AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
1997 (12) TMI 638
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....learned brother. I am really elated at the way in which he could put the factual matrix and the law in very sweet and esoteric language. My learned brother had been unique in this respect. I have always been admiring his gift of the gab. I derived immense solace and comfort while working with him. He provoked my thinking and prompted me to proceed on the right track which enabled me to have a hang of the matters. I am spellbound, as it were, and I am in entire agreement with all that he has said. I now proceed to express my views in the Pan Indian fashion. All law is an experiment, as all life is an experiment as stated by Justice Holmes of the United States of America. The Government of India made an experiment by introducing Chapter XX-C in the Income-tax Act, 1961, with effect from 1986, but the Supreme Court in Gautam (C. B.) v. Union of India [1993] 199 ITR 530 held that no doubt the Government could make an experiment but within the parameters of the Constitution. Apparently, keeping in mind the principles that there should not be unending conflict or strife or competition between the Government and the citizens in the field of taxation, the Supreme Court laid down the law....
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....en truly stated in the instrument of transfer, the competent authority may initiate proceedings for the acquisition of such property. Under the proposed amendment, it is provided that no such proceedings shall be initiated in respect of properties transferred after the 30th September, 1986. This amendment will take effect from 1st October, 1986." Clause 34 reads as under (see [1986] 158 ITR (St.) 96 ) : "Clause 34 seeks to insert a new Chapter XX-C in the Income-tax Act, 1961, enabling the Central Government to purchase immovable properties in certain cases of transfer. This Chapter contains 16 sections from section 269U to section 269UO. The provisions of the new Chapter will come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different areas. There are no other objection petitions and the Bill was adopted and became an Act." Parliament thought by enacting a law and leaving the entire implementation to the Income-tax Department it could achieve the purpose of getting more re....
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....he days of magna carta. It is also well settled that the law would coincide with reason lex semper intendit quod convenit rationi-The law always intends what coincides with reason. Parliament did not direct the Government to frame any rules for the purpose of implementing the provisions and rested content with the provisions made in the Chapter leaving it to the Department to take decisions in accordance with the well settled principles in this arena. Parliament is presumed to know the well established principles adumbrated by the Supreme Court of United States of America in Yick Wo v. Hopkins [1886] 118 US 356, wherein the court laid down : "Though the law itself be fair on its face and impartial in appearance, yet, if it is applied and administered by public authority with an evil eye and an unequal hand, so as practically to make unjust and illegal discriminations between persons in similar circumstances, material to their rights, the denial of equal justice is still within the prohibition of the Constitution. This principle of interpretation has been sanctioned by this court in Henderson v. Mayor, etc. ....
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....he quality that institutions had longed for in colonial days. The courts were also idealistic because as guardians of the constitutions they established the expression of a new law created by institutions for institutions." Consistent with this theory, in Garg (R. K.) v. Union of India [1982] 133 ITR 239, the Supreme Court held (page 255) : ". . . laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or straitjacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the Legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in ....
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....ing the power of judicial review, the courts cannot be oblivious of the practical needs of the Government. The door has to be left open for trial and error. Constitutional law like other mortal contrivances has to take some chances. Opportunity must be allowed for vindicating reasonable belief by experience". The Supreme Court laid down the principle in State of Rajasthan v. Union of India [1977] AIR 1977 SC 1361, 1410 ; [1978] 1 SCR 1 : "It must be remembered that merely because power may some time be abused, it is no ground for denying the existence of power. The wisdom of man has not yet been able to conceive of a Government with power sufficient to answer all its legitimate needs and at the same time incapable of mischief." In the light of these principles, the Supreme Court in C. B. Gautam's case [1993] 199 ITR 530, held rejecting the challenge on the constitutional validity of the Chapter (page 551). "In these circumstances, in our opinion, it cannot be said that the provisions of the said Chapter conferred an unfettered discretion on the appropriate authorities to order the purchase by the Central Government of immovable properties agreed to be sold and hence they cann....
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....tion of the immovable property to be sold in the agreement of sale with a view to evade tax finds support from the decision of this court in the case of K. P. Varghese v. ITO [1981] 131 ITR 597. Section 52 in the Income-tax Act, 1961, which has now been deleted, came up for consideration before a Bench comprising two learned judges of this court. Very briefly put, that section provided that where a person acquired a capital asset from an assessee connected with him and the Income-tax Officer had reason to believe that the transfer was effected with a view to avoid or reduce the liability of the assessee under section 45 to the tax on capital gains and with that object the transfer of the capital asset was being made at an undervalue of not less than 15 per cent., for the purposes of taxing the assessee, the full value of the consideration was taken to be its fair market value on the date of the transfer. It was pointed out by the Bench that sub-section (1) of section 52 did not deal with income to accrue or to be received, which in fact never accrued and was never received. It sought to bring within the net of taxation only that income which has accrued or is received by the assess....
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....n in the case of a bona fide transaction where the full value of the consideration for the transfer is correctly declared by the assessee (see page 606 of the Report of 131 ITR)." Referring to the case decided by the Gujarat High Court in CIT v. Smt. Vimlaben Bhagwandas Patel [1976] 118 ITR 134, the Supreme Court held that the satisfaction of the competent authority for initiation of acquisition proceedings is a subjective satisfaction on the objective facts and the reasons for the formation of the belief must have a rational and direct connection with the material coming to the notice of the competent authority, though the question of sufficiency or adequacy of the material is not open to judicial review. The Supreme Court read this into Chapter XX-C. The authorities have to act in accordance with the principles of natural justice, the Supreme Court posited thus (page 553 of 199 ITR) : "As we have already pointed out, the provisions of Chapter XX-C can be resorted to only where there is a significant undervaluation of property to the extent of 15 per cent. or more in the agreement of sale, a....
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....re, appears to us difficult to uphold the last part of sub- section (1) of section 269UE in so far as it provides that the property in respect of which an order under sub-section (1) of section 269UE is made shall vest in the Central Government free of all encumbrances. In our opinion, the expression 'free of all encumbrances' is liable to be struck down as arbitrary, without any rational nexus with the object of the legislation in question and violative of article 14 of the Constitution. Similarly, the provisions of sub-section (2) of section 269UE set out by us earlier must be read down so as to make them inapplicable to bona fide lessees in possession or bona fide encumbrance holders in possession." Therefore, following this dictum of the Supreme Court the authorities under the Act have to be very careful in ordering compulsory purchase when there are lessees or persons having subsisting mortgage rights over the properties. The Supreme Court held (page 558 of 199 ITR) : "In the result the expression 'free from all encumbrances' in sub- section (1) of section 269UE is struck down and sub-section (1) of secti....
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....id section which deals with the vesting of property in the Central Government shall operate to discharge the transferor or any other person (not being the Central Government) from liability in respect of any encumbrances on the property and, notwithstanding anything contained in any other law for the time being in force, such liability may be enforced against the transferor or such other person. This provision makes it amply clear that, in the case we have just referred to the encumbrance holder or the holder of the leasehold rights, could claim the fair value of his encumbrance or the leasehold interest out of the amount paid on account of the purchase price to the owner of the immovable property acquired by the Central Government under section 269UD. It was urged by learned counsel for the Revenue that, in case a view is taken that the expression 'free from all encumbrances' should be struck down, it would be left open to an intending seller of immovable property to undervalue the property by creating a bogus lease or a bogus encumbrance thereon and this would defeat the purpose for which Chapter XX-C was introduced. We are unable to agree. If a lease or an encumbrance is foun....
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....jective and could furnish reliable data to arrive at a just conclusion." It is in the light of these principles we have to examine the facts and circumstances of each case. Learned counsel appearing for the Revenue fairly submitted that there are no rules framed under Chapter XX-C by the Government which could form guidelines for the authorities to fix up the fair market value in the areas coming under the penumbra of Chapter XX-C. It was submitted on behalf of the Revenue that the appropriate authorities in various States had to follow the principles laid down by the courts in fixation of market value and the appropriate authorities have been following the guideline values fixed by the Revenue authorities, D.D.A. in Delhi, Delhi Administration in Delhi and other authorities in various States concerned with the collection of urban land tax and other taxes from immovable properties. When a question was put to learned counsel for the Revenue whether any rules have been framed or guidelines issued to the authorities with reference to the deductions to be made or the additions to be made while making comparative study with other sale instances properties, learned counsel submi....
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....0, in unmistakable terms noting very carefully, with great respect, the argument of the learned Attorney-General, the legal position that emerges, is that the appropriate authority should strive to find out the fair market value on a proper basis as known in the field, adopting a reasonable approach giving full and reasonable opportunity to the parties. An analysis of the facts and circumstances of each case would show that the appropriate authority had taken into account sale instances of the properties and tried to compare the value arrived at by the appropriate authority with the apparent consideration mentioned by the parties in the agreements of sale produced before it, on what can be characterised on the basis of some permutations and combinations depending upon its view either to make a pre-emptive purchase or not. No norms have been prescribed and no standard or principles had been adopted or set for itself by the appropriate authority. We want to note that learned counsel for the petitioners submitted in some cases, a particular method of deductions and additions is adopted in one case but under exactly similar circumstances in another case a different method is adopted....
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...., had to make things clear, with great respect, had placed on record the dictum by the Supreme Court in K. P. Varghese's case [1981] 131 ITR 597 which was sought to be challenged by the Department but that was not done and that was approved by the Supreme Court. And as we had said above, Parliament has not said that for the purpose of Chapter XXC a particular method of evaluation should be adopted. The appropriate authority had assumed in all cases without any exception whatsoever that it can follow a method to suit its convenience. If that is allowed, the very purpose of law is defeated. The law has not been made to enable the State to unjustly enrich itself at the cost of the citizens. The core of the democratic polity is wholly misunderstood by the appropriate authority and that is the kernel of the issue. If Parliament intended, as assumed by the appropriate authority, the language of Chapter XX-C would have been couched in different words and would not be as it is found in the statute book. We may also notice just to appreciate the question that has arisen for consideration ; previously Parliament inserted by the Taxation Laws (Amendment) Act, 1972, Chapter XX-A with effect fr....
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....perty of the nature referred to in sub-clause (ii) of clause (e), means,- (i) in a case where the consideration for the transfer consists of a sum of money only, such sum ; (ii) in a case where the consideration for the transfer consists of a thing or things only, the price that such thing or things would ordinarily fetch on sale in the open market on the date of the transfer ; (iii) in a case where the consideration for the transfer consists of a thing or things and a sum of money, the aggregate of the price that such thing or things would ordinarily fetch on sale in the open market on the date of the transfer and such sum ; and where the whole or any part of the consideration for such transfer is payable on any date or dates falling after the date of such transfer, the value of the consideration payable after such date shall be deemed to be the discounted value of such consideration, as on the date of such transfer, determined by adopting the rate of interest at eight per cent per annum." The Chapter also defines fair market value in the following terms :- "'fair market value',- (i) in relation to any immovable prope....
