Natural justice in pre-emptive purchase proceedings requires disclosure of material and reasons before compulsory acquisition.

Chapter XX-C requires a real and effective opportunity to contest a proposed pre-emptive purchase, so a show-cause notice must disclose the material and reasons supporting the tentative view of undervaluation. A cryptic notice that withholds both deprives the transferor and transferee of a meaningful chance to answer the case and is inconsistent with natural justice and fair hearing. Where the compulsory purchase order under section 269UD rests on such a defective notice, the order cannot stand and is unsustainable.

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Issues: Whether a show-cause notice issued under Chapter XX-C of the Income-tax Act, 1961, which does not disclose the material and reasons forming the tentative conclusion of undervaluation, is defective and whether the ensuing order for compulsory purchase under section 269UD is liable to be set aside.

Analysis: The statutory scheme of Chapter XX-C contemplates a real and effective opportunity to contest a proposed pre-emptive purchase. Where the appropriate authority reaches only a tentative or prima facie conclusion that the property is significantly undervalued, the basis of that conclusion must be disclosed so that the transferor and transferee can meet the case against them. A cryptic notice that withholds both the material relied upon and the reasons for the tentative view denies a meaningful opportunity of showing cause and is inconsistent with the principles of natural justice and the requirement of fair hearing read into the provision. An order made on the foundation of such a defective notice cannot stand.

Conclusion: The show-cause notice was defective for non-disclosure of the material and reasons for the tentative finding of undervaluation, and the compulsory purchase order based on it was unsustainable.

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