TaxTMI 
TaxTMI 
1994 (7) TMI 64
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....ration of Rs. 29.50 lakhs. Of the said consideration, an amount of Rs. 1 lakh was payable as earnest money on the execution of the agreement while the balance amount of Rs. 28.50 lakhs was to be paid on the completion of the sale. Clause 8 of the said agreement provided that the sale would be completed on the payment of the balance consideration of Rs. 28.50 lakhs by the purchasers to the petitioners within seven days of the receipt of the approval of the appropriate authority under section 269UD of the Act. The petitioner filed a statement in Form No. 37-I together with a copy of the agreement of sale in the office of the appropriate authority on December 19, 1990. The appropriate authority, on the basis of the said statement passed an order under section 269UD(1) of the Act on February 26, 1991, for purchase of the aforesaid property by the Central Government. Aggrieved by the above order, the petitioner filed a writ petition in this court which was numbered as Writ Petition No. 912 of 1991. The said writ petition was disposed of by a Division Bench of this court by order dated December 16, 1992, following the decision of the Supreme Court in C. B. Gautam v. Union of India [1993]....
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....-------------------------------------------------------------------------------------------- (1) (2) (3) (4) (5) (6) (7) ------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. 1. 4262 30-3-1989 Flat No. 2 23,79,000 2,537 Second floor obstructed sea view, (Transaction 1 year 9 months old) 2. 4443 10-5-1989 Flat No. 10, 40,23,529 2,504 5th floor 5th Floor distant sea Reshma view Apartments, (Transaction 1 Pali Hill, year 7 Bandra month old) 3. 6250 3-8-1990 Flat No. 41A, 28,98,537 2,505 4th floor, no Land Breeze, sea-view Pali Hill, Bandra. ------------------------------------------------------------------------------------------------------------------------------------------------- It was observed that the apparent rate of Rs. 2,189 per sq. feet of B. U. A for the flat in question was obviously low compared to sale instances Nos. 1, 2 and 3 and that the transfer was ostensibly proposed to take place at a substantially low rate and that in the circumstances, the appropriate authority was satisfied that it was a fit case for exercise of the pre-emptive right of p....
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....sed for any practical purposes as the sewerage pipes which ran along the terrace caused a severe nuisance to its user and there was no privacy as the same was surrounded all around. The petitioner also relied upon a number of sale instances to show that the consideration reflected in the agreement of sale entered into between the petitioner and the intending purchasers was by no means inadequate. The petitioner also pointed out the difference between the flat of the petitioner and the flats in the sale instances mentioned in the show-cause notice and stated that the building in which the flats referred to in the sale instances were situated were most affluent and luxurious buildings. The petitioner also cited the following instances of sale of flats in the same locality wherein no objection certificates had also been granted by the appropriate authority. ------------------------------------------------------------------------------------------------------------------------------------------------ Sl. Building/ Date of Rate/ Parties No. Flat No. agreement sq. ft. -------------------------------------------------------------------------------------------------------------------....
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....) are made only in such cases where the appropriate authority is fully convinced that after allowing some margin for error, the fair market value is definitely more by 15 per cent. than the apparent consideration." The appropriate authority even failed to take note of the fact that the agreement of sale in the instant case had been entered into on December 5, 1990, and the first instance given by the petitioner was of an agreement of sale dated September 27, 1990, and the other instances of agreements of sale were all of January, 1991, which were nearest in time to the agreement entered into by the petitioner for the flat in question, whereas the sale instances referred to by the appropriate authority in its show-cause notice were much older in time. The dates of agreements of sale in the three instances given by the appropriate authority are March 30, 1989, May 10, 1989, and August 3, 1990, respectively. The matter was not examined from this angle. The appropriate authority reiterated the sale instances set out in the reasons recorded by it where in the case of Navroz building the agreement was signed on March 30, 1989, and the rate worked out to Rs. 2,537 per sq. ft. In the case....
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.... furnished by the petitioner. "The instances relied upon and referred to by the Department are as under: -------------------------------------------------------------------------------------------------------------------------------------------------- Sl. No. Rate per sq.ft. Less 15 per cent Net amount -------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. Rs. 1. 2,537 380.55 2,156.45 (Non-discounted) 2. 2,504 375.60 2,128.40 3. 2,505 375.75 2,129.25 ------------------------------------------------------------------------------------------------------------------------------------------------ The amount per sq. ft. of item No. 1 is without discounting. The discounted rate of subject flat of petitioner is Rs. 2,189 per sq. ft." On the basis of the above calculation, it is stated that even if the sale instances relied upon by the appropriate authority are taken into consideration, there is no undervaluation in excess of 15 per cent. of fair market value which is a condition precedent for exercise of jurisdiction under Chapter XX-C of the Income-tax Act. It was further sta....
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....oint out that the very fact that the impugned order itself records in paragraph 7 regarding the fourth sale instance referred to and relied upon by the petitioner that the rate per sq. ft. was Rs. 2,367 and not Rs. 2,205 as alleged, which shows that there could be a need to check regarding the correctness and/or applicability of the other three instances. However, even if someone has got an unintended benefit or even an undeserved benefit in some instances, it is my respectful submission that this is no ground for the petitioner to claim an advantage based thereon unless mala fides or arbitrariness or deliberate discrimination in favour of these parties were to be alleged." We fail to appreciate the above contentions of the respondents. When the fair market price is to be determined on the basis of comparable sale instances, every sale instance relied upon by the appropriate authority or by the aggrieved party has to be considered on its own merits. The appropriate authority cannot act relying upon the sale instances given by it, ignoring the instances given by the aggrieved parties. In the instant case, the sale instances furnished by the aggrieved party were disregarded without ....