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.... may also notice that there are mainly four methods of evaluation which are known in the field : (1) The comparative or market sales approach ; (2) The cost approach ; (3) Income or investment approach (on the basis of rental income) ; (4) Developer's approach. In the case of the method of fixing fair market value on the basis of comparative sales, it could be done only on the basis of genuine comparable sale instances, even though a particular sale instance may not be a matching fair by the subject property. In this method, the important element is the immediate vacant possession being made available to the purchaser. Further, the property to be valued should be of a type that is easily available in the market. If the property is very valuable, as in these cases, it will be very difficult to find a comparable sale instance, leave alone the matching fair. Chapter XX-C is not for acquisition of property in public interest, but as we had indicated above, is only for the purpose of preventing evasion of tax. Consequently, the usual method of comparison for the purpose of valuation for giving compensation under the Land Acquisition Act, 1894, cannot be applied to the pro....
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....ment enacted the law the Department ought to have revived up to meet the situation realising its tremendous responsibilities. We do not intend to suggest anything to the Department, we are only testing the action of the appropriate authority on the basis of the law governing the interpretation of Chapter XX-C in its effective implementation. For, after all, the ultimate object of the law is to enable the Department to collect revenue by preventing evasion of tax. While fixing the valuation the appropriate authority should also take into account whether the properties are tenanted or any other restrictions on transfer and encumbrances are existing over the property as was contended by the learned Attorney-General before the Supreme Court in Gautam's case [1993] 199 ITR 530. The appropriate authority should be inquisitive, flexible, observant, sensitive, eclectic and constructive and should explore all possible and relevant avenues to get necessary information to arrive at a fair justifiable and accurate data to form a credible opinion to issue the show-cause notice. The appropriate authority is also expected to know that the term, market, is, what normally we think of as the plac....
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....erty consists of two floors, ground floor and first floor. They are occupied by tenants, the area of the land is about 800 sq. yds. On July 1, 1993, the owner entered into agreement with Mrs. Kailash Suneja (hereinafter called the petitioner). The apparent consideration stated in the agreement to sell is Rs. 79,99,390 inclusive of Rs. 34,99,390 towards unearned increase. On July 7, 1993, the owner and the petitioner sought permission from the appropriate authority, i.e., respondent No. 1, in Form No. 37-I as required by law on July 9, 1993 ; the appropriate authority, the first respondent issued notice to the owner asking for the following information and details : (i) A photocopy of the sanctioned building plan. (ii) A photocopy of completion certificate. (iii) A photocopy of the latest receipt No. 135100 dated September 15, 1992, amounting to Rs. 4,361 on account of the property tax for the year 1992-93 ; and (iv) A photocopy of the receipt No. 1818 dated March 19, 1993, amounting to Rs. 951.75 for the ground rent paid to the Maharani Bagh Co-operative House Building Society Ltd. (v) A photocopy of the perpetual sub-lease for plot No. C-82 (New No. G-4) duly execut....
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....00 This is 58% more than the apparent consideration of the subject pro-perty (Rs. 79,99,390) Subject property D-18 (known as I-15), Maharani Bagh. Sale agreement 2nd sale instance Sale deed 1-12-1992 Rs. 1.11 crores. Adjusted declared 500 land rate works mts. out at Rs. 29,587 per sq. mt. sq. yds. or 418 sq. Value to be increased at 1 % per month 7 months earlier to sale agreement For 7 months + 7% FAR (not so much as the 2nd instance) FAR (140100) 28% Side open (not available/which is available in 2nd instance) 5% has no basement potential 10 + 7% 43% 36% Declared land rate deducting 36% 29,587 x .64 = Rs. 18,950 per sq. mt. Value of the land of the subject property 52 x 18,950 Rs. 98,54,000 Depreciated value of the structure 9,33,758 Rs. 1,07,87,758 Tenanted Depreciat....
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....at fair market value is the rent capitalising method. The method of valuation adopted by the appropriate authority is wrong and is not in accordance with the principles laid down by courts. For the purpose of calculating deferred value, 14 years must have been the period. The owner stated that the tenants had also filed statements which would show that the tenants are bona fide tenants in occupation of the property for a long time. The owner also sought to rely on the passage from Parks on Valuation at page 123 first edition, the learned author has observed that the hypothetical or reversionary method of valuation is not in order. Attention in support has been invited by the learned author to an old case of Government of Bombay v. Merwanji Moncharji [1886] 10 LR 907 (Bom). The owner also challenged the fixation of depreciation of the building at Rs. 9,33,750. The subject properties are located at the end of the colony. The appropriate authority was wrong in taking into account the sale instance properties. It is also stated that the third instance property (Panchsheel Park) which is situate far from the colony and that is not a tenanted property. It was submitted that the considera....
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.... valuation should have been adopted if rent capitalisation is not acceptable to the appropriate authority ; (2) The appropriate authority did not give reasonable opportunity giving details about the comparable tenancy, state of the building, year of construction, the basis of rate adopted for land and other relevant data taken into account by the appropriate authority not given to the petitioner ; (3) the sale instance properties are not comparable, not proximate from situation angle ; (4) none of the sale instance properties are tenanted ; (5) In the case of tenanted property the sole permissible method of arriving at the market value is the rent capitalisation method ; (6) encumbrance of tenancy is very material because section 16(6) of the Delhi Rent Control Act, 1958, prohibits a purchaser from filing a suit for eviction within five years from the date of purchase. The assumption that the potential of the terrace would enhance the value is erroneous while the tenant in the first floor is in enjoyment of the terrace ; (7) The depreciation value of the structure at Rs. 9,33,758 is on the high side. Very material facts had not been considered in this behalf ; (8) The sale instance....
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.... of five years for a new buyer, the property may be vacated within a period of about one year by a mutual agreement. Further, it was observed that there is no subsisting lease deed as on date in respect of either of the two tenants of the subject property. With regard to value of structure taken at Rs. 9,33,758 it was stated to be worked out as per plinth area rate and that depreciation at 1.5 per cent. per annum has been allowed for 26 years, since the structure is 26 years old. The contention that possibility of utilisation of terrace rights of first floor is remote, as the same is in occupation of tenant on first floor was rejected for the reason that terrace on the first floor has not been let out to the tenant on the first floor. In respect of objection to offers, made by a tea company of Calcutta and non-resident Indian to purchase the subject property directly from respondent authority at a price higher than the apparent consideration, it was stated in the order that the two offers are not being made the basis for making this purchase order and are referred only to support the point that the sale consideration of the subject property is lower by 15 per cent. from th....
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.... in Form No. 37-I was filed under rule 48L of the Income-tax Rules, 1962, on July 7, 1993, which was accompanied by an agreement to sell dated July 1, 1993. The apparent consideration agreed between the transferor Mrs. Khatoon Quamarain and the transferee Mrs. Kailash Suneja, in respect of property No. G-4, Maharani Bagh, New Delhi (old No. C-62) was Rs. 45 lakhs plus ULI amounting to Rs. 34,99,390 payable to the DDA. Thus the effective apparent consideration for which the property was agreed to be transferred was Rs. 79,99,390 (Rs. 45,00,000 + Rs. 34,99,390). The property in question was occupied by Shri P. K. Ganeriwal as tenant on the ground floor and Sardar Amarjit Singh as tenant on the first floor. The property in question had a plot area of 668.09 sq. mts. (800 sq. yds.) on which a double-storeyed house comprising the ground floor and the first floor along with two servant quarters on the garage block had been constructed." It is further stated in the show-cause notice that the subject property was compared with the sale instances of similar properties located in similar localities, G-8 Maharani Bagh which is situated in the same locality, I-15 Maharani Bagh, which is als....
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.... to the counter affidavit and the rejoinder was filed on April 5, 1994. It is not necessary to refer to the averments in the rejoinder because the petitioner has repeated the averments in the writ petition. Mr. Syali, learned counsel for the petitioner, relied upon the judgment of the Supreme Court in C. B. Gautam's case [1993] 199 ITR 530, and submitted that the appropriate authority had not at all discharged this burden and, therefore, the purchase order is liable to be quashed. Learned counsel relied upon the passage of the judgment of the Supreme Court in State of Madhya Pradesh v. D. K. Jadav, AIR 1968 SC 1186, 1190, wherein Supreme Court had held : "It is well settled that where the jurisdiction of an administrative authority depends upon a preliminary finding of fact the High Court is entitled, in a proceeding for a writ, to determine, upon its own independent judgment, whether or not that finding is correct. The matter has been very well put by Farwell, L. J. in Rex v. Shoreditch Assessment Committee, [1910] 2 KB 859 at page 879 as follows : &nbs....
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....t of an estate in Yorkshire called Highfield consisting of a large house and 35 acres of land surrounding it. The owners served notice of objection to the order as being contrary to section 75 and the ground of objection was that the land was part of a park and was required for the amenity or convenience of the house. The Minister of Health directed a public inquiry and after holding the inquiry and taking evidence, the Chairman duly made his report to the Minister who thereupon confirmed the order. It was held by the Court of Appeal that the High Court had jurisdiction to review the Minister's finding and since the land in question was part of the park of Highfield, the order of compulsory purchase was quashed. At page 855 Luxmoore L.J. stated : 'The first and the most important matter to bear in mind is that the jurisdiction to make the order is dependent on a finding of fact ; for, unless the land can be held not to be part of the park or not to be required for amenity or convenience, there is no jurisdiction in the borough council to make, or in the Minister to confirm, the order. In such a ....
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.... stamp charges. We do not want to go into the merits of the claim of the applicant. The applicant has no locus standi to file the petition. Accordingly, C.M. No. 1988 of 1994 under order 1, rule 10, CPC, is dismissed. C. W. No. 4153 of 1993 : There are eight petitioners. The fourth respondent is Arjun Anand, who is the onwer of the property bearing No. 25, Friends Colony West, hereinafter referred to as the subject property. On February 1, 1991, there was an agreement to sell between the fourth respondent and the petitioners and the apparent consideration was Rs. 1.75 crores. On February 4, 1991, the petitioners and the fourth respondent filed in Form No. 37-I for issuance of no objection certificate. On April 18, 1991, the purchase order was passed by the appropriate authority. On the same day, the appropriate authority called upon the fourth respondent to surrender possession of the property. C. W. No. 1508 of 1991 was filed in this court challenging the purchase order. On March 1, 1993, this court allowed the writ petition, in view of the judgment of the Supreme Court in C. B. Gautam's case [1993] 199 ITR 530. It is claimed by the petitioners that on March 9, 1993, c....
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....ken at Rs. 11,60,000 the land rate per sq. mtr. works out to Rs. 2,65,00,000 (-)11,60,000 = 2,53,40,000 divided by 1173.91 = Rs. 21,586. If adjustment on account of time gap of +2%, side open +10%, potential for basement +10% in the sale instance and nearness to railway track 5% and size of plot 5% is taken into account, the rate per sq. mtr works out to Rs. 24,180. This gives land value of subject property as Rs. 2764.37 x 24180 = Rs. 6.68 crores. In view of the fact that the subject property is tenanted, its value is deferred for 5 years at 8% interest and the present value would work out to Rs. 4.55 crores to which Rs. 1,64,000 salvage value is to be added. This brings value of the subject property to Rs. 4.564 crores which is 160% above the apparent consideration." The following statements were made before the appropriate authority :- "(1) The proceedings before the appropriate authority are judicial in nature. (2) The appropriate authority is obligated to follow judicial procedure like a court though summary in nature like s....
