1998-VIL-27-SC-DT
Equivalent Citation: [1999] 235 ITR 118, 150 CTR 405, 101 TAXMANN 286
Supreme Court of India
Date: 10.11.1998
APPROPRIATE AUTHORITY AND ANOTHER
Vs
SMT. SUDHA PATIL AND ANOTHER
BENCH
Judge(s) : MS. SUJATHA V. MANOHAR., G. B. PATTANAIK
JUDGMENT
RAJENDRA BABU J.---This appeal arises out of certain proceedings initiated under Chapter XXC of the Income-tax Act, 1961. The appropriate authority made an order on February 28, 1996, by which property comprised in Municipal No. 483/24, V Block, Jayanagar, Bangalore-11, measuring 80' east to west and 122' north to south with a building thereon measuring about 2 1/2 square metres was sought to be purchased pre-emptively under the provisions of the Act for the apparent consideration disclosed in a sale deed entered into between the appellant and the second respondent. The agreement between the appellant and the second respondent is entered into on September 25, 1995, and Form No. 37-I was also filed pursuant to which the proceedings were initiated under Chapter XX-C of the Act. In the document the consideration disclosed is Rs. 63,44,000. The appropriate authority found that the rate at which the property is sought to be sold is Rs. 650 per sq. ft. while the actual market value of such land would be Rs. 850 per sq. ft. The method adopted by the appropriate authority in arriving at this conclusion is the comparable sales of similar transactions, and while the instances cited by the vendor and the appellant were rejected, the instances cited by the Department were accepted. On that basis the order was passed. The same was challenged before this court in a writ petition. The learned single judge dismissed the writ petition at the preliminary hearing stage itself by holding that the appropriate authority had followed the procedure set out in Gautam (C. B.) v. Union of India [1993] 199 ITR 530 (SC), after elaborately considering all material factors which were necessary to be established and in para. 17 a conclusion had been drawn that the agreement dated September 25, 1995, does not disclose the true consideration and the amount disclosed therein fell short by more than 15 per cent. of the fair market value. The learned judge was of the view the order does not suffer from any infirmities such as want of jurisdiction or that the order proceeds on mala fides or non-consideration of relevant material or based on any extraneous consideration.
Sri Sarangan, learned senior advocate for the appellant, submitted that the view taken by the learned single judge cannot be supported at all in the light of the order made by the appropriate authority. He submitted that in order to attack a quasi-judicial order and to seek judicial review of the same what has to be established is that the order is based on some irrelevant material or relevant material has been eschewed from consideration amongst other factors. His contention is that in the present case he had cited several instances of sales which were comparable with respect to the transaction in question and they have been kept out of consideration by the authority for reasons which cannot be accepted at all while the Department had taken note of transactions which are not comparable with the transactions in question and on that basis decided the matter. In substance, his contention is that the appropriate authority has eschewed from consideration relevant material and taken note of irrelevant material, therefore, the learned single judge was not right in the view he has taken.
Sri Seshachala, learning standing counsel for the Department, submitted that the appropriate authority has considered all the material that was put forth before it both by the appellant and the second respondent as well as what was gathered by the Department and on consideration of such material a decision had been taken and judicial review not being a form of appeal but only a proceeding against the process of decision making and when no procedural error is pointed out interference by this court is absolutely limited. He submitted therefore the view taken by the appropriate authority cannot be assailed at all and he commended to us that the learned single judge's order should be affirmed.
The principles applicable to arrive at the fair market value for the purpose of Chapter XX-C of the Act are similar to the market value determined under the Land Acquisition Act and the valuation thereof has to be arrived at objectively based on materials on record. The Department has a right of pre-emptive purchase of immovable property at an amount equal to the amount of apparent consideration only if the difference of the market value and agreed value shown in the instrument is more than 15 per cent. It is no doubt true that valuation of property cannot be arrived at with mathematical exactitude but an amount of guess work is involved in the same, but such process has to be based on some objective factors, or on some reliable data. It is only in those circumstances a just conclusion can be arrived at. One of the safest methods adopted in matters of valuation is that of the comparable cases which are in respect of lands having similar characteristics within the vicinity of the land which is sought to be sold having similar advantages and other amenities. The location and other facilities, besides the size of the plot, would be relevant factors. In the present case, the property is situated in V Block at Jayanagar. The Department took into consideration five transactions and they are :
(i) In respect of property comprised in No. 29/10, 38th Cross, 8th Block, Jayanagar;
(ii) No. 167, 21st Main, Sarakki, II Phase;
(iii) No. 1190, 26th Main, Sarakki Extension, I Phase;
(iv) No. 233, 32nd Cross, 7th Block, Jayanagar; and
(v) No. 120, 4th Cross, 10th Main, 1st Block, Jayanagar.
