SHEWALKAR DEVELOPERS PVT LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner has challenged an order dated 23.02.1993 passed under Section 269UD (1) of the Income Tax Act, 1961 (For short "ITA") and an order section 269 UE (2) of the ITA dated 04.03.1993, thereby holding that the apparent consideration shown by transferor/transferee in Form No. 37-I of the Income Tax Act has been grossly understated and therefore, subjected the said property for preemptive protection at the consideration of Rs. 20,67,500/- (-) 1,07,043/- = 19,60,456/- and, therefore, directed the transferee to hand over the possession. The petitioner (transferee) entered into an agreement of development and sell with one Shri Vikramsinha Bisen and five others (transferors) to transfer the land admeasuring 16,540 sq. ft in Khasra No. 55, Mouja Ajni PSK 9 Wardha Road, Nagpur for consideration of Rs. 20,67,500/- i.e. at the rate of Rs.125/- per sq. ft. The property mentioned in the agreement was sold at the rate of Rs.150/- per sq. ft., however, the consideration was agreed to be paid at the rate of Rs. 119/- per sq. ft. i.e. at 26% less than the market rate as observed in the order dated 23.12.1993.

(2.) As the said property was purchased, the appropriate Authority by order dated 29.12.1989 under Section 269UD (1) of the ITA ,the petitioner had filed writ petition which was allowed by remanding the matter back for fresh hearing. The matter was heard accordingly. As per the contentions based upon the material on record, the estimated cost of compound wall, development charges, are to be borne by the transferee, moreover out of the total area of land an area of 1250 sq. ft. is to be retained for approach road for common use of both the parties. Considering transferors right for the use to the extent of 50%, the burden on this account on the transferee works out to Rs. 78,125/-. The total expenditure mentioned above, works out at Rs. 4,56,109/- and same are to be added back to the apparent consideration as per the provision of Section 269 UA(1) (i) of the Act. The property was agreed to be sold at the rate of Rs. 125/- per sq. ft which is the prevailing market rate of the property. The transferee relied upon one sale instance. (sale instance mentioned hereinabove). The said property was sold at the rate of Rs. 150/- per sq. ft. It is stated that this property has better location due to fact that it is adjoining to Shri Sai Baba Mandir and has great religious sanctity whereas property under consideration is situated next to big nullah. Hence, these two properties cannot be compared.

(3.) As noted, there was nothing mentioned in the show cause notice dated 30.12.1992 issued by respondent/authority with regard to the sale transactions or the reason for taking decision to show cause as to why the property should not be purchased except calling the petitioner for hearing. Therefore, there was no material before the Authority except the sale instances relied upon by the petitioner, which was agreed to be sold at Rs. 150/- per sq. ft. on 05.04.1989 whereas the property under consideration was agreed to be sold on 02.10.1989 at the rate of Rs. 125/- sq. ft. The sale instance so relied upon by the Department was, in fact, the instance relied upon by the petitioner. The terms and conditions of both these agreements apart from location of the property, as the property of sale instance has better location as it was adjoining to Shri Saibaba Temple and has a great religious sanctity. The property involved in the present case, however, is situated next to a big nullah. Apart from this, as noted above, the total expenditure as mentioned above works out near about to Rs. 4,50,000/-. The same needs to be added back to the apparent consideration. In this background, the agreed rate of Rs. 125/- per sq.ft., which is prevailing market rate of the property, cannot be termed as undervalued or understated. Respondent Nos. 1 and 2 in its return dated 03.08.1993 contended that there is undervaluation of the property by 16.66% more and not at 26% less than the market rate as recorded in the order dated 23.02.1993.