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....the alternative, even if it be assumed for the sake of argument that the apparent consideration was lower than the "fair market value" even then a variety of compelling circumstances as given in the affidavit of his client by way of evidence (which stands uncontroverted) existed under which the property was sold at Rs. 1,75,00,000 considering the best/maximum price he could get for a tenanted property. (10) There was not an iota of evidence or any circumstance suggesting evasion of tax or a deliberate understatement of the value of property. (11) The unrebutted and uncontroverted facts and evidence is on the record produced by the transferor, his client, that there is no understatement of the value of the property. (12) Even otherwise the facts and circumstances existed under which his client sold the property for Rs. 1.75 crores particularly when he was getting a rental income of the property to the extent of Rs. 4,000 per month and he was residing in a tenanted house where he was paying about Rs. 8,000 per month as rent and he had no othe....
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....erred in assuming that the sale instance, 60, Friends Colony, was a good guide in determining the fair market value. It is further stated that the adjustments adopted by the appropriate authority were wholly arbitrary and they were made just for the purpose of passing the impugned order. The petitioners also stated that the appropriate authority arbitrarily refused to consider the sale instance, No. 2, Barakhamba Road. The petitioners assert that there was no finding by the appropriate authority that there was intentional gross understatement of the value of the property and there was tax evasion by the party and unless there was such a finding, order of compulsory purchase cannot be made. The petitioners further stated that the appropriate authority illegally and in utter contravention of the norms and standards for determining the fair market value erroneously held that since the tenancy of the tenant was on a month to month basis, therefore, the deferment factor of 5 years was reasonable to arrive at the fair market value of the suit property by calculating interest at 8% per annum while comparing the instance of 60, Friends Colony. The petitioners further stated : &nbs....
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.... 203, Golf Links, New Delhi 375 sq.yds. 31-5-1992 50,00,000 4. Ground floor at Rs. 1,150 p.m. since 1975. First Floor at Rs. 950 p.m. since 1978. 5. 2583 182, Golf Links, New Delhi 575 sq.yds 15-10-1991 1,42,00,000 Ground floor tenanted to Sh. Yashovardhan K. Zaveri since October 1991 at Rs. 6,000 p.m. first and 2nd Barsati floor vacant. 6. 2142 46, Ring Road, Lajpat Nagar III, New Delhi. 760 sq.yds. 17-7-1990 95,00,000 Rented for more than Rs. 3,500 p.m 7. 2082 3, Raj Narain Road, Civil Lines 792 sq.yds. 21-5-1990 48,78,000 Tenanted to Sh. J. C. Chandok and Family for more than Rs. 3,500 p.m 8. R-1880 A-46, Gulmohar Park, New Delhi 300 sq.yds. 21-12-1980 23,00,000 Fully single storeyed Building tenanted to Mr. Pradeep Dutta since 1978 on a monthly rent at Rs. 1,500 p.m. fair market value was worked out in this case at Rs. 35 lakhs by A.A. and yet NOC was granted because the basis of rent capitalisation was later on adopted. 9. 3042 45, Ring Road, Lajpat Nagar III 760 sq.yds. 15-10-1992 95,50,000 Only ground floor tenanted at Rs. 2,50....
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....facie illegal, wrong, manipulated and mala fide got prepared for ulterior motive and to supersede the earlier valuation report genuinely and correctly prepared at Rs. 1,11,63,234. In the present show-cause notice, the said illegal and malicious valuation report valuing the suit property at Rs. 4,77,67,461 has been repeated and made the basis for passing the impugned purchase order." The petitioners challenged the impugned order referring to the reasoning given by the appropriate authority with reference to 48, Friends Colony which was relied on by the petitioners. In paragraph 73 of the grounds, the petitioners made an attempt to highlight how the appropri-ate authority had acted in an arbitrary fashion : "That the mala fides, the arbitrary discrimination and the deliberate adoption of a wrong method of determining fair market value of the suit property on the part of the respondents Nos. 1 and 2 shall be evident from one of the remanded cases (remanded by the High Court after C. B. Gautam's case [1993] 199 ITR 530 (SC)), viz., the case of property bearing No. 37/73, Punjabi Bagh, New Delhi, having....
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.... by him to be forfeited and the entire premises and assumptions made in the notice were incorrect, and the said instance case could not be made the basis for assessing the fair market value of the suit property. It was also pointed out that the appropriate authority knew this fact very well that the earlier agreement of December, 1990, was for Rs. 2.65 crores and the purchaser cancelled the agreement and preferred the earnest money forfeited and the subsequent agreement with another purchaser in September 1991, was for Rs. 2.40 crores and granted the NOC yet in the show-cause notice it was falsely alleged that the instance property was agreed to be sold in December 1990 for Rs. 2.60 crores and deliberately suppressed the fact of the subsequent events that took place and so the instance case should not be made basis. The members of the appropriate authority and in particular respondent No. 2 to the above submissions had no answer and wrongly and rudely remarked that he was concerned with the earlier agreement and not with the subsequent one and asked petitioners' counsel to state his points further and not to talk about it and refused to consider the most material facts, and rudely ....
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..... In all these cases, whenever a higher offer has been made than the apparent consideration to the appropriate authority, the appropriate authority has always ignored such offers and the cheque sent by the voluntary purchasers but in the present case, the previous purchase order and the present purchase order have been passed considering and on the basis of the bogus offers made by Vishwanath Traders and Shri Vinod Jain respectively as stated above." On these averments, the petitioners sought to get the impugned order quashed. In the counter-affidavit filed by the appropriate authority, the allegations made in the petition are denied. In paragraph 12 of the counter, it is stated that all the three members acted in unison and all the relevant aspects were considered by them. In paragraph 17, it is stated : "A show-cause notice dated May 21, 1993 (after the inspection of the subject property on May 19, 1993), was given to the affected parties, namely, transferor, transferee and the tenant fixing the hearing for May 26, 1993. In the said show-cause notice, details of a sale instan....
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....im an interest in the consideration payable as a result of the property vesting in the Central Government are persons interested. It was held that neither by reason of section 269UD(2) nor section 269UL(3) could a transferee contend that he has secured an interest in the immovable property, contrary to the settled law as adumbrated in section 54 of the Transfer of Property Act, and various rulings of the Supreme Court. Merely because section 269UD(2) says 'every other person whom the appropriate authority knows to be interested in the property', it does not bring a transferee who has no interest in the property and in whose favour no interest is created by reason of the contract for sale, into the picture." The petitioners filed a rejoinder traversing the allegations in the counter-affidavit. On March 30, 1995, Mr. Sanjay Gupta filed an affidavit on behalf of the petitioners stating that in respect of property bearing No. 9, Kasturba Gandhi Marg, where the apparent consideration was Rs. 7.20 crores and the application in Form No. 37-I was filed on November 28, 1994, no objection certificate was granted and the fair market value of the property was assessed by the appropriate ....
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....down by the Supreme Court it is the duty of the appropriate authority to act in accordance with the wellknown principles in this behalf. Learned senior counsel referred to the following cases to bring to our notice the scope of section 269C : 1. CIT v. Arun Mehra [1986] 157 ITR 308 (Delhi). 2. IAC of I.T. v. National Flag Perfumery Works [1986] 159 ITR 737 (Kar). Learned senior counsel submitted that the initiation of proceedings for compulsory purchase must be passed on clear evidence and cannot be on assumptions. According to him, the fair market value of a property should be on well established legal principles and misapplying the legal principles would amount to no fixation of the fair market value in the eyes of law. He referred to Subbas Malharirao Kachure v. IAC of IT [1986] 159 ITR 726 (Kar). He submitted that the appropriate authority failed to keep in mind the principle that undervaluation and the presumption of tax evasion are two different concepts and the authorities cannot proceed on surmises. He referred to Sarabhai M. Chemicals Pvt. Ltd. v. P. N. Mittal, Competent Authority, IAC of I.T. [1980] 126 ITR 1 (Guj), Joseph Vallooran v. CIT [1977] 108 ITR 544 (Ori....
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....ourt had also noted the penal provisions in the Act and also the nature of the power. The court observed (headnote) : "Having regard to the nature of the power which is penal, and, also having regard to the nature of the proceedings which are quasi-criminal, the competent authority must be held to be a quasi-judicial authority. In an inquiry under Chapter XX-A, the principle of natural justice must be followed. It is axiomatic to say that the rules of natural justice are not inflexible rules nor is there any strait-jacket formula in that behalf. By and large, it can be said that in an inquiry under Chapter XX-A, the transferor and/or transferee as well as the occupant and any other known interested persons should be told the nature of allegations against them including the material collected so far by the competent authority, and be furnished copies of the statements recorded and those of the documents collected by the competent authority on which he intends to rely so as to give the person interested or affected, an opportunity to state his case and to correct or controvert the mate....
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....on of adding up the valuation arrived at by the rental method with any deferred value. Learned senior counsel also referred to CIT v. New India Construc tion Co. [1980] 123 ITR 68 (Delhi) for the same purpose. The Income-tax Appellate Tribunal quashed the proceedings under Chapter XX-A taking the view (page 73) : "That a building with vacant possession and a building with tenants are two different things altogether, so far as the market value is concerned. In the case of a building with tenants specially in an area where rent control statutes prevail. The prospects of getting a good price for the building were held to be far from bright. On the other hand, a building with vacant possession offers immediate and attractive options either as a capital investment or as a business venture. The market value of the two types of buildings was held to be not comparable." The Department filed an appeal to this court and this court upheld the order of the Tribunal holding that the proper course was to have resorted to the method of capitalisation of rental value of multiplying a number of ye....
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....al value." Learned senior counsel referred to Mani Singh Avtar Singh v. IAC of I.T. (Acquisition Range) [1985] 151 ITR 233 (P & H). Unique Associates Co-operative Housing Society Ltd. v. Union of India [1985] 152 ITR 114 (Bom). The Bombay High Court also held that the burden lies on the Revenue to show that there is understatement of the consideration and the second condition is that the assessee had actually received more than what is declared by him. He also referred to Jehangir Mahomedali Chagla v. M. V. Subrahmanian, Addl. First Assistant Collector Estate Duty [1985] 155 ITR 637 (Bom), CIT v. Arun Mehra [1986] 157 ITR 308 (Delhi), Subbas Malharirao Kachure v. IAC of I. T. [1986] 159 ITR 726 (Kar) and 166 ITR 485 (All) (sic). Learned senior counsel also referred to CIT v. Balram Prasad [1984] 150 ITR 687 (All) wherein the Allahabad High Court took the view that the burden is on the Revenue to establish that the fair market value is in excess by 15 per cent. than the apparent sale consideration and that the understatement was made with the object of evasion of tax and the assessee actually received more than what was declared in the document. The Revenue has to establish t....
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....purposes. This is an objective fact about which the competent authority must be satisfied besides another objective fact that the fair market value of the property in question exceeds by the prescribed margin the apparent consideration thereof. . . conditions mentioned in section 269C(1) and section 269D(1) should be fulfilled before proceedings can be initiated. . . (ii) excess fair market value of the property over the apparent consideration by 15 per cent. ; (iii) ulterior motive of tax evasion or concealment of income for such untrue statement of apparent consideration in the instrument of transfer of such property." The court observed "the authority must have reason to believe about the ulterior motive of the transferor of tax evasion or tax reduction or of the transferee about the concealment of income which he should disclose for tax purposes. This is an objective fact about which the competent authority must be satisfied". Learned senior counsel referred to Union of India v. Smt. Vidya R. Bijur [1994] 209 ITR 803 (Kar). The court observed following C. B. Gautam's case [1993] 199 ITR 530 (SC) (page 807) : &nbs....
