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Issues: (i) whether the transferee was denied the statutory reasonable opportunity of hearing before the compulsory purchase order under Chapter XX-C was made; (ii) whether the compulsory purchase order was sustainable on merits on the basis of the relied-upon comparable sale instance and valuation.
Issue (i): whether the transferee was denied the statutory reasonable opportunity of hearing before the compulsory purchase order under Chapter XX-C was made.
Analysis: The statutory scheme required the appropriate authority to give a reasonable opportunity of being heard to the transferor, transferee and other interested persons before making an order under section 269UD(1). The record showed that service on the transferee was not established by direct proof and the authority proceeded on presumptions drawn from service on the transferor and an order-sheet entry said to show representation by persons whose connection with the transferee was not proved. The transferor's reply had also specifically informed the authority that the transferee had not appeared to have received notice, yet no effective opportunity was ensured to the transferee before the order was made.
Conclusion: The statutory hearing requirement was not complied with, and the finding is in favour of the assessee.
Issue (ii): whether the compulsory purchase order was sustainable on merits on the basis of the relied-upon comparable sale instance and valuation.
Analysis: The authority could exercise pre-emptive purchase only where there was significant undervaluation with a tax-evasion nexus, and the fair market value had to be determined on relevant and comparable material. The sale instance relied upon was materially dissimilar, because it related to a different locality and a sale transaction, while the property under consideration was a leasehold transaction connected with an industrial undertaking and the alleged comparable transaction had not even gone through. On these facts, the valuation foundation for compulsory purchase was unsustainable.
Conclusion: The order was not justified on merits, and the finding is in favour of the assessee.
Final Conclusion: The compulsory purchase order could not be sustained either for breach of the statutory hearing requirement or on the merits of valuation, and the writ petition succeeded.
Ratio Decidendi: A compulsory purchase under Chapter XX-C can stand only if the transferee is afforded the statutory reasonable opportunity of hearing and the authority reaches a reasoned conclusion of significant undervaluation on genuinely comparable material.
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