Vidarbha Engineering Industries ... vs Union Of India (Uoi) And Anr.
2004 Latest Caselaw 198 Bom

ORDER UNDER SECTION 269UDAlleged distress sale--Details not given in Form No. 37-I

Catch Note:

After considering collaboration agreement entered into by petitioners for development of a industrial plot into commercial one and consideration payable to owner of plot, the Appropriate Authority passed an order after filing of Form No. 37-I. The petitioners contended that it was a distress sale.

Held : The order passed under section 269UD(1) was based on fair market value determined on basis of comparable sale instances as the petitioner did not furnish details in Form No. 37-I to show that it was effected under compelling circumstances and also the transferor did not get any cash amount from transferee on the date of transfer of immovable property.

Ratio:

In view of non furnishing of relevant details in Form No. 37-I pointing out distress sale, the order under section 269UD(1), passed after determining fair market value on the basis of comparable sale instances, was valid.

Held:

In the present case the sale instance which is made the basis to show the fair market value is from the adjoining area and because of similarity in location as well as proximity with the land in question, the authorities were right in holding that the transaction in question can be compared with the said sale instance and were justified in further holding that consideration of the sale transaction in question is understated by 15 per cent. [Para 30]

It is, the duty of the transferor and transferee to give all necessary details in Form No. 37-1 itself, such as whether the property in question is free from encumbrances or is an encumbered property, the nature of encumbrances, details as to whether the sale is required to be effected for compelling circumstances, such as refund of loan, redemption of mortgage, for satisfying decree of the civil court, etc.

In a situation like this, the appropriate authority is empowered to release such property from the ambit of pre-emptive purchase contemplated under section 269UD of the Income Tax Act even though the consideration for such property is less than 15 per cent of the fair market value. However, the above referred details must be mentioned by the transferor or transferee in the agreement or form provided in sub-sections (2) and (3) of section 269UC. In the instant case, the petitioners furnish any details referred to hereinabove in Form No. 371 and in the absence thereof, it will be difficult for us to hold that the appropriate authority failed to consider these aspects and, therefore, the impugned order cannot be held to be invalid in such circumstances. [Para 33]

In the instant case, the petitioners failed to discharge this burden by placing appropriate material before the department and, therefore, the impugned order cannot be held to be bad in law. Similarly, the petitioner/transferor was not getting any cash amount from the transferee on the date of the transfer of immovable property in question and as per agreement, even the constructed area to be transferred to the transferor was after the period of three years and, therefore, the appropriate authority rightly rejected the ground of distress sale. Hence, there is no merit in the contention of the petitioners in this regard. [Para 35]

Decision:

In revenue's favour.4

Cases Referred:

Dy. CIT v. Express Towers (P) Ltd. (2001) 249 ITR 556 (SC), Express Towers (P) Ltd. v. Dy. CIT (1998) 231 ITR 318 (Del), C. B. Gautam v. Union of India (1993) 199 ITR 530 (SC), Mrs. Nirmal Laxminarayan Grover v. Appropriate Authority (1997) 223 ITR 572 (Bom), M. P. Poddar (HUF)v. Appropriate Authority (2002) 253 ITR 639 (SC).

Prabhakar Manoharrao Deshpande v. Appropriate Authority (2004) 266 ITR 292 (Bom), Ramesh Bhai J. Patel v. Union of India (2001) 247 ITR 182 (SC) and Vimal Agarwal v. Appropriate Authority (1994) 210 ITR 16 (Bom).

Income Tax Act, 1961 Section 269UD

JUDGMENT

D.D. Sinha, J.

1. Heard Shri Manohar, learned counsel for the petitioners, and Shri Jaiswal, learned counsel for respondent No. 2.

2. The petition is directed against the order dated July 29,1994, passed under section 269UD(1) of the Income-tax Act, 1961, as well as order dated April 11, 1997, passed by the appropriate authority whereby application filed by the petitioners for withdrawal of Form No. 37-1 was rejected.

3. Shri Manohar, learned counsel for the petitioners, states that petitioner No. 1 is an exclusive owner of plots Nos. 34, 35 and 36 situated at Industrial Area Scheme, N. I. T., Dahipura, and Untkhana, Rambagh Road, Nagpur. Petitioner No. 1 entered into a memorandum of understanding (MOU) with petitioner No. 3 to develop plots Nos. 34, 35 and 36 subject to conversion of use of plot from industrial to commercial. The memorandum of understanding records that the property will be developed by petitioner No. 3 fully at his expenditure and cost. Petitioner No. 1 would be entitled to 22 per cent, of the said developed commercial property and petitioner No. 3 shall get 78 per cent, of the developed property. It was also agreed that petitioner No. 3 shall give interest free deposit of Rs. 10,00,000 to petitioner No. 1.

