Pre-emptive purchase valuation failed where the comparable sale property was materially different and undervaluation was not proved.

Pre-emptive purchase under section 269UD(1) was examined against the comparability of the Sale Instance Property and the Property Under Consideration, and the appropriate authority's reliance on a distant, differently regulated plot was found unsound. The Bombay High Court held that material differences in location, municipal limits, access, and amenity requirements made the sale instance unreliable for valuation. It also found that the alleged undervaluation did not cross the 15% benchmark on the departmental working, and criticised the method of adjusting advantages and disadvantages inconsistently. On that basis, the impugned purchase order was quashed and the petition was allowed.

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Issues: Whether the pre-emptive purchase order could be sustained on the basis of the sale instance relied upon by the Appropriate Authority and the finding of undervaluation exceeding 15 per cent.

Analysis: The governing principle under Chapter XX-C was that pre-emptive purchase could be invoked only where the apparent consideration was shown to be less than fair market value by 15 per cent or more, so as to justify the statutory presumption of tax evasion. For determining fair market value, the sale instance had to be genuinely comparable on locality, characteristics, and attendant restrictions. The properties relied upon here were materially different in distance, location, municipal limits, development conditions, road access, amenity requirements, and surrounding development. In those circumstances, the sale instance could not safely be used as a comparable, and the Authority was not justified in making mathematical adjustments by adding or subtracting advantages and disadvantages of dissimilar properties. The attempted computation also did not satisfactorily establish undervaluation beyond the statutory threshold.

Conclusion: The pre-emptive purchase order was unsustainable and was quashed, with the result that the petitioners succeeded.

Ratio Decidendi: A pre-emptive purchase under Chapter XX-C cannot rest on a non-comparable sale instance, and undervaluation for invoking the statutory presumption must be established on the basis of genuinely comparable properties and their fair market value.

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