Mrs. Sunny Uppal vs The Appropriate Authority ...
2002 Latest Caselaw 2070 Del

JUDGMENT

D.K. Jain, J.

1. An order, dated 30 November 1996, passed by the Appropriate Authority under Section 269UD of the Income-tax Act, 1961 (in short the Act), directing pre-emptive purchase of a residential house bearing No. 22/78 Punjabi Bagh, New Delhi is under challenge in this writ petition.

2. Material facts, leading to the filing of this petition are as follows:

On 12 August 1996, the petitioner entered into an agreement with respondents No.2 to 4, for purchase of the aforementioned 1 1/2 storeyed property, built on a plot admeasuring 2255.55 sq. yds for a consideration of Rs. 2.76 crores. As per the agreement, the vendors, respondents No.2 to 4 herein, were paid a sum of Rs. 30 lacs by way of earnest money; a further sum of Rs. 51 lacs was to be paid within fifteen days from the date of grant of no objection certificate by the Appropriate Authority, and within ninety days of the receipt of all necessary and requisite permissions, no objections and clearances, the balance sale consideration of Rs. 1.95 crores was to be paid and simultaneously peaceful vacant physical possession of the property was to be delivered to the vendee.

On the same day, the petitioner and respondents No.2 to 4 filed a statement in Form 37-I along with the agreement to sell, seeking no objection certificate from the Appropriate Authority.

On 8 November 1996, the Appropriate Authority issued a notice under Section 269UD of the Act to the petitioner and respondents 2 to 4, stating that the apparent consideration of Rs. 2.76 crores in respect of the subject property is considered low when compared with property No. 20, Road No. 75, Punjabi Bagh, New Delhi, hereinafter referred to as the sale instance. Relevant portion of the notice reads as under:

"The apparent consideration so declared appears to be low when compared with the sale instance of property No. 20, Road No. 75, Punjabi Bagh, New Delhi (Case No. R-5086) with date of agreement to sell of 22-7-1996, where the parties had declared apparent consideration at Rs. 2,51,00,000/- giving a unit land rate of Rs. 25048/- per sq. mtr.. After making certain adjustments as under:-

1. Time gap                     (+) 2%
2. FAR                          (-) 7%
3. Size of plot - sub. having
large size than instance        (-) 10%
4.Location - instance having
nuisance due to school          (+) 5%
                         Total: (-) 20%
 

 

the adjusted unit land rate would come to Rs. 20,038/- per sq. mtr. and based on that the land value of the property in question would come to Rs. 3,77,89,864/- and after adding to this amount, the depreciated cost of structure at Rs. 8,21,136/- the total FMV comes to Rs. 3,86,11,000/-. Thus, there would come a difference between the declared apparent consideration and the fair market value so determined at 40%".

Thus, noticing the difference of 40% in the declared apparent consideration and the fair market value so determined, by means of the said notice, the parties were required to show cause as to why an order for pre-emptive purchase under Section 269UD of the Act should not be made.

In response thereto, the petitioner and the said respondents submitted written submissions, objecting to the proposed action. The main objections were: (i) the construction cost taken in the case of the sale instance was not taken correctly inasmuch this being a newly constructed property with latest amenities, its construction cost was no less than Rs. 1000/- per sq. ft. as against approximately Rs. 216/- per sq. ft adopted by the Appropriate Authoirty; (ii) the cost of structure of the subject property should have been taken as nil as against Rs. 8,21,136/- because a new construction had to be raised after demolishing the building; (iii) proper adjustments on account of various disadvantages in the subject property should have been made in calculating its fair market value;

(iv) the sale instance relied upon by the Appropriate Authority was not comparable with the subject property and, further, it had certain advantage for the vendee, being situated int he immediate vicinity of their factory for which they must have paid extra price and

(v) no objection certificate had been issued by the Appropriate Authority in respect of a much better placed property No. 10/13 Punjabi Bagh, New Delhi, hereinafter referred to as petitioner's sale instance, in the month of August, 1995 when its apparent consideration had been declared at 2.54 crores.

None of the pleas of the objectors found favor with the Appropriate Authority. Upon consideration of the submissions made and noticing that petitioner's sale instance was not comparable with the subject property, being a sale transaction of August 1995, whereafter there had been substantial increase in the real estate value and located in East Punjabi Bagh, the Appropriate Authority held that the subject transaction was made for less than the market price and it was done with a view to avoid tax and in that view of the matter, the Appropriate Authority considered it to be a fit case to make pre-emptive purchase by the Central Government of the subject property under Section 269UD of the Act, at a discounted value of Rs. 2,55,14,000/-. Hence the present petition by the transferee.

