High Court Of Andhra Pradesh
I.E. Vittal & Anr. vs. Appropriate Authority & Ors
Sections 269UA(F), 269UD
Syed Shah Mohammed Quadri & B. Sudershan Reddy, JJ.
Writ Petns. Nos. 10271 & 12417 of 1994 & 2958 of 1995
17th June, 1996
Counsel Appeared
Y. Ratnakar, Vedula Srinivas & L. Narasimha Reddy, for the Petitioners : S.R. Ashok, for the Respondents
SYED SHAH MOHAMMED QUADRI, J. :
In these three writ petitions, the order of the Appropriate Authority, the first respondent herein, passed under s. 269UD(1) of the IT Act, 1961 (for short, “the Act”), in File No. AA/Hyd/6 (51)/8/89-90/94, dt. 20th May, 1994, is questioned. The impugned order relates to pre-emptive purchase of immovable property bearing Municipal No. 6- 1-145 to 149 in Walker Town, Secunderabad (for short, “the property”) by the Central Government under Chapter XX-C of the Act. The petitioners pray for a writ of certiorari, to call for the records relating to the impugned order and to quash the same.
2. The petitioners in Writ Petitions Nos. 10271 of 1994 and 2958 of 1995 are the purchasers (hereinafter referred to as “agreement holders”) of the property bearing Municipal No. 6-1-145 to 149, situate in Walker Town, Padmarao Nagar, Secunderabad, and the petitioner in Writ Petition No. 12417 of 1994 is the owner (hereinafter referred to as “vendor”) of the said property. To appreciate the various contentions raised in these writ petitions, it is necessary to refer to the relevant facts, briefly, giving rise to the filing of these write petitions. On 3rd May, 1988, the vendor agreed to sell the said property in favour of the first agreement holder for a total consideration of Rs. 24,70,000 and the first agreement holder paid a sum of Rs. 1,50,000 to the vendor. On second thoughts, the first agreement holder deemed it fit to purchase the said property in the joint names of himself and his wife and a fresh agreement was executed by the vendor in favour of the agreement holders on 16th Dec., 1988. It is stated that the general power of attorney was also given by the vendor when the agreement dt. 16th Dec., 1988, was executed. The entire sale consideration was paid but on various dates, from 3rd May, 1988 to 31st May, 1989, by the agreement holders to the vendor and it is contended that the possession of the property was handed over by the vendor to the agreement holders on 31st May, 1989. The agreement holders filed Form No. 37-I under r. 48L of the IT Rules, 1962, for obtaining a “no objection certificate” from the Appropriate Authority. The Appropriate Authority, by his order dt. 23rd Aug., 1989, passed orders under s. 269UD(1) of the Act for pre-emptive purchase of the said property by the Central Government. The validity of the said order was questioned by the agreement holders in Writ Petition No. 12507 of 1989 in this Court on various grounds including the constitutional validity of the provisions of Chapter XX-C. This Court, by its order dt. 16th Feb., 1994, while upholding the validity of the provisions of Chapter XX-C following the judgment of the Supreme Court in C.B. Gautam vs. Union of India (1992) 108 CTR (SC) 304 r/w (1993) 110 CTR (SC) 179 : (1993) 199 ITR 530 (SC) : TC 3PS.87 directed the Appropriate Authority to give show-cause notice, call for objections and provide an opportunity of hearing to the agreement holders, before passing appropriate orders. Having regard to the directions issued by this Court, the Appropriate Authority, the first respondent herein, issued a show cause notice on 26th April, 1994, setting out the reasons for arriving at the conclusion that the consideration was understated and called upon the agreement holders of file their objections. The Appropriate Authority, on a consideration of the reply filed by the agreement holders and also the material on record, by its order dt. 20th May, 1994, found that there was a difference of more than 15 per cent between the apparent consideration and the fair market value and directed the pre-emptive purchase of the property by the Central Government. It is the correctness of that order that is assailed on various grounds in this writ petition.