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....rity and observed that it cannot be construed to confer power on the appropriate authority to pass an order without carefully considering the facts and circumstances set out by the intending seller or purchaser and analysing the comparable cases cited by such persons". The court further observed (page 29) : "The very historical setting in which the provisions of Chapter XX-C were enacted suggest that it was intended to be resorted to only in cases where there is an attempt at tax evasion by significant undervaluation of immovable property agreed to be sold . . . reasons must be germane to the object for which Chapter XX-C was introduced in the Income-tax Act, namely, 'to counter attempts to evade tax'." The same proposition that the burden is on the Revenue to satisfy the two important conditions is accepted by the Rajasthan High Court in CIT v. Raja Narendra [1994] 210 ITR 250. The court observed (page 255) : ". . . unless there is evidence that the consideration actually received ....
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....ng the pendency of any proceeding is subject to the ultimate decision reached by the court in the main case. Therefore, no elaborate exposition of law is required for the purpose of finding out whether their Lordships of the Supreme Court intended to dispose of the writ petition finally while confirming the highest bid. Their Lordships had confirmed the highest bid because in the event of the writ petition being dismissed by this court the Department could straightaway take further proceedings on that basis. Their Lordships also did not think it fit to withdraw the writ petition to the file of the Supreme Court and their Lordships had not been pleased to observe that the writ petition would stand disposed of in view of the confirmation of the highest bid by their Lordships. In the light of this admitted position, it is not open to the appropriate authority to contend that in view of the order passed by the Supreme Court confirming the bid nothing survives in the writ petition and the writ petition is liable to be dismissed. We are unable to accept the submission made on behalf of the Revenue. Their Lordships of the Supreme Court, it is beyond any doubt from a perusal of the order, ....
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.... "Your attention is also invited to another sale instance of immov-able property bearing No. N-119, Panchsheel Park, New Delhi, having plot area of 1,200 sq. yards on a 45 feet wide road which was agreed to be sold for Rs. 3,25,00,000 (+) UEI of Rs. 52,54,050 (total apparent consideration Rs. 3,77,54,050) as per agreement dated September 29, 1993. This sale instance property is only one side open and is facing park. The declared land rate of this sale instance property with FAR of 100 comes to Rs. 37,520 per sq. metre if the salvage value of the sale instance property is taken at Rs. 1,06,080, (Rs. 3,25,00,000 (+) 52,54,050-1,06,080, divide 1,003.4) For arriving at fair land rate adjustment of (+) 6.5% on account of time gap. FAR (+) 14 per cent. (116-100 divide 116), extra side open (+) 5 per cent. colony difference of 10 per cent. and sale instance property facing park (-) 5 per cent. (total (+) 10.5%) is made and the land rate works out to 37,520 x 1,105 = 41,459.5 or say Rs. 41,460. Therefore, the land value of the subject property works out to 41,460 x 1,468 = 6,08,63,280." It is stated that the total value of the subject property would come to....
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.... reply that the comparable properties should be similar in size, nature, having similar characteristics and in similar locality. Referring to the decision in CIT v. Duncans Agro Industries Ltd. [1991] 192 ITR 310 (Delhi), evaluation of fair market value ignoring comparable instances of sale in the same area is erroneous. It is further stated that the first sale instance property No. 4, Palam Marg, Vasant Vihar, is situate in a very superior colony and comparing the subject property with that property and making adjustments is not at all permissible in law. The second sale instance property No. N-119, Panchsheel Park, is also not comparable. The third instance property A-95, Neeti Bagh, is also not comparable as it differs in size, number of storeys and the FAR. According to the petitioner and the vendors, the three sale instances are situate in posh colonies in South Delhi and the DDA had categorised the above said referred colonies in the bracket of highest rates and Chirag Enclave have been categorised as belonging to lower category for the purpose of fixing the rates for unearned increase. It is also stated that the appropriate authority had in its possession sufficient instance....
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....Land rate achieved : Rs. 21,279 per sq. mtre. Fair market value on this basis of the subject property : Rs. 3,12,37,600 Plus value of building : Rs. 6,45,000 Total value : Rs. 3,18,82,600." The third sale instance given in the explanation is with reference to B-4, Greater Kailash I situated on the same road. The value would come to Rs. 2,93,20,300 as per the details below : "Working of fair market value on the basis of instance at B-4 Greater Kailash Enclave I, New Delhi" Date of agreement : 12-5-1994 Land area : 500 sq. yds. (418.06 sq. mtrs) Consideration : Rs. 1,16,00,000 plus UEI UEI : Rs. 20,90,000 approx. Total consideration : Rs. 1,36,90,000 Value of structure : Rs. 5,16,000 approx. Value of land : Rs. 1,31,14,000 Land rate derived : Rs. 31,512 per sq. mtrs. Adjusted for FAR (1.6=1.90) : (-)39 per cent. Adjusted for co-ownership (As per clause 3) : (-)10 per cent. Adjusted for time gap : For 11 months 11 per cent. Land rate achieved : Rs. 19,537 per sq. mtre. Fair market value on this basis of the subject property : Rs. 2,86,80,300 Plus value of bui....
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....rties which are undervalued are not purchased unless the difference is more than 15% between the apparent consideration and the value of such properties. Even such properties which are understated by more than 15 per cent. need not be purchased if the appropriate authority is of the view that it will not be expedient to do so by the Central Government. In the case of these two properties in Greater Kailash Enclave, it is clear that they are located much below the main road level. No adjustment has been made by learned representative for this purpose. Besides, both the properties of Greater Kailash Enclave are of small plots and there is a high demand for higher plots on Outer Ring Road in South Delhi. Therefore, these sale instances are held as not comparable. It has been also argued as per the written submission dated July 22, 1994, that the subject property was vacated by the tenants on October 31, 1992. Therefore, the owner cannot sell the property for a period of 3 years as the tenant can claim the restoration of his tenancy rights. As the period of 18½ months remained unexpired on the date of agreement to sell, therefore, interest of Rs. 83,25,000 be considered. T....
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....ading tax and it was done in the normal course. There are absolutely no materials to form any opinion about this aspect of the case. The apparent consideration of the subject property is Rs. 3,65,81,149 and not Rs. 3,25,75,000 as assumed by the appropriate authority. The sale instances cited are not at all comparable with the subject property and they do not provide proper indices of the fair market value of the subject property. The adjustment for plus and minus factor cannot make totally incomparable properties comparable. The position of the parties and the difficulty of the other co-owners in getting possession and, therefore, they were inclined to sell the property had not been considered in their proper perspective. The determination of fair market value on the basis of sale instances cited by the appropriate authority is wholly illegal. The fact that the appropriate authority had not been following the same standard is highlighted in the writ petition in the following terms : "The reasoning that for arriving at fair market value on the basis of instances relied upon by petitioner adjus....
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....es. The apparent consideration appears to be understated. You are also informed that a property at A-40, Kailash Colony, was sold as per sale agreement dated February 13, 1993, situated at a colony road with one side open. The plot area of this property is 877.915 sq. mtr. and the sale consideration was Rs. 1.5. crore. After deducting the salvage cost of the structure estimated at Rs. 1,07,60,000, the land rate for this property works out to Rs. 16,971 per sq. mtr. Making adjustments for the time-gap of 12 months at 1 per cent. ((+) 12 per cent), the FAR (+) 40 per cent as the FAR of the subject property is 140 whereas of the sale instance property quoted above, it is only 100, side open (+) 5 per cent. (the subject property has two sides open whereas the sale instance) is one side open), the net adjustments come to (+) 57 per cent. On the basis of this sale instance, the land rate for the subject property works out as : Rs. 16,971 x l.57=Rs. 26,644 per sq. mt. Therefore, the land value works out to : Rs. 26,644 x 422.23 sq. mtr = Rs. 1,12,49,896 Add : Salvage cost of structure estimated 54,000 1,13,03,896 ....
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....authority which is in the following terms : "Kindly refer to your letter/D.O. No. AA/R-3786/1995-96/303 dated July 21, 1995. It is stated that the earlier demand of Rs. 95,81,149 may please be treated as withdrawn as the payment has not been received in this department. Moreover, the earlier demand sent was also provisional and the validity as deemed sale permission has expired. The final amount of unearned increase can be worked out on the basis of actual transaction price as reflected in the disposal cost of the property. Therefore, you are requested to intimate the details of final transaction including transaction value, structure value and date of disposal." This only shows that the unearned increase has not been definitely fixed by the DDA. C. W. No. 3139 of 1993 : Dr. A. K. Garg and his wife Dr. (Mrs.) Neelu Garg are the petitioners. They are doctors by profession. They are working in Saudi Arabia. They wanted to settle down in India and were in search of a suitable accommodation in or about the year 1989, they came to know that the first respondent Kailash Nath and Associates were put....
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....ah Road, New Delhi, to Nilgiri Apartments. The petitioners agreed to pay Rs. 34 lakhs for 1,800 sq. feet along with other usual charges. Correspondence including a copy of the letter dated April 27, 1991, by which respondent No. 1 confirmed the change of flat from earlier one to present one. By this time, the money put in by the petitioners with the respondent No. 1 would have risen to more than Rs. 7.5 lakhs and since the money was in foreign exchange it would have been more than Rs. 15 lakhs by that time since the value of the foreign exchange appreciated considerably. After agreeing to this, the petitioners paid further sum of Rs. 10 lakhs approx. and further agreed to pay the amount as under : (a) Amount already paid by way of deposit towards provisional booking of space prior to the date of signing this agreement. Rs. 15,00,000 (Rupees fifteen lakhs only) (b) Rs. 3,00,000 (Rupees three lakhs only) in August, 1991. (c) Rs. 3,00,000 (Rupees three lakhs only) in November, 1991. (d) Rs. 3,00,000 (Rupees three lakhs only) in February, 1992. (e) Rs. 4,00,000 (Rupees four lakhs only) in June, 1992. (f) Rs. 1,00,000 (Rupees one lakh only) in July, 1992. (g) Bal....
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....execution of the agreement. In paragraph 4 of the explanation, the petitioner stated : "It is further pertinent to note that in 1989 no objection letters were issued by your honour in respect of a couple of flats like Flat No. 2 on 3rd floor for 1,800 sq. ft. (vide NOC No. AA/1988-89/R-1650/184 dated August 7, 1989) at a sale consideration price of Rs. 20,50,000. Therefore, even if an appreciation rate of 12 per cent. per annum (as indicated in your notice) is taken into account the fair market value of our flat would be Rs. 25.42 lakhs which is far below the apparent consideration as mentioned above." The petitioners clearly mentioned how the consideration was worked out by the parties : "That as per the terms and conditions of the agreement filed with your honour, the total cost of the flat to the vendee works out to Rs. 39,90,600 as detailed under : (Rs) A. Apparent consideration 29,00,000 B. 15 per cent. extra as per clause 3 on page 7 of the agreement 4,35,000 C. Escalation as per clause 6 on page 8 of the agreement 2,00,000.00 D. L &amp....
