1 WP2134andothers.sxw IN THE HIGH COURT OF JDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2134 OF 2010 Pandharinath Bhikaji Telge "Vithal Niwas" Plot No.565 Ghatla Village, Ghatla Road, Chembur, Mumbai-400 071 ... Petitioner Vs. 1.The Appropriate Authority constituted under Chapter XXC of the Income Tax Act, 1961, Mittal Court, A-Wing, 3rd floor, Nariman Point-400 021 2. Union of India, through Ministry of Finance, North Block, New Delhi-110001 3. M/s Sunkrish Developers 17, Sai Commercial Building, 2 WP2134andothers.sxw Govandi Station Road, Govandi, Mumbai-400 088 ...Respondents WITH WRIT PETITION NO. 2135 OF 2010 Dattaram Bhikaji Telge "Vithal Niwas" Plot No.565 Ghatla Village, Ghatla Road, Chembur, Mumbai-400 071 ... Petitioner Vs. 1.The Appropriate Authority constituted under Chapter XXC of the Income Tax Act, 1961, Mittal Court, A-Wing, 3rd floor, Nariman Point-400 021 2. Union of India, through Ministry of Finance, 3 WP2134andothers.sxw North Block, New Delhi-110001 3. M/s Sunkrish Developers 17, Sai Commercial Building, Govandi Station Road, Govandi, Mumbai-400 088 ...Respondents WITH WRIT PETITION NO. 2191 OF 2010 M/s Sunkrish Developers 17, Sai Commercial Building, Govandi Station Road, Govandi, Mumbai-400 088 ..Petitioner Vs. 1.The Appropriate Authority constituted under Chapter XXC of the Income Tax Act, 1961, Mittal Court, A-Wing, 3rd floor, Nariman Point-400 021 2. Union of India, 4 WP2134andothers.sxw through Ministry of Finance, North Block, New Delhi-110001 3. Dattaram Bhikaji Telge "Vithal Niwas" Plot No.565 Ghatla Village, Ghatla Road, Chembur, Mumbai-400 071 ..Respondents WITH WRIT PETITION NO. 2192 OF 2010 M/s Sunkrish Developers 17, Sai Commercial Building, Govandi Station Road, Govandi, Mumbai-400 088 ..Petitioner Vs. 1.The Appropriate Authority constituted under Chapter XXC of the Income Tax Act, 1961, Mittal Court, A-Wing, 3rd floor,57 Nariman Point-400 021 5 WP2134andothers.sxw 2. Union of India, through Ministry of Finance, North Block, New Delhi-110001 3. Pandharinath Bhikaji Telge "Vithal Niwas" Plot No.565 Ghatla Village, Ghatla Road, Chembur, Mumbai-400 071 ..Respondents Mr. J.D. Mistri, Sr. Advocate with Aasifa Khan i/by Mannandir & Co.for the Petitioner in all petitions. Mr. Abhay Ahuja with Ms. Suchitra Kamble for the Respondent Nos. 1 and 2 in all petitions. CORAM : J.P. DEVADHAR AND A.A. SAYED, JJ. JUDGMENT RESERVED ON 2nd AUGUST, 2011 JUDGMENT PRONOUNCED ON 23rd DECEMBER, 2011 JUDGMENT (PER A.A. SAYED, J.) 6 WP2134andothers.sxw 1. The challenge in the above petitions, is to two orders - both dated 23rd October, 2009, passed by the Appropriate Authority, Mumbai, under section 269UD(1) of the Income Tax Act, 1961 ('IT Act' for the sake of brevity). By the said orders, it was held that the difference between the fair market value and apparent consideration in respect of the subject property is more than 15%, and therefore, it was a fit case of pre-emptive purchase by the Central Government under section 269 UD (1) of the IT Act. 2. Pandharinath, the Petitioner in Writ Petition No. 2134 of 2010 and Dattatram, the Petitioner in Writ Petition No. 2135 of 2010, are brothers and the owners (hereinafter collectively referred to as owners) of one half undivided share each of Plot No. 565 of Suburban Scheme III of Chembur, CTS No. 1554-A, Vithal Niwas, Ghatla Village, Ghatla Road, Chembur, Mumbai-400 0071 totally admeasuring about 890.80 sq. metres of land, with structure thereon (hereinafter referred to as 'the said property'). The brothers were apparently not in good terms. Pandharinath was in exclusive use and occupation of the eastern portion of the existing structure on the said property, whereas Dattaram, the western portion. Both Dattaram and 7 WP2134andothers.sxw Pandharinath separately entered into agreements described as 'Development Agreement' dated 20th April 1994 and 17th May, 1994 respectively with M/s. Sunkrish Developers (hereinafter referred to as Transferee) to develop and transfer the said property in respect of their undivided share on terms more particularly set out therein. The Transferee has also challenged the aforesaid two impugned orders (Writ Petition Nos. 2191 and 2192 of 2010). Respondent No.1 is the Appropriate Authority under Chapter XX-C of the IT Act, 1961 and Respondent No.2 is the Union of India through Ministry of Finance. Inasmuch as the petitions raise common questions of facts and law, they are being disposed of by this common judgment. 