On this aspect of the matter, the consideration by the Department is as follows :
"In the present case property at No. 1190 (annexure-2) comes hardly a stone's throw away from the property under consideration. This property is thus really truly comparable. Similarly, property No. 29/10, in Jayanagar 8th Block and property No. 167, Sarakki 2nd Phase, are also comparable cases though they might not be situated in 5th Block, Jayanagar, where the subject property is situated. These two properties are not very far away and are at a distance of 2 to 3 kms. away from the property under consideration and are similar in ambience. Thus, the reliance by the appropriate authority on such sale instances has been correctly made."
Admittedly, except for property referred to in Sl. No. 3 all other properties are situated quite far away from the property in question. In making comparisons between the properties proximity is one of the important factors. If the test adopted by the Department has to be accepted then any property in the city can be compared to any other property however distantly they may be located by reference to the amenities available and the kind of ambience a particular property may have. The rationale if adopted could lead to very startling results. Indeed, we specifically posed a question to learned counsel for the Department as to whether a property situate in Lower Palace Orchards could be compared to a property situate in Upper Palace Orchards for they are in close vicinity. But the kind of comparison that can be made will depend upon the nature of transaction entered into in a locality. Even in the same road if the properties are situated, a property situated in a corner may fetch more money those while that are closer to a place where commercial activity is carried on may fetch still more. That way one cannot draw the correct conclusion merely based on the fact that there is a similar kind of ambience as noticed by the Department. That would not be a safe or rational test to be adopted at all. Secondly, it may be noticed that there is only one property and one transaction in respect of which the Department has relied upon which is stated to be a stone's throw away from the property under consideration, that is, a property situate in Sarakki I Phase, which is a locality which came into existence much later than V Block, Jayanagar. That is a locality that is being developed with better or different facilities. If this aspect is borne in mind though it may be very close to that property still the value may not be exactly the same or it cannot be said that they would provide a guide to arrive at the market value of the property in question. In that view of the matter, we do not think the Department has any relevant material to arrive at the correct market value at all. The Department has eschewed from consideration the sale statistics provided by the appellant and the third respondent for one reason or the other. However, Sri Seshachala, learned counsel for the Department, contended that this property being situate on a very wide and main road consisting of a vast area definitely fetches more price than any other property situated in the interior on an area or an extension situate abutting a narrower road. It is no doubt true that could be the position. But could it be said that the two properties are comparable in order to arrive at a correct market value, particularly when we adopt the principle of comparable market value in respect of properties in question unless one can say safely that the properties at least to an extent are comparable and transaction entered are almost in near proximity or if one has definite information about the rate of increase in the rate, that could be adopted as an appropriate data. That exercise has not been done in that case. Looking from that angle there is hardly any material before the authority to fix the market value of the property as fair market value to exercise the right of pre-emptive sale under Chapter XX-C. Thus, we find the appropriate authority has taken into consideration material which could not have been taken into consideration, namely, the value of the properties which are uncomparable with the property in question.
However, Sri Seshachala, learned counsel for the Department, submitted that the lands in frontage of the road have greater value than those in smaller roads or the value of a tiny plot cannot be adopted as a basis for ascertaining the value of a larger plot. In our view, these principles are unexceptionable but have no relevance to the present case. We are not trying to find out the value of the property in question merely on the basis of the situation of the main road with heavy traffic which will diminish the value of the property. We do not see that factor alone could be adopted as the basis for market value. But the method adopted by the Department being defective in arriving at the market value, we find that the order is vitiated. Therefore, the order made which is under challenge in the writ petition at annexure "J" stands quashed. We set aside the order made by the learned single judge and allow the writ petition quashing annexure "J".