4. Learned counsel, Shri Manohar, further states that a detailed collaboration agreement was entered into between petitioners Nos. 1 to 3 on March 17,1994. It is stated in the agreement that in so far as total area admeasuring 27,886 square feet is concerned, it would be the responsibility of petitioner No. 3 to get the user of this land changed from industrial to commercial. Clause 4.4 provides that petitioner No. 3 shall make all construction at his own cost. Clause 4.6 states that constructed area shall be shared in the ratio of 22 : 78 between petitioners Nos. 1 and 3. Other relevant clauses of the agreement are 4.7, 4.14, 4.18 and 4.21. Petitioner No. 1 filed a statement under section 269UC of the Income-tax Act on April 19, 1994. In the said declaration, the apparent consideration has been shown as Rs. 100.40 lakhs towards cost of 22 per cent. share of the transferor as per the collaboration agreement.

5. It is contended by learned counsel, Shri Manohar, that respondent No. 2 issued a show cause notice for pre-emptive purchase under Chapter XX-C on July 8, 1994. The only basis for issuing show cause notice was that according to respondent No. 2, land admeasuring 736 square metres at 10, Hanuman Nagar, Nagpur, has been sold for Rs. 283 per square foot of F. S. I. The show cause notice does not state at all that the property in question was undervalued by more than 15 per cent, with a view to evade tax. The petitioners filed their reply to the said show cause notice wherein it has been stated, inter alia, that (a) there is no undervaluation of the property and at any rate there has been no attempt to evade tax and as such, the provisions of section 269UC of the Income-tax Act cannot be invoked, and (b) that the property has been sold under distress as Bank of Maharashtra had filed a recovery suit against owners for the sum of Rs. 36 lakhs and the said suit is pending before the civil court for adjudication. The bank during the proceedings of the suit, filed an application for attachment of the property in question and this position is not denied at all by the respondents. It was also stated that the property was encumbered on account of unpaid liabilities towards provident fund, sales tax, employees state insurance, etc. It was further stated in the reply that the instance quoted in the show cause notice in respect of land Survey No. 19, Hanuman Nagar, Nagpur, is incomparable inasmuch as Hanuman Nagar, Nagpur, is a posh residential locality adjacent to the Government Medical College and Hospital whereas the land in question of the petitioners is in industrial area surrounded by workshops, labour union offices, etc., which adversely affects marketability of the said land. It is contended by learned counsel for the petitioners that it was also brought to the notice of the appropriate authority that the F. S. I. of plot in question was computed at 2.5 whereas the F. S. I. of the comparable plot was computed at 1. Thus, the plots were not comparable as F. S. I. itself was different. The value of the plot in question is calculated not per square foot, but per square foot of F. S. I. and the F. S. I. itself is different, i.e., so far as the plot in question is concerned, it was 2.5 whereas F. S. I. of the comparable transaction was shown to be 1. Thus, even though the F. S. I. was different in case of both these plots, the value was sought to be calculated in terms of the F. S. I. and, therefore, the procedure adopted by the authorities is incorrect. At any rate, as the comparable plot is far away from the plot in question and is in a totally different locality, area and ward, the property was not comparable.

6. Learned counsel, Shri Manohar, submits that the appropriate authority, i.e., respondent No. 2, on July 27,1993, had sanctioned under section 269UD of the Income-tax Act a plot in Untkhana for a consideration of Rs. 90 per square foot. This fact is admitted by respondent No. 2, but the same is not considered on flimsy ground. It is contended by learned counsel that the impugned order dated July 29, 1994, is bad in law, since it fails to record that the plot was undervalued by more than 15 per cent, with a view to evade tax. It is further contended that it is well settled that the power under section 269UC of the Income-tax Act can be exercised only where the appropriate authority records a finding that there was undervaluation of the property by more than 15 per cent, and the undervaluation was done with a view to "evade tax". It is submitted that in the show cause notice also, this aspect has not been mentioned and, therefore, there is no finding or observation in the impugned order that there has been an attempt on the part of the petitioners to evade tax. In the circumstances, therefore, the power under section 269UC of the Income-tax Act cannot be exercised at all and the impugned order deserves to be quashed and set aside.

7. It is argued by learned counsel, Shri Manohar, that the authority has compared incomparable properties. The authority has not given any finding as to how the properties are comparable except a solitary sentence in the impugned order, which reads thus :

"The relevant sale instance recorded by the appropriate authority is valid."

It is submitted by learned counsel for the petitioners that except this statement, it is not stated in the impugned order as to how property in Hanuman Nagar, which is a posh residential area, can be compared with the property at Dahipura and Untkhana. The impugned order is, therefore, per se illegal and deserves to be quashed and set aside.

