Chapter XX-C pre-emptive purchase requires clear findings on undervaluation and tax evasion; absence of satisfaction invalidates the order.

Pre-emptive purchase under Chapter XX-C could be exercised only if the authority recorded both that the apparent consideration was at least 15 per cent below fair market value and that the understatement was with a view to evade tax. A mere presumption of evasion from undervaluation was not enough; the order itself had to disclose application of mind and a clear positive finding on real consideration and tax evasion. Because the authority relied on a rebuttable presumption but did not record the mandatory satisfaction, the impugned order was invalid and was quashed.

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Issues: Whether the order for pre-emptive purchase under Chapter XX-C was valid when it did not record a positive finding that the apparent consideration was not the real consideration and that the understatement was with a view to evade tax.

Analysis: The power of pre-emptive purchase under Chapter XX-C can be exercised only when the appropriate authority reaches the twin conclusions that the apparent consideration is at least 15 per cent below fair market value and that the understatement reflects an attempt to evade tax. A presumption of tax evasion may be drawn where undervaluation is found, but the order must itself disclose application of mind and record the necessary satisfaction; the court cannot supply that finding by inference. In the present case, the authority referred to a presumption in the show-cause notice and stated that the presumption had not been rebutted, but it did not make a clear positive finding that the apparent consideration was not the real consideration or that the understatement was with a view to evade tax.

Conclusion: The impugned pre-emptive purchase order was invalid and was quashed and set aside for absence of the mandatory finding on tax evasion and real consideration.

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