RAFIQ, J. - (1.) THESE two special appeals are directed against the judgment of the learned Single Judge dated 14. 9. 1994 in the writ petition filed by the appellant Krishna Kumar Rawat and three others in which appellant Smt. Mithilesh Kumari was a respondent. Factual matrix of the case is that petitioners Krishna Kumar Rawat, Ashok Kumar Rawat, Ravindra Kumar Rawat and Rajindra Kumar Rawat were intending buyers of a property located at khasra no. 126 of Village Durgapura in Tehsil Sanganer of District Jaipur, which now forms part of Jaipur City. This property consists of a plot area admeasuring 9500 sq. yards / 7945 sq. mtrs. with two godowns and certain other structures. The appellant Mithilesh Kumari (for short the vendor), the owner of the property, entered into an agreement to sale dated 18. 12. 1993 for sale of the aforesaid property in favour of the prospective buyers for a consideration of Rs. 99,84,500/ -. The sale price was calculated at the rate of Rs. 1051/- per sq. yard and a sum of Rs. 40,00,000/- was paid in advance by the prospective buyers to the vendor vide cheque dated 18. 12. 1993. It was agreed between the parties that they shall obtain a certificate in Form 37-I of the Income Tax Act and within one month thereafter the sale deed shall be got executed. According to the prospective buyers however the actual possession of the said property i. e. Godown no. 13 and 14, guard room and office premises was delivered to them and with respect to 1/4th undivided share of the remaining open land, only symbolic possession was delivered to them on 18. 12. 1993. The appellants furnished the required information about the agreement to sale in accordance with the provisions of Section 269uc of the Income Tax Act to the Appropriate Authority of the Income Tax Department in form No. 37 I together with agreement to sale and statement of transfer of the property. The Valuation Officer of the Appropriate Authority of Income Tax Department thereafter vide his letter dated 18. 1. 1994 informed the appellants that he would like to inspect the property on 21. 1. 1994 and demanded certain informations. It is stated that the appellants furnished the required information to the Valuation Officer who was later learnt to have submitted a report to the Appropriate Authority. The Appropriate Authority after receiving the report from the Valuation Officer issued a show cause notice to the appellants on 8. 3. 1994 under section 269 UD (1a) of the Income Tax Act, 1961 stating therein that apparent sale consideration as disclosed by the appellants was on lower side for various reasons and that in fact the value of the land was much higher than the agreed rate. It was stated that a plot of land at A-90, Triveni Nagar near Durgapura Railway Station was sold by Jaipur Development Authority on 7th November, 1992 in auction @ Rs. 1781/- per sq. mtrs. The Appropriate Authority also pointed out that if an adjustment of -5% on account of less development, -10% on account of general condition of plot of the property and +12% on account of difference in time were allowed and with deduction of 5% being allowed, the rate of the plot would work out to Rs. 1692/- per sq mtrs and on that basis, the value of the land measuring 9,500 sq. yard / 7,943 sq. mtrs. x 1692 would work out to Rs. 1,34,39,556/- as against the price of Rs. 99,84,500/- declared by the appellants in Form No. 37-I. The appellants were therefore required to show cause as to why the preemptive purchase order u/s. 269ud (1) of the Income Tax Act was not made and were asked to appear before the Appropriate Authority on 21. 3. 1994 at 10. 30 PM either personally or through their representative.
(2.) THE prospective buyers and the vendor both separately submitted their reply /objection to the show cause notice on 21. 3. 1994. THE vendor submitted that comparison of a small developed plot of land in Triveni Nagar was not justified. It was submitted that development of a land according to rules would need 40% of the land to be left for amenities like park, roads etc. Moreover they would be required to incur the costs of development of roads, electricity, water supply and other civic amenities. THE piece of land would therefore be required to be sub-divided into plots. THE prospective buyers in their separate reply to the show cause notice contended that in notification of the Sub- Registrar, Government of Rajasthan, Jaipur the market price of the land in Durgapura area as on 1. 4. 1991 for the first category has been fixed at the rate of 550/- per sq. mtrs and in the second category at the rate of Rs. 450/- per sq. mtrs and if 12% on the aforesaid amount is added on account of time element of two years, this would work out to Rs. 690/- per sq. mtrs. Besides, subdivision of the property would be required to be got approved from JDA which would mean leaving 30% to 40% of the land open for roads and parks and incurring cost for development of such roads, parks, water supply and provision of electricity and cost of demolition of the present structure and removal of debris would require atleast six months. THE prospective buyers submitted an additional representation on 24. 3. 1994 that a piece of land similar to the one cited in show cause notice situated in Triveni Nagar Scheme measuring 116. 13 sq. mtrs. was sold on 3. 6. 1993 for a sum of Rs. 1,00,000/- at the rate of Rs. 861. 10 per sq. mtrs. THE Sub-Registrar fixed the market value of such land for registration purpose at the rate of Rs. 1,043. 