Court quashes order under Income-tax Act, directs issuance of "No objection certificate"

The court quashed the order under section 269UD(1) of the Income-tax Act, 1961, due to inappropriate valuation methods and breach of natural justice principles. It directed the appropriate authority to issue a "No objection certificate" within four weeks, upholding the petitioner's right to acquire the property. No costs were awarded.

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Issues Involved:
1. Quashing of the order under section 269UD(1) of the Income-tax Act, 1961.
2. Granting of "No objection certificate" for the purchase of two flats.
3. Alleged undervaluation of the property.
4. Compliance with principles of natural justice.
5. Judicial review under Article 226 of the Constitution of India.

Detailed Analysis:

1. Quashing of the order under section 269UD(1) of the Income-tax Act, 1961:
The petitioner, the intended vendee, sought the quashing of the order dated January 28, 1993, passed by the appropriate authority under section 269UD(1) of the Income-tax Act, 1961. The Central Government exercised its option to purchase the property at Rs. 50 lakhs, deeming the apparent consideration in the sale agreement significantly understated.

2. Granting of "No objection certificate" for the purchase of two flats:
The petitioner also sought a consequential relief for the issuance of a "No objection certificate" to purchase the two flats located at "Sun Flower Court," Calcutta. The court directed the appropriate authority to issue the "No objection certificate" within four weeks from the date of communication of the order to render complete justice.

3. Alleged undervaluation of the property:
The appropriate authority's decision was based on the valuation reports and comparable sale instances, concluding that the apparent consideration was understated by 23.3%. The petitioner contended that the comparable properties used were not appropriate as they were located in a commercial complex and at a more advantageous location. The court found that the appropriate authority had relied on sale instances from commercial areas, which were not comparable to the residential property in question. The court also noted arithmetical mistakes in the valuation and concluded that a reasonable prudent person could not have determined an understatement based on the provided instances.

4. Compliance with principles of natural justice:
The petitioner argued that the valuation basis was not disclosed, violating the principles of natural justice. The court agreed, noting that the appropriate authority introduced new materials such as the age of the building and the rate of inflation without providing the petitioner an opportunity to rebut these. The court held that the appropriate authority substantially breached the principles of natural justice by not disclosing the methods and materials used for valuation.

5. Judicial review under Article 226 of the Constitution of India:
The court acknowledged its limited power of judicial review under Article 226, stating it cannot reappraise evidence like an appellate court. However, it can interfere if a decision is manifestly absurd or taken without considering appropriate materials. The court referred to several precedents to support its position, including the Supreme Court's decision in C.B. Gautam v. Union of India, which emphasized the need for notice and hearing in such cases. The court found that the appropriate authority's decision was not based on reasonable grounds and set it aside, directing the issuance of the "No objection certificate."

Conclusion:
The court quashed the impugned order under section 269UD(1) of the Income-tax Act, 1961, due to the inappropriate valuation methods and breach of natural justice principles. It directed the appropriate authority to issue a "No objection certificate" within four weeks, ensuring the petitioner's right to acquire the property was upheld. No order as to costs was made.

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