Court quashes biased tax order, emphasizes fair process & material provision

The court quashed the order dated February 18, 1993, issued under section 269UD(1) of the Income-tax Act, 1961, in a case involving a challenge to the order, a request for a "no objection certificate" under section 269UL(3), compensation, and an injunction against property possession. The court found the order biased and in violation of natural justice principles, emphasizing the importance of providing relevant materials and ensuring a fair process. Consequently, the court ruled in favor of the petitioners, setting aside the order and awarding costs.

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Issues involved: Challenge to order u/s 269UD(1) of the Income-tax Act, 1961, request for "no objection certificate" u/s 269UL(3), direction for compensation, injunction against property possession.

The petitioners challenged the order dated February 18, 1993, passed by the appropriate authority u/s 269UD(1) of the Income-tax Act, 1961, and sought a "no objection certificate" u/s 269UL(3). They also requested compensation for losses, an injunction against property possession, based on a transaction between close relatives requiring compliance with Chapter XX-A of the Act. The petitioners contended that the order was unjust, illegal, and invalid, emphasizing the bona fide nature of the transaction and lack of evidence of tax evasion.

The petitioners had previously filed a Writ Petition which set aside the initial order, but respondent No. 1 issued a show-cause notice in December 1992. The petitioners argued that valuation reports and crucial information were not provided, denying them a fair opportunity to respond. They highlighted that the market value of the property was not properly determined, and comparable transactions supporting their case were disregarded.

The respondents defended the order, stating that the apparent consideration was undervalued compared to the fair market value, justifying the purchase under section 269UD(1). They claimed to have followed due process and contended that the petition lacked merit. However, they could not refute allegations of a pre-determined decision and failure to provide essential materials to the petitioners.

Referring to a previous judgment, the court found the impugned order to be biased and in violation of natural justice principles. It emphasized the importance of providing relevant materials to parties and ensuring a fair process. Consequently, the court quashed the order dated February 18, 1993, ruling in favor of the petitioners and awarding costs.

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