Pre-emptive purchase under Chapter XX-C requires reasoned valuation and comparable sales analysis before invoking compulsory acquisition.

Pre-emptive purchase under Chapter XX-C is valid only where the appropriate authority, on evidence and with reasons, finds apparent consideration to be at least 15 per cent below fair market value. Where sale instances are relied upon, all materially relevant comparable sales and the property's special features must be examined and reasoned upon. The commentary states that failure to evaluate nearer comparable instances, to determine a definite fair market value, and to show undervaluation of the statutory threshold renders the purchase order arbitrary and illegal.

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Issues: Whether the order for pre-emptive purchase under section 269UD(1) of the Income-tax Act, 1961 was valid when the appropriate authority did not determine the fair market value on a reasoned comparison of all relevant sale instances and did not adequately consider the sale instances and special features relied upon by the transferor.

Analysis: The statutory scheme under Chapter XX-C permits compulsory purchase only where the apparent consideration is found to be lower than the fair market value by 15 per cent. or more, giving rise to a rebuttable presumption of tax evasion. The determination must be based on evidence, not conjecture, and the parties affected must receive a real opportunity to show cause. Where comparable sale instances are relied upon, every materially relevant instance furnished by either side must be examined on its own merits, with reasons recorded for accepting or rejecting comparability. In the present case, the authority relied on older sale instances but did not fairly assess the nearer instances produced by the petitioner, nor did it properly evaluate the property's plus and minus factors. No definite fair market value was determined, and even on the authority's own figures the apparent consideration did not show undervaluation of 15 per cent. or more.

Conclusion: The order under section 269UD(1) was arbitrary and illegal and could not be sustained.

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