05 per sq. mtr as per the rates prescribed by District Advisory Committee. Reference was given to the order of the JDA dated 4. 11. 92 according to which reserve price for lands in Durgapura area was fixed at the rate of Rs. 600/- per sq. mtrs for residential purposes. The Appropriate Authority of the Income Tax Department passed an order u/s. 269 UD (1) of the Income Tax Act on 30. 3. 1994 and by virtue of powers vested in it under that section, ordered compulsory purchase of the disputed property by Central Government at an amount equal to the said apparent consideration. The Appropriate Authority by the aforesaid order instructed his office to serve on the appellants a copy of the order made by it for purchase of the aforesaid property by the Central Government and further stated that according to the provisions of subsection (1) of Section 269ue the said property now vested in the Central Government from 30. 3. 1994. The appellants were directed by letter dated 30. 3. 1994 to deliver possession of the said property to Shri R. S. Sagar, DVO, Income Tax Department, Jaipur. Shri R. S. Sagar vide his letter dated 6. 4. 1994 directed the appellants to intimate the date and time of the intended physical handing over of the said property to him. The preemptive purchase order dated 30. 3. 1994 was challenged by the prospective buyers by filing writ petition on 15. 4. 1994. The learned Single Judge upon hearing the prospective buyers, the Income Tax Department as also the vendor dismissed the writ petition by his judgment dated 14. 9. 1994 which is under challenge in these appeals filed both by the prospective buyers and the vendor. We have heard Shri Paras Kuhad, the learned counsel for the appellants / prospective buyers in SAW No. 744/99, Shri B. L. Sharma, the leaned counsel for the appellant / vendor in SAW No. 188/95, Shri J. K. Singhi and Shri Anuroop Singhi for the respondents. Shri Paras Kuhad, the learned counsel for the appellants / prospective buyers argued that the learned Single Judge failed to consider the specific facts mentioned by the petitioners appellants specially those with regard to determination of fair market value of the property. He argued that the preemptive purchase order passed by the appropriate authority was liable to be set aside because such authority was required to ascertain the market rate prevalent in respect of the land similar to that of the land in dispute both from the point of view of the nature of the land and its location. If the market rates adopted for the comparison, were the rates applicable in respect of a totally different type of land, cost of converting the land under preemptive purchase to the kind of the land whose rates were being adopted for the purpose of comparison had to be accordingly worked out. The Appropriate Authority has however failed to do so. It adopted the rates of a developed residential building plot whereas the land in question was an undeveloped large agricultural plot of land. Such comparison therefore could not be made without providing for adequate deductions towards the cost of development and the area to be lost for providing roads, parks and other civic amenities in the process of sub-dividing the property into small developed plots. The learned Single Judge erroneously refused to examine the legality of the preemptive purchase order on the ground that the power of judicial review under Article 226 of the Constitution was available only to the extent of examining as to whether any perverse finding has been recorded by the authority or the order suffers from non application of mind or further whether the order is contrary to established principles of law. Shri Paras Kuhad therefore argued that learned Single Judge overlooked the scope of judicial review on such matters as enunciated by the Hon'ble Supreme Court in C. B. Gautam vs. Union of India , (1993) 1 SCC 78, wherein it was held that there being no right of appeal or revision, the aggrieved party in a proceeding before High Court can demonstrate that the reasons adopted by the Appropriate Authority while passing an order of preemptive purchase were erroneous, irrational or irrelevant. It was further held that on account of absence of the provision for an appeal under the Income Tax Act, judicial scrutiny in respect of exercise of power under Chapter XX-C also extends to a scrutiny whether the order is erroneous, irrational or based on irrelevant considerations which would mean that the merits of the preemptive purchase order also are amenable to judicial review under Article 226 of the Constitution. It was argued that the learned Single failed to appreciate that right of preemptive purchase can be exercised only if the fair market value is found to be at least 15% more than the apparent consideration. The onus of establishing that the conditions of taxability were fulfilled was always on the Revenue. The right of preemptive purchase order could be exercised only if the Appropriate Authority arrived at the conclusion that the assessee had actually received a larger consideration for the transaction than what was declared in the instrument of transfer. In the instant case, contrary to what was held by Hon'ble Supreme Court in C. B. Gautam, the learned Single Judge has held that 15% margin covered the remaining part of the valuation, so that no injustice is done while acquiring the property. It was therefore argued that learned Single Judge was not correct in holding that the right of preemptive purchase