In his counter-affidavit, the first respondent denied the averments in the affidavit of the agreement holders, filed in support of the writ petition, that they entered into an agreement with the vendor on 3rd May, 1988, and paid the entire sale consideration of Rs. 24,70,000 and took possession of the said property in question before 1st June, 1989. It is stated that the agreement holders failed to produce the first agreement for sale dt. 3rd May, 1988, and having regard to the facts of the case, he came to the conclusion that the plea of the agreement holders that the first agreement was entered into on 3rd May, 1988, could not be accepted. It is stated that the first respondent has furnished all the relevant material in the show cause notice dt. 26th April, 1994, when the agreement holders and other affected parties were called upon to file their objections against the proposed order of pre-emptive purchase by the Central Government and, thus, adequate opportunity was given to the agreement holders. It is submitted that the contention of the agreement holders that Chapter XX-C is not retrospective and does not operate to cover the agreements entered into prior to 1st June, 1989, is not tenable as no deed was executed and registered conveying the property in question in favour of the agreement holders by the time Chapter XX-C was made applicable to the Hyderabad city and Chapter XX-C is attracted to the transaction in question. It is stated that the agreement holders paid a substantial part of the sale consideration after publication of the Notification No. S. O. 339(E), dt. 8th May, 1989 [(1989) 79 CTR (St) 63 : (1989) 177 ITR (St.) 238)] as such the agreement holders cannot even claim that they are prejudicially affected by the said notification under which the provisions of Chapter XX-C of the Act are extended to the Hyderabad city. It is stated that after inspecting the property in question and after considering the relevant material including the comparable sales on record, the first respondent formed the satisfaction that the sale consideration in the agreement for sale has been thoroughly understated by more than 15 per cent and accordingly, passed the order of preemptive purchase. It is stated that in view of the above facts, the writ petition has to be dismissed.
3. Mr. Y. Ratnakar, learned counsel appearing for the writ petitioners-agreement holders in Writ Petition No. 10271 of 1994, urged the following two contentions before us : (1) As transfer of property in question as defined in s. 269UA(f)(i) was completed before Chapter XX-C was made applicable to the Hyderabad city, the said Chapter is not applicable to the transaction in question; and (2) The first respondent has not properly considered the comparable sales on record and has failed to take into consideration the instances of comparable sales cited by the petitioners as also the valuation report filed by the petitioners and relied on agreements which were not supplied to the petitioners. Therefore, the finding recorded by the first respondent that the apparent sale consideration is less than the fair market value by more than 15 per cent, is vitiated for these reasons besides being an erroneous finding of fact.
4. Mr. S. Venkata Reddy, learned senior counsel, appearing for Mr. L. Narasimha Reddy in Writ Petition No.
2958 of 1995, urged a new point, which was not taken in the writ petition, namely, the amount of consideration ought to have been offered to the vendor within the statutory period and it is only when the circumstances mentioned under s. 269UG are shown to exist that the sale consideration could have been deposited by the Central Government on 29th June, 1994, consequently, the deposit has to be ignored and it has to be declared that the property has revested in favour of the vendor under s. 269UH. At the outset, we may state that we would not allow learned counsel to raise this point because this point did not arise in the case of the agreement holders and the vendor who has filed Writ Petition No. 12417 of 1994, has himself not complained of not offering the amount, therefore, the agreement holders cannot raise the said point.
5. Mr. S.R. Ashok, learned standing counsel for the IT Department, submits that the agreement holders themselves understood that Chapter XX-C applies to their case and accordingly filed Form No. 37-I before the first respondent showing the date of agreement as 16th Dec., 1988. He contends that the definition of “transfer” contained in s. 269UA(f), cannot be made applicable to the provisions of Chapter XX-C wherever that term occurs and that a different meaning would have to be given to that expression in various provisions. In any event, submits learned counsel, in view of the finding recorded by the first respondent that possession of the property was not handed over to the agreement holders on 31st May, 1989, as alleged, there was no “transfer” within the meaning of that expression and Chapter XX-C has been rightly made applicable and the order of pre-emptive purchase cannot be questioned on that ground. He argues that the first respondent has relied on three comparable sales and even if the sale in respect of the property situated at Sarojini Devi Road, Secunderabad, which is a commercial area, is excluded, the sales in respect of properties situated at Barkatpura and Padmarao Nager are sufficient to conclude that the value of the consideration was understated in the agreement, and that the first respondent has rightly excluded from consideration the documents relied on by the petitioner as comparable sales. With regard to non-consideration of the valuation report, learned counsel submits that if out of some relevant considerations, one or two aspects are left out, the order cannot be termed as a bad order.