3. The events relate back to the year 1994 when Pandharinath and Dattaram entered in two separate agreements as indicated above. Under the said agreements, the said property was to be developed at the cost of the Transferee as per the proposed building plans annexed to the agreements. Each of the owners was to get an ownership flat admeasuring 988 sq. ft. built up area as shown in the plan annexed to the agreements. An amount of `6 lacs was to be adjusted towards construction costs of the flat out of the 8 WP2134andothers.sxw lump sum consideration of ` 26 lacs to be paid by the Transferee in instalments, as per the payment schedule mentioned in the agreements. The providing of the flat was stated to be the essence of the contract. The specifications, amenities and facilities to be provided in the flat were enlisted in the Second Schedule to the agreements. It was agreed that within one month from the grant of Intimation of Disapproval in respect of the proposed building or within six months from the date of agreement, whichever is earlier, the owners were to hand over vacant physical possession of the property to the Transferee. The said agreements contemplated completion of the development and handing over the flats to the owners within 18 months from the grant of commencement certificate. The Transferee was however, during the interregnum, required to provide to each of the owners an alternate rent free two-bed room accommodation in Chembur area as approved by the owners, in the region of `4,000/- per month. It was further agreed that upon completion of construction of the building, the conveyance be executed in favour of the proposed Society which would be formed. Upon execution of the agreements, Pandharinath and Dattaram (alongwith Transferee) separately submitted Form 37-I (as 9 WP2134andothers.sxw contemplated under the IT Act/Rules) together with a copy of their respective agreements. 4. The Appropriate Authority issued show cause notices to Pandharinath and Dattaram as well as the Transferee requiring them to show cause as to why an order under section 269UD (1) of the Income Tax Act should not be passed for the pre-emptive of the said property by the Central Government, as according to the Appropriate Authority there was significant undervaluation of the said property. The Valuation Report along with three sale instances as Annexure 'A' thereto, was annexed to the aforesaid notices. In the case of Pandharinath, after making adjustments as reflected in the table hereinbelow, the rate per sq.ft FSI under the agreement was worked out by the Valuation Officer at `932/- as follows: Particulars Amount Total consideration `26,00,000/- 10 WP2134andothers.sxw Amt. adjusted against the const. cost of the flat to be given ` 6,00,000/- Apparent consideration `20,00,000/- Deferred value (on account of instalments) `18,68,430/- Liability: Construction Cost Rent for 18 Months @ Rs.4000/-pm Credit: Scrap value ` 6,00,000/- ` 72,000/- ` 25,950/- Net Consideration `25,14,480/- Area of Land Total Land Area 445.4 sq. mtrs. Total FSI available 890.80 X10.764X1/2 X0.75 3596 sq.ft. FSI available to the Developer 2698 sq.ft. FSI rate per sq.ft. (built up) ` 932/- 5. So far as Dattaram's case is concerned, there was a slight difference in the FSI rate per sq. ft as worked out by the Valuation Officer, because of the difference in the agreement dates and quantum of earnest money, which resulted in a difference in the deferred value of the instalment amount. The rate per sq. ft. FSI as per the agreement was worked out in the case of Dattaram as follows: 11 WP2134andothers.sxw Particulars Amount Total consideration `26,00,000/- Amt. to be adjusted against the const. cost of the flat to be given ` 6,00,000/- Apparent consideration `20,00,000/- Deferred value (on account of instalments) `18,70,340/- Liability: Construction Cost Rent for 18 Months @ Rs.4000/-p.m. Credit: scrap value ` 6,00,000/- ` 72,000/- ` 36,630/- Net Consideration `25,05,710/- Area of Land Total Land Area 445.4 sq. mtrs. Total FSI available 890.8 X10.764X1/2 X0.75 3596 sq.ft. FSI available to the Developer 2698 sq.ft. FSI rate per sq.ft. (built up) ` 929/- 6. In response to the said show cause notices, the Transferee filed written submissions. As per the calculation given by the Transferee the rate per sq. ft. of FSI of the said property after making adjustments came to ` 1,017/-. Four sale instances were cited by the Transferee to show that the 12 WP2134andothers.sxw rate of the said property as per agreement was the fair market rate prevailing at the relevant time. 7. On 30th August 1994, the Appropriate Authority by two separate orders rejected the contentions and sale instances quoted by the Petitioners and concluded that keeping in view the size of the plot, its location, defect free title of the land, its future potential and the rate of sale instances quoted in the show cause notices, which ranged between ` 1,476/- per sq. ft. to ` 1,749/-per sq. ft., the estimated market value of the property was of ` 1,200/- per sq. ft. of FSI as against ` 932/- (in case of Pandharinath) and ` 929/- (in case of Dattaram) under the agreements and the total value was worked out to ` 32,37,600/- ( FSI 2698 sq. ft. X 1,200) in case of each of the owners. It further held that since the difference between the fair market value and