Court rules preliminary objection overruled, impugned order invalid, show-cause notice illegal.

The court overruled the preliminary objection on the maintainability of the petition by intending purchasers, citing relevant case law. It found no understatement of consideration and deemed the impugned order invalid due to improper determination of data. The show-cause notice was considered illegal for lack of disclosure. The court criticized the appropriate authority for not considering comparable sale instances in determining fair market value. Gross breaches of natural justice were found, leading to the quashing of the impugned order. The petitioners were directed to pay a specified amount to the Income-tax Department.

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Issues Involved:
1. Maintainability of the petition by the intending purchasers.
2. Alleged understatement of consideration and validity of the impugned order.
3. Validity of the show-cause notice issued by the appropriate authority.
4. Determination of fair market value and consideration of comparable sale instances.
5. Compliance with principles of natural justice.

Summary:

1. Maintainability of the Petition by the Intending Purchasers:
The preliminary objection raised by the respondents contending that the petition by the intending purchasers is not maintainable was overruled. The court held that the case of Smt. Vimla Devi G. Maheshwari v. D.D. Mohindra [2004] 268 ITR 102 (Bom) was decided on its peculiar facts and does not lay down any law that intending purchasers have no locus to challenge the order of acquisition. The court referenced the Supreme Court case of C.B. Gautam v. Union of India [1993] 199 ITR 530 (SC), where the petitioner was also an intending purchaser.

2. Alleged Understatement of Consideration and Validity of the Impugned Order:
The court found no understatement of consideration. The difference in rates and market value determined by the appropriate authority was less than 15%, indicating no undervaluation. The court noted that the determination of rate by the appropriate authority at Rs. 2,044 per sq. ft. was improper and incorrect. The agreement dated October 30, 1992, was for the transfer of house with garage only, and not for any FSI. The court concluded that the impugned order was based on wrongly determined data and was bad in law.

3. Validity of the Show-Cause Notice Issued by the Appropriate Authority:
The show-cause notice dated December 17, 1992, was deemed illegal and invalid as it did not disclose the basis for the tentative conclusion of undervaluation. The court emphasized that the show-cause notice must be self-contained, containing all material facts and particulars. The court cited several judgments, including Mrs. Nirmal Laxminarayan Grover v. Appropriate Authority [1997] 223 ITR 572, which held that non-disclosure of material and denial of opportunity vitiate the order u/s 269UD(1) of the Act.

4. Determination of Fair Market Value and Consideration of Comparable Sale Instances:
The court held that the appropriate authority failed to consider the comparable sale transactions cited by the petitioners. The Supreme Court in Union of India v. Chiranji Estate P. Ltd. [2001] 251 ITR 7, and this court in Vimal Agarwal v. Appropriate Authority [1994] 210 ITR 16, emphasized that non-comparison of comparable properties is fallacious. The court concluded that the order of the appropriate authority was invalid as it did not properly determine the fair market value and ignored comparable sale instances.

5. Compliance with Principles of Natural Justice:
The court found gross breaches of the principles of natural justice. The impugned order was passed without disclosing the basis for the tentative finding of undervaluation and without providing relevant materials to the petitioners. The court cited several cases, including Musthafa Ummer v. Appropriate Authority [2002] 254 ITR 134 (Ker), where non-furnishing of documents and denial of opportunity led to the setting aside of the order of purchase. The court reiterated that the right of pre-emptive purchase u/s 269UD is not a right of pre-emption simpliciter but can be exercised only in clear cases of gross undervaluation intended to evade tax.

Conclusion:
The impugned order dated January 15, 1993, passed by the appropriate authority u/s 269UD(1) of the Income-tax Act, 1961, was quashed and set aside for being in breach of principles of natural justice and bad in law. The petitioners were directed to pay Rs. 56,13,227 to the Income-tax Department within four weeks, failing which it would carry interest at 12% per annum. The petition was allowed with no order as to costs.

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