Case: Unitech Ltd.  Vs. Union Of India

the apparent effective consideration and the market value is more than 15%, the Appropriate Authority cannot assume jurisdiction under section 269-UD of the Act. The same does not mean that the mere fact that such difference is more than 15% will, automatically, lead to the conclusion that there has been undervaluation of property with the motive of evading tax. In Vimal Agarwal case (supra), this Court has reiterated that right of pre-emptive purchase under section 269UD is not a right of pre-emption simpliciter but is a right which can be exercised only in the cases where there is significant undervaluation in agreement of sale with a view to evade tax. The onus of establishing that undervaluation is with a view to evade tax is on the Revenue. No such finding is to be found in the impugned order?. It is not possible to agree with this view in its entirety. Undoubtedly one of the objects of the provision is to prevent evasion of taxes by showing an undervaluation which is more than 15% of the true value of the property and which in turn carries an implication that some portion of the value is not shown in the agreement or the deed but passes by way of unaccounted money. But it is not possible to say that it must be alleged in the show cause notice or a finding must be rendered in the order that there is evasion of taxes as a sine qua non for its validity. Nor is it possible to hold that the onus of establishing undervaluation with a view to evade tax is on the revenue. The true position seems to be that a significant undervaluation, greater than 15% below the fair market value raises a rebuttable presumption that there is an attempt to evade taxes. In C.B. Gautam?s case (1993) 1 SCC 78 )this Court observed that an allegation of such undervaluation of more than 15% raises a rebuttable presumption of evasion of taxes which renders an opportunity to show cause necessary. Therefore, such an opportunity must be read into the provisions of Chapter XXC. This Court observed in C.B. Gautam?s case (supra), as follows: ?As we have already pointed out the provisions of Chapter XX-C can be resorted to only where there is a significant undervaluation of property to the extent of 15 per cent or more in the agreement of sale, as evidenced by the apparent consideration being the lower than the fair market value by 15 per cent or more. We have further pointed out that although a presumption of an attempt to evade tax may be raised by the appropriate authority concerned in case of the aforesaid circumstances being established, but such a presumption is rebuttable and this would necessarily imply that the parties concerned must have an opportunity to show cause as to why such a presumption should not be drawn. Moreover, 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 the fair market value. For example: he might be in immediate need of money and unable to wait till a buyer is found who is willing to pay the fair market value for the property. There might be some dispute as to the title of the immovable property as a result of which it might have to be sold at a price lower than the fair market value or 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 is 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 and to give an interpretation to the provisions which would lead to such a result would be utterly unwarranted. The very fact that an imputation of tax evasion arises where an order for compulsory purchase is made and such an imputation casts a slur on the parties to the agreement to sell lead to the conclusion that before such an imputation can be made against the parties concerned, they must be given an opportunity to show cause that the undervaluation in the agreement for sale was not with a view to evade tax. Although Chapter XX-C does not contain any express provision for the affected parties being given an opportunity to be heard before an order for purchase is made under Section 269-UD, not to read the requirement of such an opportunity would be to give too literal and strict an interpretation to the provisions of Chapter XX-C and in the words of Judge Learned Hand of the United States of America ?to make a fortress out of the dictionary?. Again, there is no express provision in Chapter XX-C barring the giving of a show-cause notice or reasonable opportunity to show cause nor is there anything in the language of Chapter XX-C which could lead to such an implication. The observance of principles of natural justice is the pragmatic requirement of fair play in action. In our view, therefore, the requirement of an opportunity to show cause being given before an order for purchase by the Central Government is made by an appropriate authority under Section 269-UD must be read into the provisions of Chapter XX-C?. 13. The High Court has failed to render a finding on the relevance of comparable sale instances, particularly, why a sale instance in an adjoining locality has been considered to be valid instead of a sale instance in the same locality. The other aspects of the impugned order of the appropriate authority in the earlier part of judgment seems to have been missed.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It is not possible to agree with this view in its entirety. Undoubtedly one of the objects of the provision is to prevent evasion of taxes by showing an undervaluation which is more than 15% of the true value of the property and which in turn carries an implication that some portion of the value is not shown in the agreement or the deed but passes by way of unaccounted money. But it is not possible to say that it must be alleged in the show cause notice or a finding must be rendered in the order that there is evasion of taxes as a sine qua non for its validity. Nor is it possible to hold that the onus of establishing undervaluation with a view to evade tax is on the revenue. The true position seems to be that a significant undervaluation, greater than 15% below the fair market value raises a rebuttable presumption that there is an attempt to evade taxes. In C.B. Gautam?s case (1993) 1 SCC 78 )this Court observed that an allegation of such undervaluation of more than 15% raises a rebuttable presumption of evasion of taxes which renders an opportunity to show cause necessary. Therefore, such an opportunity must be read into the provisions of Chapter XXC. This Court observed in C.B. Gautam?s case (supra), as follows:13. The High Court has failed to render a finding on the relevance of comparable sale instances, particularly, why a sale instance in an adjoining locality has been considered to be valid instead of a sale instance in the same locality. The other aspects of the impugned order of the appropriate authority in the earlier part of judgment seems to have been missed