Natural justice requires notice and hearing for tenants and transferees before pre-emptive purchase orders under tax law.

Chapter XX-C pre-emptive purchase orders under section 269UD require a pre-decisional opportunity to show cause in accordance with natural justice. Persons in occupation and others with an interest in the property, including tenants and transferees, are persons interested in the acquisition proceeding and are entitled to notice and a hearing before an order is made. Acceptance of consideration by the owner does not extinguish their independent right to be heard, and observations relating to completed transactions do not control pending cases. On that basis, the impugned pre-emptive purchase orders were liable to be set aside.

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Issues: Whether tenants and transferees were entitled to notice and an opportunity of hearing before the Appropriate Authority passed pre-emptive purchase orders under section 269UD(1) of the Income-tax Act, 1961, and whether the impugned orders were liable to be set aside for want of such notice.

Analysis: The statutory scheme in Chapter XX-C was construed in light of the principles of natural justice. The Court relied on the binding effect of prior Supreme Court authority holding that a pre-purchase order under section 269UD requires a pre-decisional opportunity to show cause. It further applied the principle that persons in occupation and other persons having an interest in the property are persons interested in the acquisition proceeding, and therefore are entitled to be heard. The Court rejected the contention that acceptance of consideration by the owner extinguished the independent right of tenants and transferees to receive notice and make representations, and held that the observations concerning completed transactions did not govern pending cases.

Conclusion: Tenants and transferees were entitled to notice and hearing before the pre-emptive purchase orders were made, and the impugned orders were liable to be set aside.

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