1994 (7) TMI 25 - HC - Income Tax

Court quashes purchase orders, cases remitted for review. Intending purchasers must provide guarantees and pay interest.

The court quashed the pre-emptive purchase orders dated December 9, 1986, in both Writ Appeal No. 215 of 1994 and Writ Appeal No. 216 of 1994. The cases ... Appropriate Authority, Immovable Property By Central Government, Movable Property, Writ Petition Issues Involved:1. Validity of the pre-emptive purchase order under Section 269UD(1) of the Income-tax Act, 1961.2. Applicability of the principles laid down in the Supreme Court judgment in C. B. Gautam v. Union of India [1993] 199 ITR 530.3. Impact of the court's interim orders on the validity of possession and payment of consideration.4. Directions to be issued following the quashing of the pre-emptive purchase order.Issue-wise Detailed Analysis:1. Validity of the Pre-emptive Purchase Order:The case revolves around the pre-emptive purchase order dated December 9, 1986, under Section 269UD(1) of the Income-tax Act, 1961. The petitioner firm had agreed to purchase a property for Rs. 16,25,000 and paid an advance of Rs. 25,000. The appropriate authority chose to make a pre-emptive purchase of the property, which was challenged by the petitioner in Writ Petition No. 14089 of 1986. The learned single judge dismissed the writ petition, leading to the present appeal.2. Applicability of the Principles Laid Down in Gautam's Case:The core issue is whether the principles laid down in C. B. Gautam v. Union of India [1993] 199 ITR 530 (SC) apply to this case. The Supreme Court in Gautam's case clarified that completed transactions, where possession has been taken and compensation paid without protest, would not be invalidated. The appellant argued that the pre-emptive purchase order was challenged immediately, and subsequent possession and payment were pursuant to court orders, not voluntary actions. Therefore, the case should not fall within the Gautam clarification.3. Impact of the Court's Interim Orders:The court's interim orders played a significant role. Initially, an interim stay was granted on December 23, 1986, restraining dispossession and modification on January 23, 1987, ensuring no change in property status during the writ proceedings. The Division Bench later directed the Central Government to pay Rs. 16,00,000 to the Punjab and Sind Bank on behalf of the vendors, emphasizing the vendors' growing liability. The court clarified that these payments were subject to the writ petition's outcome and should not be construed as voluntary actions by the vendors.4. Directions Following the Quashing of the Pre-emptive Purchase Order:The court concluded that the principles in Gautam's case do not apply here, as the possession and payment occurred under court orders and were not voluntary. Consequently, the pre-emptive purchase order dated December 9, 1986, was quashed. The matter was remitted to the appropriate authority for fresh consideration in light of Gautam's principles. The intending purchaser must furnish a bank guarantee of Rs. 16 lakhs and pay interest at 12% per annum from February 1988 until the order date if the sale is permitted. If the pre-emptive purchase is upheld, the bank guarantee will be canceled, and Rs. 25,000 will be refunded to the intending purchaser.Writ Appeal No. 216 of 1994:This appeal, heard alongside Writ Appeal No. 215 of 1994, follows the same judgment. The pre-emptive purchase order dated December 9, 1986, was quashed, and the case was remitted for fresh consideration. The appellant must furnish a bank guarantee of Rs. 14,25,000 and pay interest at 12% per annum from February 9, 1987, until the order date if the sale is permitted. If the pre-emptive purchase is upheld, the bank guarantee will be canceled.Conclusion:The court allowed both writ appeals, quashed the pre-emptive purchase orders, and remitted the cases to the appropriate authority for fresh consideration. The intending purchasers were directed to furnish bank guarantees and pay interest if the sales were permitted, ensuring compliance with the principles laid down in Gautam's case.