3. The impugned order is challenged as arbitrary and vindictive mainly on the grounds that: (i) the adjustments made in the value of the sale instance and the subject property on account of disadvantages was without any basis; (ii) the comparable petitioner's sale instance, more proximate to the subject property, had been ignored; (iii) the petitioner was neither confronted with the inspection report nor had been called to comment thereon and (iv) adjustments in the value of the sale instance had been made without physically inspecting the property.

4. The petition is resisted by the Appropriate Authority, the first respondent herein, mainly on the ground that the impugned order having been passed by a committee of experts, after affording full opportunity to the petitioner and examining the property, it is not a case where this Court should interfere in the exercise of extra ordinary jurisdiction particularly when this Court is not sitting as a court of appeal against the impugned order. It is also asserted that petitioner's sale instance was not comparable as the sale had taken place more than a year ago.

5. During the pendency of the petition, applications were filed by the petitioner (CM No. 205/97 & CM 5837/97), seeking stay of auction of the subject property, proposed to be held by the Chief Commissioner of Income-tax, respondent No.5 herein. Vide order dated 11 July 1997 it was ordered that the auction proposed to be held on 16 July 1997 may continue but the confirmation shall be subject to the result of the writ petition. After the auction, on an application (CM No. 6122/98) by the auction purchasers, vide order dated 30 July 1998, the applicants were directed to be joined as respondents in the writ petition. On 2 March 1998, an application (CM 2262/98) was moved by the auction purchasers (Respondents No. 6 to 9) seeking directions to respondents No.1 to 5 to deliver possession of the property and also by interest on Rs. 3,60,25,000/-, paid by them, @ 22% per annum from the 4 December 1997 till the date of actual payment. While disposing of the application, by order dated 7 December 1999, the Income-tax department was directed to hand over physical possession of the property to them, subject to the conditions that they will not part with possession of the same in any manner and will not create any charge or encumbrance on the property. The auction purchasers were also restrained from making any structural changes in the subject property. But the prayer for payment of interest was not acceded to. It is stated that they are in physical possession of the property since then.

6. We have heard learned counsel for the parties. Mr. C.S. Aggarwal, learned counsel for the petitioner, while reiterating the aforenoted grounds urged in the petition, has mainly contended that the subject property having been compared with an in-comparable property and petitioner's sale instance having been ignored, the impugned order is un-sustainable. It is also asserted that the basis for determining the fair market value of the property having not been disclosed to the petitioner, the impugned order is otherwise bad in law being violative of the principles of natural justice. In support of the proposition that the impugned order is ab initio illegal because petitioner's sale instance has been ignored and the sale instance relied upon is not comparable, learned counsel has placed reliance on Ashok Kumar Sood v. Deputy Commissioner of Income-tax and Ors.

,    Mrs. N. Santhiyavalli and Ors. v.  
Union of India and Anr.  (1998)
  Natvarlal Dayarjibhai Patel v.  Union of India and Ors.    Vimal Aggarwal v.  Appropriate

Authority and Ors. (1994) 210 ITR 16 (Bom). Strong reliance is also placed on a recent decision of the Calcutta High Court in ITC Limited v. Appropriate Authority to support the plea that failure to confront the party with the valuation report vitiates the order of pre-emptive purchase.

7. Mr. R.D. Jolly, learned senior standing counsel for the Revenue, on the other hand, while supporting the impugned order, has submitted that since the petitioner had not raised any objection with regard to the non-supply of the valuation report before the Appropriate Authority, he cannot be permitted to raise this issue at this juncture. He would also submit that the fact that the subject property was sold in auction for more than Rs. 3.60 crores shows that the view taken by the Appropriate Authority was correct. Learned counsel contended that the conclusions arrived at by the Appropriate Authority after taking note of all the relevant factors, including the comparable sale instance, no case for judicial review is made out. In support of the proposition that the impugned order does not suffer from any defect, which could warrant interference by this Court, reliance has been placed on the decisions of the Supreme Court in Union of India and Ors. v. Shatabadi Trading and Investment P. Ltd. and Ors. (2001) 251 ITR 93, Appropriate Authority and Anr. v. Smt. Sudha Patil and Anr. (1999) 235 ITR 118 and of this Court in Brindco Sales Ltd. v. Appropriate Authority (2001) 248 ITR 465 and R. S. Company v. Appropriate Authority and Ors. (2002) 256 ITR 220.

