K. RAMAMOORTHY, J. ( 1 ) I have had the benefit of reading thedraft judgment prepared by my learned Brother. I am really elatedat the way in which he could put the factual matrix and the lawin a very sweet and exoteric language. My learned Brother hadbeen unique in this respect. I have always been admiring at hisgift of the gup. I derived immense solace and comfort while working with him. He provoked my thinking and prompted me to proceed on a light track which enabled me to have hang of the matters. I am spell bound, as it were, and I am in entire agreement withwhat all he has said. I now proceed to express my views in thefan Indian fashion. ( 2 ) ALL law is an experiment as all life is an experiment, as stated by Justice Holmes of the United States of America. The Government of India made an experiment by introducing Chapter XX-Cin the Income-tax Act, 1961 w. e. f. 1986 but the Supreme Courtin C. B. Gautam s case held, that no doubt the Government couldmake an experiment but within the parameters of the Constitution. Apparently, keeping in mind the principles that there should not beunending. conflict or strife or competition between the Governmentand the citizens in the field of taxation the Supreme Court laid downthe law clearly. The attempt of the revenue to garner resources, tomop up the deficiency in the budget by collecting revenue throughtax laws has been subject matter of decisions for a long time. Itwould be scarcely relevant to trace the history of direct taxationin India except to note that there were some acts from 1860 onwards and in the year 1886 there was some Act and the completecodification of the law covering the entire territory of India was notthere and the native states were having their own laws. For thefirst time in 1922 the British Government enacted the Indian Income-tax Act, 1922 to collect revenue. There were loopholes and thecitizens always tried to find out some means to get round the lawand the Courts were to resolve the disputes. ( 3 ) IN view of the present economic scenario, the resources crunchis always pressing the Government to amend the tax laws, now andthen, to increase the collection of the revenue. Every year thegovernment tries to bring about legislation for amending the taxlaws and they are always challenged. ( 3 ) IN view of the present economic scenario, the resources crunchis always pressing the Government to amend the tax laws, now andthen, to increase the collection of the revenue. Every year thegovernment tries to bring about legislation for amending the taxlaws and they are always challenged. ( 4 ) BEING not satisfied with existing machinery, the Parliamentintroduced in the Income Tax Act, 1961 Chapter XX-A by thetaxation Laws Amendment Act, 1972 which came into force onthe 15th of November 1972. In 1986 the Parliament introducedchapter XX-C :- "purchase by Central Government of Immovable propertiesin certain cases of transfer. "the object of the Bill is to give effect to the Financial Proposalsof the Central Government of India for the financial year 1986-87. The notes on clauses explained the various provisions contained inthe Bill. Clause 33 of the Bill reads as follows :- "clause 33 of the Bill seeks to amend section 269c of theact relating to immovable property in respect of whichproceedings for acquisition may be taken. "under the existing provisions, where a competent authorityhas reason to believe that any immovable property ofa fair market value exceeding one hundred thousandrupees has been transferred by a person to anotherperson for an apparent consideration which is less thanthe fair market value of the property and that the consideration for such transfer as agreed to between theparties has not been truly stated in the instrument oftransfer, the competent authority may initiate proceedings for the acquisition of such property. Under the proposed amendment, it is provided that no suchproceedings shall be initiated in respect of propertiestransferred after the 30/09/1986. This amendment will take effect from 1/10/1986. "clause 34 reads as under :- "clause 34 seeks to insert a new Chapter XX-C in theincome-tax Act, 1961 enabling the Central Governmentto purchase immovable properties in certain cases oftransfer. This chapter contains 16 sections from section 269u to Section 269uo. The provisions of the new Chapter will come into force onsuch date as the Central Government may, by notification in the Official Gazette, appoint and different datesmay be appointed for different areas. There are no other objection petitions and the Bill was adopted and became an Act. " ( 5 ) THE Parliament thought by enacting a law and leaving theentire implementation to the Income Tax Department it could achieve the purpose of getting more revenue to the Government andpreventing concentration of wealth. There are no other objection petitions and the Bill was adopted and became an Act. " ( 5 ) THE Parliament thought by enacting a law and leaving theentire implementation to the Income Tax Department it could achieve the purpose of getting more revenue to the Government andpreventing concentration of wealth. ( 6 ) THE authorities commenced proceedings purporting to actunder Chapter XX-C and those actions were challenged in variouscourts and ultimately the Supreme Court had to consider the attackon the constitutional validity of the Chapter in C. B. Gautam s case (1993) 199 I. T. R. 530. Before the Supreme Court the Union ofindia challenged the correctness of the Supreme Court judgment ink. P. Vergheese s case (1981) 131 I. T. R. 597 which dealt with thescope of Chapter XX-A. The Supreme Court in C. B. Gautamvs. Union of India and others, (1993) 199 I. T. R. 530 ejected thechallenge made by the Union of India and followed and reaffirmedthe dictum laid down in K. P. Vergheese s case. The Parliamentwhile enacting Chapter XX-C thought that the Department wouldappreciate the spirit behind the enactment and would act in theinterests of the revenue following the principles laid dwon by thesupreme Court. keeping in view the rights of the citizens. The Parliament was well aware of the scope and ambit of Article 14 of theconstitution of India with reference to the actions of the executiveauthorities in determining the rights and obligations of the citizens. The depth and the toughness of the roots of Article 14 of the Constitution of India was in the mind of the Parliament. The Parliament assumed that whatever may be the actions of the officers ofthe Income Tax Department they are always subject to the controlof the High Courts and the Supreme Court exercising their powersand testing the orders of the Authorities on the anvil of the Article14 of the Constitution of India. In the process, the Parliament havingin mind the provisions of Chapter XX-A and K. P. Vergheese swere enacted Chapter XX-C giving powers to the Authorities underthe Act for purchasing the property coming within the ambit ofchapter XX-C. ( 7 ) WHILE dealing with the law enacted by the Parliament thepresumption always is AEOUUM ET BONUM EST LEX LEGUM-that which is equal and good is the law of laws. ( 8 ) CITIZENS also presume FUS EST NORMA RECTI ETQUICKQUID EST CONTRA NORMAN RECTI EST INJURTA-Law is rule of right; and whatever is contrary to the rule of rightis a wrong. The principle in LEX TUTISSLMA CASSIS, SUB CLYPEO LEGIS NEMO DECIPITUR-Law is the safesthelmet: under the shield of the law none are deceived, is well recognisedfrom the days of MAGNA CARTA. It is also well settledthat the law would coincide with reason LEX SEMPER INTENDIQUOD CONVENIT RETIONI-The law always intends what coincides with reason. The Parliament did not direct the Governmentto frame any rules for the purpose of implementing the provisionsand was rest content with the provisions made in the Chapter leavingit to the Department to take decisions in accordance with the wellsettled principles in this arena. The Parliament is presumed to knowthe well established principles adumbrated by the Supreme Court ofunited States of America in Yick Wo vs. Hopkins, (1886) 118 US356 wherein the Court laid down :- "though the law itself be fair on its face and impartial in appearance, yet, if it is applied and administered by public authority with an evil eye and an unequal hand, so as practically to make unjust and illegal discriminations between persons in similar circumstances, materialto their rights, the denial of equal justice is still withinthe prohibition of the Constitution. This principle ofinterpretation has been sanctioned by this court inhenderson v. Mayor, etc. of New York, 92 U. S. 259[bk. 23, L. ed 543]; Chy Luny v. Freeman, 92 U. S. 275 [bk. 23, L. ed. 676]; Neal v. Delaware 103 U. S. 370 [bk. 26, L. ed. 267] and Soon H ng v. Crowley [supra]. The present cases, as shown by the facts disclosed in the record, are within this class. It appears that both petitioners have complied with every requisite, deemed by the law or by the public officers charged with its administration necessary for the protection of neighboring property from fire, or as a precaution against injury to the public health. No reason whatever, except the will of the supervisors, is assigned why they should not be permitted to cany on, in the accustomed manner, their harmless and useful occupation, on which they depend for a livelihood. No reason whatever, except the will of the supervisors, is assigned why they should not be permitted to cany on, in the accustomed manner, their harmless and useful occupation, on which they depend for a livelihood. And while this consent of the supervisors is withheld from them and from two hundred others who have also petitioned, all of whom happened to be Chinese subjects, eighty others, not Chinese subjects, are permitted to carry on the same business under similar conditions. The fact of this discrimination admitted. No reason for it is shown, and the conclusion cannot be resisted, that no reason for it exists except hostility to the race and nationality to which the petitioners belong, and which in the eye of the law is not justified. The discrimination is therefore illegal, and the public administration which enforces it is a denial of the equal protection of the laws and a violation of the Fourteenth Amendment of the Constitution. The imprisonment of the petitioners is therefore illegal, and they must be discharged. " ( 9 ) THE declaration made by Thomas Jafferson, one of the greatpresidents of the United States of America must always be kept inmind. He said "laws and institutions must go hand in hand withthe progress of human mind as new discoveries are made, newtruths are discovered and manners and opinions change with thechange of circumstances, institutions must advance also and keeppace wiih the time. " Therefore, the authorities while implementingthe provisions of Chapter XX-C should have in mind the entireconstitutional mandate and the constitutional ethos in dischargingtheir duties. In its wisdom the Parliament left it to the Courts tocontrol the actions of the officers while acting under Chapter XX-C. As declared by Galanwill Austin, who said "the judiciary was tobe the arm of the social revolution, upholding the quality that institutions had longed for in colonial days. The Courts were alsoidealistic because as guardians of the constitutions they establishedthe expression of a new law created by institutions for institutions. "consistent with this theory, in R. K. Garg vs. U. O. I. and Others, 198114) SCC 675, the Supreme Court held :- - "laws relating to economic activities should be viewed withgreater latitude than laws touching civil rights such asfreedom of speech, religion etc. "consistent with this theory, in R. K. Garg vs. U. O. I. and Others, 198114) SCC 675, the Supreme Court held :- - "laws relating to economic activities should be viewed withgreater latitude than laws touching civil rights such asfreedom of speech, religion etc. It has been said by noless a person than Holmes, J. , that the legislature shouldbe allowed some play in the joints, because it has todeal with complex problems which do not admit of solution through any doctrinaire or straight jacket formulaand this particularly true in case of legislation dealingwith economic matters, where, having regard to thenature of the problems required to be dealt with, greaterplay in the joints has to be allowed to the legislature. The court should feel more inclined to give judicialdeference to legislative judgment in the field of economic regulation than in other areas where