8. It is contended by learned counsel for the petitioners that in para. (11) of the impugned order, the appropriate authority has sought to distinguish the sale instance in the same area at Dahipura and Untkhana. It is submitted that in the said comparable property, respondent No. 2, the authority itself granted sanction under section 269UD of the Income-tax Act in the same locality for Rs. 90 per square foot. This, fact has been admitted by respondent No. 2. However, the said sale instance though from the same area, is sought to be distinguished on a flimsy ground that the property did not have roads on three sides. The property had a frontage of only 12.5 metres, etc. It is submitted that even assuming that there were some disadvantages in the sale instance, the authority failed to "consider that the present property was sold for a price, which is more than double the rate of the sanctioned sale instance, i.e., Rs. 186 per square foot. Thus, the rejection of sale transaction in the same locality and acceptance of sale transaction in a totally different locality clearly demonstrates that the impugned order is without application of mind, arbitrary and deserves to be quashed and set aside.

9. Learned counsel, Shri Manohar, vehemently states that plot in question is in the industrial and backward area of Untkhana and Dahipura, Rambagh Road, Nagpur, whereas comparable land is in Ward No. 10, Hanuman Nagar, Nagpur, which is a posh residential locality and, therefore, rates in Hanuman Nagar were bound to be much higher. Similarly, land at Hanuman Nagar is smaller in size, i.e., 736 square metres, whereas the property in question is 2,024.22 square metres. It is submitted that it is well settled that smaller plots fetch much more price than larger plots. Thus, the two plots with totally different measurements are clearly incomparable and, therefore, notice as well as impugned orders are bad in law.

10. It is submitted by learned counsel for the petitioners that respondent No. 2 never made any attempt nor has calculated the real price of the plot in question. No method is employed to calculate the real cost or price of the plot in question except to say that some other plot in a totally different locality and which is far away from the plot in question, was sold at the rate of Rs. 283 per square foot of F. S. I. When the price of the plot in question was itself not computed by respondent No. 2, it cannot be said that the apparent consideration was undervalued by more than 15 per cent. It is, therefore, contended that only property quoted by the respondents as comparable is really incomparable and hence, the show cause notice was invalid and the order passed pursuant to such show cause notice is also not only invalid, but without jurisdiction and deserves to be quashed and set aside. In order to substantiate the contentions, reliance is placed on the judgments of the apex court and High Courts in C. B. Gautam v. Union of India [1993] 199 ITR 530; Vimal Agarwal v. Appropriate Authority [1994] 210 ITR 16 (Bom) ; Mrs. Nirmal Laxminarayan Grover v. Appropriate Authority [1997] 223 ITR 572 (Bom), Writ Petition No. 590 of 1995-Prabhakar Manoharrao Deshpande v. Appropriate Authority [2004] 266 ITR 292 (Bom)-judgment dated June 18, 2002 and Deputy CIT v. Express Towers P. Ltd. .

Shri Jaiswal, learned counsel for respondent No. 2, has not disputed the aspect of memorandum of understanding between petitioners Nos. 1 and 3 dated March 1, 1993, collaboration agreement dated March 17, 1994, application filed before the respondents by the petitioners in Form No. 37-1, show cause notice dated July 8, 1994, and reply filed by the petitioners dated July 14, 1994.

11. Learned counsel, Shri Jaiswal, states that the contention of the petitioners that notice under Chapter XX-C of the Income-tax Act is without application of mind is incorrect. It is submitted that the procedure, which is laid down under Chapter XX-C as interpreted by the apex court in the case of C. B. Gau-tam v. Union of India [1993] 199 ITR 530 is that the entire enquiry is of a summary nature in view of the limited time frame provided by the provisions of law. The transferor and transferee are required to provide details of transfer proposed by filling the prescribed form, i.e., Form No. 37-1. The appropriate authority on perusal of details given in the form and after comparing comparable sale transactions needs to come to a prima facie conclusion as to whether the proposed sale is understated by more than 15 per cent. It is contended that on reaching such a conclusion, the appropriate authority issues a show cause notice calling upon the parties to show cause as to why the property should not be acquired under Chapter XX-C. On receipt of the reply of the parties and after giving them an opportunity to produce their evidence and after hearing them, the appropriate authority passes an order after deciding as to whether property is to be acquired or not on behalf of the Central Government. It is submitted that in the instant case, after following the above referred procedure contemplated by the apex court in the case of G B. Gautam [1993] 199 ITR 530, the appropriate authority passed the impugned order and, therefore, there is absolutely nothing to suggest that the same is passed without application of mind nor notice issued can be said to be invalid in law. It is contended by learned counsel for respondent No. 2 that the appropriate authority has in fact compared the sale transaction in question with the comparable sale instance and formed a prima facie opinion that the proposed sale is understated by more than 15 per cent.

12. Learned counsel, Shri Jaiswal, further states that the claim of the petitioners that their property is not valued independently is without any basis. The entire scheme of Chapter XX-C is of summary nature and there is no requirement under law to get the property valued as in the case of acquisition of land. The summary method of deciding as to whether the sale proposed is understated is only by comparing it with comparable sale instance. It is submitted that time provided under the Act for this purpose is limited and within the time frame provided by law, it is neither possible nor desirable to get the property valued independently, which is also not the requirement of law. It is contended that the compensation payable under Chapter XX-C of the Income-tax Act is not the compensation fixed by the authority, but the same is determined by the parties themselves. In such circumstances, there is no prejudice caused to the transferor since he will get the same compensation which he would have received had he sold the property to the transferee. In the instant case, the transferor would receive the apparent consideration as calculated in accordance with the provisions of section 269UA of the Income-tax Act read with rule 48-I of the Income-tax Rules.

