2008 (12) TMI 211 - HC - Income Tax

Court overturns property valuation orders, finding lack of fair opportunity for defense. No fraud intent.

The Court set aside the orders under section 269UD of the Income-tax Act, 1961, determining the fair market value of a property, as the authority failed ... Petitioners are challenging orders passed under section 269UD for purchase of immovable property by central govt. - authority has not taken into account relevant documents produced by the petitioners and care has not been taken to arrive at a reasonable market value. Even considering the fair market value arrived at by the authority, the transaction falls within the prescribed limit of 15 per cent. and, therefore, the orders are not sustainable. - The authority is directed to issue necessary certificate under section 269UL Issues:Challenge to orders under section 269UD of the Income-tax Act, 1961 - Fair market value determination - Rectification application rejection - Consideration of relevant sale instances - Opportunity to defend case - Compliance with prescribed limit of 15 percent.Analysis:1. The petitioners challenged orders under section 269UD of the Income-tax Act, 1961, specifically exhibits 'E' and 'N'. The impugned order dated July 26, 1993, determined the fair market value of a flat sold by the petitioners, concluding that the property was undervalued. The authority found the fair market value should be higher than the calculated rate, leading to potential acquisition by the Central Government under section 269UD(1) of the Act.2. The petitioners filed a rectification application citing omitted sale instances and incorrect valuation considerations. They argued that a minimum 15 percent undervaluation was necessary as per a Supreme Court decision. However, the authority rejected the rectification application, leading the petitioners to challenge both the original order and the rectification rejection in the present petition.3. The petitioners contended that the authority failed to consider relevant sale instances and did not provide a reasonable opportunity to present their case adequately. They emphasized the importance of including necessary sale instances in determining the fair market value, which the authority allegedly disregarded. The petitioners submitted documents supporting their argument, which were not appropriately addressed by the authority.4. The Court noted that the authority did not adequately consider the sale instances presented by the petitioners in determining the fair market value. The authority's valuation fell within the 15 percent limit, as per the Supreme Court precedent, indicating no ulterior motive to defraud the Revenue. Consequently, the Court found the orders at exhibits 'E' and 'N' unsustainable and set them aside, quashing the proceedings against the petitioners.5. In conclusion, the Court allowed the writ petition, making the rule absolute without any costs. The authority was directed to issue the necessary certificate under section 269UL of the Act, thereby resolving the challenge to the original order and rectification rejection under section 269UD comprehensively.