Dr. Krishna, appearing for respondent No. 2, at this stage, submitted that in the cross-fire between the appellant and the Department he has been the sufferer. He submitted that the second respondent is a highly accomplished and reputed doctor and he was afflicted with kidney problem and in those circumstances was compelled to sell this property to raise sufficient money for appropriate treatment. That objective could not be fulfilled for he could not put forth the sale immediately. He still incurred a great deal of expenses to sustain himself. In those circumstances, this court should give appropriate direction by compensating the second respondent for the loss he might have sustained normally or as contemplated under the agreement by directing the appellant to pay appropriate interest or compensating in any other manner known to law. He adverted to the decision of the Supreme Court in Rajalakshmi Narayanan v. Margaret Kathleen Gandhi [1993] 201 ITR 681, inasmuch as the transaction could not be completed not on account of the default of the second respondent or that of the appellant but on account of the intervention of the Department by initiating proceedings under section 269UD of the Act. Therefore, he submitted that we must give appropriate relief to him. Unfortunately, for us, though we do sympathise with the situation in which the second respondent is placed, this court will not be in a position to give any such direction. It is certainly possible for the parties concerned to arrive at a proper settlement in this regard. We do hope that the appellant being a prudent person aware of the trend in the market would adequately compensate the second respondent in this regard. The appeal shall stand allowed accordingly. In the circumstances, the parties shall bear their own costs.
K. N. Rawal, Additional Solicitor-General (Rajiv) Nanda, Ranbir Chandra, Advocate, for B. K. Prasad, Advocate, with him), for the appellants.
G. Sarangan, Senior Advocate (Ms. Janaki Ramachandran Advocate, with him), for respondents No. 1.
Hegde and P. P. Singh Advocates, for respondent No. 2.
JUDGMENT
The judgment of the court was delivered by
G. B. PATTANAIK J.---This appeal is directed against the judgment and order dated March 6, 1997, passed by the Division Bench of the Karnataka High Court in Writ Appeal No. 1233 of 1996. The said writ appeal arises out of a proceeding initiated under Chapter XX-C of the Income-tax Act, 1961. The property in question is situated in Block 5, Jayanagar, Bangalore, measuring 85 feet from east to west and 122 feet from north to south bearing No. 483/24. Respondent No. 2, Shri A. G. Krishna, is the owner of the property. He entered into an agreement of sale with respondent No. 1, Smt. Sudha Patil, for a consideration of Rs. 63,44,000 under an agreement dated September 25, 1995. The appropriate authority under the Income-tax Act in exercise of its powers under section 269UD of the Act passed an order for purchase of the property by the Central Government on an amount equal to the amount of consideration mentioned in the agreement of sale after due notice to the transferor of the property and after arriving at a conclusion that the property in question has been undervalued by a sum of Rs. 200 per square foot. The aforesaid order was passed by the appropriate authority on February 28, 1996. It may be stated that the appropriate authority took into consideration the various sale instances relied on by the parties as well as the gradual trend in the enhancement of the value of the property. The said order of the appropriate authority was assailed by respondent No. 1, the proposed transferee, by filing a writ petition which was registered as Writ Petition No. 7586 of 1996. The learned single judge of the Karnataka High Court dismissed the said writ petition by order dated March 22, 1996, holding, inter alia, that the order of the appropriate authority does not suffer from any legal infirmity and the said order has been passed after following the prescribed procedure and the conclusion of the appropriate authority has been arrived at on a consideration of all relevant and germane materials produced in the course of the proceeding. Respondent No. 1, however, challenged the said order by preferring an appeal and the Division Bench by the impugned judgment and order dated March 6, 1997, came to hold that the appropriate authority has come to the conclusion about the valuation of the land by taking into consideration the sale instances which are not comparable with the property in question and thereby the conclusion is vitiated. The Division Bench also came to the conclusion that the concerned authority had no relevant material to arrive at the correct valuation of the property and further the method adopted by the Department was defective and consequently the order made by the authorities concerned is vitiated. With these conclusions the order passed by the appropriate authority having been quashed and the writ appeal having been allowed the said appropriate authority is in appeal in this court.