13. It is contended by learned counsel, Shri Jaiswal, that the contention of the petitioners that the appropriate authority has not considered the aspect that sale was necessitated due to various compelling circumstances including claims of the bank and various authorities like provident fund, etc., is also incorrect firstly because Form No. 37-1 filled by the petitioners themselves does not make reference to any of these encumbrances or requirements. As a matter of fact, Form No. 37-1 specifically provides for declaration of details of encumbrances on the property to be transferred as well as details of liabilities due to local authorities. It is contended that the petitioners themselves have failed to give any of these details in the form submitted by them and, therefore, the appropriate authority cannot be blamed for lapses committed by the petitioners. It is submitted that even while giving reply to the show cause notice, documents substantiating these claims have not been either annexed with the said reply or produced by the petitioners and, therefore, the appropriate authority could not take into consideration this aspect.

14. Learned counsel, Shri Jaiswal, submits that the contention of the petitioners that the property in question was a distress sale is also incorrect. If the petitioners were required to enter into the sale transaction for the purpose of clearing dues, then in that case, such details would have been mentioned in the agreement between the parties. However, this aspect is totally absent in the agreement. It is contended that besides this, it is the case of the petitioners that the transferor is not getting any cash amount from the transferee immediately and even the constructed areas were to be transferred to the transferor after the period of three years. It is, therefore, contended that the entire case of the petitioners that the sale was for the purpose of urgently settling the dues is totally false.

15. It is further contended by learned counsel for respondent No. 2 that the contention of the petitioners that the sale instance taken into consideration by the appropriate authority is not comparable is also incorrect It is not correct to say that property situated in a different area cannot be compared. As a matter of fact, Hanuman Nagar and Untkhana are adjoining areas. The appropriate authority has inspected both the properties and come to the conclusion that the properties are clearly comparable. The subjective satisfaction of the appropriate authority cannot be challenged in a petition under article 226 of the Constitution of India. It is submitted that there is nothing on record to suggest that these properties are not comparable. The sale instance given by the petitioners is not a comparable sale instance and the authorities have given proper and cogent reasons for the same.

16. Learned counsel, Shri Jaiswal, states that there is no requirement under law to mention that property under proceedings is undervalued by more than 15 per cent, with a view to evade tax. If there is any understatement of value of the property as determined by the appropriate authority, it gives rise to the presumption that black-money is involved in the transaction. In the instant case, the apparent consideration is worked out by the appropriate authority in accordance with the provisions of section 269UA of the Income-tax Act read with rule 48-1 of the Income-tax Rules, which is Rs. 76,30,400. However, even if the apparent consideration is taken at Rs. 1,00,40,000 as stated by the petitioners themselves, the rate of 1 square foot of F. S. I. comes to Rs. 184 whereas in the comparable sale instance, it comes to Rs. 283. It is, therefore, contended by learned counsel that even if a slight difference in location, area and other aspects is taken into consideration, the difference in value is extremely high and on the basis thereof, it has been rightly concluded by the appropriate authority that the sale in question has been grossly understated by the petitioners. In order to substantiate his contentions, reliance is placed by learned counsel, Shri Jaiswal on the judgments of the apex court in M. P. Poddar, (HUF) v. Appropriate Authority [2002] 253ITR 639 and Ramesh Bhai J. Patel v. Union of India [2001] 247 ITR 182.

17. We have given our anxious thought to various contentions canvassed by the respective learned counsel for the parties and also perused the judgments of the apex court and High Courts referred to and relied upon by the respective learned counsel for the parties. It will be appropriate to consider certain undisputed facts before we adjudicate upon the issue in question. Those are :

(a) Petitioner No. 1 is the exclusive owner of plots Nos. 34, 35 and 36 situated at Industrial Area Scheme, N. I. T., Dahipura and Untkhana, Ram-bagh Road, Nagpur. Petitioner No. 1 entered into a memorandum of undertaking (MOU) with petitioner No. 3 to develop plots Nos. 34, 35 and 36 subject to conversion of use of plot from industrial to commercial. The memorandum of undertaking records that the property will be developed by petitioner No. 3 fully at his expenditure and cost. Petitioner No. 1 would be entitled to 22 per cent, of the said developed commercial property and petitioner No. 3 shall get 78 per cent, of the developed property. It was also agreed that petitioner No. 3 shall give interest free deposit of Rs. 10,00,000 to petitioner No. 1.

(b) Respondent No. 2 issued a show cause notice for pre-emptive purchase under Chapter XX-C of the Income-tax Act on July 8,1994. The basis for issuing show cause notice was that according to respondent No. 2, land admeasuring 736 square metres at 10, Hanuman Nagar, Nagpur, has been sold for Rs. 283 per square foot of F. S. I. whereas the land in question is sold for Rs. 184 per square foot of F. S. I. and, therefore, consideration in respect of land in question was understated by more than 15 per cent.