6. On the above contentions, the following points arise for determination : (1) Whether Chapter XX-C of the Act applies to the transaction in question ; and (2) Whether the impugned order of pre-emptive purchase by the Central Government passed by the first respondent on 20th May, 1994 is sustainable in law.
7. First, we shall take up the first point. With the laudable objective of curbing the practice of understating the consideration in the transfer document, with a view to avoid tax liability, Parliament inserted Chapter XX-A in the IT Act, 1961, by the Taxation Laws (Amendment) Act, 1972, w.e.f. 15th Nov., 1972. As the said Chapter failed to achieve the desired results, Parliament by the Finance Act, 1986, inserted, w.e.f 1st Oct., 1986, s. 269RR which provides that the provisions of Chapter XX-A shall not apply to or in relation to the transfer of any immovable property made after 30th Sept., 1986, and inserted Chapter XX-C by the same Finance Act w.e.f 1st Oct., 1986. Initially, the said Chapter was made applicable to the cities of Delhi, Bombay, Calcutta and Madras. However, by notification issued on 1st June, 1989, that Chapter was extended to other cities including the twin cities of Hyderabad and Secunderabad. It comprises 16 sections. Sec. 269UA is the definition section. Sec. 269UB deals with constitution of the Appropriate Authorities to perform the functions under this Chapter. Sec. 269UC says that notwithstanding anything contained in the Transfer of Property Act, 1882, or in any other law for the time being in force, no transfer of any immovable property in such area and of such value exceeding ten lakhs 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 and the person to whom it is proposed to be transferred in accordance with the provisions of sub-s. (2) at least four months before the intended date of transfer. Sub-ss. (2) to (4) of s. 269UC are procedural and it is not necessary to refer to them in any detail. Sec. 269UD confers power on the Appropriate Authority to make an order for the purchase by the Central Government of such immovable property at an amount equal to the amount of apparent consideration. We shall revert to it presently. While upholding the constitutional validity of Chapter XX-C in C.B. Gautam vs. Union of India (supra), the Supreme Court observed, inter alia, that the powers of compulsory purchase conferred under the provisions of Chapter XX-C are intended to be (and are being) used only in cases where, in an agreement to sell an immovable property in an urban area in which the provisions of that Chapter apply, there is a significant undervaluation of the property by 15 per cent or more; if the Appropriate Authority is satisfied that the apparent consideration shown in the agreement for sale is less than the market value by 15 per cent or more, it may draw a presumption that this undervaluation has been done with a view to evading tax; such a presumption, however, is rebuttable and the intending seller or purchaser can lead evidence to rebut it; moreover, the reasons for such acquisition, which are required by s. 269UD to be recorded in writing, must be germane to the object for which the Chapter was introduced, namely, to counter attempts to evade tax. It was remarked 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 and that though the time frame within which the order for compulsory purchase had to be made was a fairly tight one, it was not such as would preclude a reasonable opportunity of being heard or to show cause being given and it was directed that before an order for compulsory purchase was made under s. 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. It was also observed that although a presumption of an attempt to evade tax might be raised by the Appropriate Authority concerned in a case where the aforesaid circumstances were established, such a presumption was rebuttable and this would necessarily imply that the concerned parties must have an opportunity to show cause as to why a presumption should not be drawn. It was pointed out that in a given transaction of an agreement to sell, there might be several bona fide considerations which might induce a seller to sell his immovable property at less than what might be considered to be its fair market value, for example, he might be in immediate need of money and unable to wait till a buyer was found who might be willing to pay the fair market value for the property; there might be some dispute as to the title to the immovable property as a result of which it might have to be sold at a price lower than the fair market value or there might be a subsisting lease in favour of the intending purchaser. There might similarly be other genuine reasons which might have led the seller to agree to sell the property to a particular purchaser at less than the market value even in cases where the purchaser might not be his relative ; unless an intending purchaser or intending seller was given an opportunity to show cause against the proposed order for compulsory purchase, he would not be in a position to rebut the presumption of tax evasion. It was also held that it was inconceivable that the order which was required to be served by the Appropriate Authority under s. 269UD(2), would be one which did not contain the reasons for the passing of the order or was not accompanied by the reasons recorded in writing. Therefore, the reasons for the order must be communicated to the affected party.