fundamentalhuman rights are involved. The Court must alwaysremember that legislation is directed to practical problems, that the economic mechanism highly sensitive andcomplex, that many problems are singular and contingent, that laws are not abstract propositions and do notrelate to abstract units and are not be measured byabstract symmetry that exact wisdom and nice adaptation of remedy are not always possible and that judgment is largely a prophecy based on meagre and uninterpreted experience . Every legislation particularly in economic matters is essentially empiric and it is based onexperimentation or what one may call trial and errormethod and therefore it cannot provide for all possiblesituations or anticipate all possible abuses. There mayhe crudities and inequities in complicated experimentaleconomic legislation but on that account alone it cannotbe struck down as invalid. The Courts cannot, aspointed out by the United States Supreme Court in Secyof Agriculture v. Central Roig. Refining Co. , (1950)94 L. ed. 381, be converted into tribunals for relief fromsuch crudities and inequities. There may even be possibilities of abuse, but that too cannot of itsell be a groundlor invalidating the legislation, because it is not possiblefor any legislature to anticipate as if by some divine prescience, distortions and abuses. Indeed, howsoever greatmay be the care bestowed on its framing, it is difficultto conceive of a legislation which is not capable of beingabused by perverted human ingenuity. The Court musttherefore adjudge the constitutionality of such legislation by the generality of its provisions and not by itscrudities or inequities or possibilities of abuse of any ofits provisions. Indeed, howsoever greatmay be the care bestowed on its framing, it is difficultto conceive of a legislation which is not capable of beingabused by perverted human ingenuity. The Court musttherefore adjudge the constitutionality of such legislation by the generality of its provisions and not by itscrudities or inequities or possibilities of abuse of any ofits provisions. If any crudities, inequities or possibilities of abuse come to light the legislature can alwaysstep in and enact suitable mandatory legislation. That isthe essence of pragmatic approach which must guide andinspite the legislature in dealing with complex economicissues. " ( 10 ) IN laying down, the dictum the Supreme Court followed theprinciples laid down in Keshavananda Bharati vs. State of Kerala, (1973 Suppl. SCR 1 ). (2) "in exercising the power of Judicialreview the Courts canrot be oblivious of the practical needs of thegovernment. The door has to be left open for trial and error. Constitutionallaw like other mortal contrivance has to take somechances. Opportunity must be allowed for vindicating reasonablebelief by experience. " ( 11 ) THE Supreme Court laid down the principle in State ofrajasthan Others vs. UOI, AIR 1978 (3) SC 1361= 1978 (1)SCR 1 "it must be remembered that merely because power maysometimes be abused, it is no ground for denying the existence ofpower. The wisdom of man has not yet been able to conceive ofa Government with power sufficient to answer all its legitimate needsand at the same time incapable of mischief. " ( 12 ) IN the light of these principles, the Supreme Court in C. B. Gautam s case held rejecting the challenge on the constitutionalvalidity of the Chapter. "in these circumstances, in our opinion. it cannot be said that the provisions of the said Chapter conferredan unfettered discretion on the appropriate authorities to order thepurchase by the Central Government of immovable properties agreedto be sold and hence they cannot be regarded as conferring arbitraryor unfettered discretion on the appropriate authorities to the challengeto the provisions of the said Chapter as being violative of Article14 of the Constitution of India must, therefore, fail". Dealingwith the scope of Chapter XX-C and the obligation of the Department the Supreme Court observed :- "the legislative history of Chapter XX-C, in the stand takenby the Union, of India and the Central Board of Directtaxes as shown in the main counter affidavit theaffidavit of H. K. Sarangi, which has been filed afterobtaining instructions from the Income-tax Departmentand the Central Board of Direct Taxes, make it clearthat the powers of compulsory purchase conferred underthe provisions of Chapter XX-C of the Income-tax Actare being used and intended to be used only in caseswhere in an agreement to sell an immovable property inan urban area to which the provisions of the said Chapterapply, there is a significant undervaluation of the property concerned, namely, of 15 per cent, or more. Ifthe appropriate authority concerned is satisfied that, inan agreement to sell immovable property in such areasas set out earlier, the apparent consideration shown inthe agreement for sale is less than the fair market valueby 15 per cent or more, if may draw a presumptionthat this undervaluation has been done with a view toevade tax. Of course, such a presumption is rebuttableand the intended seller or purchaser can lead evidenceto rebut such a presumption. Moreover, an order forcompulsory purchase of immovable property under theprovisions of section 269 UD requires to be supportedby reasons in writing and such reasons must be germaneto the object for which Chapter XX-C was introduced inthe Income-tax Act, namely, to counter attempts toevade tax. "therefore, the categoric statement of law by the Supreme Court isthat the order compulsory purchase should be on valid reasons andmust be consistent with Chapter XX-C. The Supreme Court dealingwith K. P. Vaigheese case held :-"the conclusion that the provisions of Chapter XX-C are tobe resorted to only where there is significant undervaluation of the immovable property to be sold in theagreement of sale with a view to evade tax finds support from the decision of this court in the case of K. P. Vergheese v. Income Tax Officer (1981) ITR 597. Section 52 in theincome-tax Act, 1961, which has now been deleted,came up for consideration before a Bench comprisingtwo learned Judges of this court. Very briefly put. Section 52 in theincome-tax Act, 1961, which has now been deleted,came up for consideration before a Bench comprisingtwo learned Judges of this court. Very briefly put. thatsection provided that where a person acquired a capitalasset from an assessee connected with him and theincome-tax Officer had reason to believe that the transfer was effected with a view to avoid or reduce theliability of the assessee under section 45 to the tax oncapital gains and with that object the transfer of thecapital asset Was being made at an undervalue of notless than 15 per cent, for the purposes of taxing theassessee, the full value of the consideration was takento be its fair market value on the date of the transfer. It was pointed out by the Bench that sub-section (1)of section 52 did not deal with income to accrue or tobe received, which in fact never accrued and wasnever received. It sought to bring within the net oftaxation only that income which has accrued or is received by the assessee as a result of the transfer of thecapital asset and since it would not be possible for theincome-tax Officer to determine precisely how muchmore consideration is received by the assessee than thatdeclared by him, sub-section (1) provides that the fairmarket value of the property as on the date or the transfer shall be taken to be the full value of the considerationwhich, has accrued or has been received by theassessee. The onus of establishing that the conditions oftaxability are fulfilled is always on the Revenue. In thatcase, it was urged on behalf of. he Revenus that, underthe provisions of section 52 (2), once the Income-taxofficer is satisfied of the condition that the considerationdeclared by the assessee in respect of the transfer is lessby 15 per cent, or more of the fair market value, thecapital gains can. be computed on the footing that thefair market value was. the consideration received by theassessee. This submission was rejected by this court. Itwas pointed out that the submission would be justifiedonly on a strict literal reading of sub-section (2) of section 52 but that such a construction could not be adopted. The court observed that. the task of interpretation ofa statutory enactment is not a mechanical task. Thefamous words of Judge Learned Hand of the Unitedstates of America that ". . . . . . The court observed that. the task of interpretation ofa statutory enactment is not a mechanical task. Thefamous words of Judge Learned Hand of the Unitedstates of America that ". . . . . . it is true that the wordsused even in, their literal sense are the primary andordinarily the most reliable source of interpreting themeaning of any writing : be it a statute, a contract oranything else. But it is one of the surest indexes of amature and developed jurisprudence not to make a fortress. out of the dictionary; but to remember that statutesalways have some purpose or object to accomplish, whosesympathetic and imaginative discovery is the surest guideto their meaning" were quoted with approval. Afterconsidering various authorities and the historical settingin which the provisions of the said section were enacted,it was held that the fair and reasonable construction toput on the provisions of sub-section (2) of section. 52would be to so construe it that it would apply only whenthe consideration for the transfer is understated or inother words, only where the assessee has actually received a larger consideration for the transfer than thatwhich is declared in the instrument of transfer and itcould have no application in the case of a bona fidetransaction where the full value of the consideration forthe transfer is correctly declared by the assessee (see page606 of the Report of 131 ITR ). " ( 13 ) REFERRING to the case decided by the Gujarat High Courtin Commissioner of Income Tax v. Smt. Vimlaben Bhagwandas Patel, (1979) 118 ITR 134,i he Supreme Court held that the satisfaction of the competent authorityfor initiation of acquisition proceedings a subjective satisfaction on the objective facts and the reasons for the determination ofthe belief must have a rational and direct connection with the material coming to the notice of the competent authority, though thequestion of sufficiency or adequacy of the material is not open tojudicial review. The Supreme Court read this into Chapter XX-C. The authorities. have to act in accordance with the principles ofnatural justice, the Supreme Court posited thus:- "as we have already pointed out, the provisions of Chapterxx-C can be resorted to only where there is a significantundervaluation of property to the extent of 15 per centor more in the agreement of sale, as evidenced by theapparent consideration being lower than the fair marketvalue by 15 per cent or more. We have further pointedout that, although a presumption of an attempt toevade tax may be raised by the. appropriate authorityconcerned in case of the aforesaid circumstances beingestablished, such a presumption is rebuttable and thiswould necessarily imply that the concerned parties musthave an opportunity to show cause as to why such apresumption should not be drawn. Moreover, in agiven transaction of an agreement to sell. there mightbe several bona fide consideration? which might inducea seller to sell his immovable property at less thanwhat might be considered ,to be the fair market value. For example : he might be in immediate need of moneyand unable to wait till a buyer is found who is willingto pay the fair market value for the property. Theremight be some dispute as to the title of the immovableproperty as a result of which it might have to be soldat a price lower than, the fair market value or a subsistinglease in favour of the intending purchaser. Theremight similarly be other genuine reasons which mighthave led the seller to agree to sell the property to aparticular purchaser at less than market value even incases where the purchaser might not be his relative. Unless an intending purchaser or intending seller is givenan opportunity to show cause against the proposed orderfor compulsory purchase, he would not be in, a positionto rebut the presumption of tax evasion and to give aninterpretation to the provisions which would lead to sucha result would be utterly unwarranted. The very factthat an imputation of tax evasion arises where an orderfor compulsory purchase is made and