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TMI Blog2022 (5) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... . On this ground alone, the impugned order is liable to be quashed and set aside. In our view, the view taken by the Appropriate Authority is palpably erroneous and cannot stand to the scrutiny of law even on merits. Therefore, to recap, the Valuation Officer has noted on 22nd April 1991 and the Deputy Commissioner of Income Tax (A.A.) has noted on 24th April 1991 that the said property was not undervalued. The Appropriate Authority (respondent no.2) has not stated in its reasons recorded in 1991 why they did not accept these two reports. The Appropriate Authority (respondent no.2) has not stated anywhere why it was not accepting the three comparables mentioned by VO. The Appropriate Authority (respondent no.2) has not given the basis for comparing Sea Face Park and Navroze Apartment with the said property, when those two properties were farther away than the three properties used by VO to compare Valuation of Navroze Apartment used in the first order dated 29th April 1991 by the Appropriate Authority (respondent no.2) was only about 9% more compared to the said property. The mathematical calculations by adding and subtracting advantages and disadvantages to arrive at a conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ER K.R. SHRIRAM, J.): 1. Petitioner is a company registered under the Companies Act, 1956. Petitioner, by an agreement dated 18th February 1991, agreed to purchase from respondent nos.3 and 4 an apartment being Flat No.72 along with two covered car parking situated at a building called Summer Ville, Bhulabhai Desai Road, Mumbai - 400 026 admeasuring about 1758 sq. ft. along with 5 shares of Rs.50/- each bearing distinctive nos.66 to 70 under Certificate No.14 issued by New Summer Ville Premises Co-op. Housing Society Limited (the said property). The total consideration agreed was Rs.63,00,000/-, i.e., at the rate of about Rs.3,399/- per sq. ft. 2. Petitioner and respondent nos.3 and 4 filed a statement in Form 37-I alongwith copies of the agreement dated 18th February 1991 (the said agreement) for transfer of the said property. In the said form, the consideration for the said property was shown as Rs.63,00,000/-. 3. By an order dated 29th April 1991 passed under Section 269UD(1) of the Income Tax Act, 1961 (the Act), the Appropriate Authority decided to acquire the said property. The said order dated 29th April 1991 (1st Order) was challenged by petitioner in this Court by filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- and why an order should not be made in accordance with the provisions of Section 269UD (1) of the Act. Petitioner replied to the show cause notice by its Advocate's letter dated 9th January 2009 and tendered the same during the personal hearing on 9th January 2009. At the same time, respondent no.2 passed the impugned order dated 9th January 2009 (the third order) for acquisition of the said property. This order is impugned in this petition. Therefore, this is the third round of litigation in this Court. 7. Mr. Dada submitted as under: (a) respondent no.2 failed to comply with the Court's directions issued vide its order dated 21st October 2008 in the second petition, being Writ Petition No.614 of 1993, by not indicating the fair market value in the Show Cause Notice dated 19th December 2008 and tried to correct the non-compliance by issuing a supplementary notice dated 7th January 2009; (b) notice dated 19th December 2008 issued by respondent no.2 does not indicate as to why the sale rate in the said agreement dated 18th February 1991 is found to be lower; (c) in the notice dated 19th December 2008, non-comparable sale instances of two properties have been cited by resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a view to evade tax. As held by this Court in Mrs. Amarjit Thapar V/s. S.K. Laul (2007) 298 ITR 336 (Bom.), failure to specify that undervaluation was intended to evade tax and refusal to consider the comparable sale instances submitted by the affected party, the stand of respondents is vitiated; (l) unless the difference in the apparent effective consideration and the market value is more than 15%, the Appropriate Authority cannot assume jurisdiction under Section 269UD of the Act. The same does not also mean that the mere fact that such difference is more than 15% will, automatically, lead to the conclusion that there has been undervaluation of property with the motive of evading tax; (m) the right of pre-emptive purchase under Section 269UD of the Act is not a right of pre-emption simpliciter but is a right which can be exercised only in the cases where there is significant undervaluation in agreement of sale with a view to evade tax and the onus of establishing that undervaluation is with a view to evade tax is on the Revenue; (n) even though in C.B. Gautam (Supra), it is stated that the pre-emptive purchase has to be resorted to only if the fair market value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the last personal hearing. In fact, this Court had, by its order dated 8th April 2022, called upon respondents to produce its file and also produce the reasons which have been separately recorded as noted in its order dated 29th April 1991 which was never provided earlier. Those reasons were provided to this Court based on our directions. We will deal with those reasons separately. We have also to note that during the hearing, Mr. Sharma stated that the noting was made by the Executive Engineer who is from the Central Public Work Department on deputation to the Income Tax Department. He assists