apparent consideration is more than 15%, it fit case for pre-emptive purchase by the Central Government under section 269 UD(1) of the IT Act. In the case of Pandharinath, the consideration payable by the Central Government was stated to be `18,68,430/-, and in the case of Dattaram, `18,70,340/-. The Appropriate Authority vide its letters dated 13 WP2134andothers.sxw 30th August, 1994, which was sent alongwith acquisition orders, also called upon owners to submit the original title deeds/documents etc. relating to the said property within 6 days and to hand over the possession of the property within 15 days from the receipt of the letter. It was stated in the said letters that upon passing of the orders dated 30-08-1994, the property vests in the Central Government and that on failure to comply, action would be taken as per provisions of Section 269UE(2) and (4). 8. Aggrieved by the orders dated 30th August, 1994 passed by the Appropriate Authority, Pandharinath and Dattaram jointly filed a Writ Petition being W.P. No. 2110 of 1994 on 14-9-1994. By an order dated 22-9-1994 the Division Bench of this Court granted interim relief in the following terms: "Only interim relief granted is, Department will not auction the property after obtaining the possession" This order was not subjected to challenge by either of the parties. 9. On 28-09-1994, the Appropriate Authority informed the owners and Transferee that since they had failed to handover vacant possession of 14 WP2134andothers.sxw the property in time the apparent consideration of the property is deposited in Appropriate Authority’s P.D. Account. 10. By letter dated 30th September, 1994, the owners through their Advocates informed the Appropriate Authority that pursuant a summons being issued under section 131 of IT Act, the original title deeds of property had already been handed over on 27th September, 1994 to Shri Pradeep Sharma, the then Deputy Commissioner of Income Tax, and informed the Appropriate Authority that they were ready and willing to hand over physical possession of the said property subject to the Central Government complying with the terms and conditions of the agreements which the Transferee was required to comply with. The Appropriate Authority addressed a letter dated 11th October, 1994 to the owners, the material portion which is reproduced hereinbelow: “As regards the question of possession, I have been directed to state as under: Members of Appropriate Authority discussed the question of possession of the property with reference to the purchase order, Court’s order, terms of Agreement for transfer and letter of the transferor. The Transferor has represented that he will give possession of the property, as per the terms of transfer on alternate accommodation being provided to him. The Members of the Appropriate Authority decided that the transferor should give a letter confirming the possession of the Department on the property and that he is staying there till he has provided an alternate accommodation. 15 WP2134andothers.sxw Since the matter is in dispute in writ petition before the High Court and the auction is stayed, the members Appropriate Authority considered that the payment for the purchase to the transferor will be released after the High Court’s final order in the writ proceedings. “ 11. By letter dated 9th November, 1994, the owners called upon the Appropriate Authority to take possession of the said property by complying with the terms and condition of the agreements which the Transferee was required to comply with and pay the purchase price that was required to be paid to them within one month from the date of passing of the orders and further stated that there was no dispute regarding title to the property or to the persons who should receive the payment. The owners, by their letter dated 9th January, 1995 agreed to give a letter confirming that the Appropriate Authority is in notional possession of the property as against the Appropriate Authority confirming the compliance of the obligations under the agreements and once again asked the Appropriate Authority to take possession of the said property and make payments of the purchase price to them. Matters stood at that and during the pendency of the writ petition, the owners continued to remain in possession of the property and the purchase price remained deposited with the Appropriate Authority, which amount was later invested in Term Deposits. 12. The aforesaid Writ Petition No. 2110 of 1994 came up for final hearing in 2008-09 and further affidavits came to be filed by the parties. 