Mr. Rawal, learned Additional Solicitor-General appearing for the appellant, contended that the Division Bench of the High Court committed a gross error of law and exceeded its jurisdiction in interfering with the finding of the appropriate authority with regard to the market value of the land in question, in the absence of any procedural irregularity and in the absence of a finding by the High Court that the appropriate authority had considered irrelevant materials or have excluded relevant materials from consideration. A finding of an inferior Tribunal like the appropriate authority under the Income-tax Act can be interfered with by the High Court when the court comes to the conclusion that the Tribunal has not considered relevant materials or it has considered irrelevant or extraneous materials or the conclusion is one which no reasonable man can come to on the materials on record or the conclusion is one which is based on no evidence. Since in the case in hand the appropriate authority took the relevant sale instances in the locality to arrive at a conclusion where valuation shown in the agreement of sale was grossly low and on consideration of those relevant and germane materials, the appropriate authority came to the conclusion that the valuation shown in the transaction was grossly low, the said conclusion should not have been interfered with by the High Court in exercise of its supervisory jurisdiction under article 226, even if the High Court could have come to the conclusion as an original authority. In other words, what the learned Additional Solicitor-General contended is that the power of the High Court being supervisory in nature, the said power must be exercised within the parameters already indicated in several decisions of this court and the High Court was not justified in embarking upon an enquiry of the evidence and on re-appreciating the same in coming to a conclusion that the valuation arrived at was not proper.
Mr. G. Sarangan, learned senior counsel appearing for the transferee, and Mr. Hegde, learned counsel appearing for the transferor, on the other hand, contended, that for invoking the powers of purchase of property under Chapter XX-C of the Act the burden being on the Department to show that the apparent consideration of the property shown in the transaction is less than its fair market value by 15 per cent. and the said burden not having been discharged in the case in hand by the Department by adducing reliable and germane materials, the Division Bench of the High Court was fully justified in interfering with the conclusion and order passed by the appropriate authority.
According to Mr. Sarangan, learned counsel appearing for the respondent, the order passed by the appropriate authority under Chapter XX-C having not provided for any remedy of appeal the standard of scrutiny by the High Court should be somewhat different from the standard of scrutiny as against orders of any other inferior Tribunal and the High Court is duty bound to take note of all submissions made by an aggrieved person. Judged from this standpoint, the Division Bench having recorded a finding that the sale instances relied upon by the appropriate authority cannot be held to be comparable, the ultimate conclusion of the appropriate authority that the valuation of the property shown in the transaction is grossly low becomes a conclusion without any evidence and such conclusion has rightly been interfered with by the High Court. In support of such contention, learned counsel places reliance on a decision of the Delhi High Court in the case of Mahesh Chandra Agarwal v. Union of India [1998] 231 ITR 318. According to learned counsel for the respondents, a reading of the order of the appropriate authority would indicate that the said authority has acted more or less in an arbitrary manner in arriving at the fair market value of the property in question and, therefore, in the interest of justice the Division Bench rightly quashed the said order of the appropriate authority.
In view of the rival contentions of the parties, two questions really arise for our consideration.
1. Merely because no appeal is provided for under the statute against an order passed by the appropriate authority under Chapter XX-C of the Act does the supervisory power of the High Court under article 226 get enlarged in any way and can the High Court in such a case exercise an appellate power and reappreciate findings to come to its own conclusion?
2. Whether in the case in hand the conclusion arrived at by the appropriate authority with regard to the fair market value of the property in question was by taking into consideration all relevant and germane materials and whether the Department discharged the burden that lay on it in establishing that the apparent consideration of the property as indicated in the agreement of sale was less than its fair market value by 15 per cent.?
