45 is on the main road, whereas the disputed land i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued by the Government. As on the date when the agreement of sale was executed, namely, on May 27, 1996, the Government itself fixed the guidelines rate at Rs. 1,230 per sq. yard and, therefore, the petitioners have taken into account the market value fixed by the Government as on the date of the agreement of sale, as they could not have imagined that it would be increased at a later date and adopted such increased value. In addition the Government engineer himself assessed the value of the property at Rs. 1,592 per sq. yard. We have already pointed out that the Supreme Court in C. B. Gautam v. Union of India [1993] 199 ITR 530 held that if the appropriate authority is satisfied that, in an agreement to sell immovable property in such areas as set out earlier the apparent consideration shown in the agreement for sale is less than the fair market value by 15 per cent. or more, it may draw a presumption that this undervaluation has been done with a view to evade the tax. For drawing such a presumption the appropriate authority should be satisfied on the basis of the material before it that the apparent consideration shown in the agreement of sale is less than the fair market value ..... X X X X Extracts X X X X X X X X Extracts X X X X
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