The legislative recognition of the observations of the Supreme Court came by inserting sub-s. (1A) in s. 269UD which says that before making an order under sub-s. (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 and sub-s. (1B) provides that every order made by the Appropriate Authority under sub-s. (1) shall specify the grounds on which it is made. However, the observation of the Supreme Court that the pre-requisite for passing the order of compulsory purchase, viz., where, in an agreement to sell an immovable property in an urban area, there is a significant undervaluation of the property by 15 per cent is not incorporated in the amended s. 269UD. But as the law declared by the Supreme Court is the law of the land in view of Art. 141 of the Constitution, every order of compulsory purchase of immovable property by the Central Government, has to fulfil the pre-requisite test laid down by the Supreme Court. It will be apt to extract s. 269UD here : “269UD. Order by Appropriate Authority for purchase by Central Government of immovable property.— (1) The Appropriate Authority, after the receipt of the statement under sub-s. (3) of s. 269UC in respect of any immovable property, may, notwithstanding anything contained in any other law or any instrument or any agreement for the time being in force, and for reasons to be recorded in writing, make an order for the purchase by the Central Government of such immovable property at an amount equal to the amount of apparent consideration : Provided that no such order shall be made in respect of any immovable property after the expiration of a period of two months from the end of the month in which the statement referred to in s. 269UC in respect of such property is received by the Appropriate Authority : Provided further that in a case where the statement referred to in s. 269UC in respect of the immovable property concerned is given to an Appropriate Authority, other than the Appropriate Authority having jurisdiction in accordance with the provisions of s. 269UB to make the order referred to in this sub-section in relation to the immovable property concerned, the period of limitation referred to in the preceding proviso shall be reckoned with reference to the date of receipt of the statement by the Appropriate Authority having jurisdiction to make the order under this sub-section. (2) The Appropriate Authority shall cause a copy of its order under sub-s. (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.” A perusal of the provision extracted above shows that after receipt of the statement under sub-s. (3) of s. 269UC in respect of any immovable property, the Appropriate Authority may make an order for the purchase of the property by the Centralgovernment at an amount equal to the amount of apparent consideration. That power is subject to the provisions of sub-ss. (1A) and (1B). The first proviso prescribes a period of limitation of two months from the end of the month in which the statement referred to in s. 269UC, in respect of such property is received by the Appropriate Authority, to make an order of pre-emptive purchase of such property by the Central Government.
The second proviso deals with the specific situation of cases where the statements were filed on or after 1st June, 1993, in which case the extended period of limitation of three months will apply. The third proviso deals with the situation where the statement is handed over to the Appropriate Authority, other than the Appropriate Authority having jurisdiction in which case the period of limitation should be reckoned from the date of receipt of the statement by the Appropriate Authority who has jurisdiction. If the Appropriate Authority was prevented from passing the order of pre-emptive purchase on account of stay granted by the Court the limitation of two months or three months, as the case may be, will have to be counted after excluding the period from the date of granting of stay till the date of vacation of the order of stay. Sub-s. (2) directs that a copy of the order of pre-emptive purchase be served on the transferor and if he is not in possession of the property then on the occupier, transferee and every other person whom the Appropriate Authority knows to be interested in the property. Here, we may have to read one more limitation, i.e., if the Appropriate Authority comes to the conclusion that the apparent consideration of the agreement for transfer 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 evading tax, and it is only then that an order for pre-emptive purchase of the property by the Central Government can be passed by the Appropriate Authority. The expression “agreement for transfer” is defined in s. 269UA(a) to mean an agreement whether registered under the Registration Act, 1908 (16 of 1908), or not, for the transfer of any immovable property. The word “transfer” is defined in s. 269UA(f) in relation to any property to mean transfer of such property by way of sale or exchange or lease for a term of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in s. 53A of the Transfer of Property Act, 1882. Therefore, it follows that if sale or exchange or lease of an immovable property has been completed, it falls within the meaning of “transfer”; so also an agreement for sale coupled with delivery of possession of the property or with a stipulation allowing the transferee to retain the possession of the property, will be within the meaning of “transfer”. It follows that if the “transfer” as defined in cl. (f) of s. 269UA was completed before 1st June, 1989, the provisions of Chapter XX-C would not apply.