such an imputation casts a slur on the parties to the agreement to sellleads to the conclusion that before such an imputation can be made against the partics concerned, theymust be given an opportunity to show cause that theundervaluation in the agreemert for sale was not witha view to evade tax. " ( 14 ) REFERRING to the challenge on section 269 UD and 269 UEwhich speak of encumbrance and leasehold rights, the Supremecourt said in our view, the submissions of the learned counsel arenot without merit. " The Supreme Court held :- "it, therefore, appears to us difficult to uphold the last partof sub-section (1) of section 269ue in so far as itprovides that the property in respect of which an orderunder sub-section (1) of section 269ue is made shallvest in the Central Government free of all encumbrances. " The Supreme Court held :- "it, therefore, appears to us difficult to uphold the last partof sub-section (1) of section 269ue in so far as itprovides that the property in respect of which an orderunder sub-section (1) of section 269ue is made shallvest in the Central Government free of all encumbrances. In our opinion, the expression free of allencumbrances is liable to be struck down as arbitrary,without any rational nexus with the object of the legislation in Question and violative of article 14 of theconstitution. Similarly, the provisions of sub-section (2)of section 269ue set out by us earlier must be readdown so as to make them inapplicable to bona fidelessees in possession or bona fide encumbrance holdersin possession. "therefore, following this dictum of the Supreme Court the authorities under the Act have to be very careful in ordering compulsorypurchase when there are lessees or persons having subsisting mortgagerights over the properties. The Supreme Court held:- "in the result the expression free from all encumbrances in sub-section (1) of section 269 UE is struck down andsub-section, (1) of section 269ue must be read withoutthe expression free from all encumbrances with theresult that the property in question would vest in thecentral Government subject to such encumbrances andleasehold interests as are subsisting thereon except forsuch of them as are agreed to be discharged by thevendor before the sale is completed. " ( 15 ) REGARDING monthly tenancies, the Supreme Court held:-"the next controversy posed was regarding the monthlytenancies. As far as monthly tenancies are concerned, they do not pose any difficulty because monthly tenantsare also lessees in law although their right is a verylimited one. If the agreement to sell does not providefor vacant possession or the determination of monthlytenancies, such tenancies would continue even on anorder for purchase by the Central Government beingmade by the appropriate authority concerned undersection 269ud (1); but such tenants would lose theprotection g,iven to tenants under the rent protectionlaws because such laws are not made applicable toproperties owned by the Central Government with theresult that their tenancies could be terminated by thecentral Government. The loss of the protection of therent Control Acts cannot be regarded as an interest forwhich any compensation is liable to be paid. The loss of the protection of therent Control Acts cannot be regarded as an interest forwhich any compensation is liable to be paid. AS we have stayed earlier, where an agreement for sale provides that the property is intended to be sold free of allencumbrances or leasehold rights, the order for purchaseof such property under section 269 UD (1) in. the saidchapter would result in the said property vestingin the Central Government free of such encumbrancesor leasehold interest. In such a case, theholders of the encumbrances or leasehold interestswould have to obtain their compensation from theamount awarded as the purchase price to the ownerof the property. This appears to be a fair constructionbecause, in such a case, the apparent consideration canbe expected to include the value of such leasehold interestsor encumbrances. The holders of the encumbrances orleasehold interests which would be destroyed in thismanner can be said to be persons interested as contemplated in clause (e) of section 269ua. In this connec-529tion, we may refer to sub-section. (5) of section269ue which declares that nothing in the said section which deals with the vesting of property in the Central Government shall operate to discharge the transferor or any other person (not being thecentral Government) from liability in respect of anyencumbrances on the property and, notwithstanding anything contained in any other law for the time being inforce, such liability may be enforced against the transferoror such other person. This provision makes it amplyclear that, in the case we have just referred to, the encumbrance holder that the holder of the lease hold rightscould claim the fain value of his encumbrance or the leasehold interest out of the amount paid on amount of thepurchase price to the owner of the immovable propertyacquired by the Central Government under section 269ud. It was urged by learned counsel for the Revenue that, incase a view is taken that the expression free from allencumbrances" should be struck down, it would be leftopen to an intending seller of immovable property toundervalue the property by creating a bogus lease or abogus encumbrance thereon and this would defeat thepurpose for which the Chapter XX-C was introduced. Weare unable to agree. Weare unable to agree. If a lease or an encumbrance isfound to be bogus, it can be treated as of no legal effectand in that event, it would not affect any of the rights ofthe Central Government on the vesting of the propertyin the event of an order for purchase being made undersection 269ud (1 ). If it is so considered necessary, theprovisions of the Chapter might be so amended so as toclarify that if any lease or encumbrance is created witha view to defeat the provisions of Chapter XX-C, suchlease or encumbrance will be regarded as void or ignoredfor the purposes of the said Chapter. That, however, isfor Parliament to consider. " ( 16 ) THE Supreme Court recognised that the object of provisionsof Chapter XX-C is a laudible object, namely to counter evasion ofthe tax in transactions of sale of immovable properties. ( 17 ) THE judgment of the Supreme Court is that the authoritiesacting under Chapter XX-C have to conform to the principles ofnatural justice and are obliged to give reasons for making compulsorypurchase, and the decisions of the authorities should be fair andreasonable and must satisfy the test laid down by the Supreme Courtwe all have to remember what Justice Holmes said "we need attention in the obvious to learn to transcend cur own conviction, and toleave room for much we hold dear to be done away with, short ofrevolution by the orderly change of law". That means the authoritiesshould always be aware of the fact that their actions are subject tojudicial review and would be tested on the touchstone of Article 14of the Constitution of India. The House of Lords in Gold Coastselection Trust Ltd. vs. Humphrey, (1949) 17 ITR (Sapp1) 19 (HL) (4) observed :- "that valuation is an art, not an exact science, mathematicalcertainty is not demanded, nor is it possible? A certainclement of guess has to be there based on objective factors having reasonable nexus with the evidence on recordthe various factors are there on the basis of which outof the various methods by which the valuation of the immovable property can be made, appropriate methodis to be adopted. It depends on the location of the property, the purpose for which the property is used, thenature of the property, the time when the agreement isentered into and similar other objective factors. It depends on the location of the property, the purpose for which the property is used, thenature of the property, the time when the agreement isentered into and similar other objective factors. Thevaluation, therefore, has to be done by a method whichis more objective and could furnish reliable data toarrive at a just conclusion-"it is in the light of these principles we have to examine the facts andcircumstances of each case. ( 18 ) THE learned counsel appearing for the revenue fairly submittedthat there are no rules framed under Chapter XX-C by the Governmentwhich could form guidelines for the authorities to fix up the fairmarket value in the areas coming under the penumbra of Chapterxx-C. It was submitted on behalf of the revenue that the appropriate authorities in various States had to follow the principles laiddown by the Courts in fixation of market value and the appropriateauthorities have been following the guidelines values fixed by therevenue Authorities, D. D. A. in Delhi, Delhi Administration in Delhii and other authorities in various States concerned with the collectionof urban land tax and other taxes from immovable properties. ( 19 ) WHEN a question was put to the learned counsel for therevenue whether any rules have been framed or guidelines issued tothe authorities with reference to the deductions to be made of theadditions to be made while making comparative study with other saleinstances properties, the learned counsel submitted that no such ruleshave been framed. ( 20 ) THE crux of the matter is that the Parliament had broughtinto this Statute Book Chapter XX-C with a particular purpose; toprevent evasion of tax. It is a basic principle of interpretation ofstatute right from Heyden s case (1584) 76 E. R. 637 the Courtsshould consider a few facts to appreciate the object of the law andintentment of their by the law maker. Stating it broadly without intending to be exhaustive the factors are (1) What was the law beforethe making of the Act?; (2) What was the mischief and defect whichthe earlier law could not remedy ?; (3) What remedy the Parliamenthad decided to provide in the new law ? (4) The true reason of theremedy; (5) The language of the law should be analysed. (4) The true reason of theremedy; (5) The language of the law should be analysed. ( 21 ) AT this moment when we are considering the orders passedin the above cases by the Appropriate Authority our task is renderedeasier by the judgment of Their Lordships of the Supreme Court ingautam s case. ( 22 ) THE Parliament was fully aware of the methods of evaluatingfair market value. The Parliament left it to the discretion of theappropriate Authority without giving any specific guidelines. Theparliament did not provide for any appeal to the aggrieved personsagainst the order of the Appropriate Authority. The Parliament isaware as noticed by Their Lordships of the Supreme Court ingautam s case and accepted by the Department that the order of theappropriate Authority is subject to the judicial review by the Highcourts under Articles 226 and 227 of the Constitution of India. Andthe Parliament knows and appreciates the scope of the power of thejudicial review by the High Courts. ( 23 ) THEREFORE, while enacting the Chapter the Parliament expected the Appropriate Authority to act in ail cases in accordance withthe fundamental principles of valuation to find out the real and fairmarket value of the property in the light of so many imponderablesand in valuation sphere the Appropriate Authority is expected to actreasonably bearing in mind the interest of the revenue and the rightsof the citizens. It is this dual constitutional responsibility that wasput on the shoulders of the Appropriate Authority, a high public functionary under the law. Therefore, on a proper interpretation of thelaw and as per the categorical dictum laid down by the Supremecourt in Gautam s case in unmistakable terms noting very carefully,with great respect, the argument of the learned Attorney General, thelegal position that emerges is that the Appropriate Authority shouldstrive So find out the fair market value on a proper basis as knownin the field, adopting a reasonable approach giving full and reasonable opportunity to the parties. ( 24 ) AN analysis of the facts and circumstances of each case wouldshow that the Appropriate Authority had taken into account saleinstances of the properties and tried to compare the value arrived atby the Appropriate Authority with the apparent consideration mentioned by the parties in the agreement of sale produced before if onwhat can be characterised on the basis of some permutations and combinations depending upon its view either to make a pre-emptivepurchase or not. No norms have been prescribed and no standardor