8. Before dealing with the rival submissions, it would be advantageous to have a birds' eye view of the provisions contained in Chapter XX-C of the Act, providing for the purchase of immovable property by the Central Government in certain cases of transfer. Section 269UD bestows a right on the authority having jurisdiction with the area where the property is situated to make an order for pre-emptive purchase of the immovable property by the Central Government at an amount equal to the amount of apparent consideration as per the statement submitted to it under Section 269UC. Section 269UD does not provide for any condition precedent to assume jurisdiction except that the property is situate in an area to which the Chapter is applicable and the statement in the prescribed from has been received in respect thereof. Except for providing the time limit within which an order under Section 269UD can be made, there is no other statutory circumspection on the wide powers conferred under the Section. However, the Supreme Court, in C.B. Gautam v. Union of India (1993) 199 ITR 530 has laid down that the provisions of the said Chapter can be invoked when the ostensible sale consideration of the immovable property is less than its fair market value by 15% or more. It is also observed that in such a case the Appropriate Authority is entitled to draw a presumption that the under valuation has been done with a view to evade tax but the presumption is rebuttable and the intending transferor or the prospective transferee can show that there was a bona fide consideration which induced the former to agree to sell the property at less than the fair market value because of certain peculiar or special circumstances. It is pertinent to note that in the originally enacted provisions and prior to the decision of the Apex Court in C.B. Gautam (supra), even the requirement of giving an opportunity of being heard to the parties concerned or recording of reasons for the purchase of the property, was not the requirement in the said Chapter. It was only by virtue of the insertion of Sub-section (1A) with effect from 17 November 1992 that a reasonable opportunity of being heard is to be granted to the transferor, the person in occupation of the property, the transferee and to every other person whom the Appropriate Authority knows to be interested in the property. Similarly, Sub-section (1B), inserted on the same date, mandates recording of reasons specifying the ground on which the order is made. Section 269UN in the Chapter stipulates that the order passed under Section 269UD shall be final and conclusive and shall not be called in question in any proceedings under the Act or under any other law for the time being in force. In other words, no statutory remedy is provided to the aggrieved party. Thus, the only course open to the person aggrieved is to take recourse to the constitutional remedy of judicial review.

9. The scope of judicial review has been subject matter of numerous judicial pronouncements and by now the parameters for exercise of supervisory jurisdiction by the High Court under Articles 226 and 227 of the Constitution are well settled. One of the general principles is that judicial review under Article 226 cannot be converted into appeal. Judicial review is directed, not against the decision but is confined to the examination of the decision making process. Judicial review cannot extend to the examination of the correctness or reasonableness of a decision as a matter of fact (See: H.B. Gandhi, Excise and Taxation Officer v. Gopinath & Sons (1992) Suppl. 2 SCC 997)

10. It would be useful to notice a few other decisions which are directly on the point at issue. In Mr. Kailash Suneja v. Appropriate Authority and Ors. (1998) 231 ITR 318, since affirmed by the Supreme Court in Appropriate Authority and Anr. v. Kailash Suneja and Anr. (2001) 251 ITR 1, this Court had observed that the satisfaction of the Appellate Authoirty for initiation of proceedings under Chapter XX-C is a subjective satisfaction on the objective facts and the reasons for the determination of the belief must have a rational and direct connection with the material coming to the notice of the Appellate Authority, though the question of sufficiency or adequacy of the material is not open to judicial review. It was also said that while exercising powers of judicial review under Article 226 of the Constitution, though the case is not to be examined as an appellate court, it has to be kept in view that a citizen has no alternative remedy and it is permissible to examine whether extraneous matters have been considered by the authority and relevant materials have not been taken into consideration.

11. In Smt. Sudha Patil case (supra) , dealing such the same provisions and taking note of the aforenoted observations in Kailash Suneja case, their Lordships of the Supreme Court have held that if on the materials on record two views are possible, one which has been given by the inferior Tribunal and the other which the High Court may, on examining the material, itself comes to the conclusion, then also it would not be possible for the High Court to substitute its conclusion for that of the Tribunal. It has been observed that merely because no appeal is provided for against the order of the Appropriate Authority, directing compulsory purchases by The Government, the supervisory power of the High Court does not get enlarged nor the High Court can exercise the appellate power.

12. In Shri Sita Ram Sugar Company Limited and Anr. v. Union of India and Ors. , Constitution Bench of the Supreme Court observed thus:

"Whether an order is characterised as legislative or administrative or quasi-judicial, or, whether it is a determination of law or fact, the judgment of the expert body, entrusted with power, is generally treated as final and the judicial function is exhausted when it is found to have "warrant in the record" and a rational basis in law."