8. Adverting to the question as to whether the agreement entered into in this case is covered by Chapter XX-C, we may point out that the alleged agreement dt. 3rd May, 1988, was neither relied upon nor filed along with the statement in Form No. 37-I; the petitioners (agreement holders) filed along with Form No. 37-I agreement dt. 16th Dec., 1988. Chapter XX-A ceased to apply to the transaction entered into after 30th Sept., 1986. The alleged transfer of the property in question was made on 16th Dec., 1988, which was after Chapter XX-A ceased to be operative and before Chapter XX-C was extended to the twin cities of Hyderabad and Secunderabad on 1st June, 1989. Admittedly, there has been no registered deed of sale. What is contended is that pursuant to the agreement for sale, in part performance of that agreement, possession of the property was handed over to the agreement holders by the vendor. But, the Appropriate Authority did not accept the plea that the vendor handed over the possession of the property to the agreement holder on 31st May, 1989.Consequently, there was no “transfer” of the property before 1st June, 1989. This finding is canvassed before us by Mr. Ratnakar as being erroneous on the ground that the first respondent has not taken into consideration the general power of attorney dt. 31st May, 1989, and the fact that all the payments relating to the sale consideration were made before that date. It is further contended that the fact of handing over possession is evident from the letter of the vendor dt. 31st May, 1989, and that this fact was also mentioned in the affidavit in the earlier writ petition as well as in the present writ petition. The first respondent did not believe the existence of the agreement dt. 3rd May, 1988. The Appropriate Authority referred to cl. 3 of the agreement dt. 16th Dec., 1988, and pointed out that no payment schedule was mentioned therein. It was noted that the schedule of receipt of payments was furnished to the Department only in February., 1991. The Appropriate Authority did not believe that the payments mentioned therein were towards consideration pursuant to the alleged agreement. It was pointed out that the land which was to be sold was not disclosed either in the wealth-tax returns of Sri Rajan B. Patel though the vendor claimed that the property was inherited by him. It also took note of the fact that along with the statement in Form No. 37-I, copy of the agreement dt. 16th Dec., 1988, was filed but not the copy of the alleged agreement dt. 3rd May, 1988. Regarding the letter of the vendor dt. 31st May, 1989, it was stated that a xerox copy of that letter alone was filed and that can hardly be an acceptable evidence. With regard to the letter dt. 13th May, 1994, said to have been written by Shri Rajan B. Patel, it was stated that the fact of handing over possession of the land was not mentioned therein.
9. We will now examine whether the factors pointed out by learned counsel for the agreement holders are such as to vitiate the finding of the Appropriate Authority. We have already stated that the letter of the vendor dt. 31st May, 1989, mentioning about handing over possession of the property has not been accepted by the Appropriate Authority and we do not find any cogent reason to take a different view. Further, the fact that the very next day, 1st June, 1989, the provisions of Chapter XX-C were made applicable to the twin cities of Hyderabad and Secunderabad also makes the said plea highly artificial. In any event, the letter does not mention that possession was handed over in part performance of the agreement for sale dt. 16th Dec., 1988. However, Mr. Ratnakar submits that that letter was not placed before the Appropriate Authority by the agreement holders or their counsel, but the Appropriate Authority himself picked up that letter from the bundle of counsel so it ought to have been accepted. We are afraid, we cannot accede to this contention. The fact that the bundle was containing such a letter and the same was picked up by the Appropriate Authority would not add to the veracity of the letter nor would it increase its probative value. That letter by itself cannot be treated as irrefragable evidence of handing over possession. Yet another factor which is pressed into service is execution of the general power of attorney by the vendor on 31st May, 1989. We have perused the general power of attorney. Nothing is mentioned in the general power of attorney which leads to the conclusion that possession was handed over to the agreement holders pursuant to the agreement for sale. The fact that the preamble portion contains a recital “upon handing over of possession”, in our view, is not conclusive of the fact of handing over of possession pursuant to the agreement of sale. In our view, no reliance can be placed on the averments in the affidavit filed in support of the present writ petition or earlier writ petition to the effect that possession was handed over to the agreement holders as those averments were made long after the dispute with regard to handing over possession had already begun. There is no recital in the agreement for sale dt. 16th Dec., 1988, itself with regard to handing over of the possession of the property.