principles had been adopted or set for itself by the Appropriateauthority. We want to note that the learned counsel for the petitioners submitted in some cases, a particular method of deductionsand additions is adopted in one case but under exactly similar circumstances in another case a different method is adopted without anyrational basis. However, we do not want to dilate on this aspectbecause we are sitting under Articles 226 and 227 of the Constitutionof India and the parameters laid down by the Supreme Court arewell settled and clear. The Appropriate Authority had acted in anarbitrary fashion in arriving at the fair market value in all the cases. Sale instances of properties comparable with the subject propertieshave not been taken into account and properties situate for awayfrom the subject properties have been taken into consideration andthe additions and deductions are made at the whims and fancies atthe subjective satisfaction of the Appropriate Authority. In none ofthe cases, we are able to see any reasonable basis known to the fieldto fix the fair market value. It is a matter of common knowledgenow-a-days in all the cities all over India the revenue authorities havefixed value for areas where the land is situate for the purposes ofstamp duty. In Delhi, in particular, Delhi Administration and thedelhi Development Authority periodically are reviewing the value ofthe land in all localities on relevant factors for the purpose of stampduty and unearned increase. So far as Delhi is concerned, the value fixed by these public authoritiescould form proper basis for arriving at the market value of the land. The value of the building can be ascertained in accordance with thewell known principles. These two things would give a clear ideaabout the real worth or the fair market value of the property. Thevalue of an immovable property depends upon a variety of factors. Two buildings may be adjacent to another one may fetcha large price and the other may not The authorities have alsoto take into account all the visscitutides in the lives of the partiesand the circumstances under which the transactions are being enteredinto That is the reason why the Department in giving instructionsto the Appropriate Authorities had said that there will be a presumption, if the apparent consideration is less than the fair market valueby 15%, of tax evasion. Therefore, while issuing the show causenotice it is incumbent on the Appropriate Authorities to collect allfacts which would enable a reasonable authority properly instructedin law to make the presumption. The Supreme Court, as we had. pointed earlier in Gautam s case, had to make things clear, withgreat respect, had placed on record the dictum by the Supreme Courtin K. P. Vergheese s case which was sought to be challenged by thedepartment but that was not done and that was approved by thesupreme Court. And as we had said above, the Parliament hasnot said that for the purpose of Chapter XX-C a particular methodof evaluation should be adopted. The Appropriate Authority badassumed in all cases without any exception whatsoever that it canfollow a method to suit its convenience. If that is allowed, the verypurpose of law is defeated. The law has not been made to enablethe State to unjustly enrich itself at the cost of the citizens. Thecore of the democratic polity is wholly misunderstood by the Appropriate Authority and that is the kernel of the issue. If the Parliament intended, as assumed by the Appropriate Authority the languageof Chapter XX-C would have been couched in different words andwould not be as it is found in the Statute Book. We may alsonotice just to appreciate the question that has arisen for consideration, previously the Parliament inserted by the Taxation Laws Amendment Act, 1972 Chapter XX-A w. e. f. 15-11-1992 it ceases to beoperative in respect of transaction of immovable property made after13-9-1986. We may alsonotice just to appreciate the question that has arisen for consideration, previously the Parliament inserted by the Taxation Laws Amendment Act, 1972 Chapter XX-A w. e. f. 15-11-1992 it ceases to beoperative in respect of transaction of immovable property made after13-9-1986. Under Section 269-A the definition of apparent consideration is given as under:-"apparent consideration",- (1) in relation to any immovable property transferred, beingimmovable property of the nature referred to in sub-clause (i) of clause (e), means,- (i) if the transfer is by way of sale, the consideration forsuch transfer as specified in the instrument of transfer; (ii) If the transfer is by way of exchange,- (A) in a case where the consideration for the transfer consists of a thing or things only, the price that suchthing or things would ordinarily fetch on sale in theopen market on the date of execution of the instrument of transfer; (B) in a case where the consideration for the transfer consists of a thing or things and a sum of money, theaggregate of the price that such thing or things wouldordinarily fetch on sale in the open market on the dateof execution of the instrument of transfer and suchsum; (iii) if the transfer is by way of lease,- (A) in a case where the consideration for the transfer consists of premium only, the amount of premium asspecified in the instrument of transfer; (B) in a case where the consideration for the transfer consists of rent only, the aggregate of the moneys (if any)payable by way of rent and the amounts for the serviceor things forming part of or constituting the rent, asspecified in the instrument of transfer; (C) in a case where the consideration for the transferconsists of premium and rent, the aggregate of theamount of the premium, the moneys (if any) payable by way of rent and the amounts for the service orthings forming part of or constituting the rent, asspecified in the instrument of transfer, and where thewhole or any part of the consideration for such transfer is payable on any date or dates falling after thedate of such transfer, the value of the considerationpayable after such date shall be deemed to be thediscounted value of such consideratiaon, as on the dateof such transfer, determined by adopting the rate ofinterest at eight per cent per annum; (2) in relation to any immovable property transferred,being immovable property of the nature referred toin sub-clause (ii) of clause (e), means,- (I) in a case where the consideration for the transferconsisted of a sum of money only, such sum ; (II) in a case where the consideration for the transferconsists of a thing or things only, the price thatsuch thing or things would ordinarily fetch on salein the open market on the date of the transfer; (III) in a case where the consideration for the transferconsists of a thing or things and a sum of money,the aggregate of the price that such thing or thingswould ordinarily fetch on sale in the open marketon the date of the transfer and such sum, andwhere the whole or any part of the considerationfor such transfer is payable on any date or datesfalling after the date of such transfer, the value of theconsideration payable after such date shall be deemed tobe the discounted value of such consideration as on thedate of such transfer, determined by adopting the rareof interest at either per cent per annum". The Chapter also defines fair market value in the following terms:-"fair market value",- (I) in relation to any immovable property transferred by wayof sale or exchange, being immovable property of thenature referred to in sub-clause (i) of clause (e), meansthe price that the immovable property would ordinarilyfetch on sale in the open market on the date of execution of the instrument of transfer of such property; (II) in relation to any immovable property transferred by wayof lease, being immovable property of the nature referred to in sub-clause (i) of clause (e), means thepremium that such transfer Would ordinarily fetch inthe open market on the date of the execution of theinstrument of transfer of such property, if the consideration for such transfer had been by way of premiumonly; (III) in relation to any immovable property transferred, beingimmovable property of the nature referred to in subclause (ii) of clause (e), means the consideration in theform of money that such transfer would ordinarily fetchin the open market on the date of the transfer, if suchtransfer had been made only for consideration in money;" ( 25 ) UNDER Section 269-D the Competent Authority was enjoinedto issue preliminary notice. ( 26 ) UNDER Section 269-C the Competent Authority could initiateproceedings for acquisition of property and the Competent Authoritywas obliged to give reasons. The second proviso to Section 269-C (1) is relevant and it reads as follows:- "provided further that no such proceedings shall be initiatedunless the competent authority has reason to believe thatthe fair market value of the property exceeds the apparent consideration therefore by more than fifteen per centof such apparent consideration. " ( 27 ) WHILE introducting Chapter XX-C the Parliament did notthink fit or necessary to have similar proviso but it came in the formof instructions in the Department to the Appropriate Authorities. ( 28 ) SECTION 269-G provided for an appeal to the Tribunal againstthe order of the Competent Authority and Section 269-H providedfor a further appeal to the High Court. ( 29 ) THE Chapter XX-C was inserted by the Finance Act, 1986with effect from 1st of October 1986. I do not want to advert tothe scope of the Finance Act because the objects had already beenextracted. ( 30 ) THUS, in the light of the above position of law, the approachmade by the Appropriate Authority cannot be said to be in accordance with the law. I do not want to advert tothe scope of the Finance Act because the objects had already beenextracted. ( 30 ) THUS, in the light of the above position of law, the approachmade by the Appropriate Authority cannot be said to be in accordance with the law. We may also notice that there are mainly fourmethods of evaluation which are known in the field: (1) The comparative or market sales approach; (2) The cost approach; (3) Income or investment approach (on the basis of rentalincome); (4) Developers approach. ( 31 ) IN the case of the method of fixing fair market value on thebasis of comparative sales, it could be done only on the basis ofgenuine comparable sale instances. Even though a particular saleinstance may not be a matching fair by the subject property. Inthis method, the important element is the immediate vacant possession being made available to the purchaser. Further, the propertyto be valued should be of a type that is easily available in the market. If the property is very valuable, as in these cases, it will be verydifficult to find a comparable sale instance leave alone the matchingfair. Chapter XX-C is not for acquisition of property in publicinterest but as we had indicated above is only for the purpose ofpreventing evasion of tax. Consequently; the usual method of comparison for the purpose of valuation for giving compensation underthe Land Acquisition Act, 1894 cannot be applied to the propertycoming within the purview of Chapter XX-C. Before issuing theshow cause notice, the law enjoins on the Appropriate Authority, asthe initial burden is on it, to take into account sale instances whichcould be compared and the Appropriate Authority cannot issue showcause notice by resorting to Procrustean methods by making additions and deductions without any rational basis and act on thatpremise come to a conclusion relating to a figure to assume that theapparent consideration is 15% less than the fair market value and,therefore, the parties intended evasion of tax. In the context ofthe law laid down by the Supreme Court, in our view, in none ofthe cases the Appropriate Authority could discharge the initialburden. ( 32 ) THE Department along with the instructions issued, couldhave notified appropriate value bounds giving the value of the landin different areas depending upon the location and facilities availableas was done in England under the Domestic Property Regulations,1991. ( 32 ) THE Department along with the instructions issued, couldhave notified appropriate value bounds giving the value of the landin different areas depending upon the location and facilities availableas was done in England under the Domestic Property Regulations,1991. The Department also could have issued specific instructionsgiving the rates of construction and method of depreciation