Case Note & Summary
The petitioners, owners of an open plot of land in Pune, challenged an order dated February 23, 1995, passed by the Appropriate Authority under Section 269UD(1) of the Income Tax Act, 1961, directing pre-emptive purchase of their property. The Authority had concluded that the apparent consideration of Rs. 1,20,00,000 was undervalued by more than 15% compared to the fair market value, relying on a sale instance of a nearby property. The petitioners argued that the sale instance property was not comparable and that even using that instance, the undervaluation did not exceed 15%. The High Court examined the facts and found that the sale instance property was not comparable in terms of location, size, and development potential. The court noted that the subject property was an open plot with development rights granted to petitioner No.4, whereas the sale instance property was a developed plot. The Authority had not considered these differences. The court held that the finding of undervaluation was erroneous and quashed the order, allowing the writ petition.
Headnote
A) Income Tax - Pre-emptive Purchase - Section 269UD(1) Income Tax Act, 1961 - Undervaluation - The Appropriate Authority ordered pre-emptive purchase of immovable property on the ground that the apparent consideration was undervalued by 15% or more than the fair market value. The court held that the sale instance property relied upon was not comparable to the subject property in terms of location, size, and development potential, and even on the basis of that sale instance, the alleged undervaluation did not exceed 15%. Consequently, the order was quashed. (Paras 1-3) B) Income Tax - Fair Market Value - Determination - Section 269UA(d) Income Tax Act, 1961 - The court observed that the Appropriate Authority failed to correctly compute the fair market value by not considering the development rights granted and the restrictions on the subject property. The reliance on a non-comparable sale instance vitiated the finding of undervaluation. (Paras 2-3)
Issue of Consideration
Whether the Appropriate Authority was justified in ordering pre-emptive purchase of the petitioners' property under Section 269UD(1) of the Income Tax Act, 1961 on the ground that the apparent consideration was undervalued by 15% or more than the fair market value.
Final Decision
The writ petition is allowed. The impugned order dated February 23, 1995 is quashed and set aside.
Law Points
- Pre-emptive purchase under Chapter XX-C of Income Tax Act
- 1961 requires strict compliance with conditions
- including undervaluation of 15% or more
- sale instance property must be comparable in all respects
- burden on revenue to establish undervaluation
- fair market value must be determined correctly.
