Madras H.C : The petitioner and the vendor filed a statement under s. 269UC of the IT Act, 1961 (‘the Act’) in Form 37-I on 7th Sept., 1988.

High Court Of Madras

B. Sundararajan vs. Appropriate Authority

Sections 269UD

R. Jayasimha Babu, J.

Writ Petn. Nos. 20284 of 1994 & 17671 of 1995 and

W.M.P. No. 30905 of 1994

20th November, 1998

Counsel Appeared

K.C. Rajappa, for the Petitioner : C.V. Rajan & Mrs. Aparna Nandakumar, for the Respondent

ORDER

R. JAYASIMHA BABU, J. :

Petitioner, Mr. Sundararajan in W.P. No. 20284 of 1994, entered into an agreement on 25th Aug., 1988 for the purchase of property with an extent of 3 grounds and 1,844 sq. ft. at No. 37, IV Main Road, Gandhi Nagar, Madras-20 for a sum of Rs. 19 lakhs. The rate per ground was Rs. 5,04,000. The petitioner and the vendor filed a statement under s. 269UC of the IT Act, 1961 (‘the Act’) in Form 37-I on 7th Sept., 1988. The Appropriate Authority on 15th Nov., 1988 made an order for compulsory purchase of the property and that order was challenged by the petitioner in W.P. 150399 of 1988 on 5th Dec., 1988. This Court stayed further proceedings on 9th Dec., 1988, though by that date the vendor had surrendered the possession. The property was not put up for auction in view of the interim order passed by this Court on 2nd Jan., 1989. This Court made an order directing the authority to pay the sale consideration under the agreement between the vendor and the vendee, namely, Rs. 19,00,000 to the vendor and on such payment, the vendor was to return the advance of Rs. 1,00,000 to the vendee. The counsel for the vendor who is one of the respondents here confirms that the advance that had been received earlier, (interim) Rs. 1,00,000 had been returned to the vendee. The vendor, has, thus, received the value in full.

The writ petition filed by the petitioner in W.P. No. 150339 of 1988 was subsequently dismissed. However, an appeal filed against that order in Writ Appeal No. 880 of 1994 was allowed by a Division Bench of this Court on 28th July, 1994 and the matter was remanded to the authority for fresh disposal after giving due opportunity to the petitioner. The petitioner was asked to furnish a bank guarantee for a sum of Rs. 19,00,000 in favour of the authority to ensure a payment of the consideration in the event of the authority ultimately deciding to grant no objection certificate. The bank guarantee was fully furnished to the authority by the petitioner. After the matter went back to the authority, it issued fresh a show-cause notice to the legal heirs of the vendors as also to the petitioner calling upon them to show-cause as to why the property should not be pre-emptively purchased for a discounted consideration of Rs. 18,53,247. It was stated therein, inter alia, that the agreed land rate on the basis of discounted consideration was Rs. 4,64,400, whereas the market value was over Rs. 5,90,727. Two sale instances in the vicinity of the property were relied upon by the authority, both being at 39, Second and Third Main Road, Gandhi Nagar, Adyar, in which sales 5-1/2 grounds were agreed to be sold under agreement dt. 30th July, 1987 at the rate of Rs. 5,90,727 per ground and 3,673 grounds were agreed to be sold under agreement dt. 27th April, 1988 at the rate of Rs. 6,81,550 per ground.

In reply to that show-cause notice, the petitioner filed his objections, pointing out therein, inter alia, that neither he nor his vendor had any intention to avoid any tax, that there was no evidence to show that they had any such motive, that the properties mentioned in the show-cause notice were not in the immediate vicinity of this property, that the larger road width in front of this property was, in fact a disadvantage, as the larger area was required to be left open and that the sales affected in respect of other properties in the immediate vicinity of this property were effected at rates much lower than the rates at which the petitioner had agreed to purchase this property, that in fact, the property situated at 38-IV Main Road which was immediately adjacent to this property had been sold under the document dt. 3rd Aug., 1988, at the rate of Rs. 2,72,420 per ground to the petitioner. He also gave details of other sales of properties in the vicinity in all of which the rate was less than the rate as discounted by the authority for this property. Thereafter, the petitioner wrote to the authority on 29th Sept., 1994 bringing to the notice of the authority a sale agreement of February, 1987 between Mr. Raj Mohan Gandhi and others and Mr. S.S. Rajasekhar, sons of Mr. C. Subramaniam, former Governor of Maharashtra, under which property bearing No. 4, IV Main Road, Gandhi Nagar, Adyar, Madras, which property was situated on the same road as that on which the property, the subject-mater of the agreement between the petitioner and the proposed transferor, was situated, was agreed to be sold for Rs. 10,11,000. That property had an extent of 3-11 grounds. The authority had issued a ‘no objection certificate’, for that transaction in April, 1987. The land rate per ground under that agreement works out to Rs. 3,25,000. The petitioner pointed out that even after providing inflation at the rate of 0.92 per cent per month, the land rate for the property which was the subject-matter of the impugned order works out to Rs. 3,78,913 which is very much less than the land rate of Rs. 4,84,400 per ground worked out for this property by the authority. Petitioner also pointed out that many of the transactions relied upon by the petitioner were subsequent to the date of the agreement. The property transacted at No. 38, IV Main Road, Gandhi Nagar, Adyar, at the rate of Rs. 2,72,420 per ground was the transaction entered into a few days before the date of the agreement between the petitioner and his transferors.