16 WP2134andothers.sxw The Division Bench of this Court after considering the submission of the parties vide its Judgment dated 15th June, 2009 held that the orders dated 30th August, 1994 passed by the Appropriate Authority under section 269UD(1) of the Act cannot be sustained. The Division Bench observed that the transactions referred and relied upon by the Petitioners and more particularly transaction No.3 were not properly considered by the Appropriate Authority. The Division Bench further observed that the Appropriate Authority appears to have not taken into consideration three transactions which were relied upon by the Appropriate Authority in the show cause notice and that it is difficult to accept the contention taken in the affidavit filed by Mr. M.P. Ahuja, Assistant Commissioner of Income Tax on 25-2-2009, that those transaction were not relied upon. It was noted that as per calculation made by the Appropriate Authority, the apparent consideration is about `932/- per sq. ft. of FSI and if 15% is added therein this come to `1,072/-. On the other hand, as per calculation of Petitioners the consideration was `1,017/- per sq. ft. of FSI and if 15% is added thereto, it comes to `1,170/- and therefore the difference between the fair market price fixed by the Appropriate Authority and the apparent consideration with an addition of 15% is not much. The Appropriate Authority should have given valid reasons and data to as to how the market value could be ` 1,200/- sq. ft. The Division Bench observed that the Appropriate Authority had given conflicting and contrary findings in respect of net apparent consideration and the fair market value to be paid by the Government to the Petitioners as according to the show cause notice it was 17 WP2134andothers.sxw stated to be ` 18,68,430/-, whereas according to the Valuation Report it worked out to ` 25,14,480/-, which showed non application of mind. In the circumstances, the Division Bench set aside the impugned orders dated 30th August, 1994 passed by the Appropriate Authority and remanded the matter for fresh hearing and granted liberty to the parties to rely on any additional material. Directions were also given that the matter shall be decided within a period of 4 months from the date of appearance of the Petitioners. 13. After remand, in the 2nd round of hearing, the owners filed detailed submission dated 10th August, 2009. No new instances were relied upon by the either of the parties. After hearing the Petitioners, on 23rd October, 2009, the Appropriate Authority again passed the two orders for pre-emptive purchase under section 269UD(1) of the IT Act, which are impugned in the above petitions. It was recorded in the orders that the payment will be made by the Central Government in accordance with the provisions of Section 269UF(1) read with section 269UG (1) of the IT Act within the stipulated period subject to the owners complying with the conditions under section 269UE(2) of surrendering or delivering possession of the property to the Appropriate Authority within 15 days of the service of the said order. 14. Being aggrieved by the orders dated 23rd October, 2009, initially the owners jointly filed Writ Petition No.1210 of 2010. The said writ petition 18 WP2134andothers.sxw was allowed to be withdrawn with liberty to file two separate petitions. Thereafter, the aforesaid petitions came to be filed by the owners as also the Transferee. 15. Mr. Mistri, Learned Senior Counsel for the Petitioners made the following submissions. (i) that under the agreements each of the owners was to receive a sum of ` 26,00,000/- and one flat admeasuring 988 sq. ft. in the newly constructed building and the owners were only required to pay ` 6,00,000/- being the costs of construction of the flat and the land was to be transferred to a Co-operative Housing Society. For the purpose of determining the apparent consideration and the rate, the Appropriate Authority ought to have considered the market value of flat of 988 sq.ft. and not the construction cost of the flat. The rate per sq.ft. FSI of ` 932/- (in case of Pandharinath) and ` 929/- ( in case of Dattaram) adopted by the Appropriate Authority to decide whether the property was fit to purchase under Chapter XX-C was therefore erroneous; (ii) that there was a conflict as regards the net apparent consideration and the fair market value to be paid by the Government to the owners as reflected even in the order dated 15th June, 2009 of the Division Bench of this Court; 19 WP2134andothers.sxw (iii) that the Appropriate Authority has not tendered the payment within the stipulated time as required under Section 269 UH of the I.T. Act and that the amount was deposited by the Central Government in the P.D. Account of Appropriate Authority prior to the passing of the impugned orders, cannot be considered as a valid deposit under Section 269 UG(1) and there was no tender as required under the law made by the Appropriate Authority to the owners and, therefore, the impugned orders stand abrogated. Under Section 269 UG the Appropriate Authority can deposit the amount in the P.D. Account only when a dispute arises as to apportionment of consideration [Section 269UG(2) ] or the person entitled to