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....sit bank rate of 10 per cent. at that time. If that rate of interest is taken, it works out to Rs. 1,47,000. The assumption of Rs. 2,00,000, on account of fluctuation in the exchange rate is also not acceptable. It is so because the payment is stated to be in terms of Indian rupees in the agreement. Therefore, the effective consideration works out to Rs. 29,00,000 + 1,47,000 + 4,35,000 = Rs. 34,82,000. This gives a per sq. ft. rate of Rs. 2,468 as against the fair market rate of Rs. 3,000 per sq. ft. arrived at earlier on the basis of sale instance. This is in excess by 21.6 per cent. of the apparent consideration." When the attention of the appropriate authority was drawn to the sale of flat No. 2 in the first floor where no objection certificate was granted by the appropriate authority the appropriate authority rejected the argument by saying : "The learned representative has also placed reliance on the sale instance of flat No. 2 on first floor which was sold for an apparent consideration of Rs. 20,50,000 (The date of filing Form No. 37-I before the appropriate authority is June 14, 1989) and also sale of F....
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.... application in Form No. 37-I was filed with the appropriate authority for the issuance of no objection certificate. On July 5, 1994, the appropriate authority issued show-cause notice to respondents Nos. 3 and 4 and the petitioner. The appropriate authority came to the conclusion that by virtue of a comparison of the subject property with S-237, Greater Kailash-I the apparent consideration is 40.43 per cent. less than the fair market value and on a comparison with the second sale instance property E-547, Greater KailashII, the fair market value of the subject property is less than 75.99 per cent. Regarding the first instance sale property, the view of the appropriate authority is expressed in the following terms : "Your attention is invited to the sale of first floor of property at S-237, Greater Kailash-I, with a built-up area of 1,200 sq. feet which was agreed to be sold for an apparent consideration of Rs. 24,00,000 as per agreement dated November 26, 1993. This property was also on a 40 feet wide road with only two sides open, therefore, if adjustments on account of time gap of + 5 pe....
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....would sign the agreement only when 75 per cent. payment is received. The transferee made the payment of Rs. 5,10,00,000, i.e., more than 20 per cent. of the consideration on March 22, 1994, still the transferors refused to sign the agreement. The transferee made further payment of Rs. 11,00,000 making the total to Rs. 16 lakhs up to April 11, 1994, i.e., 2/3rds of the total consideration still they did not sign the agreement unless they received further Rs. 90,000 on April 23, 1994 and got the assurance in writing with interest clause for the balance Rs. 1,00,000 within 30 days. This being a peculiar transaction cannot be compared with newly constructed normal flats available for sale with sufficient margin of time for making payment. Therefore, the date of transaction of the sale is March 22, 1994, when more than 20 per cent. payment was made." They also brought to the notice of the appropriate authority the last date for making payment for the Bangalore flat by March 31, 1994, which was extended just by 10 days. The flat is being sold to its immediate neighbour on the second floor with whom the transferors had good relationship and the transferors could also save commission to....
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..... and 135.85 sq. ft. in the subject property. The smallest bed room of S-237 is the biggest bed room of the subject property. The toilet sizes are 41.93 sq.ft., 39.37 sq. ft. and 39.87 sq. ft. as against 27.95 sq. ft., 23.50 sq. ft. and 42.5 sq. ft. in the subject property case. All the toilets are well ventilated in S-237 whereas one toilet is without even a window and size of 23.5 sq. ft. could not be used as toilet, so has been converted into store. The overall usable area of S-237 G.K-I excluding walls and passages is 1014.92 sq. ft. whereas it is only 968.58 sq. ft. in the subject case." It is also stated that the specification in that property is kota stone with marble strips in drive-ways, complete white marble flooring everywhere in the flat and no mosaic is used in the whole building. The doors and windows are of teak woods with brass fittings and there is also servant quarter. Therefore, according to the explanation there is no comparison at all with the subject property. About the second sale instance, it is stated : "The second instance quoted in the show-cause noti....
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....ng the response of the advertisements cannot at all be sustained because no one normally keeps the record of the response and there is no reason to reject the case of the petitioners. Regarding the payment made to the vendor in Bangalore it is stated : "As a matter of fact about 70 per cent. of the payment was received by the transferors only by 23rd April, 1994, and if the advance payments for the subject property were to be utilised by them for making payment at Bangalore, they could have done so only within the extended period by 10th April, 1994. Since the advance payment aggregating to a sum of Rs. 17,00,000 (5,10,000 + 11,00,000 + 90,000) was received by the transferors for the subject property only by April 23, 1994, no direct nexus can be established between the receipt of 70 per cent. of the apparent consideration for the subject property and the payment that was required to be made for purchase of the property at Bangalore. However, since the payment to the extent of 70 per cent. had been received in this case by the transferors by 23rd April, 1994, as advance, as against the prevalent....
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....he life of the building, the appropriate authority gives a very curious reasoning : "While the ground floor of the subject property might have been constructed on load bearing walls in the year 1962 on which the first floor is stated to have been built in 1986, the contention that the property constructed on load bearing walls has a life of about 60 years, out of which in the present case 30 years had already expired leaving an unexpired life of only 30 years is neither relevant nor material because the cost of construction of a property is a very insignificant part of the total value of the property, as the plot of land accounts for more than 90 per cent. of the total value of the property. Besides in actual fact properties built on load bearing walls far outlive their life of 60 years if properly maintained." About the point of non-availability of parking space and the servant quarters, the appropriate authority has expressed : "The next contention that the subject property had no parking space whatsoeve....
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....nbsp; "We may state that the difference in the value of the property on account of inferior or superior specifications is negligible as the cost of the structure is a very insignificant part of the total value of the property, the land value accounting for more than 90 per cent. of the total value of the property." The appropriate authority rejected comparison with E-280 Greater Kailash-II. On this process of reasoning the order for compulsory purchase was made. In the writ petition what is stated in the explanation is reiterated. We are of the view that the appropriate authority has not adopted any standard for ascertaining the fair market value of the subject property. Therefore, the show-cause notice itself is bad in law. C. W. No. 3884 of 1994 : In this writ petition, Mr. R. C. Chawla and his daughter, Ms. Suchitra Chawla, are the petitioners. The subject property, is C-590, Defence Colony, New Delhi. On May 6, 1994, the agreement for sale was entered into between Mr. J. S. Sawhney and Mr. R. C. Chawla. The area of the property is 325 sq. yds. with built up single storey consisting of t....
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.... On August 18, 1994, the explanation was given by the transferors and the transferees. Regarding C-86, it is stated that there are three independent rooms over the garage and it is a 2½ storeyed building and construction is new one. Regarding C-77, it is stated that it is a complete two storeyed building and the accommodation available is double what is available in the subject property. The subject property is facing the servant quarters and the garages of the house which are situated in E Block. The subject property is 32 years old and is in a dilapidated condition. In the ground floor there are two bed rooms with drawing, dining, kitchen and on the first floor there is only one bed room with drawing and dining. On August 18, 1994, a further reply was sent by Mr. R. C. Chawla stating that title of the transferor J. S. Sawhney is in dispute. A public notice dated May 22, 1994, was enclosed by him and he brought to the notice of the appropriate authority the pendency of Suit No. 224 of 1994 in the court of Shri P. K. Dham, Additional District and Sessions Judge, Delhi, and that the alleged co-owners had obtained order of stay. He also brought to the notice of the appropriat....
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....the house had three bedrooms attached bath, drawing, dining. The value shall be : Rs. 88,00,000 divide 271.73 Rs. 32,285.08 (-) Rs. 3,00,000 (salvage value) Rs. 85,00,000 divide 271.73 Rs. 31,281.06 The apparent consideration on an adjustment of (+3%) time-gap is made shall be Rs. 32,225.00 per sq. mtr." He emphasised the fact that C-86, referred to in the show-cause notice, is a centrally airconditioned property with two-storeyed construction, with a terrace garden, having six bed rooms and a separate garage block, three kitchen with imported fittings. He also relied upon NOC granted by the appropriate authority on May 6, 1994, with reference to 182, Golf Links, New Delhi, to show how the appropriate authority had acted in an arbitrary way. The appropriate authority passed the order of compulsory purchase on August 31, 1994, maintaining the same position in the show-cause notice and without considering in a proper way the representation made by the writ petitioners. In the writ petition what is stated in the explanation and further explanation is reiterated and it is submitted that the appropriate authority ha....
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....n this case. He is not a necessary party to the writ petition. Therefore, the application of Arun Dua to implead himself as a party is dismissed. A perusal of the petition and the counter and other documents in this case would show that the appropriate authority has not at all applied the principles applicable for fixing of fair market value. Therefore, the order of the appropriate authority cannot at all be sustained. C. W. No. 5613 of 1993 : Chiranji Estates Pvt. Ltd., has filed this writ petition challenging the order of the appropriate authority dated November 26, 1993. On August 28, 1993, there was an agreement for sale between the third respondent, Ved Prakash Marwah, and the writ petitioner for purchasing Plot No. 3, Block A, East of Kailash admeasuring 306 sq. mts. the consideration fixed is Rs. 70 lakhs. On August 30, 1993, there was an application to the appropriate authority in Form No. 37-I. On September 6, 1993, there was a supplementary agreement. On September 6, 1993, the appropriate authority wrote to the petitioner asking it to furnish certain particulars. On November 4, 1993, the appropriate authority issued a show-cause notice. The appropriate authority ....
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....uilding as on date of agreement would be Rs. 10 lakhs. In that way the cost of land would be reduced to Rs. 41 lakhs and the unit cost of the land would work out to Rs. 24,520 sq. mtr. The unit cost of the land thus arrived at would have to be subjected to the following adjustments :- (i) Time GapSale instance was 1/2 on May 23, 1993. The subject property is of August 28, 1993. There is gap of three months. A 1 per cent. variation per month is permissible. That would give a total variation of 3 per cent. 3 per cent. (ii) The FAR of the property at E-326, East of Kailash is 160. The FAR of the subject property is 190. This would require an adjustment of 18.75 per cent. 18.75 per cent. (iii) The property at E-326 is facing a park. The subject property does not face any park. So deduction is at 5 per cent. (-) 5 per cent. (iv) The subject property is facing the Nullah. Deduction for the detriment, therefore, at 5 per cent (-) 5 per cent. (v) The subject property is surrounded by jhuggies and jhompries and Amar Colony which is not a high profile colony. As compared to E-326 which is facing Greater Kailash I on the one side and Nehru Pla....
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.... A Block as the properties in C, D and E Blocks do not have a cluster of jhuggies and jhompries around them or a nullah facing them. Lastly, it has been stated that since the transferor is a distinguished and meritorious officer of the I.P.S. and had worked as an advisor to the Jammu and Kashmir Government he could not be expected to indulge in clandestine deals. It has also been submitted that while making a comparison like should be compared with like and the comparable cases should be in reasonable proximity and should provide similar amenities and advantages. In paragraph 8, it is stated : "We have gone through the written submissions dated November 14, 1993, submitted by the transferee carefully and have also considered the submissions made on behalf of the transferee on the date of hearing. We accept the proposition that while making a comparison like should be compared with like and this order of pre-emptive purchase is being passed keeping in view the general proposition that like should be compared with like. Further it is difficult to accept as a general proposition the contention that the p....