by the Central Government for an amount equal to the amount of apparent consideration has to be exercised to relieve the transferor of any grievance. Shri Paras Kuhad further argued that the Appropriate Authority erred in law in accepting the rates notified by the government for registration of the conveyance deeds which have since received legislative recognition in newly inserted provision of Section 50c of the Income Tax Act. The learned Single Judge has thus proceeded to pass his judgment on the basis of presumptions and surmises, the impugned judgment is therefore suffer from error apparent on the face of the record. It was argued that learned Single Judge was not correct in holding that the market value of the land has to be adopted merely looking at the rates prevalent in the market in the locality or situation of the plot and the potentiality of its use. The learned Single Judge on that basis in fact refused to examine the correctness of the preemptive purchase order which in fact was based on erroneous, irrelevant and irrational reasons.
(3.) SHRI Paras Kuhad argued that the determination of fair market value of the Appropriate Authority was wholly illegal because it was based on adoption of a totally incorrect price of the disputed land taking it to be a developed plot on the basis of the solitary example of auction sale dated 7th November, 1992 of plot no. A-19, Triveni Nagar, Jaipur. Adoption of such rate was unrealistic and totally incorrect as was evident from the price reflected under the sale-deeds of other developed plots in Triveni Nagar itself namely plot No. B-44 and A-256 which related to the transaction of sale carried out in the month of June and July, 1993. According to such sale transactions, the market rate that was determined was Rs. 1,300/- per sq. mtrs. The Appropriate Authority also failed to consider that while the price adopted for comparison was that of a developed building plot, the property in question was a larg undeveloped tract of agricultural land and if for the purpose of comparison, the price of the developed building plot was to be adopted, the cost of converting the undeveloped land area into developed building plots of small sizes was also required to be taken into consideration. The learned Single Judge however refused to determine either the extent of saleable plot area that was likely to became available upon sub-division and consequential development of undeveloped land in question, which would have required the loss of land for making provision of the roads, parks and other civic amenities according to these sub division rules. The learned Single Judge failed to examine the correctness of the market rate of developed plots adopted by the Appropriate Authority with reference to sale deed of other similar plots located in the same area and more proximate in point of time and was not correct in holding that such recorded sales may or may not reflect the correct market price. The learned Single Judge having held that market value has to be determined looking to the rates prevalent in the same locality, situation of the plot and potentialities of its use, omitted to consider the disadvantages attached to the land of undeveloped large agricultural area, which for the purpose of development would essentially require huge costs to be incurred and leaving out nearly 30% to 40% for the purpose of facilities. The learned Single Judge refused to examine the comparable sale price reflected from the transactions cited by the appellants on the ground that this was a question of fact and could not be examined under Article 226. At the same time, however, the learned Single Judge approved the adoption of the rates with regard to the residential plots situated in the same colony of which instances were given by the appellants. Such reasonings were therefore mutually contradictory and totally inconsistent. In any case, Triveni Nagar not being the closest locality, there being four other localities absolutely adjacent to the area in question,comparison with the plot of Triveni Nagar could not be made. If at all the rates of the nearby plot area for the purpose of comparison were to be taken, such comparison ought to have been made on the basis of sale transactions of the plots in the adjacent localities. The authorities could not in isolation have picked up the sales reflecting the price of the transaction which took place in December, 1992. The Appropriate Authority committed an error of law in adopting the market rate of a developed building plot and applying the same to an undeveloped covered area bearing industrial godown. The impugned order of preemptive purchase was therefore vitiated under law. When comparison for the purpose of valuation was made with a developed vacant residential plot, the property in question was also required to be reduced to the status of residential development vacant building plot before the comparative rates could be adopted or in the alternative the property should have either been valued by treating it as a commercial property or as an industrial property. If it was to be treated as the commercial property then the valuation has to be made to the extent of area that would have been available according to the plans approved by the JDA which would have meant loss of about 85% of the total area being integral and concomitant to the development of the property as commercial property. The learned Single Judge was therefore not right in adopting the rates in the commercial