Case Note & Summary
The writ petition challenged an order dated 28 April 1993 passed by the Appropriate Authority under Section 269UD(1) of the Income Tax Act, 1961, directing compulsory purchase by the Central Government of an immovable property, namely bungalow no. 4A in Indu-Park Co-operative Housing Society Ltd. at Andheri (West), Bombay, along with five shares of the society. The petitioner, as purchaser, and the transferor trust, Evangelical Alliance Ministries Trust, a public trust registered under the Bombay Public Trusts Act, were parties to the sale transaction. The trust had advertised the property for sale in five newspapers in June 1990, received offers of Rs.22,10,796 and Rs.18,50,000, and after negotiation accepted the petitioner's increased offer of Rs.23,10,000, subject to permissions from Charity Commissioner, society, and no objection from the appropriate authority under Chapter XX-C of the Income Tax Act. An application for sanction under Section 36 of the Bombay Public Trusts Act was filed on 6 May 1991 and sanction was granted by Charity Commissioner on 24 November 1992; the society gave permission on 25 January 1993. Form 37-I was submitted on 4 February 1993. The appropriate authority issued a show cause notice dated 13 April 1993, calling upon the petitioner and transferor trust to show cause why an order under Section 269UD(1) should not be made. The show cause notice did not contain any material or details. A reply was filed on 22 April 1993. By order dated 28 April 1993, the appropriate authority rejected the no objection and made an order under Section 269UD(1), relying upon a valuation report and six sale instances which were never provided to the petitioner. The court noted that the appropriate authority had accepted the Charity Commissioner's sanction but dismissed it as merely persuasive without reasoning, and that the authority had also assumed Rs.100 per sq.ft would be sufficient for repairs without any basis and without affording opportunity to the petitioner to respond. The court held that show cause notice is not an empty formality and its purpose is to afford reasonable opportunity to affected persons to show that apparent consideration is market price or that there is no undervaluation due to peculiar facts. The failure to supply the valuation report and sale instances, and the lack of reasoning for disregarding the Charity Commissioner sanction and for repair cost assumption, vitiated the order. Accordingly, the court quashed the impugned order dated 28 April 1993.
Headnote
A) Income Tax - Compulsory Purchase of Immovable Property - Natural Justice - Income Tax Act, 1961, Section 269UD(1) - Show cause notice dated 13 April 1993 lacked any material details and did not provide valuation report or sale instances; court held that issuance of show cause notice is not an empty formality and affected parties must be given reasonable opportunity to contend absence of undervaluation. Held order liable to be quashed (Paras 5-8). B) Income Tax - Compulsory Purchase of Immovable Property - Valuation Report and Comparable Sale Instances - Income Tax Act, 1961, Section 269UD(1) - Appropriate authority relied upon valuation report and six sale instances but did not furnish them to petitioner or transferor trust, depriving them of opportunity to respond; court held this violated principles of natural justice (Paras 6-7). C) Income Tax - Compulsory Purchase of Immovable Property - Charity Commissioner Sanction - Income Tax Act, 1961, Section 269UD(1); Bombay Public Trusts Act, Section 36 - Appropriate authority acknowledged Charity Commissioner's sanction but dismissed it as only persuasive without assigning reasons; court held such dismissal without reasoning impermissible (Para 7). D) Income Tax - Compulsory Purchase of Immovable Property - Repair Cost Estimation - Income Tax Act, 1961, Section 269UD(1) - Appropriate authority assumed Rs.100 per sq.ft was sufficient for repairs without basis and without giving petitioner opportunity to respond; court held this was arbitrary (Para 7).
Issue of Consideration
Whether the order dated 28 April 1993 passed under Section 269UD(1) of Income Tax Act is valid when the show cause notice lacked material details and the appropriate authority relied on valuation report and sale instances without furnishing them to the affected parties.
Final Decision
The Bombay High Court quashed the impugned order dated 28 April 1993 passed by the Appropriate Authority under Section 269UD(1) of the Income Tax Act, 1961, holding that the show cause notice was bereft of material details and the authority relied on valuation report and sale instances without furnishing them to the petitioner, thereby violating natural justice.
Law Points
- Show cause notice under Section 269UD(1) Income Tax Act must contain material details
- valuation report and sale instances relied upon must be furnished to affected parties
- opportunity to respond to renovation cost estimation required
- Charity Commissioner sanction cannot be dismissed without reasons
- order under Section 269UD(1) vitiated by violation of natural justice