13. In Brindco Sales Limited (supra) , to which one of us (D.K.Jain, J.) was a party, quoting passages from various Indian and English decisions, which included Rex v. Electricity Commissioners [1924] 1 KB 171 (CA), Rex v. Northumberland Compensation Appellate Tribunal [1952] 1 AIR 122 (CA) and more particularly form G. Veerappa Pillai v. Raman & Raman Limited , wherein it was observed that however extensive the jurisdiction may be, it is not so wide or large as to enable the High Court to convert itself into a Court of appeal and examine for itself the correctness of the decisions impugned and decide what is the proper view to be taken or the order to be made, it was said that jurisdiction under Article 226 maybe exercised to correct errors of jurisdiction and the like but not to upset pure findings of fact. The following situations, where the Court should exercise the power of judicial review, were culled out:

(i) Erroneous assumption or excess of jurisdiction;

(ii) Refusal to exercise jurisdiction;

(iii) Error of law apparent on the face of the records as distinguished from a mere mistake of law or error of law relating to jurisdiction;

(iv) Violation of the principles of natural justice;

(v) Arbitrary or capricious exercise of authority or discretion;

(vi) Arriving at a finding which is perverse or based on no material;

(vii) A patent or flagrant error of procedure;

(viii) Order resulting in manifest injuries.

14. Thus, it is trite that judicial review cannot be treated as an appeal from the decision of an inferior tribunal and the High Court cannot sit in judgment over the correctness of the decision but is concerned only with the correctness of the decision making process. The Court should interfere if the decision of the authority is not grounded on any evidence or is based on surmises or proceeds on irrelevant factors and so manifestly unreasonable that no reasonable person would, on the given facts and circumstances, come to the conclusion reached by the authority.

15. Having examined the impugned order in the light of the aforenoted broad principles, we are of the considered view that it does not warrant any interference. As noted above, learned counsel for the petitioner has laid emphasis on two issues, namely, (1) the determination of the fair market value of the subject property being without proper basis inasmuch as it has been compared with an incomparable instance and the comparable instance cited by the petitioner has been ignored and (2) the valuation report of the subject property prepared by the valuation officer was not supplied to the petitioner and thus, violating the principles of natural justice. Taking the second point first, in the light of the affidavit, filed by Shri S.K.Ray, Member (Judicial), Appropriate Authority, to the effect that at no point of time during the proceedings under Chapter XX-C before the Appropriate Authoirty, the petitioner or any other party had ever complained about the non-supply of the valuation report, it is now too late in the day of for the petitioner to make a complaint on that score. We have carefully scrtunised the written objections file by the petitioner to the show cause notice. No such request was made therein. Besides, the afore-extracted portion of the show cause notice clearly indicates the basis for arriving at the fair market value of the subject property and the petitioner had filed objections thereto, without asking for the valuation report prepared by the registered valuer, and the same mainly pertained to the adjustments made therein on account of advantages and disadvantages of the sale instance property and the subject property. Accordingly, we have no hesitation in rejecting the argument that a proper opportunity to rebut the material used against the petitioner has not been granted. No such plea has been urged even in this petition. It is clearly an afterthought and cannot be entertained at this juncture.

16. Coming to the main issue of determination of fair market value of the subject property, it is true and as observed by Y.K. Sabharwal, J. (as his Lordship then was) in Kailash Suneja case (supra) that the fair market value of a property cannot be determined by theoretical consideration in an abstract manner by applying multipliers and arbitrary adjustments since as far as possible, the actual value of a property int he market is required to be determined for action under Chapter XX-C of the Act and the mode, manner and method of arriving at the valuation of a property is a part of procedure, it has to be fair, just and reasonable. But at the same time, it is well settled that in order to determine the market value of the property, comparable instances are one of the recognised methods. Though the two properties may not be on all fours but the sale instance does indicate and provide useful market index of the prices and can be taken into consideration. further, suitable adjustments, depending on various factors like location, time of sale etc., are also accepted norms. Although Mr. Aggarwal had feebly pleaded that since the subject property was a built up structure, its fair market value should have been determined by applying rent capitalisation method but we find from the record that no such plea was ever raised before the Appropriate Authority. As noticed above, the entire attempt of the petitioner was to justify the apparent consideration on the basis of its own sale instance. From the discussion in the impugned order, we find that the objections raised by the petitioner with regard to the sale instance of the department and information with regard to her own sale instance, have been taken into consideration and all the objections raised by the petitioner before it, by which the adjustment on account of allocation, plot size et., have been dealt with by the Appropriate Authority. Bearing in mind the limited scope of judicial review, we find it difficult to hold that the view taken by the Appropriate Authority is perverse or so manifestly un-reasonable that no reasonable person, on the given facts, would come to the same conclusion, thus warranting interference by this Court. The aforenoted decisions relied upon by the learned counsel for the petitioner are of no avail to her. Each of these has been rendered on its own facts/situation and in all these cases the Courts have found as a fact that the Appropriate Authority had failed to consider the relevant evidence or had brushed aside the evidence on un-tenable grounds, which, as noticed above, is not the case here.

17. For the foregoing reasons, we do not find any merit in the petition. The same is accordingly dismissed; Rule is discharged and all interim orders stand vacated. The Appropriate Authority shall be free to confirm the auction. There will, however, be no order as to costs.