So far as the first question is concerned, the parameters for exercise of supervisory jurisdiction of the High Court under article 226 of the Constitution, while examining the decision of an inferior Tribunal, has no connection with the question whether an appeal is provided for against the said order of the Tribunal under the statute in question. As has been held in several decisions of this court, the power being supervisory in nature in exercise of such power, a finding/conclusion of an inferior Tribunal can be interfered with if the High Court comes to the conclusion that in arriving at the conclusion the Tribunal has failed to consider some relevant materials or has considered some extraneous and irrelevant materials or that the finding is based on no evidence or the finding is such that no reasonable man can come to such a conclusion on the basis of which the finding has been arrived at. This being the settled position, it is difficult to sustain a plea that when the order of the Tribunal does not provide for an appeal, the High Court can get its jurisdiction enlarged and exercise an appellate power while examining the correctness of the conclusion arrived at by such Tribunal. In the case of C. B. Gautam v. Union of India [1993] 199 ITR 530 (SC) where the provisions of Chapter XX-C had been assailed as being ultra vires, the Constitution Bench of this court negatived the contention raised that the provisions are arbitrary, since no appeal or revision has been provided against the order made by the appropriate authority for compulsory purchase of immovable property on the ground that the provisions of the said Chapter could be resorted to only when there is an attempt at tax evasion by significant undervaluation of immovable property agreed to be sold and further reasons are required to be recorded and disclosed to the affected parties and opportunity to be heard is required to be given before making an order for purchase. This court ultimately came to the conclusion that the power of the appropriate authority is not arbitrary and the pre-conditions engrafted in the provisions must be satisfied for invoking the power to make an order for compulsory acquisition. This being the position, we fail to understand how the supervisory power of the High Court while examining the correctness of the conclusion arrived at by such appropriate authority could get enlarged merely because there is no appeal or revision against the order of the appropriate authority. In the case of Kailash Suneja (Mrs.) v. Appropriate Authority [1998] 231 ITR 318, the decision of the Delhi High Court on which the learned senior counsel for the respondent strongly relied, the learned judges themselves have indicated that the satisfaction of the competent authority for initiation of acquisition proceedings is a subjective satisfaction on the objective facts and the reasons for the determination of the belief must have a rational and direct connection with the material coming to the notice of the competent authority though the question of sufficiency or adequacy of the material is not open to judicial review. The learned judges of the Delhi High Court in the aforesaid case have themselves indicated that while exercising powers of judicial review under article 226 of the Constitution though the case is not to be examined as an appellate court, it is to be kept in view that a citizen has no alternative remedy and it is permissible to examine whether extraneous matters have been considered by the authority and relevant materials have not been taken into consideration. This statement of the Delhi High Court on which learned counsel for the respondent strongly relied, in our considered opinion, does not in any way enlarge the power of judicial review in the matter of exercise of supervisory power of the High Court under article 226 against an order of an inferior Tribunal. It may be stated here that on the materials if two views are possible, one which has been given by the inferior Tribunal and the other which the High Court may, on examining the materials itself, come to a conclusion, then also it would not be possible for the High Court to substitute its conclusion for that of the Tribunal. In the aforesaid premises, we are of the considered opinion that merely because no appeal is provided for against the order of the appropriate authority, directing compulsory acquisition by the Government, the supervisory power of the High Court does not get enlarged nor the High Court can exercise an appellate power.
