1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.625 OF 1993 Hansraj Madhavji Thakkar (Trustees of Thakker's Family Trust) having his address at 517, Maker Chambers V, Nariman Point, Bombay – 400 021. ..Petitioner Vs. 1. (a) S.K.Laul, Chief Engineer (b) S.C.Tiwari, Commissioner Income-tax, (c) C.M.Betgeri, Commissioner Income-tax. 2. Union of India. 3. Shaukat Fatehi Consultants Pvt.Ltd. 241-2, Rambha, Nepean Sea Road, Bombay – 6. ..Respondents Mr.K.B.Bhujle with Ms.Mina Kapadia i/b.Pandya Gandhi and Co. for the Petitioner. Mr.R.Asokan for the Respondents. CORAM : DR.S.RADHAKRISHNAN AND 2 A.P.BHANGALE, J.J. DATED : 4TH JUNE,2008 ORAL JUDGMENT (PER DR.S.RADHAKRISHNAN,J.) 1. The Petitioners have challenged the order dated 25th February, 1993 passed by the Appropriate Authority under Section 269 UD(1) of the Income Tax Act,1961 (hereinafter referred to as “the Act”). The Petitioners have prayed for issuance of the appropriate writ against the 1st Respondent requiring them to issue No objection Certificate under Section 269 UL(2) of the Income Tax Act and release and restore the office premises bearing No.517, 5th Floor, Maker Chamber-V, Nariman Point, Mumbai admeasuring about 766 sq.ft. In area. The purchase transaction entered at the rate of Rs.3133/- per sq.ft. For total consideration of Rs.24,00,000/- 2. The facts which are relevant for consideration are as under: On 22nd February, 1988 the Petitioners and entered into an agreement with Respondent No.3 Shaukant Fatehi, Consultants Pvt.Ltd., 241-2, Rambha, Nepean Sea Road, Mumbai-6 (owner of the premises) for purchase of office premises referred above for total consideration of Rs.24 lacs. Accordingly, on 29th 3 February,1988, the Petitioners and 3rd Respondent had filed Form No.37-I in duplicate with copies of the agreement dated 22nd February,1988. On 18th March,1988, the Respondents informed the Petitioners that office premises (property in question) was to be inspected by the Valuation Officer, thereafter the Appropriate Authority had served order dated 28th April,1988 ordering the purchase of aforesaid office premises by the Central Government. The said order was challenged in Writ Petition No.1667 of 1988 by the Petitioners filed in this Court. The said writ petition was disposed of whereby the order dated 28-4-1988 was quashed with a direction that a fresh order be passed in respect of the application of the Petitioners after granting an opportunity of hearing, in the light of the Apex Court decision in C.B.Gautam Vs. Union of India, 199 ITR 530. 3. The appropriate authority (1st Respondent) had thereafter served show cause notice dated 20-01-1993 to the Petitioner thereby fixing a hearing on 2-2-1993. The said show cause notice along with annexures "Reasons Recorded" mentioning that there is a report of valuation officer dated 30-3- 1988 and notings of IAC dated 4-9-1988 were referred, however 4 they were never furnished to the Petitioners, in spite of their demand. 4. According to the Petitioners their Advocate appeared and advanced oral arguments as also submitted written submission contending that subject premises was in the rear corner surrounded by three buildings and secondly rate of Rs.3133/- per sq.ft. of the office premises was within 15% of the value of first 3 instances mentioned by the appropriate authority. The instances number 2nd and 3rd were from the same building and had a better advantage and even then it was within 15% of apparent consideration. It was also pointed out that no parking space was attached to the office premises. It was also pointed out that seller needed funds urgently and hence 90% consideration was paid at the time of the agreement. Risk was taken because the price negotiated was fair according to petitioners. Petitioners had placed reliance on an instance of the transaction in respect of the same floor of the building being Unit NO.514 which took place in the month of February 2008 where area of 600 sq.ft. area sold at the rate of Rs.3200/- per 5 square feet for consideration of Rs.21,92,000/- under the agreement dated 11-2-1988. 5. Further according to the Petitioner they received an order under Section 269 UD (1) of the Income Tax Act passed on 25-2- 1993 with "Reasons Recorded" holding that the property was fit for purchase by the Central Government and was accordingly being purchased. 6. Thus aggrieved by the said impugned order the Petitioners have filed this writ petition. 7. Grievance of the Petitioners is that the subject property was situated in the rear corner surrounded by three buildings. The rate of Rs.3133/- per sq.ft. of the subject property was within 15% of the 3 instances cited by the appropriate authority. Besides that subject property has no parking space attached to it. According to the Petitioners sellers needed funds urgently, hence 90% amount was paid at the time of the agreement. This risk was taken because price negotiated was fair according to the Petitioner. One instance was pointed out by the Petitioners 6 of the premises situated on the same floor of the building which is described as Unit no.514 having are of 600 sq.ft. was sold in February 1988 at the rate of Rs.3200/- per sq.ft.. Thus the valuation of the subject property was about 2% less at the rate of Rs.3133/- per sq.t. sold for total consideration of Rs.19,20,000/- under an agreement dated 11-2-1988, hence there is no question of under valuation of more than 15%.. 