For all these reasons, the finding recorded by the Appropriate Authority with regard to handing over of possession cannot be disturbed. Mr. Y. Ratnakar placed reliance on the judgments of the Delhi High Court and the Gujarat High Court to show that if the agreement was executed earlier to the notification applying Chapter XX-C of the Act to the area, the provisions of that Chapter could not be applied to the transaction which was already entered into before the date of the notification. In Capt. Sanjeev Sethi vs. Union of India (1992) 101 CTR (Del) 81 : (1992) 195 ITR 338 (Del) : TC 3R.1019 an agreement was entered into between the owner of a plot of land with “Competent Builders” for developing it and constructing a multi-storeyed residential building thereon on 4th Sept., 1979. Pursuant to that agreement, a power of attorney was executed in favour of the builder, which authorised the builder to enter into agreements for sale of the flats to be constructed. Accordingly, allotment letters were issued by the builder in favour of the intending purchasers. Disputes arose from time to time and the rate at which the flats were to be purchased, was increased. In place of the original builder, another person Ansal had taken over the rights and liabilities under the agreement and issued fresh letters of allotment on 9th Oct., 1990. On the basis of that letter, the price of the flat exceeded Rs. 10 lakhs. The petitioner applied for a “no objection certificate” in Form No. 37-I to the Appropriate Authority who passed an order of pre-emptive purchase by the Central Government. That order was questioned before the Delhi High Court. A Division Bench of the Delhi High Court quashed the impugned order taking the view that the execution of the tripartite agreement showed that the rights and liabilities of the builder were taken over by Ansals and it was clear that the original allotment had created rights and liabilities between the allottees of the flats and the owner; the fresh letters of allotment did not effect a novation of the contract and that the buyers and sellers had not changed. The only change was that of the builder as one builder had stepped into the shoes of another. Since the earlier agreement of 1979 was being given effect to, the provisions of Chapter XX-C of the Act were not applicable and that only the provisions of Chapter XX-A were applicable. The reasoning of the judgment appears to be that as the transaction was already covered by the provisions of Chapter XX-A, the newly introduced provision of Chapter XX-C had no application. It may be noted that there, under the provisions of Chapter XX-A having regard to the definition of “transfer” and “immovable property”, the transaction of “transfer” was completed. In the instant case, as we have pointed out, the finding of fact regarding completion of transfer is against the petitioners. Therefore, that decision does not help the petitioners.
In Sunshine Travels and Tours (P) Ltd. vs. Union of India (1995) 213 ITR 749 (Del) also there was a finding that possession of the property was given to the transferee. The Division Bench of the Delhi High Court held that a transaction effected prior to 1st Oct., 1986, which involved the transfer of a right enabling the transferee to enjoy the building to be constructed became a statutory transfer for purposes of Chapter XX-A and such a “transfer” was subject to the statutory steps contemplated by s. 269C. It was further held that if by the time Chapter XX-C came into force, there had been already a transaction resulting in a “transfer” as defined, the Court could not read Chapter XX-C so as to make it operative retrospectively on that transaction of “transfer”. For the reasons already mentioned, that judgment also does not help the petitioners.
