Compulsory purchase notices under tax law fail for vagueness when they omit the basis of alleged undervaluation and evasion.

Show cause notices for compulsory purchase under Chapter XX-C were invalid because they did not disclose the reasons or material supporting the tentative view that the transaction was undervalued or intended to evade tax. The Bombay HC held that such bare notices failed to give fair notice and breached natural justice, especially since they were identical to notices already quashed in binding precedent later affirmed by the Supreme Court. As the notices were vitiated for vagueness and non-disclosure of the basis for the prima facie conclusion, the consequential order under section 269UD(1) also could not stand and was invalid.

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Issues: Whether the show cause notices issued for compulsory purchase under Chapter XX-C of the Income-tax Act, 1961 were vague and invalid for failure to disclose the basis of the tentative conclusion of undervaluation and tax evasion, and whether the consequent order under section 269UD(1) could stand.

Analysis: The notices did not disclose the reasons or material on which the Appropriate Authority formed its prima facie view that the transaction was undervalued or intended to evade tax. The notices were identical to those earlier held invalid and quashed in prior binding precedent, later affirmed by the Supreme Court. On that footing, the notices suffered from the same defect and could not satisfy the requirement of fair notice before compulsory purchase proceedings.

Conclusion: The show cause notices and the consequential order under section 269UD(1) were invalid, bad in law, and vitiated for breach of the principles of natural justice.

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