8. The next grievance of the Petitioners that order under Section 269 UD (1) of the Income Tax act dated 25-2-1993 referred the separate reasons recorded earlier and held that the subject property was fit for purchase by the Central Government. The Petitioners had submitted an application seeking rectification of the impugned order dated 12-3-1993 in view of Section 269 UJ of Income Tax Act, 1961. In the facts and circumstances making reference to instances of sale relied upon by the Petitioners, it is contended that the impugned order was in contravention of the principle of natural justice on the following points, viz. i) no “fair market value“ was determined by the appropriate authority while passing the impugned order; as 7 such it was impossible to determine that the apparent consideration was less by more than 15%. ii) the new instances relied upon by the authorities were not informed to the petitioners; hence, the same is violative of the principles of natural justice. iii) Instances of the sales in respect of the same floor and that too of the same month was not considered by the appropriate authority; iv) the appropriate authority ought to have considered the fact that there was no question of tax evasion on the part of the Petitioners. v) The valuation report dated 30-03-1988 and notings of IAC were never furnished to the Petitioner, in spite of demand by the Petitioner. On these grounds the learned counsel for the Petitioner, Mr.Bhujale prayed for quashing the impugned order passed by the learned appropriate authority. 9. The learned Counsel Mr.Ashokan on behalf of the Respondents - Income Tax authorities found it difficult to counter the submissions advanced on behalf of the Petitioner because 8 prima facie also the appropriate authority did not arrive at any “fair market value” and without determination of which it could not have been possible for the appropriate authority to arrive to a conclusion that the subject property was under valued to the extent of more than 15% of the fair market value. The learned Counsel for the Income Tax authority conceded that no fair market value was determined by the appropriate authority. 10. Mr. Ashokan, learned Counsel appearing on behalf of the revenue submitted that prior to the decision of this Court in the case of Vimal Agarwal v. A.A. and Ors. reported in 210 I.T.R. 16, there was no practice of determining the fair market value. Mr. Ashokan further submitted that the objections raised by the Petitioners have in fact been considered in the impugned order and, therefore, no fault can be found with the said order. Accordingly, Mr. Ashokan submitted that there is no merit in the petition and the same is liable to be dismissed. 11. We have carefully considered the rival submissions. The Apex Court in the case of C.B. Gautam (supra) has held that the provisions of Chapter XX-C can be resorted to only when there is a 9 significant undervaluation to the extent of 15% of the fair market value with a view to evade tax. As held by this Court in the case of Vimal Agarwal (supra) it is necessary to first determine the fair market value of the property in question in the light of the attending circumstances. This Court has further held that without determining the fair market value, it is not only difficult but impossible to say that the apparent consideration is lower than the fair market value by 15%. In the present case, admittedly, the fair market value of the property in question is not determined and, therefore, purchase of the property in question on the footing that there is undervaluation to the extent of 15% of the fair market value has to be held to be without any basis. 12. Moreover, before passing the impugned order, the appropriate authority has neither given the documents relating to the sale instances referred to in the show cause notice nor in the impugned order, the appropriate authority has referred to the sale instance pointed by the Petitioners in their reply to the show cause notice. Also the Valuation Report and notings of Dy.Commissioner were not furnished to the Petitioners which clearly violative of the principles of natural justice. In these circumstances, the grievance 10 of the Petitioners that the impugned order suffers from serious infirmities deserves acceptance. 13. For all the aforesaid reasons, we are of the opinion, that the impugned order cannot be sustained and is hereby quashed and set aside. 14. Accordingly, the petition is allowed. Rule is made absolute in terms of prayers (a) and (b) with costs. (A.P.BHANGALE,J.) (DR.S.RADHAKRISHNAN,J.)