(c) The petitioners submitted their reply to the said show cause notice issued by respondent No. 2' for pre-emptive purchase of land on July 14,1994.

(d) The impugned order dated July 29,1994, was passed by the authorities under section 269UD(1) of the Income-tax Act whereby the explanation given by the petitioners was rejected and it was held that it is a fit case for preemptive purchase of property under Chapter XX-C of the Income-tax Act and purchase of immovable property in question was ordered.

18. The first contention canvassed by learned counsel for the petitioners is that power under section 269UD of the Income-tax Act can be exercised only when the authority records satisfaction that the value of the property in question has been understated with a view to "evade tax", In the present case, in the absence of any allegation in the show cause notice and any finding in the impugned order that the property in question is undervalued with a view to "evade tax", neither the show cause notice nor the impugned order is sustainable in law. In order to substantiate this contention, reliance is placed on the observations of the apex court in paras. (21) and (25) of the judgment in C. B. Gautam's case [1993] 199 ITR 530 which read thus (pages 548 and 551) :

"The legislative history of Chapter XX-C, in the stand taken by the Union of India and the Central Board of Direct Taxes as shown in the main counter affidavit and the affidavit of H. K. Sarangi, which has been filed after obtaining instructions from the Income-tax Department and the Central Board of Direct Taxes, make it clear that the powers of compulsory purchase conferred under the provisions of Chapter XX-C of the Income-tax Act are being used and intended to be used only in cases where in an agreement to sell an immovable property in an urban area to which the provisions of the said Chapter apply, there is a significant undervaluation of the property concerned, namely, of 15 per cent, or more. If the appropriate authority concerned is satisfied that, in an agreement to sell immovable property in such areas as set out earlier, the apparent consideration shown in the agreement for sale is less than the fair market value by 15 per cent, or more, it may draw a presumption that this undervaluation has been done with a view to evade tax. Of course, such a presumption is rebuttable and the intended seller or purchaser can lead evidence to rebut such a presumption. Moreover, an order for compulsory purchase of immovable property under the provisions of section 269UD requires to be supported by reasons in writing and such 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.

In these circumstances, in our opinion, it cannot be said that the provisions of the said Chapter confer 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 cannot be regarded as conferring- arbitrary or unfettered discretion on the appropriate authorities. The challenge to the provisions of the said Chapter as being violative of article 14 of the Constitution must, therefore, fail."

19. It is no doubt true that in view of the observations of the apex court in C. B. Gautam's case [1993] 199 ITR 530 referred to hereinabove, the order of compulsory purchase of immovable property under the provisions of section 269UD of the Income-tax Act must provide reasons germane to the object for which Chapter XX-C was introduced in the Income-tax Act and power under this Chapter can be invoked if transfer of immovable property is attempted with a view to evade tax. However, we cannot ignore the scheme of Chapter XX-C of the Income-tax Act, which postulates a basic premise that the understatement of consideration in an instrument of transfer or sale is untruly made, if it falls short of the fair market value by 15 per cent, and the ulterior motive should be presumed to be concealment of income or tax evasion unless rebutted by the parties to the transfer. In the instant case, in the impugned show cause notice itself, it is specifically mentioned by the respondent-Department that after comparing consideration of land in question of petitioners with the consideration in respect of sale instance, the appropriate authority has recorded its prima facie conclusion that the rate of Rs. 184 per square foot of F. S. I., for property in question appears to be too low and apparent consideration appears to be understated by more than 15 per cent. Similarly, once the consideration is understated by 15 per cent., the ulterior motive of concealment of income or tax evasion needs to be presumed. However, the parties are entitled to rebut the said presumption. Hence, the contention of learned counsel for the petitioners that there is no allegation in this regard in the show cause notice is absolutely incorrect and cannot be sustained.

20. Similarly, the appropriate authority after a careful consideration of the submissions made by the transferor and transferee and on the basis of material available on record as well as information supplied by the petitioners in Form No. 37-1 and after comparing the transaction in question with a comparable sale of the property situated at Hanuman Nagar, Nagpur, rejected the objections raised by the transferor and held that reliance placed on the sale instance by the appropriate authority to show that the property in question is understated by 15 per cent, is valid. Therefore, the contention of learned counsel for the petitioners in this regard is misconceived and devoid of merit.

21. It is no doubt true that the provisions of Chapter XX-C of the Income-tax Act do not confer an unfettered discretion on the appropriate authorities. However, the appropriate authorities can always exercise powers conferred on them under Chapter XX-C whenever there is a significant undervaluation of the concerned property by 15 per cent, or more and order pre-emptive purchase of such property under section 269UD(1) of the Income-tax Act. In our considered view, the observations made by the apex court in paras. (21) and (25) of the judgment in C. B, Gautam's case [1993] 199 ITR 530 do not further the case of the petitioners.