for thepurpose of implementing the provisions of Chapter XX-C. Supposethe Department had fixed the value of the land at Connaught Placeat Rs. 10 lakhs per ground and value of construction for the purposeof the Chapter Rs. 1,000 per sq. ft. and the parties intending toenter into transactions of transfer should fix that value and pay taxto the Department on that basis. The Department could also havesaid if the parties entered into transactions less than the value fixedby the Department there will be presumption tax evasion andthe Department could issue show cause notice for pre-emptive purchase. If the parties enter into transactions of transfer in accordancewith the value fixed by the Department then there will be no undervaluation and tax could be levied and collected on that basis. Insteadof purchasing on pre-emptive purchase one or two properties on theexercise of the discretion by the Appropriate Authority a large numberof properties could be brought within the tax net and the revenuealso would be more by manifold. The Income Tax Departmentknows that this is similar to the process of rating in banking jurisprudence. That could be adopted by providing relevant data forarriving at the Fair Market Value. The moment the Parliamentenacted the law the Department ought to have revived upto meet thesituation realising its tremendous responsibilities. We do not intend to suggest anything to the Department. Weare only testing the action of the Appropriate Authority on the basis ofthe law governing the interpretation of Chapter XX-C in its effectiveimplementation. For, after all, the ultimate object of the law is toenable the Department t ocollect revenue by preventing evasion oftax. While fixing the valuation the Appropriate Authority shouldalso take into account whether the properties are tenanted or anyother restrictions on transfer and encumbrances are existing over theproperty as was contended by the learned Attorney General beforethe Supreme Court in Gautam s case. While fixing the valuation the Appropriate Authority shouldalso take into account whether the properties are tenanted or anyother restrictions on transfer and encumbrances are existing over theproperty as was contended by the learned Attorney General beforethe Supreme Court in Gautam s case. The Appropriate Authorityshould be inquisitive, flexible, observant, sensitive, eclectic, and constructiveand should explore all possible and relevant avenues toget necessary information to arrive at a fair justifiable and accuratedata to form a credible opinion to issue the show cause notice. Theappropriate Authority is also expected to know that the term, market,is, what normally we think of the place where the sellers and buyersmeet, but in economics in a larger sense market would mean theavailability of commodities at a particular price specifying the needsand requirements of the sellers and buyers and the Appropriateauthority is also expected to know that in the real estate parlancethe market would mean the availability of the title to a property andinterest therein, the bundle of rights at a particular point of time asrequired, by specifying the needs of the parties. It is an operatonbetween the parties in trading with each other, depending upon theutility of the property from the purchasers point of view and the pricefrom the vendors point of view. It is in this back drop the Department should consider issuing show cause notice for making preemptive purchase. The market value of a property would dependon important factors like ( 1 ) its demand in the investment market; (2) Annual net income the property may yield in future. Theappropriate Authority should analyse the investment carefully andall the important and relevant factors should be dynamically considered weighing all things in operation in the actual market. No doubtthe potential of the subject property could be taken into acount ondevelopment right basis but that would come in the last after everything relevant is brought into the decision-making process for fixingthe fair market value before issuing show cause notice. There is nopoint in attempting to cherry-pick the fair market value in caseswhere the Appropriate Authorities desire to pass and order of compulsory purchase. The Appropriate Authorities should not be likecharlatans with a tunnel vision but shall act with a statementshipto achieve the goal set by the Parliament and at once make thecitizens discharge their obligations without hardship. The citizensshould be satisfied that the Appropriate Authorities function withinthe well defined boundaries. under the Constitution. The Appropriate Authorities should not be likecharlatans with a tunnel vision but shall act with a statementshipto achieve the goal set by the Parliament and at once make thecitizens discharge their obligations without hardship. The citizensshould be satisfied that the Appropriate Authorities function withinthe well defined boundaries. under the Constitution. There should notbe any chinks in the exercise of power by the Appropriate Authorities. ( 33 ) IN the above back drop, as it were, we have to consider thefacts, of each case. In C. W. 5220193 the subject property is C-62 (New G-4), Maharani Bagh, New Delhi. The property is ownedby Mrs. Khatoon Qumarain (hereinafter referred to as the owner ). She was 86 at the time of the agreement in the year 1993. Theproperty which is referred to as subject property consists of two floors,ground Floor and First Floor. They are occupied by the tenants,the area of the land is about 800 sq. yds. On 1-7-1993 the ownerentered into agreement with Mrs. Kailash Suneja (hereinafter calledthe petitioner ). The apparent consideration stated in the agreement to sell is Rs. 79,99,390. inclusive of Rs. 34,99,390 towardsunearned increase. On 7-7-1993 the owner and the petitioner soughtpermission from the Appropriate Authority i. e. respondent No. 1 inform No. 37-1 as required by law. On 9-7-1993 the Appropriateauthority first respondent issued notice to the owner asking for thefollowing information and details:- (I) A photocopy of the sanctioned Building Plan. (II) A photocopy of Completion Certificate. (III) A photocopy of the latest receipt No. 135100 dated15-9-92 amounting to Rs. 4361 on account of the property tax for the year 1992-93; and (IV) A photocopy of the receipt No. 1818 dated 19-3-93amounting to Rs, 951. 75 for the ground rent paid tothe Maharani Bagh Cooperative House Building Societyltd. (V) A photocopy of the perpetual Sub-Lease for plot No. C-82 (New No. G-4) duly executed between the Maharanibagh Cooperative House Building Society Ltd. andmrs. Quamarain is also being submitted duly signed. bythe transferor and transferee. "on 26-7-1993 the owner submitted the documents to the Appropriateauthority. On 29-9-1993 the first respondent Appropriate Authority issued show cause notice under section 269ud-1 of the Incometax Act, 1961 to the owner, the petitioner, the two tenants. It isstated in the show cause notice that the subject property was compared with the three properties termed as sale instances properties:-1. G-8, Maharani Baghapparent consideration 1. 26 crores. On 29-9-1993 the first respondent Appropriate Authority issued show cause notice under section 269ud-1 of the Incometax Act, 1961 to the owner, the petitioner, the two tenants. It isstated in the show cause notice that the subject property was compared with the three properties termed as sale instances properties:-1. G-8, Maharani Baghapparent consideration 1. 26 crores. Apparent consideration of subjectproperly is higher by 58%. 2. D-18. Maharani Baghapparent consideration 1. 1 1 crores. Apparent consideration of subject (known as I-15)property is higher by 22%. 3. N-62. Panchsheel Parkapparent consideration 1. 91 crores. Apparent consideration of subjectproperty is higher by 60%. How the value of the subject property is determined will be clear from the following table :-Subject property1st sale instance propertysale Agreement 9-7-93apparent sale con-Declared land rate works out atsale deed dt. 25-6-1991 24 monthssiderationat Rs. 21,821 per sq. mt. earlier sale agreement. value to be increased at l% permonth. For 24 months 24%has no basement potential. 10% to be deducted. Thus value to be added ishas basement14% (24%-10%)If 14% is added the land rate ofsubject property would cometors. 21,821x 14%=rs. 24,875 orrs. 25,000 per sq. mt. Value of landrs. 1. 30 croresdepreciated value of the struc-turers. 9,35,758the total value of the subjectpropertyrs. 1,39,3,758the property is tenanted. Depreciated value for 6 yearsat 8% is calculated at :rs. 87,78,267 (Rs. 1,39,33,758x. 63) (a) Thus the value of the sub-ject property isrs. 87,78,267 (b) To this, rent for 6 years isadded. Rs. 1,42,092has barsati potential of the area is 149. 90 sq. mts. has no barsati potential. (c) This is to be added. Rs. 37,27,500the value of the subjectproperty is fixed atrs. 1,26,42,859orrs. 1,26,45,000this is 58% more than theapparent consideration of thesubject property (Rs. 79,99,390)Subject property D 18 (known as 1-15)2nd sale instancemaharani Bagh. Sale agreementsale deed 1-12-92rs. 1. 11 crores. Adjusted declared land rate500 sq. yds. or 418 sq. mts. works out at Rs. 29,587 persq. mt. Value to be increased at 1% permonth 7 months earlier tosate agreementfor 7 months. +7%far (not so much as the 2ndfar (140-100)--28%instance. Side open (not available/whichis avilable in 2nd instance.-5/ohas no basement potential.-10%+7% -43%declared land rate deducting-36%29,587 x. 64=-Rs. 18,950 per sq. mt. . Value of the land of the subject52 x 18,950property=rs. 98,54,000depreciated value of thestructure. Rs. '. 9,33,758-Rs. 1,07,87,758tenanteddepreciated valueat the rate of 8%rs. 67,96,287 (Rs. 1,07,87,758 x. 63)Rental increase for 6 years. Rs. 142092. 00=28,21,655barsati potential148. 90 sq. mt. Side open (not available/whichis avilable in 2nd instance.-5/ohas no basement potential.-10%+7% -43%declared land rate deducting-36%29,587 x. 64=-Rs. 18,950 per sq. mt. . Value of the land of the subject52 x 18,950property=rs. 98,54,000depreciated value of thestructure. Rs. '. 9,33,758-Rs. 1,07,87,758tenanteddepreciated valueat the rate of 8%rs. 67,96,287 (Rs. 1,07,87,758 x. 63)Rental increase for 6 years. Rs. 142092. 00=28,21,655barsati potential148. 90 sq. mt. x 18950total value of the subject pro-Rs. 97. 60,034perty.-22% higher than to A. C. Subject property3rd sale instance. Sale Agreement9-7-93n-62, Panchsheel Park 800 yds. having FARLand rate declared works out at29. 4. 1993sale agreementrs. 28,455 per sq. mt. Considerationrs. 1,56,00,000if the rate of increase of 1% permonthrs. 35,02,2204 months Time gap x 4%rs. 1,91,02,220no open areafalling open area-5%no basement potentialbasement available.-10^=4/o -15% -11%the land rate works out atrs. 25,333 (28455 x. 89)land rate of subject property (ground floor 1st floor)520 sq. mts. =25,333x520=rs. 1,31,73,160-1,31,73,160. 00depreciated value of the struc-ture9,33,758. 00rs. 1,41,06,918. 00depreciated value at the rateof 8% Rs. 88,87,358barsati potential148. 90 sq. mts. . Value148. 90x25333rs. 37,72,083. 00value of the subject propertyrs. 88,87,358. 00rs. 37,72,083. 00rs. 1,42,092. 00rs. 1,28,01,533. 