Pre-emptive purchase under Chapter XX-C sustained where valuation, comparables and prima facie undervaluation were adequately supported.

Chapter XX-C pre-emptive purchase could be sustained where alleged encumbrances and pending disputes were only inter se the transferors and transferee and did not amount to third-party claims affecting fair market value. Loss of original title deeds was treated as immaterial on the facts because the authority knew of the loss, issued public notice, and no adverse claim emerged. A sale instance may be used as a comparable after adjustments for time gap and FAR, and location differences do not necessarily discredit valuation. The provision does not require a conclusive finding of actual understatement before action; a prima facie inference of undervaluation, coupled with a fair opportunity to rebut, is sufficient.

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Issues: Whether the order of pre-emptive purchase under Chapter XX-C of the Income-tax Act, 1961 was invalid for failure to account for encumbrances, pending disputes, absence of original title deeds, alleged non-comparability of the sale instance, and for not recording a definite finding of understatement of consideration.

Analysis: The Court held that the disputes relied upon by the petitioner were only between the transferors and the transferee and did not involve third-party claims, so they did not depress the fair market value of the property. The absence of the original title deeds was also held to be immaterial on the facts, as the authority was aware of the loss and no adverse claim surfaced after public notice. The sale instance at Hanuman Road was treated as a valid comparable after adjustments for time gap and FAR, and the location differences were found insufficient to discredit the valuation. The Court further held that Chapter XX-C did not require a conclusive finding of actual under-the-table understatement before action could be taken; it was sufficient that the authority indicated circumstances giving rise to a prima facie inference of undervaluation and afforded a fair opportunity to rebut it.

Conclusion: The pre-emptive purchase order was upheld and the challenge failed.

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