Pre-emptive purchase notice must disclose grounds and material relied on; a vague notice under Chapter XX-C is invalid.

A show-cause notice issued under section 269UD had to disclose the grounds for the proposed pre-emptive purchase, the material relied upon, and any prima facie view of undervaluation so the transferor and transferee could meaningfully meet the case against them. A bare direction to reply to proposed action under Chapter XX-C was insufficient because it did not tell the affected parties what they had to answer or allow them to controvert the basis of the proposed acquisition. On that reasoning, the notice was held vague and invalid, and the order passed under section 269UD(1) could not be sustained.

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Issues: Whether the show-cause notice issued under section 269UD of the Income-tax Act, 1961 was invalid for vagueness and denial of a reasonable opportunity to the transferor and transferee before initiating pre-emptive purchase proceedings.

Analysis: The notice merely required a reply to the proposed action under Chapter XX-C and did not disclose the grounds on which the competent authority proposed to purchase the property, the material relied upon, or any prima facie conclusion of undervaluation. A notice of this kind is not an empty formality; it must inform the affected persons of the case they have to meet so that they may correct or controvert the material and show that the apparent consideration reflects the market value. In the absence of such disclosure, the persons concerned are left unaware of the basis of the proposed action and are effectively denied a fair opportunity to object.

Conclusion: The show-cause notice was vague and invalid, and the impugned order passed under section 269UD(1) could not be sustained.

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