22. So far as the judgment of this court in Vimal Agarwal's case [1994] 210 ITR 16 is concerned, in para. (15) it is observed thus (page 34) :

"It is thus clear that in all cases where an order is proposed to be passed for purchase of the property by the Central Government under section 269UD(1) of the Act the appropriate authority has to determine the figure of the fair market value of such property with reference to which it can be ascertained whether the apparent consideration was lower by 15 per cent, or more. That has not been done in the instant case. Here, even if the rates at which the properties referred to in the instances relied upon by the appropriate authority were sold are taken to be the fair market value on the relevant date, then also even from the highest of the three figures, the apparent consideration of the property under consideration is not lower by 15 per cent, than the fair market value. If the instances relied upon by the petitioner are taken into account, the margin will be much lesser than 15 per cent. In some of the cases the apparent consideration will be even higher than the sale price shown therein. In such a situation, no presumption of undervaluation with a view to evade tax can be drawn. It may also be expedient to observe at this stage that it was never the stand of the Revenue before the Supreme Court that pre-emptive purchase can be resorted to automatically once the difference between the fair market value and the apparent consideration is 15 per cent, or more. On the other hand, the Revenue itself had emphatically stated before the Supreme Court that the limit of 15 per cent, is not to be applied mechanically but a reasonable margin for probable error has to be taken into account. That is because section 269UD does not confer an unfettered discretion on the appropriate authority to order purchase of any and every property. In other words, the right of pre-emptive purchase under section 269UD is not a right of pre-emption simpliciter. It is a right which can be exercised only in cases where there is significant undervaluation in the agreement of sale 'with a view to evade tax'. The emphasis is on 'attempt at tax evasion'. The onus of establishing that the undervaluation is with a view to evade tax is on the Revenue. An imputation of tax evasion arises in a case where an order of compulsory purchase is made which casts a slur on the parties to the agreement. Such an imputation cannot be made mechanically without due regard to the explanation of the affected parties. The presumption of undervaluation in case of undervaluation of 15 per cent, or more being a rebuttable one, the evidence led by the intending seller or purchaser assumes great importance. The observations of the Supreme Court in C.B. Gautam's case [1993] 199 ITR 530 to the effect that having regard to the limited time frame enquiry pursuant to the explanation of the seller or the purchaser might be a somewhat limited one or a summary one 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. However, in the instant case, oven that question would not arise as evidently the apparent consideration is not lower than 15 per cent, of the fair market value."

23. So far as the case of Vimal Agarzval [1994] 210 ITR 16 (Bom) is concerned, the same is distinguishable on the basis of the facts involved in the said case. In the said case, the apparent consideration of the property involved was not lower by 15 per cent, than the fair market value and, therefore, the question of pre-emptive purchase in the said case did not arise. However, in the instant case, the situation is entirely different and, therefore, in our considered view, the procedure adopted by the authorities in the present case and finding recorded in the impugned order cannot be said to be inconsistent with the law laid down by this court in the case of Vimal Agarioal [1994] 210 ITR 16 (Bom).

24. In the instant case, the property referred to in the sale instance is relied on by the appropriate authority to show the fair market value on the relevant date and it is after comparing the difference between the two, that the appropriate authority prima facie came to the conclusion that consideration for the property in question was undervalued by 15 per cent, than the fair market value of the property referred to in the sale instance. Therefore, the contention of learned counsel for the petitioners that the appropriate authority has not determined the fair market value of the property in question before arriving at the conclusion that the same is understated by 15 per cent, than the fair market value is misconceived and cannot be accepted.

25. It is no doubt true that the respondent-Department has to undertake a summary enquiry within a time frame pursuant to the explanation of the seller or purchaser. However, the same cannot be considered 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. In the instant case, the appropriate authority has taken into consideration the explanation given by the petitioners as well as the sale instance, which the petitioners wanted to compare with the transaction in question. The appropriate authority in para. (11) of the impugned order has observed that the sale instance is not comparable with the property under consideration for the following reasons :

(a) The sale instance does not have roads on three sides like the property under consideration ;

(b) The locality of the sale instance mainly consists of small engineering workshop, tile work, saw mill, etc. ;

(c) On the north boundary of the property, the great Nag Nallah is situated which carries waste water resulting in certain disadvantage to the sale instance property ;

(d) The property had frontage of 12.5 M only on the Great Nag Road.

26. The appropriate authority after taking into consideration the above referred characteristics of land in the sale instance, rejected the same since because of location of the property, it could not be compared with the sale transaction in question and also rejected the objection of the petitioners against pre-emptive purchase on this count. It is, therefore, clear that this is not the case where the authorities without considering the facts and circumstances brought on record by the petitioners, mechanically rejected the objection of the petitioners and exercise power under section 269UD(1) of the Income-tax Act arbitrarily.