area and refusing to take into consideration the area that was to be lost on that account as per already approved plans. Similarly if the valuation of the property was to be done by taking it as an industrial property, the value of the land underlying the industrial godown could not have been assessed with reference to the price applicable to residential building plots and the value of the godown were to be taken into consideration together with the loss in the value of the land arising on account of its reduction in the form of industrial land. Since the industrial land available in the vicinity was valued at Rs. 100/- per sq. mtrs only, the alleged value of the godown at Rs. 42 lacs, as assessed by the authorities was wholly unrealistic. The learned Single Judge failed to appreciate that Form No. 37 I was filed on 31. 12. 1993 and show cause notice was served on 11. 3. 1994 i. e. 70 days after filing of the returns and therefore the Appropriate Authority was not justified in rejecting the request of the appellant for grant of at lest 15 days time for collecting complete evidence and placing it on record in support of the facts stated by them. The learned Single Judge failed to appreciate that the appellants were at no stage called upon to show cause as to why the property be not treated as commercial property and the godowns in question may not be valued at Rs. 42 lakhs. The mandatory requirement being that for passing the preemptive purchase order within 90 days, the loss of initial 70 days meant only 20 days being available to the authority for determination of the proceedings under Chapter XX-C which occasioned failure of justice because reasonable opportunity was not provided to the appellants for defending their case. The learned Single Judge failed to appreciate that no show cause notice was issued by the department to the other interested person namely the co-owners of the open land forming part of the property who was very much interested persons within the meaning of Chapter XXC of the Income Tax Act and non service of notice upon her vitiated the entire proceedings. The order of preemptive purchase was merely based on surmises and conjectures without there being any credible material to suggest any attempted evasion of tax. While notice was given to the appellants on different grounds but the ultimate order that has been passed on 30. 3. 1994 is based on a totally different consideration. It was not within the competent of the Appropriate Authority to travel beyond the scope of show cause notice. Shri Paras Kuhad further argued that the Appropriate Authority had apparently considered the report of the Valuation Officer but copy of the report of the Valuation Officer was not supplied to the petitioner. This clearly prejudiced the case of the petitioner because it was obligatory upon the Appropriate Authority to supply a copy of the same to the petitioner. The copy of the Valuation Report has been placed on record by the vendor / appellant along with an application filed at the time of hearing and Shri Paras Kuhad on that basis argued that while other factors with regard to deductions on the rates of comparable sales price of A-19, Triveni Nagar were mentioned in the show cause notice as also in the impugned order but the factor with regard to deduction of -10% for encumbrance due to built up structures on the plot and further deduction of -10% for joint ownership as suggested by the Valuation Officer were completely withheld by the Appropriate Authority. This according to Shri Kuhad vitiated the impugned order and violated the requirement of reasonable opportunity of hearing being provided to them in terms of Section 269ud (1a ). It was argued that the learned Single Judge failed to appreciate that major part of the property was in the nature of undivided open land, dimension and location of which were uneven and the possession having not taken place, therefore, the land covered by road and other amenities and it was not known as to by what time possession as also the ownership right of the same was likely to be available to the prospective buyers. Such land area being totally incapable of being used in gainful manner, till the dispute with regard to its dimension was resolved by the different co-owners, it could not be valued without reference to these encumbrance factors. It was argued that learned Single Judge failed to correctly appreciate the principles of law enunciated by Hon'ble Supreme Court in various judgment of Hon'ble Supreme Court in Rakesh C. Rastogi & Anr. vs. Appropriate Authority & Anr. , (2002) 10 SCC 335, Appropriate Authority & Anr. vs. Kailash Suneja & Anr. , (2001) 6 SCC 565, C. B. Gautam vs. Union of India & Ors. , (1993) 1 SCC 78, Usha Kulkarni & Ors. vs. Union of India & Ors. , 1996 ITR 190 (Vol. 219), E. Vittal & Anr. vs. Appropriate Authority & Ors. , 1996 ITR 760 (Vol. 232), Himmatlal Vadalia & Ors. vs. Union of India & Ors. , 1998 ITR 854 (Vol. 232), Appropriate Authority & Anr. vs. Smt. Varshaben Bharatbhai Shah & Ors. , 2001 ITR 342 (Vol. 248), Brig. Sahib Singh Kalha vs. Amritsar Improvement Trust & Ors. , 1982 AILACC 593 (Suppl.), Appropriate Authority of Income Tax vs. Jagdish Electricians India Pvt. Ltd. & Ors. , 2003 ITR 468 (Vol. 264) (SC), Sona Builders vs. Union of India & Ors. , 2001 ITR 197 (Vol. 251) (SC), Dr. Anand Prakash vs. Appropriate Authority, 2006 ITR 395 (Vol. 287) (Del.), Musthafa Ummer & Anr. vs. Appropriate Authority & Ors. , 2001 ITR 134 (Vol. 254) (Ker. ). ;