and values the property of the Appropriate Authority. Therefore, to say that he has no authority is not logical and if he had no authority, we fail to understand why he was asked to inspect the property and permitted to make notes for the official records. In the noting, it is written "VO's recommendation" and VO is, we were informed, Valuation Officer. He has recommended on 22nd April 1991 that the declared value is reasonable. The file thereafter was put up by him to his superior officer, who Mr. Sharma states was the Deputy Commissioner of Income Tax (A.A.). He has also recorded a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and note dated 24th April 1991 of Deputy Commissioner of Income Tax (A.A.). As noted earlier, both these persons have recorded that the declared value was not understated. The said reasons, however, does not mention why the opinion of these two persons have not been accepted. In the said reasons, the Appropriate Authority relies upon two other transactions of sale which from the documents filed are not close to the said property are not comparable. Petitioner has filed in the petition google search location printouts. In fact, the three comparable given by the Valuation Officer are closer and comparable to the said property. We should mention here that in the said reasons recorded, there are no addition and subtraction of various advantages and disadvantages to the two properties which respondent no.2 has used as comparable. The second property, i.e., Navroze Apartment, the rate is shown as Rs.3,741/- per sq. ft. whereas, the rate for the said property was Rs.3,399/- per sq. ft. In our view, since the difference was only about 9%, respondent no.2 for reasons which are obvious, has in its supplementary show cause notice dated 7th January 2009 read with statement of valuation annexed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nything as has been done in this case or without specifying the grounds for holding that the property is required to be purchased under Section 269UD of the Act, then it can be held that reasonable opportunity of showing cause has not been given. The transferor and transferee would be totally unaware of the grounds which had prompted the appropriate authority to arrive at prime facie conclusion that the power under Section 269UD(1) of the Act was required to be exercised and the property should be compulsorily purchased. xxxxxxxxxxxxxxxxxxxxxxx 13. We have to also note that as held by the Apex Court in C.B. Gautam (Supra), even the limit of 15% prescribed cannot be mechanically applied and the reasonable margin for probable error has to be considered. This Court in Mrs. Amarjit Thapar (Supra) has held that the order of the Appropriate Authority was invalid and void ab initio as there is no positive finding that there was an attempt to evade tax. It will be useful to reproduce the following portions from Mrs. Amarjit Thapar (Supra), which read as under: 33. Where the Appropriate Authority has failed to clearly determine the fair market value and to specify that undervaluation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew to evade tax. In the impugned order, it is only stated that the transaction under consideration was proposed to take place at a rate lower than the fair market value by more than 15% considering the fair market value determined by the Appropriate Authority. On this ground alone, the impugned order is liable to be quashed and set aside. In our view, the view taken by the Appropriate Authority is palpably erroneous and cannot stand to the scrutiny of law even on merits. 15. Therefore, to recap, the Valuation Officer has noted on 22nd April 1991 and the Deputy Commissioner of Income Tax (A.A.) has noted on 24th April 1991 that the said property was not undervalued. The Appropriate Authority (respondent no.2) has not stated in its reasons recorded in 1991 why they did not accept these two reports. The Appropriate Authority (respondent no.2) has not stated anywhere why it was not accepting the three comparables mentioned by VO. The Appropriate Authority (respondent no.2) has not given the basis for comparing "Sea Face Park" and "Navroze Apartment" with the said property, when those two properties were farther away than the three properties used by VO to compare. In any case, the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon at 12% p.a. shall become payable until payment / realisation. Petitioner shall pay all society charges payable at the relevant time, i.e., 1991, together with interest, if any, for getting the shares transferred in its name. 18. The Prothonotary and Senior Master shall refund to respondent nos.1 to 4 the sum of Rs.1,75,500/- deposited during the second petition together with accumulated interest, if any. This amount shall be paid provided (a) respondent nos.1 to 4 file a declaration that they are not challenging this order or judgment or (b) the SLP or petition to be filed by respondent nos.1 to 4 is dismissed or rejected. 19. From the minutes of the order dated 13th September 1991 filed in the second petition, there is a sum of Rs.1,22,589/- that would become payable to respondent nos.5 to 7 in that petition together with interest thereon at 10% per annum from 13th September 1991 until payment. Mr. Dada states that two out of the three respondents, i.e., respondent nos.5 to 7 are respondent nos.3 and 4 in this petition. They are not before us. Therefore, petitioner to deposit an amount of Rs.1,22,589/- together with interest thereon at 10% per annum from 13th September ..... X X X X Extracts X X X X X X X X Extracts X X X X
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