6. Though the petitioner had placed elaborate material which prima facie showed that the rate at which he had agreed to purchase the property from his transferors was the fair market value, the authority brushed aside all those documents by merely observing that all the transactions were subsequent to the date of agreement between the petitioner and his transferors. This is what the authority has observed in relation to these documents : “The transferee has furnished details of sales in I, II, III & IV Main Road in Gandhi Nagar areas. The dates of registration of these documents vary from 29th Aug., 1988 to 15th March, 1989 which are beyond the agreement date, viz., 25th Aug., 1988 under discussion and hence are not comparable.

As regards details furnished in respect of the properties vide letter of the transferee dt. 23rd Sept., 1994 it is seen that the property at door No. 31, IV Main Road, Gandhi Nagar, Madras relates to transfer of undivided share of interest in land and not a case of outright sale as in the case under discussion. The second property at No. 4, IV Main Road, Gandhi Nagar, Adyar is further away compared to the sale instances indicated in the show-cause notice and as such both the sale instances relied on by the transferee are not comparable.”

The authority did not doubt the genuineness of any of the transactions relied upon by the petitioner. The authority merely asserted that they are not comparable. This manner of dealing with the rights of parties must be very strongly disapproved. The authority is vested with vast powers and superior Courts do not interfere with their orders except on strong grounds, having regard, inter alia, to the fact that power is vested in an authority which is composed of members with long years of experience and who have in the past held high positions. It is expected of them that they will bring a judicial approach to the matters before them. To brush aside what is inconvenient without meeting the points raised and stating cogent reasons for not accepting the evidence presented is not a sound judicial approach.

The reasons, if at all they can be characterised as such, given by the authority, are clearly arbitrary and wholly untenable. The fact that every transaction had been entered into, the transactions were not doubted by the authority on the date subsequent to the date of the agreement, but transactions ranging from a few days subsequent to the agreement to the date within one year of the agreement did not on that account alone render them non-comparable. The authority did not find that there was fall in price after the date of the agreement. On the other hand, the method of valuation adopted by the authority to make addition to the values ascertained from the date of the transaction till the date of the consideration, further amounts to the fact that, for the period subsequent to the period of transaction, there was inflation. If properties were transacted at a lesser rate immediately after the date of the agreement, that evidence is a clear evidence which is relevant and is helpful in ascertaining the market value when the values shown in those transactions are less than the value at which the parties before the authority, had agreed to transact. The authority’s refusal to regard another property at the same rate and which was transacted at a figure which is almost half of on rate and which the petitioner had agreed to buy this property and which transaction was about one year prior to the date of the agreement between the petitioner and his transferor, is again wholly arbitrary. Even after providing for inflation for the period subsequent to the date of that transaction, the market value of this property was very much less than value at which the petitioner had agreed to buy the property.

The mere fact that the authority is entitled to raise a presumption that the petitioner intends to avoid tax at the stage of issuing a show-cause notice does not entitle it to brush aside the evidence on market value offered by the parties in response to that show-cause notice which evidence if properly examined would demonstrate that the value at which the parties had agreed to transact was in accordance with those values which were capable of being regarded as market value. The genuineness of the transaction not having been doubted, the authority cannot merely rely on one or two transactions cited by it, where the values were higher ignoring the fact that even subsequent to those transactions properties in the vicinity had been transferred at much lower rates.

The authority appears to have been over-anxious to sustain its earlier order directing compulsory purchase. It is most unfortunate that the authority should have brought such an approach to the consideration of a case before it. The authorities should be free from prejudice or bias of any kind including bias in favour of itself in seeking to sustain the order made by it on earlier occasion. The matters had to be approached with an open mind. All evidence presented before the authority was required to be considered in a fair and non-arbitrary manner which the authority has in this case failed to do.

Having regard to the long period that had lapsed from the date of the agreement, nearly 10 years have gone and the fact that even after the remand the order made by the authority has been found to be arbitrary and unsustainable, this is a fit case wherein any request for further remand should be declined. A person who has entered into a transaction to purchase immovable property at its fair market value is not to be driven to endless litigation on account of the authority’s order. Having regard to the evidence placed by the petitioner before the authority, it is clear that the market value of the property at the time of the transaction cannot be said to have been higher than the rate at which the petitioner had agreed to purchase the property.

The impugned order, is therefore, set aside. The authority is directed to issue ‘no objection certificate’immediately after the petitioner pays to the authority a sum of Rs. 19,00,000. Such payment shall be made by the petitioner within the period of six weeks from the date of receipt of a copy of this order.

The petitioner shall be entitled to cost in the sum of Rs. 2,500. Consequently, W.M.P. 30905 of 1994 is closed.

[Citation : 254 ITR 794]

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