Pre-emptive purchase fails where valuation material is undisclosed and natural justice is denied in land acquisition assessment

Pre-emptive purchase under section 269UD(1) of the Income-tax Act was held unsustainable where the valuation basis was not disclosed in the notice and the affected parties were denied a fair opportunity to rebut it. The Authority relied on sale instances from another locality, treated general land appreciation as self-evident, and failed to consider material factors such as litigation, encumbrances, and development restrictions. In a proceeding with serious civil consequences, satisfaction for pre-emptive purchase must rest on objective facts and comply with natural justice. The order was quashed for unfair procedure and an unreliable valuation exercise.

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Issues: Whether the order directing pre-emptive purchase under section 269UD(1) of the Income-tax Act, 1961 was sustainable when the notice and the material relied upon did not disclose the relevant sale instances and the petitioners were not afforded a fair and effective opportunity to meet the case against them.

Analysis: The Authority relied on sale instances from a different locality and treated general appreciation in land values as self-evident, without placing the supporting material before the petitioners in the notice. The petitioners had only a short time to respond, their request to lead evidence was not considered, and the order ignored significant factors affecting valuation, including litigation, encumbrances, and restrictions on development. In a proceeding having serious civil consequences, the satisfaction for invoking pre-emptive purchase had to rest on objective facts and had to be reached consistently with the principles of natural justice.

Conclusion: The impugned order was not sustainable and was quashed. The petitioners succeeded.

Final Conclusion: The pre-emptive purchase order was set aside for failure to follow fair procedure and for reliance on an unsustainable valuation exercise.

Ratio Decidendi: An order under section 269UD(1) cannot stand unless the material relied upon is disclosed and the affected party is given a real opportunity to rebut it; pre-emptive purchase requires satisfaction based on objective facts and adherence to natural justice.

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