Coming to the second question, on examining the order passed by the appropriate authority for arriving at a conclusion as to what would be the fair market value of the property in question agreed to be sold, we find that the said appropriate authority did consider all the germane and relevant materials produced before it in the course of the proceedings and formed its opinion that there is understatement of consideration in the agreement dated September 25, 1995, by an amount more than 15 per cent. of the fair market value. On the basis of several sale transactions which are all contemporaneously made and which have the same potentiality and situated in the same locality, the appropriate authority came to the conclusion that the fair market land rate could not be less than Rs. 850 per square foot. Further, in the absence of any irrebuttable materials adduced on behalf of the transferor or the transferee as to why in the impugned transaction the property has been agreed to be sold at Rs. 650 per square foot, the natural presumption arises that it was with a view to attempt to evade tax. In fact in Gautam's case, referred to supra [1993] 199 ITR 530, this court had held that the provisions of Chapter XX-C can be resorted to only where there is a significant undervaluation of the property to the extent of 15 per cent. or more in the agreement of sale, as evidenced by the apparent consideration being lower than the fair market value by 15 per cent. or more and a presumption of an attempt to evade tax may be raised by the appropriate authority concerned where the aforesaid circumstances are established but such a presumption is undoubtedly a rebuttable one. In the case in hand, the plea of the transferor that he agreed to sell the land at a lower price as he was in urgent need of money to defray the medical expenses on account of kidney transplantation was duly considered but negatived inasmuch as the transplantation was done in June, 1994, and the agreement of sale was made in September, 1995. The authority also took into consideration the fact that the transferor was a highly qualified doctor and had held various offices with distinction in a career spanning over four decades in India and abroad. No other reason having been advanced and the only plea advanced having been considered and rejected, and in our view rightly, it is difficult for us to sustain the argument advanced by learned counsel for the respondent that the transferor has been able to rebut the presumption arising out of a grossly low valuation on the ground of forced sale. Having examined the order of the appropriate authority we have no hesitation to come to the conclusion that the appropriate authority passed the order for compulsory purchase under section 269UD of the Act after giving due opportunity to the parties concerned of hearing and after recording the reasons as to the fair market value of the land and further after recording a finding that there has been a significant undervaluation of the property to the extent of more than 15 per cent. in the agreement of sale. Such conclusions of the appropriate authority were based on consideration of relevant materials produced in the course of the proceedings and the authority was fully justified in drawing the presumption that the undervaluation had been done with a view to evade the tax and the transferor could not rebut the said presumption by adducing any positive ground. The High Court, therefore, exceeded its jurisdiction in interfering with such conclusions of the appropriate authority by embarking upon an inquiry as an appellate authority and by recording its own conclusion in substitution of the conclusion of the Tribunal and, therefore, the said decision of the High Court gets vitiated. In the aforesaid premises, we set aside the impugned judgment of the Karnataka High Court in Writ Appeal No. 1233 of 1996 and affirm the decision of the appropriate authority. The writ petition filed before the High Court stands dismissed.
It was contended on behalf of the respondents that even if the order of the appropriate authority under section 269UD of the Act is ultimately upheld by this court, the respondents should be entitled to the interest on the amount of consideration money indicated in the agreement dated September 25, 1995, particularly when the intended transferee under the deed has deposited a sizeable amount of the said consideration amounting to Rs. 43 lakhs. The learned Additional Solicitor-General appearing for the appropriate authority resisted the prayer of the transferee for grant of interest on the ground that the transferee having attempted to delay and defeat the compulsory purchase of the property and the amount in question having been deposited after the transferor refused to take the money, it would not be in the interest of justice to award interest in the case in hand. In support of his contention reliance has been placed on Rajalakshmi Narayanan v. Margaret Kathleen Gandhi [1993] 201 ITR 681 (SC). In the aforesaid case this court held that whether interest should be paid to the owner of an immovable property who has entered into an agreement of sale but the sale could not be completed by reason of an order of purchase under section 269UD of the Income-tax Act, and if so, at what rate will have to be decided in the facts and circumstances of each case. As a general rule the court had observed that when such seller has raised no objection or obstruction either to the purchase of a property by an order under section 269UD or to the completion of the agreement of sale entered into by him but is unable to get purchase price by reason of the said order and the stay order passed by a court then interest at an appropriate rate can be paid to him, if equity so requires. In the aforesaid case, this court had ordered that the Government should pay to the appellant the amount stated as the consideration for the sale of the said property in the agreement entered into between the appellant and respondent No. 1 with interest thereon at 15 per cent. per annum. This court had issued the aforesaid direction to be followed in the event the order of compulsory purchase passed is ultimately upheld. The court while issuing the aforesaid direction took judicial notice of the fact that the prices of the immovable properties have shot up continuously for the last few years. The learned Additional Solicitor-General, however, stated that the amount in question which has been deposited by the Government is carrying interest being deposited in a fixed deposit.
Having considered the facts and circumstances of the case we think it appropriate to direct that the entire amount lying in deposit together with the interest accrued thereon should be paid to the respondents. This appeal is accordingly allowed with the aforesaid direction and observation.
But in the circumstances there will no order as to costs.
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