In Shantivan Corpn. vs. Sub-Registrar (1990) 90 CTR (Guj) 196 : (1991) 189 ITR 583 (Guj) : TC 3R.1007, the agreement of sale dt. 30th May, 1989, provided that the ownership in the property was to be transferred only on the payment of the entire amount of consideration and that possession was not to be transferred before the last payment was received towards the consideration amount. Before the Appropriate Authority, the parties never contended that possession was transferred on 31st May, 1989, and as the document was not registered before 1st June, 1989, the ownership of the property was not transferred in view of s. 54 of the Transfer of Property Act and s. 47 of the Registration Act and as such there was no sale prior to 1st June, 1989. The Division Bench of the Gujarat High Court which dealt with that case took the view that even if possession was transferred, it would not have affected the application of the provision of Chapter XX-C enabling the statutory purchase of the property by the Central Government free from all encumbrances. Multi Rise Towers (P.) Ltd. vs. Appropriate Authority (1995) 124 CTR (Cal) 391 : (1995) 211 ITR 102 (Cal) : TC 3PS.311, is a case decided by a learned single judge of the Calcutta High Court. It was held that the rights might not only be with respect to any existent building or part of a building which had been constructed but might also be with regard to buildings to be constructed in future. The agreement between the petitioner and the owners created a right in the petitioner in respect of the premises and there was a transfer of immovable property under Chapter XX-A. Therefore, the order of pre- emptive purchase under s. 269UD of Chapter XX-C of the Act was not valid and was liable to be quashed.
From the discussion of the cases referred to above, it is clear that in those cases the “transfers” in question were covered by Chapter XX-A. There is, however, conflict of judicial opinion on the question of applicability of Chapter XX-C where an agreement coupled with delivery of possession, falls within the extended definition of “transfer” which was completed before the coming into force of Chapter XX-C. Inasmuch as in the case on hand, the plea that possession was handed over was not accepted by the Appropriate Authority and we are not persuaded to disturb that finding, as such there was no completed “transfer” of the property before application of Chapter XX-C to the twin cities of Hyderabad and Secunderabad. We consider it unnecessary for purposes of this case to express any opinion on the question as to what would have been the position had the “transfer” in this case been completed within the meaning of s. 269UA(f) of the Act.
16. This takes us to the second question, namely, whether the impugned order passed by the first respondent is sustainable in law. It has already been pointed out that in Gautam’s case (supra), the Supreme Court laid down that having regard to the history of the legislation, compulsory purchase under Chapter XX-C can be made only when there is a significant undervaluation of the property by 15 per cent or more. In such a case a presumption can be drawn that the undervaluation had been done with a view to evading tax. But such a presumption, however, is rebuttable and the intending seller or purchaser can lead evidence to rebut it. In this case, a finding has been recorded by the Appropriate Authority that the apparent consideration mentioned in the agreement for sale of the property in question is understated by more than 15 per cent when compared to the fair market value and this finding would give rise to the presumption of evasion of tax, noted above. But before us this finding is assailed as being erroneous. To arrive at that finding the Appropriate Authority had relied upon three transactions. The first relates to property bearing Municipal No. 6-1-189, Padmarao Nagar, Secunderabad ; the second relates to property bearing No. 9-1-130 and 131, Sarojini Devi Road, Secunderabad, and the third transaction relates to agreement for sale in respect of Municipal Nos. 3-4-482 and 3-4-482/1, Barkatpura, Hyderabad. In so far as the property situate at Sarojini Devi Road, Secunderabad, is concerned, it is in a commercial area and it has been fairly conceded by learned standing counsel for the income-tax that it would not be a comparable sale. The property situate at Barkatpura, a locality far away from Padmarao Nagar, cannot also be taken as a comparable sale because that is in a different locality having different amenities, different advantages and disadvantages in contradistinction to Padmarao Nagar ; so a sale transaction in the Barkatpura area cannot be a comparable sale in judging understatement of the consideration in the transaction of Padmarao Nagar. Now we are left with the sale transactions at Padmarao Nagar, which are relevant and comparable transactions. What is relied upon by the Appropriate Authority is an agreement for sale which is said to have been entered into on 28th June, 1989. It is stated that the land rate works out to Rs. 1,129 per sq. yard. The total extent covered by the agreement is stated to be 2,400 sq. yards. The petitioners requested the Appropriate Authority to furnish a copy of agreement on the ground that it is not a registered document and that they would not be in a position to secure the same. Here we may note the contents of the petitioner’s letter dt. 16th May, 1994, addressed to the Appropriate Authority wherein it is stated as follows : “…..We shall be grateful if copies of agreements and information which we requested in our letter dt. 11th May, 1994, are furnished to us. Otherwise there is no way for us to verify the calculations made by you and the opportunity of hearing becomes an empty formality. In our submission, these proceedings are also quasi-judicial proceedings and on our side whatever sale documents we have referred to, we have furnished copies to the Appropriate Authority without any default on our part. The agreements referred to in the show-cause notice by you are not registered documents. Consequently, we are not in a position to obtain the same from the Registrar of Documents. The parties have refused to give us any information. We are, therefore, left with no alternative except to reiterate our request to the Appropriate Authority for furnishing the same. Our request may once again be considered.”