27. So far as the observations of this court in Mrs, Nirmal Laxminarayan Gro-ver's case [1997] 223 ITR 572 are concerned, there is no quarrel with the principle that the appropriate authority cannot place reliance on the sale instance, which is not comparable because of its location, surroundings, etc., with the transaction in question. However, so far as the case in hand is concerned, the appropriate authority has placed reliance on the sale instance of the property, which is comparable, though situated in Hanuman Nagar, which is adjacent to the property in question. Therefore, the contention of learned counsel for the petitioners that these two properties are not comparable cannot be accepted. Similarly, it is well settled that considering the limited time frame within which the Department has to complete the entire procedure, it will not be practicable nor possible for the income-tax authorities to undertake the exhaustive procedure contemplated under the provisions of the Land Acquisition Act for the purpose of computing the market value of the property. At the same time, the Department has to consider the sale instance demonstrating fair market value, comparable with the property in question and after taking into consideration the explanation as well as the sale instance relied on by the transferor/transferee, the Department must come to the conclusion that the property in question was undervalued by 15 per cent, or more and it is only after such conclusion is reached, that the order passed under section 269UD of the Income-tax Act can be sustained. In the instant case, it cannot be said that the procedure adopted by the appropriate authority is inconsistent in this regard and, therefore, the impugned order is just and proper.

28. The petitioners have placed reliance on the judgment of this court in the case of Prabhakar Manoharrao Deshpande [2004] 266 ITR 292 in order to show that in the said case it was held by this court that the sale transaction from civil lines cannot be considered for evaluating the price of the property at Cement Road, Dharampeth. It is contended by learned counsel for the petitioners that both the properties' were from residential localities, even then because of location of the properties and their surroundings, this court held that they cannot be compared though located in the residential areas. So far as the judgment of this court in the case of Prabhakar Manoharrao Deshpande [2004] 266 ITR 292 is concerned, the same is based on the facts and circumstances involved in the said case and in view of location and other features of the properties involved, this court came to the conclusion that the sale instance of civil lines cannot be considered for evaluating the price of the property at Cement Road, Dharampeth, Nagpur, and, therefore, the finding arrived at by this court in the above referred case in the facts and circumstances of the present case, ipso facto, in our considered view, cannot be made applicable though there is no quarrel about analogy evolved by this court in the said case and, therefore, the said judgment does not further the case of the petitioners.

29. In the case in hand, the sale instance which is made the basis to show the fair market value is from the adjoining area and because of similarity in location as well as proximity with the land in question, the authorities were right in holding that the transaction in question can be compared with the said sale instance and were justified in further holding that consideration of the sale transaction in question is understated by 15 per cent. We must express that merely because lands though similar in nature, location and other characteristics are situated adjacent to each other, because of different names given to different areas in the town, fall in different areas, that by itself is no ground for not comparing the sale transaction in respect of such lands, if dates of such sale transactions are in close proximity with each other and there is no bar in such situation, to accept the sale consideration of such sale instance as fair market value of the land in the said area. Similarly, there cannot be a common yardstick in this regard. The fair market value necessarily depends upon the facts and circumstances of each case. The finding recorded by this court in the case of Prabhakar Manoharrao Deshpande [2004] 266ITR 292 is of little help to the petitioners because the same is recorded on the basis of totally different facts and circumstances.

30. Shri Manohar, learned counsel for the petitioners, has also relied on the judgment of the apex court in the case of Deputy CIT v. Express Towers P. Ltd. [2001] 249 ITR 556 in order to show that the explanation offered by the transferor in that case that he was desperate to sell the property in order to go abroad and settle with his only daughter in the U.S.A. and that the sale instances are of incomparable properties in different areas and the adjustment can arise in cases where there is basic similarity between two properties, was rejected by the appropriate authority by passing order, which was challenged before the Delhi High Court and the Delhi High Court in Express Towers P. Ltd, v. Deputy CIT [1998] 231 ITR 318) set aside the said order. The apex court dismissed the special leave petition against such order. It is contended by learned counsel, Shri Manohar, that in the instant case, the land in question was sold by the transferor in view of compelling necessity, i.e., for the purpose of satisfying debts, refund of bank loan, decree of the civil court, etc. However, this aspect has been completely ignored by the appropriate authority while considering the market value of the property in question.

31. It will be appropriate at this stage to consider and understand the scheme of the relevant provisions of the Income-tax Act, particularly of section 269UC. Section 269UC, of the Income-tax Act contemplates that no transfer of any immovable property, the value of which exceeds an amount mentioned under this section, shall be effected except after an agreement for transfer is entered into between the person, who intends transferring the immovable property and the person to whom it is proposed to be transferred, at least four months before the intended date of transfer. Sub-section (2) prescribes that such agreement shall be reduced in writing in the form of a statement by each of the parties to such transfer. The said form is Form No. 37-1. Sub-section (3) provides that every such statement shall-

(i) be in the prescribed form ;

(ii) set forth such particulars as may be prescribed ; and

(iii) be verified in the prescribed manner.