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....), or in any other law for the time being in force, no transfer of any immovable property of such value exceeding five lakh rupees as may be prescribed, shall be effected except after an agreement for transfer is entered into between the person who intends transferring the immovable property (hereinafter referred to as 'the transferor') and the person to whom it is proposed to be transferred (hereinafter referred to as 'the transferee') in accordance with the provisions of sub-section (2) at least four months before the intended date of transfer. (2) The agreement referred to in sub-section (1) shall be reduced to writing in the form of a statement by each of the parties to such transfer or by any of the parties to such transfer acting on behalf of himself and on behalf of the other parties. (3) Every statement referred to in sub-section (2) shall, (i) be in the prescribed form ; (ii) set forth such particulars as may be prescribed ; and (iii) be verified in the prescribed manner, and shall be furnished to the appropriate authority in such manner and within such time as may be prescribed, by each of the parties to such transaction or by any of the parties to such transaction ....
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....ation referred to in the second proviso shall be reckoned, where any stay has been granted by any court against the passing of an order for the purchase of the immovable property under this Chapter, with reference to the date of vacation of the said stay. (1A) Before making an order under sub-section (1), the appropriate authority shall give a reasonable 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. (2) The appropriate authority shall cause a copy of its order under sub-section (1) in respect of any immovable property to be served on the transferor, the person in occupation of the immovable property if the transferor is not in occupation thereof, the transferee, and on every other person whom the appropriate authority knows to be interested in the property." The validity of these sections was challenged before the Supreme Court in C. B. Gautam v....
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....uant to the explanation given by the intending purchaser or the intending seller might be a somewhat limited one or a summary one but we decline to accept the submission that the time-limit provided is so short as to preclude an enquiry or show cause altogether." In the light of the above observations, the Supreme Court concluded as follows : "...we are clearly of the view that the requirement of a reasonable opportunity being given to the concerned parties, particularly, the intending purchaser and the intending seller must be read into the provisions of Chapter XX-C. In our opinion, before an order for compulsory purchase is made under section 269UD, the intending purchaser and the intending seller must be given a reasonable opportunity of showing cause against an order for compulsory purchase being made by the appropriate authority concerned. 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, as evidenced by the apparent consideration being lower than the fair market value by 15 per cent. or more. We have further pointed ou....
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....orted to only when there is significant undervaluation in the agreement of sale with a view to evade tax. (ii) An order of compulsory purchase of immovable property can be made only if the appropriate authority is satisfied that in the agreement to sell immovable property, the apparent consideration as shown in the agreement is less than the fair market value by 15 per cent. or more. In such a case the appropriate authority may draw a presumption that this undervaluation has been done with a view to evade tax. (iii) Though a presumption of attempt to evade tax could be raised by the appropriate authority concerned in case the aforesaid circumstances are established, such a presumption is rebuttable and this would necessarily imply that the concerned parties must have an opportunity to show cause as to why such a presumption should not be drawn. (iv) A reasonable opportunity of being heard and to show cause should be given to the concerned parties, particularly the intending purchaser and the intending seller. (v) There might be several bona fide considerations which may induce the seller to sell his immovable property at less than the fair market value such as : (a) he might be....
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....particulars on the basis of which the appropriate authority could have located the properties in question had been furnished by the petitioner. An order passed merely on the basis of the sale instances given by the appropriate authority without considering the sale instances referred to by the aggrieved parties and setting out cogent reasons for not acting upon them, cannot be a proper and valid order. Moreover, in the instant case it is evident from the chart furnished by the petitioner which has been set out earlier, that the apparent consideration shown in the agreement for sale is not less than the fair market value of any of the properties mentioned by the appropriate authority in its show-cause notice by 15 per cent. or more, which might give rise to the presumption of undervaluation with a view to evade tax. Besides, in the instant case, no fair market value of the property in question has been determined by the appropriate authority. Merely three instances of sales have been set out in the order, where also the rate per square foot built-up area is Rs. 2,504, Rs. 2,505 and Rs. 2,507, respectively. It is well-settled that though certain properties may be similar, each proper....
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....e not comparable with the property under consideration is on the appropriate authority. The assessment of the appropriate authority in this regard should be objective and based on careful analysis of comparable cases and on sound reasons. This is a delicate task, more so because of the fact that ordinarily no two properties are alike. In applying the comparative sale method of valuation, the appropriate authority should compare the apparent consideration with the market value reflected in the most comparable instance, whether furnished by the authority or the aggrieved parties, which provides the index of market value. The proximity from the time angle and proximity from the situation angle are also relevant considerations for ascertaining the most comparable instance. Having identified the instances which provide the index of market value, the price reflected therein may be taken as the norm and the market value of the property under consideration may be deduced by making suitable adjustments for the plus and minus factors vis-a-vis property under consideration by placing the two in juxtaposition. The balance-sheet of plus and minus factors may be drawn for this purpose and the re....