00this is higher by 60%546 ( 34 ) WHAT has been done by the Appropriate Authority is 1% isadded for every month as if every month there is increase of 1% inthe property. The basement potential of the property consideredand barsati potential taken into account. Taking into account thesubject properties tenanted 6 years deferred value at 8% is calculatedand 6 years rent is added to the value arrived at by the aboveprocess. ( 35 ) ON 14-10-1993 the owner, the petitioner sent replies to theappropriate Authorities. The petitioner stated in the reply that the two floors are under the occupation of the tenants and the comparableinstances have to be identified on the proximity from time angle and (2) to proximity from situation angle. In the case of tenanted properties, he sale permissible method of arriving at fair market valueis the rent capatilising method. The method of valuation adoptedby the Appropriate Authority is wrong and is not in accordance withthe principles laid down by Courts. For the purpose of calculatingdeferred value 14 years must have been the period. The ownerstated that the tenants had also filed statements which would showthat the tenants are bona fide tenants in occupation of the propertyfor a long time. The owner also sought to rely on the passage from Park's on Valuation at page 123 1st Edn. For the purpose of calculatingdeferred value 14 years must have been the period. The ownerstated that the tenants had also filed statements which would showthat the tenants are bona fide tenants in occupation of the propertyfor a long time. The owner also sought to rely on the passage from Park's on Valuation at page 123 1st Edn. the Id. author has observed that the hypothetical or reversionary method of valuation isnot in order. Attention in support has been invited by the Id. authorto an old case of the Government of Bambay vs. Merwanji Monchar ji10 LR (Bom.) 907 (5 ). The owner also challenged the fixation ofdepriciation of the building at Rs. 9,33,750 the subject properties islocated at the end of the colony. The Appropriate Authority waswrong in taking into account the sale instance properties. It is alsostated that the third instance property (Panchsheel Park) which issituate far from the colony and that is not a tenanted property. It wassubmitted that the consideration stated in the agreement represents thefair market value and there was no intention of evasion of tax. Therefore, No objection Certificate should be granted. It was also statedin the affidavit filed by Hemant Sarangi, Under Secretary, Centralboard of Direct Taxes in C. B. Gautam's case that the following types properties could not ordinarily be purchased by the Centralgovernment:-"1 Cases of doubtful or disputed titles. 2. Transaction by and with the Government. I3. Properties with bonafide tenancies of long standing. 4. Properties with too many restrictions of users, ( 36 ) ON 21-10-1993 the owner had submitted his statement aboutthe offer made by Mr. Ganeriwal, one of the tenants in the properlypurchase the property and it is stated that it is not genuine and thatis an irrelevant fact. The other tenant Amarjeet Singh stated in hisobjection petition dated 16-10-1993 that his tenancy rights shouldnot be effected by the purchase. Again on 19-10-1993 the tenantamarjeet Singh stated that he appeared before the Appropriate Authority and mentioned about the suit No. E-369/91 filed against him bythe owner and be had expressed displeasure over the way in whichmr. Upadhaya, Member of the Appropriate Authority acted. ( 37 ) THE first respondent Appropriate Authority passed the orderof compulsory purchase on 25-10-1993. Again on 19-10-1993 the tenantamarjeet Singh stated that he appeared before the Appropriate Authority and mentioned about the suit No. E-369/91 filed against him bythe owner and be had expressed displeasure over the way in whichmr. Upadhaya, Member of the Appropriate Authority acted. ( 37 ) THE first respondent Appropriate Authority passed the orderof compulsory purchase on 25-10-1993. The basis of the order isthat comparing the apparent consideration of the subject properlywith three sale instances properties the apparent consideration isgrossly under valued and, therefore, the Appropriate Authority wasobliged to pass the order. The facts. as mentioned in the show causenotice are adopted in the order impugned. The Appropriate Authority has also referred to the offer made by Mr. P. K. Ganeriwal, atenant and ultimately the Appropriate Authority cams to the conclusionthat the apparent sale consideration of the subject property is lowermore than 15% from the fair market value of the property. Theappropriate Authority has not given a finding that the under valuation was made with the sole object of evading tax. ( 38 ) THE petitioner has challenged this order. In the writ petition it is stated that the method adopted by the Appropriate Authority in arriving at the fair market value was not permissible in law. The normal method of valuation should have been adopted if rentcapitalisation is not acceptable to the Appropriate Authority; (2) Theappropriate Authority did not give reasonable opportunity giving details about the comparable tenancy, state of the building, year ofconstruction, the basis of rate adopted for land and other relevantdata taken into account by the Appropriate Authority not given tothe petitioner; (3) the sale instances properties are not comparable,not proximate from situation angle; (4) none of the sale instancesproperties are tenanted; (5) In the case of tenanted property thesole permissible method of arriving at the market value is the rentcapitalisation method; (6) encumbrance of tenancy is very materialbecause section 16 (6) of the Delhi Rent Control Act, 1958 prohibitsa purchaser from filing suit for eviction within five years from thedate of purchase. The assumption that the potential of the terracewould enhance the value is erroneous while the tenant in the first floorin enjoyment of the terrace; (7) The depreciation value of structureat Rs. 9,33,758 is on the high side. The assumption that the potential of the terracewould enhance the value is erroneous while the tenant in the first floorin enjoyment of the terrace; (7) The depreciation value of structureat Rs. 9,33,758 is on the high side. Very material facts had notbeen considered in this behalf; (8) The sale instance of S-39a,panchsheel Park is comparable because it is similar to subject property, both are of 800 sq. yds. and both are fully tenanted. Theproperty at S-39a, the position was (1) F. A. R. is 140 whereas thesubject property is 100; (2) the property is situate on a 150' wideroad whereas subject property is situated on a 30' wide load, NOCwas issued to S-39a Panchsheel Park for Rs. 70 lakhs plus unearnedincrease. And if this is taken into account, the aggregate value ofthe subject property works out at Rs. 77. 7 lakhs ignoring the tenancyof one floor. If this is compared. Fair Market Value of the subject property would be far less than the apparent consideration. ( 39 ) IN the affidavit filed by the Central Board in Gautam's caseit is stated that the properties of bona fide tenancies of long standingshould not ordinarily be purchased. ( 40 ) DURING the course of the proceedings, it was brought tothe notice of the petitioner by the Appropriate Authority that a Teacompany of Calcutta and one Mr. Jeff from abroad had made offersfor purchasing the property. The petitioner was not furnished withany documentary evidence. The aforesaid persons appear to be thenominees of the tenant P. K. Ganeriwal. ( 41 ) AMARJEET Singh, the tenant of the first floor made it clear inhis letter dated 16-10-1993 that he is a tenant of the first floor andterrace above. He stated: -"the sale instance of S-39a, Panchsheel Park relied upon bypetitioner, was arbitrarily dealt with. Without any basis/working the land rate of this property was worked outto Rs. 30,347 per sq. mtr. and therefore, was stated to beof no help to petitioner. Relying upon the other instance of property at 56, Jor Bagh, New Delhi, whichwas tenanted and the tenant was paid a sum ofrs. 65. 61 lacs for vacating, petitioner submitted that itwill have to make such payments to tenants for gettingthe subject property vacated. 30,347 per sq. mtr. and therefore, was stated to beof no help to petitioner. Relying upon the other instance of property at 56, Jor Bagh, New Delhi, whichwas tenanted and the tenant was paid a sum ofrs. 65. 61 lacs for vacating, petitioner submitted that itwill have to make such payments to tenants for gettingthe subject property vacated. However, this submissionwas negated by observing that no judcial notice of sucha position can be taken as no such payment is stipulatedin the agreement for sale and purchase of subject property. The contention that deferment factor for tenancies shouldbe taken as 14 years and not 6 years was rejected forthe reason that after initial lock-in period of five years fora new buyer, the property may be vacated within a periodof about one year by a mutual agreement. Further, itwas observed that there is no subsisting lease deed as andate in respect of either of the two tenants of the subject property. With regard to value of structure takenat Rs. 9,33,758 was stated to be worked out as per plintharea rate and that depreciation @ 1. 5% per annum, hasbeen allowed for 26 years, since the structure is 26 yearsold. The contention that possibility of utilisation of terracerights of first floor is remote, as the same is in occupation of tenant on first floor was rejected for the reasonthat ten ace on the first floor has not been let out tothe tenant on the first floor. In respect of objection to offers made by a Tea Companyof Calcutta and non-resident Indian to purchase the subject property directly from respondent Authority at aprice higher than the apparent consideration, it was statedin the order that the two offers are not being made thebasis for making this purchase order and are referredonly to support the point that the apparent sale consideration of the subject property is lower by 15% from thefair market value of the property. " ( 42 ) ACCORDING to the petitioner, the discount of 8% for 6 yearson account of subject property being tenanted is unrealistic, imaginaryand arbitrary. The tenants on the ground floor and the first floorare there for a long time. The tenant in the ground floor is from1979 and the first floor from 1967. The suit for eviction with reference to first floor Amarjeet Singh, which was filed in 1977, wasdecided in his favour in 1986. The tenants on the ground floor and the first floorare there for a long time. The tenant in the ground floor is from1979 and the first floor from 1967. The suit for eviction with reference to first floor Amarjeet Singh, which was filed in 1977, wasdecided in his favour in 1986. The discount of 8% for 6 yearswas given without any rational basis. The basement potential is notat all real but is imaginary and arbitrary. It is further stated that thebasis of calculation for determination of fair market value is vitiated bythe following facts:-"the value of land operation to ground and first floor shouldbe 535. 12 sq. mts. instead of 520 sq. mts. F. A. R. ofground floor and first floor is 80 out of total 100 and80% of 668. 9 sq. mts. comes to 535. 12 sq. mts. and not520 sq. mts. Consequential additional for barsati floorpotential should have been made with reference to landarea 133. 78 sq. mts. as against 148. 90 as calculated bythe Appropriate Authority". ( 43 ) THE value of construction at Rs. 9,35,753 after giving depreciation of 1. 5% for 26 years (age of the building) is a low. Minimum should have been 5%. Determination of cost of construction on the basis cr plinth area is not done. Subject property is situateat the deed end of the road and 5% discount ought to have beengiven. Discount for basement 10% is low in the present situationwhen getting space in Delhi is very difficult. A specific request wasmade to the Appropriate Authority to furnish data with reference toproperties cleared within the last one year in the same locality orother surrounding areas, with reference to tenanted properties andthat was not given. The method adopted by the Appropriate Authority is arbitrary and hit by Article 14 of the Constitution of India. ( 44 ) THE respondents 1 and 2 filed a counter affidavit traversing theallegations in the writ petition. In paragraph I the nature of the property and consideration are referred to in the following terms:- "a statement in form No. 37-1 was filed under Rule-48-I ofthe Income-tax Rules, 1962 on 7/07/1993, whichwas accompanied by an agreement to sell dated 1/07/1993. The apparent consideration agreed between the transferor Mrs. Khatoon Quamara-in and the transfereemrs. Kailash Suneja, in respect of property No. G-4,maharani Bagh, New Delhi (old No. C-62) was Rs. 45lacs plus UEI amounting to Rs. The apparent consideration agreed between the transferor Mrs. Khatoon Quamara-in and the transfereemrs. Kailash Suneja, in respect of property No. G-4,maharani Bagh, New Delhi (old No. C-62) was Rs. 45lacs plus UEI amounting to Rs. 34,99,390 payable to thedda. Thus the effective apparent consideration forwhich the property was agreed to be transferred Wasrs. 79,99,390 (45,00,000+34,99,390 ). The propertyin question was occupied by Shri P. K. Ganeriwal astenant on the ground floor and Sardar Amarjit Singh astenant on the first floor. The property in question had aplot area of 668. 