32. The other sub-sections of section 269UC are not relevant for the issue in question. It is, therefore, evident that it is the duty of the transferor and transferee to give all necessary details in Form No. 37-1 itself, such as whether the property in question is free from encumbrances or is encumbered property, the nature of encumbrances, details as to whether the sale is required to be effected for compelling circumstances, such as refund of loan, redemption of mortgage, for satisfying decree of the civil court, etc. This provision is introduced in the Income-tax Act in order to safeguard the sale transaction, which exceeds the value mentioned in section 269UC, if the same is effected under compelling circumstances and is a distress sale. In a situation like this, the appropriate authority is empowered to release such property from the ambit of pre-emptive purchase contemplated under section 269UD of the Income-tax Act even though the consideration for such property is less than 15 per cent. of the fair market value. However, the above referred details must be mentioned by the transferor or transferee in the agreement or form provided in sub-sections (2) and (3) of section 269UC of the Act. In the instant case, the petitioners did not furnish any details referred to hereinabove in Form No. 37-I and in the absence thereof, it will be difficult for us to hold that the appropriate authority failed to consider these aspects and, therefore, the impugned order cannot be held to be invalid in such circumstances and hence, the judgment of the apex court in the case of Deputy CIT v. Express Towers P. Ltd. [2001] 249 ITR 556 does not further the case of the petitioners.

33. The observations made by the apex court in the case of M P. Poddar (HUF) [2002] 253 ITR 639 are relevant, which read thus :

"The Supreme Court itself has observed in the above case that looking to the time frame within which the order has to be passed, what is possible is a limited or summary inquiry, the whole purpose being to enable the petitioner to put forth his case before the Department as to why a purchase order should not be made. The hearing opportunity for example, would enable the petitioner to point out why the price was appropriate. He can also point out any special circumstances in which a lower price has been agreed upon. It was, therefore, for the petitioner to adduce appropriate material in support of his contention. He cannot contend that the Department should search its records pertaining to some other case to gather particulars for the benefit of the petitioner. We also do not find any application by the petitioner for the production of any records. The appropriate authority has considered the material produced by the petitioner. The grievance, therefore, of the petitioner in the present case that the comparable sale instances have not been taken into account or have not been properly considered, does not appear to be justified."

34. It is, therefore, well settled that it is for the transferor to bring it to the notice of the Department the special circumstances in which lower price has been agreed upon and the first opportunity in this regard the transferor gets is while submitting Form No. 37-1 wherein he is required to give details. In the instant case, the petitioners failed to discharge this burden by placing appropriate material before the Department and, therefore, the impugned order cannot be held to be bad in law. Similarly, the petitioner/transferor was not getting any cash amount from the transferee on the date of the transfer of immovable property in question and as per agreement, even the constructed area to be transferred to the transferor was after the period of three years and, therefore, the appropriate authority rightly rejected the ground of distress sale. Hence, there is no merit in the contention of learned counsel for the petitioners in this regard.

35. It is no doubt true that consideration in respect of the land in question needs to be compared with the fair market value of land and for determining fair market value, there are two methods, namely, by determining market value of the land in question and, secondly, by comparing the same with the sale instance of the land, which is similarly situated. In view of the second proviso of section 269UD of the Income-tax Act, the appropriate authority after receipt of statement referred to in section 269UC, is required to pass an order of pre-emptivce purchase within a period of two months and now after June 1, 1993, within a period of three months. It is, therefore, evident that the time frame within which the appropriate authority has to pass an order under section 269UD is very limited and, therefore, as we have already observed hereinabove, the exhaustive procedure contemplated for determination of the market value under the Land Acquisition Act is not possible to be undertaken by the authorities under the Income-tax Act. There is another reason for the same, i.e., in the land acquisition case, the burden is on the owner of land to establish the market value of the land under acquisition whereas in the case of pre-emptive purchase under section 269UD of the Income-tax Act, the appropriate authority is only required to consider whether consideration for the land in question is undervalued by 15 per cent, or more than the fair market value. The value of the land in question is already determined and reflected in the statement contemplated under sub-sections (2) and (3) of section 269UC and, therefore, what is required to be determined for pre-emptive purchase under section 269UD is whether such consideration is undervalued by 15 per cent, of the fair market value and the same can be considered on the basis of sale instance of the land, which is similarly situated and the date of sale of such land is in close proximity with the date of sale of the land in question. In view of this legal position, the procedure adopted by the appropriate authority in order to hold that the land of the petitioner is undervalued by 15 per cent, and more in view of the fair market value demonstrated by the sale instance is neither inconsistent with the scheme of the Act nor invalid in law and, therefore, the contention of learned counsel for the petitioners in this regard is misconceived and devoid of substance. Similarly, the other contentions canvassed by learned counsel for the petitioners also cannot be accepted for similar reasons.

36. For the reasons stated hereinabove, no case is made out for interference. The petition is dismissed. The rule is discharged. No order as to costs.