Compulsory acquisition valuation failed where tenancy encumbrance was ignored and incomparable sale instances were used

The compulsory acquisition order under Chapter XXC was unsustainable because the appropriate authority did not properly value the tenancy encumbrance or give adequate reasons for treating the tenant-related cost as nominal. It also relied on incomparable sale instances of built-up apartments on a main road, without explaining their relevance to an interior plot with a small tenanted structure and open land. The authority further failed to address a closer sale instance relied on by the petitioners that had been assessed by the department at a lower figure. The order was therefore vitiated by non-application of mind and inadequate valuation reasoning.

---

---

Issues: Whether the order of compulsory acquisition under Chapter XXC of the Income-tax Act, 1961 was sustainable when the appropriate authority allegedly failed to properly value the tenancy encumbrance and relied on incomparable sale instances.

Analysis: The challenge turned on whether the apparent consideration was shown to be less than the fair market value by the threshold required for pre-emptive purchase. The valuation adopted by the appropriate authority treated the cost of accommodating the tenant as nominal, but the record did not show adequate reasons for that assumption despite the practical difficulty of redevelopment with the tenant in possession of the structure and open land. The sale instances relied upon were of built-up commercial or residential apartments on a main road, whereas the subject property was an interior plot with a small structure under tenancy; the order did not explain how such instances were used to determine the value of the land. The authority also failed to deal with a sale instance relied upon by the petitioners which was closer in nature and time and which had been assessed by the department at a lower figure.

Conclusion: The acquisition order was vitiated by non-application of mind and inadequate reasoning on valuation, and could not be sustained.

---