09 sq. mts. (800 sq yds.), on which adouble storeyed house comprising the ground floor andthe first floor alongwith two servant quarters on thegarage block had been constructed". ( 45 ) IT is further stated that in the show cause notice that thesubject property was compared with the sale instances of similar properties located in similar localities, G-8 Maharani Bagh which issituated in the same locality, 1-15 Maharani Bagh, which is alsosituated in the same locality and N-62 Panchsheel Park, situated in alocality comparable to Maharani Bagh. What is stated in the showcause notice is repeated. ( 46 ) THE purchase order was passed on 25-1-93 after consideringthe sale instances. It is asserted that the appropriate authority isunder no obligation to the petitioner to enable him to prepare hiscase. About the tenancy, it is stated:-"the averments made in these two sub-paras are not admitted. Although a new buyer of a property covered under therent Control Act cannot file a suit for eviction for fiveyears as per section 14 (6) of the Delhi Rent Control Act. new buyer can after the expiry of five years and withina period of one year thereafter can have the propertyvacated from a tenant by means of mutual compromiseand it may not be necessary to approach a Court of Lawfor getting the property vacated. It is worth mentioningthat there was no subsisting lease deed in respect ofeither of the two tenants of the subject property. Whiledetermining the market value of a tenanted propertygoverned by the Rent Control Act, the adoption of a deferment factor is an accepted practice of valuation". This reasoning itself is not enough to find out the approach of theappropriate authority to the question. Whiledetermining the market value of a tenanted propertygoverned by the Rent Control Act, the adoption of a deferment factor is an accepted practice of valuation". This reasoning itself is not enough to find out the approach of theappropriate authority to the question. It is stated in the counter thatduring the course of hearing the petitioner was confronted with twoletters, one received from Bhubandhar Tea Company, Calcutta, whowere willing to purchase the property for a sum of Rs. 61,45,009plus unearned increase and other charges. There was also an offerfrom Satish Jha. NRI, who was willing to purchase the subject property for a sum of Rs. 61 lakhs plus unearned increase and stampcharges. According to respondents 1 and 2, the basis of purchase orderwas on a comparison of three sale instances mentioned in the showcause notice. Reference is made to the representation made by thetenants which is not very much relevant at this stage. The Appropriate Authority has disputed the method of valuations suggested bythe petitioner. The respondents 1 and 2 have also chosen to disallowthe discount claimed by the petitioner. The Appropriate Authoritymaintained the same. stand that is taken by it in the show cause notice. ( 47 ) PETITIONER filed a rejoinder to the counter affidavit and therejoinder was filed on 5-4-1994. It is not necessary to refer to Iheaverments in the rejoinder because the petitioner has repeated theaverments in the writ petition. ( 48 ) MR. Syalli, learned counsel for the petitioner relied upon thejudgment of the Supreme Court in C. B. Gautam's case and submitted that the Appropriate Authority had not at all discharged. thisburden and, therefore, the purchase order is liable to be quashed. The learned counsel relied upon the passage of the judgment of thesupreme Court reported in AIR 1968 SC 1156 (6) wherein thesupreme Court had held :-"it is well settled that where the jurisdiction of an administrative authority depends upon a preliminary finding of factthe High Court is entitled, in a proceeding for a writ, todetermine upon its own independent judgment whether ornot that findings is correct. The matter has been verywell put by Farwell, L. J. in Rex v. Shoreditch Assessmentcommittee, 1910-2 KB 859 at p. 879 as follows :-"the existence of the provisional list is a condition precedent to their jurisdiction to hear and determine, and as the claimant is entitled to require them to hear and determine. The matter has been verywell put by Farwell, L. J. in Rex v. Shoreditch Assessmentcommittee, 1910-2 KB 859 at p. 879 as follows :-"the existence of the provisional list is a condition precedent to their jurisdiction to hear and determine, and as the claimant is entitled to require them to hear and determine. they cannot refuse to take the steps necessary togive rise to such jurisdiction; if they do, their refusal mayhe called in question in the High Court. No tribunal ofinferior jurisdiction can by its own decision finally decideon the question of the existence or extent of such jurisdiction; such question is always subject to review by thehigh Court, which does not permit the inferior tribunaleither to usurp a jurisdiction which it does not possess,whether at all or to the extent claimed, or to refuse toexercise a jurisdiction which it has and ought to exercise. Subjection in this respect to the High Court isa necessary and inseparable incident to all tribunals oflimited jurisdiction for the existence of the limit necessitates an authority to determine and enforce it is a contra-diction in terms to create a tribunal with limited jurisdiction and unlimited power to determine such limit at itsown will and pleasure such a tribunal would be autociatic,not limited and it is immaterial whether the decision ofthe inferior tribunal on the question of the existence ornon-existence of its own jurisdiction is founded on law orfact a Court with jurisdiction confined to the city oflondon cannot extend such jurisdiction by findings as afact that Picadily Circus is in the ward of Che. pe. "the same principle was enunciated by the Court ofappeal in White and Collins v. Minister of Health. 1939-2 KB 838. The question debated in that case waswhether the High Court had jurisdiction to review thefinding of the administrative authority on a question offact. It appears that Part V of the Housing Act, 1936,enabled the local authority to acquire land compulsorilyfor the provision of houses for the workingng classes, buts. 75 of the Act provided that nothing in the Act was toauthorise the compulsory acquisition of land "which atthe date of compulsory purchase forms part of any park,garden or pleasure ground or is otherwise required forthe amenity or convenience of any house". 75 of the Act provided that nothing in the Act was toauthorise the compulsory acquisition of land "which atthe date of compulsory purchase forms part of any park,garden or pleasure ground or is otherwise required forthe amenity or convenience of any house". In accordance with the provision of this part of the Act, the Riponborough Council mace an order for the compulsory purchase of 23 acres of land, it being part of an estate inyorkshire called Highfield consisting of a large house and35 acres of land surrounding it. The owners servednotice of objection to the order as being contrary tos. 75 and the ground of objection was that the land waspart of a park and was required for the amenity or convenience of the house. The Minister of Health directeda public inquiry and after holding the inquiry and takingevidence, the Chairman duly made his report to the Minister who thereupon confirmed the order. It was held bythe Court of Appeal that the High Court had jurisdictionto review the Minister's finding and since the land inquestion was part of the park of the park of Highfield, the order ofcompulsory purchase was quashed A page 855 Luxmoore L. J. stated :"the first and the most important matter to bear in mindis that the jurisdiction to make the order is dependent ona finding of fact; for, unless the land can be held not tobe part of a park or not to be required for amenity orconvenience, there is no jurisdiction in the borough councilto make, or in the Minister to confirm, the order. In such a case it seems almost self-evident that the Courtwhich has to consider whether there is jurisdiction to makeor confirm the order must be entitled to review the vitalfinding on which the existence of the jurisdiction reliedupon depends. If this were not so the right to apply tothe Court would be illusory. " ( 49 ) THE learned counsel referred to Smt. Rajshri vs. CWT, 163itr 473 (7), CGT vs. Executors and Trustees of the Estate of Latesh. Ambalal Sarabhai, 170 ITR 144 (8) and Commissioner of Income Tax vs. Shivaoni andco. 184 ITR 573 (9 ). The learned counsel relied upon Centuryspinning and Weaving Co. vs. ulhas Nagar Municipality, AIR 1971sc 1021 (10), Babubhai Muljibhai Patel vs. Nandlal Khodidas,atr 1974 2105 (11) submitted that filing of a suit is not an effectiveremedy. Ambalal Sarabhai, 170 ITR 144 (8) and Commissioner of Income Tax vs. Shivaoni andco. 184 ITR 573 (9 ). The learned counsel relied upon Centuryspinning and Weaving Co. vs. ulhas Nagar Municipality, AIR 1971sc 1021 (10), Babubhai Muljibhai Patel vs. Nandlal Khodidas,atr 1974 2105 (11) submitted that filing of a suit is not an effectiveremedy. ( 50 ) THE learned counsel for respondents Mr. Rajendra andmr. Midha never put forth the argument that the petitioners shouldbe driven to the filing of suits for getting the reliefs prayed for inthe writ petition. What the learned counsel contended was that theorder of compulsory purchase cannot be challenged at all. Therefore,it is not necessary to go into the question whether the petitioners in thewrit petitions would be entitled to file suit in Civil Courts challengingthe order of compulsory purchase made by the Appropriate Authority. We may also note that under Section 293 of the Income Tax Act,1961 jurisdiction of the Civil Court is barred and that section readsas under:-"293. No suit shall be brought in any civil court to setaside or modify any [proceeding taken or] order madeunder this Act; and no prosecution, suit or other proceeding shall lie against [the Government or] any officerof the Government for anything in good faith done orintended to be done under this Act. " . ( 51 ) THEREFORE, the question whether filing of a suit is an effective alternative remedy would not arise at all for consideration. ( 52 ) THE learned counsel Mr. Syalli submitted when the fairmarket value has not been arrived at adhering to the principlesacceptable in law, no question of presumption of tax evasion wouldarise. ( 53 ) THIS application is filed by Bhupender Tea Co. . whoe is one of the person offered to purchase the property forrs. 61. 45,0091- plus unearned increase and stamp charges. ( 54 ) WE do not want to go into the merits of the claim of theapplicant. The applicant has no locus standi to file the petition. Accordingly, CM. 1988/94 under Order 1 Rule 10 Civil Procedure Code is dismissed. ( 55 ) THERE are eight petitioners. The fourth respondent isarjun Anand, who is the owner of the property bearing No. 25,friends Colony West hereinafter. He referred to as the subjectproperty. On 1-2-1991 there was an agreement to sell betweenthe fourth respondent and the petitioners and the apparent consideration was Rs. 1. 75 crores. ( 55 ) THERE are eight petitioners. The fourth respondent isarjun Anand, who is the owner of the property bearing No. 25,friends Colony West hereinafter. He referred to as the subjectproperty. On 1-2-1991 there was an agreement to sell betweenthe fourth respondent and the petitioners and the apparent consideration was Rs. 1. 75 crores. On 4-2-1991 the petitioners andthe fourth respondent filed in Form No. 37-1 for issuance of noobjection certificate. On 18-4-1991 the purchase order was passedby the Appropriate Authority. On the same day the Appropriateauthority called upon. the fourth respondent to surrender possession of the property. C. W. 1508! 