receive the consideration refuses to accept the payment or if there is any dispute as to the title to receive the amount of consideration [Section 269UG(3)]; (iv) that the mere fact that the Petitioners did not give possession of the subject property would be no reason for the Appropriate Authority not to tender the amount to the owners and that no such condition has been stipulated under Section 269 UG of the I.T. Act. In any event, the owners had shown their willingness to give possession of the said property upon the Appropriate Authority complying with the obligations of the Transferee under the Agreement including providing an alternate rent free accommodation as provided in the agreements; (v) that the three sale instances relied upon by the Appropriate Authority are not comparable with the said property and the details provided in respect of the said instances of the Appropriate Authority were 20 WP2134andothers.sxw false and incorrect as set out in a separate chart produced before this Court by the Petitioners; (vi) that the sale instances given by the Petitioners were comparable to the said property and ought to have been accepted and that the Appropriate Authority has wrongly sought to distinguish and ignore the sale instances given by the Petitioners; (vii) that the Appropriate Authority failed to comply with the terms and conditions of the agreements including providing alternate rent free accommodation. 16. In support of his submissions the learned Senior Counsel has relied upon the following judgments: (i) Chand V. Raheja Vs. Union of India (1996) 7 SCC 175. (ii) Parasrampuria Estate Developers P. Ltd. V. Members of Appropriate Authority, 282 ITR 110. (iii) Union of India Vs. Madhusudan Das, 254 ITR 581. (iv) Madhusudan Das Vs. Appropriate Authority, 223 ITR 353. (v) Hotel Mardias Pvt. Ltd. Vs. Union of India, 220 ITR 94. 21 WP2134andothers.sxw (vi) Appropriate Authority Vs. Tanvi Trading Trading and Credits P. Ltd., 191 ITR, 307. (vii) Tanvi Trading & Credits P. Ltd. Vs. Appropriate Authority, 188 ITR 623. (viii) Jethamal Mohanlal Khivansara V. Union of India, 272 ITR 143. (ix) Mrs. Kailash Suneja Vs. Appropriate Authority, 231 ITR 318. (x) Shrichand Raheja Vs. S.C. Prasad (Appropriate Authority), 213 ITR 33. The Ld. Senior Counsel also pointed out the meaning of the word “tender” as appearing in Black's Law Dictionary - Seventh Edition to mean an unconditional offer of money or performance to satisfy a debt or obligation. 17. Mr. Ahuja, learned Counsel for the Respondents, on the other hand submitted as under : (i) that the entire valuation has been done in accordance with the terms of the agreement and in accordance with the Income Tax Act and the Rules framed thereunder; 22 WP2134andothers.sxw (ii) that all the three instances cited by the Appropriate Authority are comparable for the reasons given in the tabular remarks column submitted to this Court on behalf of the Respondents; (iii) that the four instances cited by the Petitioners were not comparable and that out of the four instances, sale instance Nos. 2 and 4 were not pressed by the Petitioners themselves; (iv) that the Appropriate Authority had arrived at the fair market value of the flat at `1,200/- per sq. ft of FSI after substantial discount of comparable sale rates and after considering all relevant material and hearing the parties; (vi) that the High Court may not exercise an appellate power while examining the correctness of the conclusions arrived at by the Appropriate Authority; (v) that if two views were possible, the High Court would not substitute its own conclusion for that of the Appropriate Authority; (vi) that Section 269 UH has no application to the facts of the present case in as much as the owners, though obliged, failed to hand over possession of the subject property under Section 269 UE (2) of the Income Tax Act and the Appropriate Authority had offered to make payment of the apparent consideration within one month subject to the owners delivering possession of the said property; 23 WP2134andothers.sxw (vii) that in any event, the amount has been deposited by the Appropriate Authority as required under the provisions of the Act. In the instant case, under Section 269 UG (3), it was not necessary for the Appropriate Authority to tender the apparent consideration and it was open to them to deposit the same in the P.D. Account as there was a dispute as to the title. The expression “title” used in Section 269 UG (3) would include “possession” which was required to be given by the owners to the Appropriate Authority and, therefore, there was no question of any abrogation as suggested by the Petitioners. In support of his submissions the learned Counsel has relied upon the following judgments : (i) Appropriate Authority Vs. Smt. Sudha Patil, 235 ITR 118. (ii) Union of India Vs. Shatabdi Trading and Investment P. Ltd., 251 ITR 93. (iii) Smt. Vimla Devi