The Appropriate Authority, however, did not furnish copies of the documents relied upon by him but dealt with the request of the petitioners in the impugned order as follows : “. . . . The nature of the properties and the conditions of the agreement are matters of facts which could be verified by the transferee from local enquiry. With regard to the request of the transferee to assist him with the detailed information available with us, instead of his making effort for local enquiry, we draw his attention to the judgment of the Bombay High Court in the case of Vimla Devi G. Maheshwari vs. S.K. Laul, Appropriate Authority (1993) 112 CTR (Bom) 42 : (1994) 208 ITR 734 (Bom): TC 3PS.112. Since the sale instances cited by us are on record, we have carefully considered these. . . .”
In our view, when the Appropriate Authority had relied upon the documents to record the finding of understatement of the sale consideration, in all fairness, the copies of the documents should have been furnished to the agreement holders particularly when they have brought to the notice of the authority that in spite of efforts they were not in a position to secure the same. We may observe here that where a statutory authority relies upon a document in a proceeding but denies a copy of the same to the affected party, he violates the principles of natural justice as the opportunity of being heard should be an effective opportunity but not an empty formality. Had copies of those documents been given to the petitioners, they would have been in a position to show that the consideration mentioned therein was overstated or would have brought on record circumstances under which a higher consideration was agreed upon between the parties, which did not represent fair market value. In the absence of the agreements relied upon by the Appropriate Authority, the agreement holders were handicapped to explain the same. It may be noticed that if the documents relied upon by the Appropriate Authority are excluded from discussion, there is no material to support the finding of understatement of consideration by more than 15 per cent in the agreement in question, recorded by the Appropriate Authority. We, therefore, hold that not providing copies of the agreements which were relied upon by the Appropriate Authority to record an adverse finding against the agreement holders amounts to denial of opportunity of being heard resulting in violation of the principles of natural justice which would vitiate the proceedings.
17. The impugned finding of the Appropriate Authority suffers from yet another defect—nonconsideration of relevant material. Here we may also note that the agreement holders had relied upon a registered sale deed in respect of the property bearing Municipal No. 6-1-279/10/6 which is in the same locality, namely, Padmarao Nagar. Under that sale deed, land of an extent of 163.32 sq. yards was sold for Rs. 1,90,000 in August, 1990. The Appropriate Authority described this property as that of lower middle class and on that ground he declined to consider it as a comparable sale. What is more surprising is that the Appropriate Authority did not rely on sale of property in the same locality as not a comparable sale whereas he relied upon agreement for sale of property in another locality which is about 10 kms. away, namely, Barkatpura, treating it as a comparable sale.
We have perused the plan prepared by the Appropriate Authority delineating all the three properties in Padmarao Nagar, namely, the property sale of which is relied upon by the agreement holders, the property in respect of which pre-emptive purchase order is passed and the property in respect of which agreement for sale is treated by the Appropriate Authority as comparable sale. We must point out that the other two properties are not only in the same locality but also in close proximity to the property in question. Indeed, from the plan it appears that the comparable sale relied upon by the agreement holders is of the property which is only 250 metres away from the property in question. However, another submission is made by learned standing counsel for the Revenue to disregard the sale of the said property on the ground that it relates to small extent of land. It is well-settled that consideration for sale of small extents of lands is always more than the consideration for large extents of lands. So this contention is untenable. If the consideration mentioned in this sale deed is accepted as representative of fair market value of land in Padmarao Nagar, it becomes difficult to support or sustain the finding of understatement of consideration in the agreement for sale in question, recorded by the Appropriate Authority.
8. For the aforementioned reasons we quash the order of the first respondent in No. AA/Hyd/6/ (51)8/89-90/94, dt. 20th May, 1994, and accordingly, allow the writ petitions but having regard to the circumstances of the cases, we make no order as to costs.
[Citation : 221 ITR 760]
