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Issues: Whether the order of pre-emptive purchase under Chapter XX-C was valid despite the assessees' challenge that the property was not undervalued by more than 15 per cent and that the comparable sale instance relied upon by the authority was not truly comparable.
Analysis: The statutory scheme of Chapter XX-C permits pre-emptive purchase where the apparent consideration is found, on a prima facie comparison with comparable transactions, to be significantly below fair market value, giving rise to a rebuttable presumption of tax evasion. The authority is not required to undertake a full market-valuation exercise akin to land acquisition proceedings, but must consider the materials filed in Form No. 37-I and any explanation offered by the transferor and transferee. On the facts, the authority examined the cited sale instance, found it comparable in locality and proximity, and gave reasons why the assessees' suggested instance was not comparable. The plea of distress sale also failed because the relevant particulars and supporting material were not furnished in the prescribed statement, and the explanation was not substantiated. The limited time-frame under the provision did not render the enquiry invalid.
Conclusion: The pre-emptive purchase order was upheld as a valid exercise of power under Chapter XX-C, and the challenge failed.
Ratio Decidendi: Under Chapter XX-C of the Income-tax Act, 1961, pre-emptive purchase is sustainable where the authority, on a summary enquiry, records a reasoned prima facie finding of undervaluation of at least 15 per cent on the basis of a comparable sale instance and the transferor fails to rebut the resulting presumption.
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