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....gap, FAR, location, nullah and plot size of the subject property. The adjustments to be allowed on account of these factors works out to (+) 18.75 per cent. (+) 3 per cent. (-) 5 per cent. and (-) 10 per cent. The net adjustment accordingly works out to (+) 1.75 per cent. which gives a land rate of Rs. 25,702 per sq. mtr. as against the declared land rate of Rs. 22,570 per sq. mtr. Accordingly, we adopt a land rate of Rs. 25,700 per sq. mtr. and on this basis, the land value of the subject property works out to Rs. 78,64,200 to which the depreciated cost of the structure of Rs. 9,92,618 is to be added which gives the market value of property as Rs. 88,56,818. The difference between the apparent consideration and the fair market value accordingly works out to 26.52 per cent." About C-111, East of Kailash, it is stated that property sought to be transferred by collaboration agreement are not comparable to those which are transferred by outright sale. As regards property A-32, East of Kailash, it is stated : "This property was in occupation of one Sh. D. N. Katyal. The agreement to sell....
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....,99,518 + 9,92,618). The fair market value of the property so worked out is higher than the apparent consideration by 37 per cent. Thus, even on comparison with D-137, East of Kailash, New Delhi, the apparent consideration is lower by 37 per cent." It may be noticed from the above that it is admitted by the appropriate authority that adjustments can be given only on account of time gap, FAR, location, nullah, and plot size of the subject property. If the same thing is adopted in all cases one can appreciate the view of the appropriate authority. A consideration of the orders passed in the batch of writ petitions would show that the appropriate authority has never been consistent. In the writ petition the averments made in the reply and the view taken by the appropriate authority are repeated and, therefore, it is unnecessary to deal with the averments in the writ petition. In reply also the appropriate authority has maintained the same reasoning that is given in the impugned order. C. W. No. 4357 of 1993 : In this writ petition the order for compulsory purchase dated May 28, 1993, is challenged. On May 21, 1987, respondents Nos. 5 and 6 Smt. Jeet Kaur and Mr. Moha....
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....hich was sold on February 18, 1987. This property is a leasehold one but even then the land rate worked out to Rs. 8,350 per sq. mtr. after an adjustment of land tenure (lease-hold and free-hold) FAR time gap and location the net land rate works out to Rs. 7,432 per sq. mtr. If the average of these three sale instances is taken into account the land rate works out to Rs. 7,850 per sq. mtr. Therefore, on this basis, the land value works out to Rs. 7,850 x 375 = Rs. 29,43,750. If the value of structure of Rs. 3,41,000 is further added the total value so worked out comes to approximately Rs. 32,85,000 against the declared consideration of Rs. 23,50,000 which is an excess by 28.5 per cent." On May 18, 1993, the petitioners and respondents Nos. 5 and 6 filed the explanation about the situation of the property. It is stated : "That the locality where the said property is situated is known as Safdarjung Enclave Extension, New Delhi. It is submitted that this locality was not developed by a government agency or by any private colonizer. It is a part of old village known as Arjun Nag....
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....034 at pages 49-65, seller Smt. Chander Kali, purchasers Rajhans Developers (P.) Ltd. dated 17-2-1988. 5,200 Page No : 0418 It is submitted that in this case proceedings were initiated under Chapter XX-C of the Income-tax Act by the appropriate authority and on being satisfied with the value, proceedings were dropped. Copies of notice and order of the appropriate authority are enclosed. (Rs.) 4. Vacant plot No. B-7/26 Plot area 70 sq. mtrs sold for Rs. 3,15,000 on 28-2-1988 4,500 5. Vacant plot No. B-7/119 Area 238 sq. mtrs. sold for Rs. 17,00,000 on 13-10-1992 7,142 About the sale instance property, it is stated in the explanation : "B-1/66, Hauz Khas, New Delhi Firstly, this is situated in a different posh colony. The property is of 163 sq. mtrs sold on February 1987, giving land rate at Rs. 9,741 as per show-cause notice. While the adjoining property No. B-1/17 Hauz Khas, was area 196.66 sq. yds sold on 21-1-1987, for Rs. 12,50,000 giving rate of Rs. 6,377. Similar is the position of other instances cited by the cell, they differ in their situation, size, etc., In any case, it is submitted that these ....
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....1 per cent. on account of FAR (1.625) and 10 per cent. on account of location (sale instance being on main road was made and net adjustment of 16 per cent was arrived at. Therefore, the rate arrived at worked out to Rs. 8,350 X 0.8 percent = Rs. 7,014 per sq. metre. On this basis, the value of land works out to Rs. 7,014 X 375 = Rs. 26,30,250. The total value after addition of depreciated value of structure comes to Rs. 26,30,250 + 3,41,000 = Rs. 29,71,250 even without considering other two sale instances given in the show-cause notice. The value so worked out is 26 per cent, in excess of the apparent consideration Rs. 29,71,250 23,50,000 62,12,500 X 100 23,50,000 On the facts stated above the apparent consideration is clearly understated. It is not necessary to expatiate on the scope of adjustments because there is no law governing the adjustments. In the writ petition, the order is challenged on various grounds and we need not deal with all the points and it is enough to highlight the broad challenge made by the petitioners. It is submitted that the appropriate authority did not disclose to the petitioners how it fixed 22 per cent. as the rate f....
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....ty would state : "As regards the contention now raised regarding conversion charges of leasehold land into freehold on the basis of notification dated February 14, 1992, issued by the Ministry of Urban Development, the same cannot constitute the basis for any rectification. Firstly, this contention was not raised at the time of hearing on May 18, 1993, during the course of proceedings under section 269UD. Besides, this notification cannot be relied upon and made the basis for arguing that an adjustment of only plus 10 per cent. is called for for converting leasehold land into freehold as against the adjustment of plus 22 per cent. made by the appropriate authority on this score. Secondly, this notification is for a limited period up to March 31, 1994, for regularising land deals prevalent in Delhi." From a reading of the order of the appropriate authority and the show-cause notice, we are clear that in assessing the fair market value of the property, well established principles had been ignored. Therefore, there was absolutely no basis in law for the appropriate authority to issue the s....
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....(SC) ; AIR 1967 SC 1427 ; [1967] 2 SCR 703. 6. State of Punjab v. Ramchander Jagdish Chander Chand, AIR 1974 SC 543. 7. Air India v. Nergesh Meerza AIR 1981 SC 1829 ; [1983] 62 FJR 237 . 8. Hari Chand Sarda v. Mizo District Council, AIR 1967 SC 829. 9. Hari Krishna Bhargav v. Union of India [1966] 59 ITR 243 ; AIR 1966 SC 619. He also submitted that arbitrariness in State action is violative of article 14 of the Constitution of India, when we are governed by rule of law, which should be in accordance with the constitutional parameters. He relied upon the following decisions of the Supreme Court : 1. E. P. Royappa v. State of Tamil Nadu, AIR 1974 SC 555. 2. Dr. Amarjit Singh Ahluwalia v. State of Punjab [1975] 3 SCR 82 ; AIR 1975 SC 984. 3. Ramana Dayaram Shetty v. International Airport Authority of India, AIR 1979 SC 1628. 4. Union of India v. Tulsiram Patel [1985] 3 SCC 398, AIR 1985 SC 1416. 5. Olga Tellis v. Bombay Municipal Corporation [1985] 3 SCC 545 ; AIR 1986 SC 180. 6. Paradise Printers v. Union Territory of Chandigarh [1988] 1 SCC 440 ; AIR 1988 SC 354. 7. Mahesh Chandra v. Regional Manager, U. P. Financial Corporation [1993] 78 Comp Ca....
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....] SCR 558. 5. Mrs. Sarojini Ramaswami v. Union of India, AIR 1992 SC 2219 ; [1992] 5 JT 1 (SC). 6. Union of India v. Raghubir Singh [1989] 178 ITR 548 ; [1989] 2 SCC 754. 7. Rukmanand Bairoliya v. State of Bihar, AIR 1971 SC 746. 8. Bhagwathula Samanna v. Special Tahsildar and Land Acquisition Officer, AIR 1992 SC 2298 ; [1991] 4 SCC 506. We have no doubt that the orders of the appropriate authority are subject to the judicial review and as a matter of fact learned counsel, Mr. Rajendra and Midha, appearing for the Revenue, did not contest that proposition. Learned senior counsel, Mr. Madan Bhatia, almost went to the extent of challenging Chapter XX-C before us. The argument no doubt is attractive and absorbing considering it in the context of the categorical pronouncements by their Lordships of the Supreme Court of India. Even so, when the Supreme Court in C. B. Gautam's case [1993] 199 ITR 530, had upheld the constitutional validity of Chapter XX-C, we refrain from entering that arena. We are of the view that the order of the appropriate authority cannot be sustained in law. C. W. No. 3594 of 1990 : In this writ petition, on November 27, 1989, the order for c....
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....Rex. Anagram Finance Ltd. v. Appropriate Authority [1996] 217 ITR 22 (Guj) is a judgment rendered on March 30, 1995, by the Division Bench of Gujarat High Court consisting of C. K. Thakker and Rajesh Balia JJ. In the writ petition, the order dated January 31, 1995, passed by the appropriate authority was challenged in and by which compulsory purchase was made. The Bench noted the contentions on behalf of the petitioner in the following terms (page 24) : "Three-fold contentions have been raised before us by the petitioner. Firstly, it is contended that the petitioner was not afforded adequate opportunity of hearing by not taking proceedings promptly within the time-frame prescribed under the Act and, therefore, the order is vitiated having been made in breach of the principles of natural justice in hot haste at the close of the time barrier. Secondly, it has been contended that the appropriate authority was under obligation to determine the fair market value of the property in question before it could order pre-emptive purchase. Determination of the fair market value of the property soug....
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....ble opportunity of being heard to the transferor, the person in occupation of the immovable property if the transferor is not in occupation of the property, the transferee and to every other person whom the appropriate authority knows to be interested in the property. (1B) Every order made by the appropriate authority under sub- section (1) shall specify the grounds on which it is made'. It is the requirement of the statute that before making any order for pre-emptive purchase, the appropriate authority has to give reasonable opportunity of being heard to the transferor, the person who is in occupation of the property and the transferee and also to every person whom the appropriate authority knows to be interested in the property and thereafter he has not only to reach his satisfaction but record specific grounds for taking action under that provision. A combined reading of section 269UD(1A) and (1B) of the Act leaves no room for doubt that it is a question of objective decision making process by taking into consideration all the relevant materials which have come before the hearing authority and considering the ....
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.... fixing the fair market value. In Krishnakumar Agarwal v. Appropriate Authority [1966] 217 ITR 274 the Division Bench of the Gujarat High Court consisting of Rajesh Balia and M. B. Shah JJ. rendered the judgment on September 19, 1995. The Bench had followed the judgment of the Division Bench delivered on March 30, 1995 (Anagram Finance Ltd. v. Appropriate Authority [1996] 217 ITR 22 (Guj)). The appropriate authority passed the order of compul- sory purchase on April 28, 1995, and that was challenged before the Bench. The order was passed without affording any opportunity to the petitioner against the proposed action of purchasing the property. The court observed (page 279) : "Section 269UD(1B) enjoins a duty on the appropriate authority to specify the grounds on which it decides to pass an order under section 269UD(1). That includes within it an obligation to consider all the relevant materials which are before the appropriate authority in deciding two cardinal premises before it can decide to purchase the property. The foundational facts on which the appropriate authority must be satisfied h....
