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Issues: Whether the order for pre-emptive purchase under Chapter XX-C of the Income-tax Act, 1961 was sustainable when the Appropriate Authority had not determined the fair market value of the property on the date of the agreement and had proceeded on assumptions and inadequate reasons.
Analysis: The statutory scheme for pre-emptive purchase requires an objective decision based on relevant material and reasons that disclose why the apparent consideration is understated by the prescribed margin. The reasons recorded must show determination of the fair market value in the light of the attending circumstances, and the conclusion cannot rest on conjectures or assumptions as to construction cost, profit, or valuation. The order under challenge did not record a finding of the market value of the property on the relevant date and instead proceeded on assumed figures and estimates. In the absence of such a determination, the statutory basis for invoking compulsory purchase was not established.
Conclusion: The order under section 269UD(1) could not be sustained and was liable to be quashed.
Final Conclusion: The petition succeeded, the pre-emptive purchase order was set aside, and the respondents were required to issue the no objection certificate.
Ratio Decidendi: An order of pre-emptive purchase under Chapter XX-C must be supported by a reasoned determination of fair market value on the relevant date; in the absence of such determination, the order is unsustainable.
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