Case Note & Summary
The Supreme Court dismissed appeals by prospective buyers (Krishna Kumar Rawat & Ors.) and partly allowed the appeal by the Union of India against a High Court order that had directed refund of advance payment with interest. The dispute arose from an agreement dated 11.11.1993 for purchase of land measuring about 9500 sq. yards in Jaipur for Rs.99,84,500. The appropriate authority under the Income Tax Act, 1961 issued a show cause notice alleging undervaluation, comparing the land with a nearby plot sold by Jaipur Development Authority at Rs.1781 per sq. meter. After considering replies, the authority passed a pre-emptive purchase order on 30.03.1994 under Section 269UD(1) directing compulsory purchase by the Central Government at the apparent consideration. The writ petition and appeal by the buyers were dismissed by the Rajasthan High Court. The Supreme Court held that the valuation by the authority was reasonable and not arbitrary, and that the High Court correctly upheld the order. The Court also noted that the constitutional validity of Chapter XXC was upheld in C.B. Gautam vs Union of India. However, the Court partly allowed the Union's appeal against the direction to pay interest on the refund to the buyers, as the buyers had not challenged that part. The appeals by the buyers were dismissed, and the Union's appeal was allowed to the extent of deleting the interest direction.
Headnote
A) Income Tax Act - Pre-emptive Purchase - Section 269UD - Compulsory Acquisition - Appropriate Authority's order directing pre-emptive purchase of immovable property at apparent consideration was upheld by the High Court and Supreme Court - The dispute pertained to an agreement for sale of land at Rs.1051 per sq. yard, but the authority found the value to be higher based on comparable sales - Held that the authority's valuation was reasonable and not arbitrary (Paras 1-24). B) Income Tax Act - Valuation - Comparable Sales Method - Section 269UC - Show Cause Notice - The appropriate authority relied on an auction sale of a plot by Jaipur Development Authority at Rs.1781 per sq. meter, with adjustments for development, size, and time gap, to determine the value of the suit land - Held that the method was proper and the objections of the appellants were rightly rejected (Paras 9-13). C) Income Tax Act - Constitutional Validity - Chapter XXC - Section 269UE - The constitutional validity of Chapter XXC (including Section 269UE) was upheld by the Constitution Bench in C.B. Gautam vs Union of India (1993) 1 SCC 78 - Held that the provisions are valid and the pre-emptive purchase order was legal (Para 22-23).
Issue of Consideration
Whether the High Court was justified in upholding the pre-emptive purchase order dated 30.03.1994 passed by the appropriate authority under Section 269UD(1) of the Income Tax Act, 1961, directing compulsory purchase of the suit land by the Central Government at the apparent consideration.
Final Decision
The Supreme Court dismissed Civil Appeal Nos. 9800-9801 of 2010 filed by the prospective buyers, upholding the pre-emptive purchase order. In Civil Appeal No. 9901 of 2010 filed by the Union of India, the Court partly allowed the appeal and set aside the direction for payment of interest @ 6% p.a. on the refund amount to the buyers, as the buyers had not challenged that part of the order.
Law Points
- Pre-emptive purchase
- undervaluation
- comparable sales method
- Section 269UD
- Section 269UC
- Income Tax Act
- 1961
- Chapter XXC
- constitutional validity upheld
- C.B. Gautam case