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....this burden which rests upon him. The assessee may claim to have discharged the burden by relying on the material which is on record in the penalty proceedings.' A somewhat similar view was expressed by the Rajasthan High Court in Addl. CIT v. Noor Mohd. and Co. [1974] 97 ITR 705 (page 714) : 'What quantum of evidence would rebut a legal presumption in a given set of facts does not admit of any rigid rule.' In the present case, on undisputed facts we find that in order to arrive at the finding of the fair market price of the property in question, the matter was referred by the appropriate authority to the Department's own valuer and according to the valuer's report, the very premise of raising a presumption of evasion was not there inasmuch as according to undisputed pleadings, the apparent consideration disclosed in the agreement was equal to the fair market value of the property determined by the official valuer. In the face of a fair market value of the property under consideration itself having been determined, what weighed with the appropriate authority to discard the fair market value of the property under consideration and to fall back on the consideration of SIP an....
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....K. Thakker and Rajesh Balia JJ.) dealt with the matter and the judgment was rendered on June 26, 1995. In this case the order of the appropriate authority dated April 28, 1995, was challenged. Dealing with the challenge, the court observed (page 34) : "Various contentions were raised by Mr. J. P. Shah, learned counsel for the petitioner. It was submitted that the exercise of the power was beyond jurisdiction as there was no allegation of avoidance and evasion of tax by the parties. In the absence of such allegation, exercise of the power was bad in law. Mr. Shah also submitted that no positive finding has been recorded by the appropriate authority as to how it came to a definite conclusion that the apparent and discounted consideration of the property under consideration was understated by more than 15 per cent. This is a sine qua non or condition precedent for exercise of the power under Chapter XX-C and as the said condition is not fulfilled, the order requires to be quashed. Mr. Shah vehemently contended that the appropriate authority has committed serious error in placing relianc....
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....ty was much more than the one available to the property under consideration. The appropriate authority observed : 'Though the frontage is narrow, it does not affect the value of the property under consideration substantially compared to the sale instance property . . .' Mr. Shah rightly contended that it cannot be said that the narrow frontage does not affect value of the property. Regarding shape also, the appropriate authority was not right in not allowing deduction particularly when it did not dispute the submission of the petitioner that the property under consideration was having an odd shape. Again, the appropriate authority has committed an error of law on the face of the record in observing that though the frontage of the property under consideration was narrow on the 30' wide T. P. Road, whereas the sale instance property was having a wide road. It would not affect the value of the property under consideration substantially compared to the sale instance property inasmuch as the sale instance property, due to its proximity to the High Court, suffered from the problem of t....
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....incumbent upon the appropriate authority to come to a positive finding and definite conclusion that the property was undervalued. In the absence of such a finding or conclusion, no order under section 269UD(1) can be made. A similar question arose before us in Special Civil Application No. 869 of 1995-Anagram Finance Ltd. v. Appropriate Authority [1996] 217 ITR 22 (Guj) decided by us on March 30, 1995. Considering the relevant provisions of the Act as also the decision of the Hon'ble Supreme Court in Barium Chemicals Ltd. v. Company Law Board [1966] 36 Comp Cas 639 ; AIR 1967 SC 295, we observed (at page 28) : 'The combined reading of section 269UD(1A) and (1B) of the Act leaves no room for doubt that it is a question of objective decisionmaking process by taking into consideration all relevant materials which have come before the hearing authority and considering the rival aspects of the matter. Moreover, the requirement of law is to specify the grounds on which the order of pre-emptive purchase is made. That obligation does not stop by merely rejecting the submissions made before it. The....
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....d (1B) of the Act leaves no room for doubt that it is a question of objective decision-making process by taking into consideration all the relevant materials which have come before the hearing authority and considering the rival aspects of the matter. Moreover, the requirement of law is to specify the grounds on which the order of pre-emptive purchase is made. That obligation does not stop by merely rejecting the submissions made before it. The rejection of submissions made by the vendors or the transferee or the persons interested in the property, does not lead to a consequence that grounds for making pre-emptive purchase exist. The sine qua non is that the reasons must exist on the material placed before it, for supporting the action taken for pre-emptive purchase under section 269UD of the Act. The order clearly falls short of this requirement.' In our opinion, the point is concluded by the above decision also. Since no satisfaction has been arrived at by the respondent authority on the basis of objective facts and no reasons have been recorded for coming to a positive conclusion as to why there was difference of more than 15 per cent., the order cannot be said to be in accor....
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....statement, without recording the conclusion of the appropriate authority himself, about a nexus between understatement of consideration and attempt to tax evasion, it is not permissible to raise presumption that the appropriate authority has also found that such understatement was an attempt to evade the tax when such an order is challenged before courts. It is also to be seen that for element of a nexus being present with the understatement of consideration and attempt to evade tax, it is essential that the apparent consideration is not the real consideration. Therefore, merely on the finding that the apparent consideration is less than fair market value without there being any satisfaction that the apparent consideration is not the real consideration, the nexus cannot be established with an attempt to evade tax. Therefore, it is also necessary in the chain of decision-making not only to arrive at the conclusion of the differentiation between the fair market value and the apparent consideration but it is required that the fair market value of the property concerned is arrived at and a conclusion is reached that the apparent consideration is not the real consideration." After re....
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....should be told the nature of allegations against him including the material collected so far by the competent authority, and be furnished copies of the statements recorded and those of the documents collected by the competent authority on which he intends to rely so as to give the person interested or affected an opportunity to state his case and to correct or controvert the material sought to be relied upon, and the competent authority should act in a just manner at all stages of such inquiry which would necessarily imply that the authority shall furnish any other additional material which it might have collected after the initiation of the proceedings in the course of the inquiry to the person interested or affected by the proposed acquisition. . . ." And then the Bench observed that "we are in respectful agreement with the above observation." The Allahabad High Court set aside the order and quashed the order on the ground that the two months period had expired and, therefore, it was not a fit case for remittal. In Gangadhar alias Tatya Shed Bhawanrao v. Appropriate Authority [1996] 220 ITR 579, the Gujarat High Court had again an occasion to deal with the point. The Bench ....
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....nial of opportunity of being heard resulting in violation of the principles of natural justice which would vitiate the proceedings." In Smt. Varshaben Bharatbhai Shah v. Appropriate Authority [1996] 221 ITR 819, the Division Bench of the Gujarat High Court consisted of B. C. Patel and R. M. Doshit JJ. and the judgment was delivered on February 5 and 6, 1996. The court considered the question about non-observance of principles of natural justice. The court noted (page 830) "The appropriate authority took into consideration the material provided by the Valuation Officer in detail but the same is not supplied to the petitioner." The court also noted (page 830) : "It is not disputed that the reports in detail are not supplied to the petitioner." At page 831, the court posed the question and answered it in the following terms : "Can it be said that sufficient opportunity is afforded even when parties are called upon to contradict the conclusion arrived at for valuation without providing the reports of the....
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....hing such a report, it cannot be said to be a real hearing or a fair hearing but can be said to be an empty formality." In Ashis Mukerji v. Union of India [1996] 222 ITR 168, a Division Bench of the Patna High Court D. P. Wadhwa C. J. (as His Lordship then was) and S. J. Mukhopadhaya J. considered the validity of the order passed by the appropriate authority on July 11, 1996. The Division Bench besides quashing the order of the appropriate authority set aside the order of taking possession of the property and declared that the property shall revest in the writ petitioner. In Mrs. Nirmal Laxminarayan Grover v. Appropriate Authority (Income-tax Department) [1997] 223 ITR 572, the Division Bench of the Nagpur Bench of the Bombay High Court had an occasion to deal with the challenge on the order passed by the appropriate authority. The Division Bench came to the conclusion that in the absence of specific rules and guidelines the appropriate authorities would act only arbitrarily. The passage at page 586 brings home the point : "Moreover, there is no material to show that in a period of one year and two months, the market value of the land in the Civil Lines area would apprecia....
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....ion from which the inference must clearly flow that it is done for evasion of taxes. As regards the principles relating to the comparable sale instances, the said principles are well settled by the judgments of the Supreme Court regarding the determination of market value of the acquired land under the Land Acquisition Act which principles can usefully be resorted to in the determination of the question of gross undervaluation of the market value of the property in question which are the subject-matter of compulsory purchase under Chapter XX-C of the Act. As pointed out hereinbefore, the sale instance relied upon by the appropriate authority cannot be said to be a comparable sale instance and, therefore, cannot furnish a good guide for determining the market value of the suit land." The court further observed (page 593) : "There is also force in the contention raised on behalf of the petitioner that in the absence of the particulars of the material or the reason(s) being disclosed in the show-cause notice for entertaining a tentative or a prima facie view that the value of the suit l....
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....ve to meet.' It must be then seen that the conclusions of the authority at the stage of giving a show-cause notice are always prima facie or tentative conclusions for, if it is not so, its ultimate order would suffer from its bias, i.e., its pre-determined mind. However, because its conclusions at the stage of show-cause notice are only prima facie or tentative conclusions, it would not mean that they are not required to be disclosed in the showcause notice. The above stand taken by the respondents in their return is thus wholly misconceived and is untenable. In fact, it betrays the ignorance of the respondents about the basic tenets of the principles of natural justice which we have referred to above as requirements of a proper show-cause notice." Dealing with the contentions on behalf of the Revenue that the inquiry was summary in nature and, therefore, the appropriate authority was justified in adopting its own procedure and methods, the court observed (page 595) : "As regards the other reason given by the respondents for dispensing with the requirement of giving reason(s) o....
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.... possession before taking action under section 269UD(1) of the Act, the question of time-frame and summary nature of enquiry has no relevance to the question of incorporating in the showcause notice the particulars of the material in the possession of the appropriate authority on the basis of which it entertains a view that the property in question is grossly undervalued. The petitioner is, therefore, clearly prejudiced in her defence since the relevant material upon which the prima facie view of the appropriate authority that the property in question is undervalued is based is not disclosed in the show-cause notice given to her. The impugned order of the appropriate authority passed pursuant to such a defective show-cause notice is thus illegal and is vitiated for not being in consonance with the basic principles of natural justice. In the light of the view taken by us above, it cannot be held that the appropriate authority has proved by clear and cogent material on record that the suit land is significantly undervalued, which is a criteria laid down by the Supreme Court for compulsory purchase of immovable property under section 269UD(1) of the Act in C. B. Gautam's case [1....
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....come. (2) There is a rebuttable presumption of tax evasion where the fair market value of the subject property exceeds the apparent consideration by 15 per cent. (3) The passing of a pre-emptive purchase order under section 269UD(1) of the Act implies tax evasion and imputation of tax evasion adversely affects the reputation and image of the concerned parties and, therefore, the purchase order shall not be made lightly and in routine. (4) The burden lies on the authority to establish that the apparent consideration falls short of the market value by more than 15 per cent. and it never shifts ; only the onus continues shifting from one to another. (5) The parties are entitled to be supplied entire material relied upon by the authority including the valuation reports on record. (6) The imputation of tax evasion or concealment of income cannot be mechanically or lightly made without due regard to the explanation of the affected parties and meticulous examination of instances of comparable properties cited by the affected parties and the peculair circumstances resulting in the reduction of the value of the property. (7) It is impermissible to pass a pre-emptive purcha....
