Fair market value determination is essential for pre-emptive purchase under Chapter XXC; unsupported valuation fails.

Pre-emptive purchase under Chapter XXC of the Income-tax Act could not be sustained because the Appropriate Authority did not first determine the fair market value of the subject property on a reasoned, evidence-based basis. The statutory condition for invoking purchase was that the apparent consideration be lower by 15% or more than fair market value, and that precondition was not properly established. The authority relied on a comparable sale without allowing for material differences, including location, nature of the property, municipal limits, encumbrances, and the value of the constructed area included in the consideration. The acquisition order was therefore set aside.

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Issues: Whether the order directing pre-emptive purchase of the property under Chapter XXC of the Income-tax Act, 1961 was sustainable when the Appropriate Authority had not determined the fair market value of the property and had relied on a comparable sale without making allowances for material differences.

Analysis: Pre-emptive purchase under Chapter XXC can be ordered only where the apparent consideration is found to be lower by 15% or more than the fair market value. Determination of fair market value is therefore a condition precedent and must be based on evidence, not conjecture. The impugned order did not state the fair market value of the property. The relied-upon comparable was not identical, as the subject property was open land outside municipal limits while the cited instance was a constructed property within municipal limits. Material differences affecting value, including location, nature of the property, encumbrances, and the value of the additional constructed area forming part of the consideration, were not properly factored in.

Conclusion: The acquisition order was unsustainable and was set aside.

Final Conclusion: The petition succeeded because the statutory precondition for pre-emptive purchase was not properly established and the valuation exercise was legally deficient.

Ratio Decidendi: For an order of pre-emptive purchase under Chapter XXC to stand, the Appropriate Authority must first determine the fair market value of the subject property on a reasoned and evidence-based comparison, making due allowance for material differences between the properties compared.

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