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....not ordinarily be taken into consideration for determining its fair market value. (19) General guidelines and criteria to make adjustments on account of time, locations, size of plot, etc., for comparing values of different properties, to determine the fair market value of the subject property, shall be made known to the public and shall not be kept a guarded secret. (20) In determining the fair market value of a property, regard must be had to the field realities, such as long delays taking place in courts in getting possession from bona fide tenants in cases where tenants have protection of rent laws and also in cases where suits for possession are filed under the Transfer of Property Act. (21) The fair market value of a property cannot be determined by theoretical considerations in an abstract manner by applying multipliers and arbitrary adjustments since, as far as possible, the actual value of a property in the market is required to be determined for action under Chapter XX-C of the Act. (22) The element of guess work inherent in most cases involving determining of market value has not to be taken as a factor against the citizens. (23) For determining undervalua....
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.... 63 per cent. of the value of sale instance properties. The authority has also considered two offers made to it though it is claimed that the said offers were not made the basis of the purchase order but it only corroborated other evidence on record showing under valuations. The agreement in respect of property G-18, Maharani Bagh, being one of the sale instance properties taken into consideration for determining the fair market value of the property, had been entered into on June 25, 1991. On account of the time gap of 24 months, the adjustment of plus 24 per cent. was made. In another sale instance property being G-8, Maharani Bagh, there was basement potential and, therefore, adjustment of minus 10 per cent. was made by the authority on that count. The impugned pre-emptive purchase order is utterly perverse. There is nothing on record to suggest as to what were the special reasons for making a purchase order in respect of almost wholly tenanted property. Assuming there was some justification for the authority to initiate proceedings for the pre-emptive purchase of the property under Chapter XX-C of the Act, the method of valuation of the fair market value had to be just....
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....mtrs. including 830.95 sq. mtrs declared excess land under the Urban Land Ceiling Regulation Act. The net area of the plot under the property, therefore, 2762.32 is 2,364.37 sq. mtrs. The property was agreed to be sold for an apparent consideration of Rs. 1.75 crores under agreement dated February 1, 1991. The earlier order for preemptive purchase made in respect of this property on April 18, 1991, by the authority was set aside by this court on March 1, 1993, in view of the decision of the Supreme Court in C. B. Gautam's case [1993] 199 ITR 530 and the matter remanded to the authority for fresh examination. Thereafter, the show-cause notice dated May 21, 1993, was issued by the authority and the impugned pre-emptive purchase order was made on May 28, 1993. This property is also tenanted. The facts noticed in the impugned order passed by the authority show that from January 1, 1974, the lessee of the property was Jain Shudh Vanaspati Ltd., at a monthly rent of Rs. 4,000 for the residence of Vinod Kumar Jain who had been in occupation of the said property as director of the lessee-company. In terms of a lease deed dated December 1, 1983, the entire property was leased to Vinod Ku....
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....rational. In respect of the subject property whereof there is so much of litigation, the authority labours under the belief that the period of lease agreement having already expired and the tenancy after the lease period being monthly, there could be no question of the tenant not being evicted. Under these circumstances 5 years deferment formula was applied for determining the market value and net rent capitalisation method. It has to be borne in mind that the monthly rent was only Rs. 4,000. It also deserves to be noticed that though the sale instance of property No. 60 was taken into consideration for determining the fair market value of the property in question but it has now come on record that in respect of property No. 60, Friends Colony, agreement dated December 5, 1990, for Rs. 2.65 crores did not materialise. The seller forfeited Rs. 25 lakhs and the said agreement was cancelled and under a subsequent agreement of September 1991, the property was sold at Rs. 2.40 crores. On that agreement "no objection certificate" was granted by the appropriate authority. According to the approach of the authority, if on account of nominal rent of Rs. 4,000 like the one in respect of prop....
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.... impugned order of preemptive purchase was made by the authority on July 28, 1994. The sale instances given in the show-cause notice and confirmed under the impugned order for determining the fair market value of the property are : (1) 4, Palam Road, Vasant Vihar. (2) N-119, Panchsheel Park, New Delhi. (3) A-95, Neeti Bagh, New Delhi. In respect of the Vasant Vihar property the agreement to sell was dated August 20, 1993, in respect of the Panchsheel Park property the agreement was dated September 29, 1993, and in respect of the Neeti Bagh property the agreement was dated October 28, 1993. After plus and minus adjustments on account of time gap, locational difference of the colony and the plot, etc., the unit land rate per sq. mtr. was worked out to Rs. 33,440 by applying the sale instance of Vasant Vihar property, Rs. 41,460 on the basis of Panchsheel Park property and Rs. 34,172 per sq. metre on the basis of Neeti Bagh property. The sale instances given by the transferor and the transferee in respect of property B-13, Greater Kailash Enclave I, B-16, Panchsheel Park, and B-4, Greater Kailash Enclave I, where the agreements had been executed on January 17, 1994, May 27....
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....es. The impugned order thus cannot be sustained and deserves to be quashed. C. W. No. 3139 of 1993 : The property in issue in this petition is Flat No. 2 on 4th Floor Neelgiri Apartments, 9, Barakhamba Road, New Delhi. The petitioners who are purchasers are husband and wife. They are doctors by profession. Under the agreement dated June 25, 1991, the flat in question was agreed to be sold to the petitioners for a sum of Rs. 29 lakhs plus 15 per cent, other charges. The pre-emptive purchase order made by the authority on August 23, 1991, was set aside by this court by judgment dated March 1, 1993, in view of the decision of the Supreme Court in C. B. Gautam's case [1993] 199 ITR 530. Thereafter, show-cause notice dated May 10, 1993, was issued to the transferor and transferee relying upon the sale instance of Flat No. 4 on the third floor of the same building said to have been agreed to be sold for Rs. 38 lakhs, as per agreement dated May 30, 1991, and having the built up area of 1341 sq. ft. The built-up area of the flat in question is 1411 sq. ft. The unit rate of the sale instance flat was worked out at Rs. 2,834 per sq. ft. and on that basis value of the subject flat was w....
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...., if compared with the rate of comparable flat at Rs. 2,898 would be 6.25 per cent. It may also be noted that the case of the petitioners before the authority was that Barakhamba Road being a very busy road, it is subject to heavy air and noise pollution and hence the flat of residential purpose in the front complex has disadvantage. The authority erroneously rejected the value of the flat on the first and third floor in respect of which permission has been granted on the ground that the said sales were much prior to the date of agreement. In other cases noticed hereinbefore the authority had by applying adjustment taken into consideration the instances of the sale effected about two years prior to the date of the agreement. Further, from the material placed on record, it appears, that Rs. 23,30,924 was tendered by the Central Government to the vendor on September 6, 1993, which was beyond the stipulated period under section 269UG(1), thereby attracting the rigours of section 269UH resulting in the abrogation of the purchase order. The purchase order deserves to be quashed. CWP No. 3726 of 1994 : Flat No. 84 in Greater Kailash Part I, New Delhi, on the first floor wa....
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....f money. The question, however, is not about the prudence of the transferors to sell the property to the transferee because the transferors wanted immediate payment but is whether there is any attempt to evade tax. The factor that the subject property was agreed to be sold to an immediate neighbour who also gave about 70 per cent. amount as advance, cannot be rejected only on the ground that only transactions between the relatives on account of natural love and affection can be considered for a value lesser than market value. The whole concept of distress sale, in so far as applicable to such matters, has been completely misunderstood by the authority. Further, the subject flat was constructed in the year 1986 and was compared by the authority with a flat constructed in the year 1993 alleged to have specification of a five star hotel by merely stating, without any material on record, that the difference of specification in construction was negligible. At the same time, the sale instance of flats at E-273, Greater Kailash in ground floor under agreement dated March 31, 1993 for Rs. 17,55,000 relied upon by the parties was ignored on the ground that the construction was old. The s....
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....consideration disclosed is understated by more than 15 per cent. The land rate of the subject property has been worked out at Rs. 29,659 per sq. mtr. The land rate of C-77 agreed to be sold at Rs. 99 lakhs including conversion charges as per agreement dated December 22, 1993, has been worked out at Rs. 35,838 per sq. mtr. and it is concluded that the total value of the subject property is about 20 per cent. higher than the apparent consideration. It is stated to be lower by 43.6 per cent. when compared to the sale instance property C-86 agreed to be sold for Rs. 1.25 crores as per agreement dated July 19, 1994. It was strenuously contended before the authority by the petitioners that the sale instance properties were not comparable on account of various factors including the nature of construction and disadvantage of the location of the subject property, the same facing the servant quarters of E-Block and also that the subject property was under litigation and the proceedings were pending in a court of law. The authority ignored the pending litigation factor by, inter alia, stating that the order dated May 27, 1994, passed by the Additional District Judge restraining the sale, t....
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....ccount of litigation had been discounted by 10 per cent. as was done in other cases while considering the fair market value, the apparent consideration of the subject property would have been within permissible limits, when compared with the sale consideration of property No. C-77, Defence Colony. Apart from the above, the authority without any just cause rejected the explanation pertaining to property at C-86 that it was a centrally air- conditioned property and thus not comparable by merely observing that the said fact only showed that the value of the property C-86 was slightly more. It failed to consider that the value of a centrally air-conditioned property could not have been taken into view to value the subject property. Looking from any angle, we find it difficult to sustain the impugned order of pre-emptive purchase and, therefore, the same is set aside. C. W. P. No. 5613 of 1993 : Under the agreement dated August 28, 1993, respondent No. 3-Ved Prakash Marwaha, agreed to sell to the petitioner the property A-3, East of Kailash, measuring 300 sq. mtr. for Rs. 70 lakhs. The sale instance considered by the appropriate authority for coming to the conclusion that th....
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....incomparables and declining to compare the instance of comparable properties. In this view the impugned order of pre-emptive purchase deserves to be quashed. C. W. P. No. 4357 of 1993 : Under agreement dated May 21, 1987, property bearing No. B-7/118, Safdarjung Enclave Extension, having plotted area of 375 sq. mtr. was agreed to be sold for Rs. 23.50 lakhs. The order of pre-emptive purchase made on July 10, 1987, was set aside in C. W. P. No. 2275 of 1987 decided on March 1, 1993, in view of the Supreme Court decision in C. B. Gautam's case [1993] 199 ITR 530. Thereafter, the authority issued show-cause notice dated May 11, 1993, wherein it was stated that prima facie apparent consideration of the subject property was low as compared to other sale transactions. Reference has been made by the authority in the show-cause notice to the land rate per sq. mtr. in respect of property No. B-1/16, Hauz Khas, New Delhi, which sale took place in February, 1987 ; sale instance of property No. J-10, Green Park, and yet another sale instance of B-2/ 2, Safdarjung Enclave, sold in February, 1987. The average of three sale instances was taken into account to work out the land rate of Rs. 7....
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....ncomparable sale instances has been absence of any guidelines, norms and standard to determine the fair market value of the properties. The mode and manner for determining the fair market value has to be fair, just and reasonable and not arbitrary. The authority has been applying different yardsticks in different cases. Though in determining the fair market value of a property, there has to be some element of guess work, that does not mean that the basic facts to be taken into consideration should differ from case to case and should depend upon as to who are the members of the authority. Such a course would be arbitrary and violative of article 14. There is reasonable likelihood of arbitrariness stepping in while determining the fair market value of properties in the absence of any norms and guidelines for addition and/or deduction. The impugned order deserves to be quashed. C. W. P. No. 3594 of 1990 : In this case the impugned pre-emptive purchase order dated November 27, 1989, has been made by the authority in respect of Property No. 756, Asian Games Village, which was agreed to be sold for Rs. 20 lakhs in terms of the agreement dated September 14, 1989. The responden....