91 was filed in this Court challenging the purchase order. On 1-3-1993 this Court allowed the writpetition in view of the judgment of the Supreme Court in C. B. Gautam's case. ( 56 ) IT is claimed by the petitioners that on 9-3-1993 counselfor the petitioners appeared before the Appropriate Authority andmade a request for an inspection of the file. On 15-3-1993 anapplication to the Appropriate Authority to issue no objectioncertificate was made along with an affidavit of Sanjay Gupta. Onthe same day, the fourth defendant also filed an application forissue of no objection certificate stating that the transaction was abona fide one and there was no under valuation. Apprehendingthat the Appropriate Authority might not give sufficient opportunity the petitioners filed C. M. 3797193 for a direction to theappropriate Authority that the petitioners and the fourth respondent should be given an inspection of the file, copies of the valuation reports and the entire correspondence received from the Members of Parliament and the then Finance Minister recommendingthe purchase of the property. On 11-5-1993 an order was passedby this Court recording the undertaking given by the learned counsel for the Revenue that the Appropriate Authority would act inaccordance with law. On 19-5-1993 there was a phone call fromthe Chairman, Appropriate Authority that the Appropriate Authority would be inspecting the property. Allegations of collusionbetween the Chairman and one of the tenants are made in thepetition. On 21-5-1993 a show cause notice is given by the Appropriate Authority which are served on the petitioners at 6 P. M. onthat day. In paragraph 4 of the show cause notice it is stated thatone Vinod Kumar Jain. requested for hearing as he was a tenant inthe premises. On 21-5-1993 a show cause notice is given by the Appropriate Authority which are served on the petitioners at 6 P. M. onthat day. In paragraph 4 of the show cause notice it is stated thatone Vinod Kumar Jain. requested for hearing as he was a tenant inthe premises. In paragraph 6 the basis for the show cause noticeis given as under :-"in the case of subject property, the apparent considerationis Rs. 1,75,00,000, -. The plot area is 3595. 32 sq. mtrs. including 830. 95 sq. intrs. declared as excessland under ULCR Act. The net plot area comes to3595. 32 - 830. 95=2764. 37 sq. mtrs. If salvagevalue of Rs. 1,64,445 is considered, the achievedland rate works out to Rs. 1,75,00,000 - 1,64,445. 00=1,73,35,555 divided by 2764. 37=6271 per sq. mtr. We may compare the sale instance of property at 60-Friends Colony (East) which was agreed to be sold on 5-12-90 for apparent considerationof Rs. 2. 65 crores. If the depredated value ofstructure of sale instance is taken at Rs. 11,60,000. 00the land rate per sq. mtr. works out to Rs. 2,65,00,000- (- ) 11,60,000. 00 = 2,53,40,000. 00divided by 1173. 91 =rs. 21,586. 00. If adjustment onaccount of time gap of + 2 per cent, side open+ 10 per cent, potential for basement plus 10 per centin the sale instance and nearness to railway track--- 5 per cent and size of plot - 5 per cent is taken,into account, the rate per sq. mtr. works out tors. 24,180. This gives land value of subject propertyas Rs. 2764, 37 x 24180= 6. 68 crores. In view or thefact that the subject property is tenanted, its value isdeferred for 5 years @ 8 per cent interest and the present value would work out to Rs. 4. 55 crores to whichrs. 1,64,000. 00 salvage value is to be added. Thisbrings value of the subject property to Rs. 4. 564crores which is 160 per cent above the apparent consideration. "the following statements were made before the Appropriateauthority:- ( 1 ) The proceedings before the Appropriate Authority are judicial in nature. (2) The Appropriate Authority is obligated to follow judicial procedure like a court though summary in nature like small cause court following the principles laid down in Civil Procedure Code and Evidence Act. "the following statements were made before the Appropriateauthority:- ( 1 ) The proceedings before the Appropriate Authority are judicial in nature. (2) The Appropriate Authority is obligated to follow judicial procedure like a court though summary in nature like small cause court following the principles laid down in Civil Procedure Code and Evidence Act. (3) The Appropriate Authority is mandated to act judicially and is accountable for its acts which must be done and exercised judicially and not arbitrarily. (4) The difference between the apparent sale consideration and the fair market price to the extent of 15 per cent or more did not automatically prove that there was under valuation so as to attract the rigour of Section 269-UD to pass purchase order. (5) The difference between the apparent consideration and fair market value to the extent of 15% or more is merely presumptive of an attempt being made to evade tax but the said presumption is rebuttable and the seller and the purchaser are entitled to show to the Appropriate Authority that there exist several circumstances and factors in which the property was agreed to be sold at a lesser price than the fair marketvalue and have a right to give evidence to rebut the presumption. (6) The mandatory and precedent condition which must be satisfied before exercising the power to pass the purchase order is that there must exist an intention557and act to evade tax and that black money i. e. additional consideration other than the apparent consideration must pass beneath the table. In case of non- existence of this precedent condition, no purchase order can be passed, notwithstanding the apparent consideration being less than the fair market value. (7) Since the imputation tax evasion arises where an order tor compulsory purchase is made and such an imputation could he made against them. he must begiven an opportunity to show cause and prove that the alleged undervaluation in the agreement for sale was not with a view to evade tax. (8) Another precedent condition is that the apparent sale consideration has been intentionally understated i. e. a deliberate understatement of the value of the property to evade tax. he must begiven an opportunity to show cause and prove that the alleged undervaluation in the agreement for sale was not with a view to evade tax. (8) Another precedent condition is that the apparent sale consideration has been intentionally understated i. e. a deliberate understatement of the value of the property to evade tax. (9) The apparent sale consideration or the property in question is higher than the fair market value assessed/ determined by any norm, method or standard, In the alternative, even if it be assumed for llie sake of argument that the apparent consideration was lower than the "fair Market value" even then a variety ofcompelling circumstances as given in the affidavit of his client by way of evidence (which stands uncontroverted) existed under which the property was sold at Rs. 1,75,00. 000. 00 considering the best/maximum price he could gel for a tenanted property. (10) There was not an iota of evidence or any circumstance suggesting evasion of tax or a deliberate understatement of the value of property. (11i ) The unrebutted and uncontroverted facts and evidence is on the records produced by the transferor, his client, that there is no understatement of the value of the property. (12) Even otherwise the tacts and circustances existed under which his client sold the property for Rs. 1. 75 crores particularly when he was getting a rental income of the property to the extent of Rs. 4,000. 00 per month and he was residing in a tenanted house where he was paying about Rs. 8,000. 00 per month as rent and he558 had no other house in Delhi and no business premises wherein he could cany on his business and that he was also paying very heavily for more thanrs. 14,000. 00 (Rs. fourteen thousand only) per month as a rent for the business premises and was in dire need of finances to carry on his business gainfully and successfully. (13) His client had no hope of getting the property vacated and that Shri Vinod Jain was a hard litigant and was a very rich and big industrialist weilding great influence in political circles and bureaucrats and various other tacts and circumstances have been disclosed in his affidavit under which the apparent consideration is much more than the fair market value. (14) The fair market value of a tenanted properly is to be determined on the basis of capitalisation of rentalincome. " ( 57 ) ABOUT the sale instances cited, it was submitted that therecould be no comparison between the subject property and property bearing No. 60, Friends Colony because 60 Friends Colonywas a vacant property, the actual physical vacant possession of theproperty was handed over/delivered to the purchaser and the saleconsideration was for vacant property while the suit property wasa tenanted property and that Vinod Kumar Jain was raising disputes with ulterior motives. The Appropriate Authority did notgive an opportunity the reply, to the show cause notice and'the reply, when it was given, was refused to be received by theoffice at the instance of the Chairman. It is further stated in thepetition that on 28-5-1993 the purchase order was passed. It is further stated in the petition that there were dissimilarities betweenthe subject property and 60 Friends Colony and there was absolutely no basis for determination of fair market value, The petitionerreferred to the decision of the Orissa High Court in 108 ITR 544and 125 ITR 665. It is submitted that the observation of the Appropriate Authority that the tenants can be easily evicted iswholly fallacious and that would completely vitiate the order. Itis further stated by the petitioners that the Appropriate Authorityshould have resorted to the fixation of fair market value on thebasis of capitalisation of rent for some years. The Appropriateauthority erred in assuming that the sale instance 60 Friendscolony was a good guide in determining the lair market value. It is further stated that the adjustments adopted by the Appropriateauthority were wholly arbitrary and they were made just for thepurpose of passing the impugned order. The petitioners also statethat the Appropriate Authority arbitrarily refused to consider thesale instance No. 2, Barakhamba Road. The petitioners assertthat there was no finding by the Appropriate Authority that therewas intentional gross under statement of the value of the propertyand there was tax evasion by the party and unless there was sucha finding, order of compulsory purchase cannot be made. The petitioners also statethat the Appropriate Authority arbitrarily refused to consider thesale instance No. 2, Barakhamba Road. The petitioners assertthat there was no finding by the Appropriate Authority that therewas intentional gross under statement of the value of the propertyand there was tax evasion by the party and unless there was sucha finding, order of compulsory purchase cannot be made. Thepetitioners further stated that the Appropriate Authority illegallyand in utter contravention, of the norms and standards for determining the fair market value erroneously held that since thetenancy of the tenant was for month to month basis, therefore,the deferment factor of 5 years was reasonable to arrive at thefair market value of the suit property by calculating interest at8% per annum while comparing the instance of 60 Friendscolony. The petitioners further stated :-"the deferment factor of 5 years was based on no evidence and not on any principle but was based onconjectures and surmises, whim and caprice maliciously entertained by the Appropriate Authority foroblique motives and purposes. The deduction at therate of 8% by way of interest for 5 years had nobasis and no principle. The market rate of interestis 24% and not 8% and no prudent purchaser canrisk his money at 8% interest in purchasing a litigated or tenanted property and even otherwise wouldget a return of Rs. 4. 000. 00 p. m. as rent meaning thereby that he would set only Rs. 2. 40,oo0. 00 asrent in 5 years on his investment of Rs. 4. 55 croresas wrongly and maliciously observed/held by therespondents No. 1 and 2 and not at the rate of 8%p. a. as falsely and maliciously observed by therespondent No. 2 with no hope and certainty to getthe vacant possession of the suit property by gettingthe tenant evicted through the process of the courtafter 5 years. "the petitioners also asserted that in all other cases of tenantedproperty the method of valuation adopted by the Appropriateauthority was the capitalisation of rent for 20 years and NOChad been granted in all such cases. According to the petitionersin the following cases that method was adopted and NOC wasgranted;-____________________________________________________________________________s. R. No. Property Area Date Considera- Remarksno. of Agree-tionment to sell________________________________________________________________________________________________1 2 3 4 5 67_______________________________________________________________________________________________1. 3139 41-B,kotwali 4100 Sq. yds. 14-1-93 68,00,000 1. Three smallportiontenanted since 21-1-93 Road New Delhi 1970 @ Rs. 770 p. m. 550p. m. and 500 p. m. Rest of property with vacant posses- sion. 2. R. No. Property Area Date Considera- Remarksno. of Agree-tionment to sell________________________________________________________________________________________________1 2 3 4 5 67_______________________________________________________________________________________________1. 3139 41-B,kotwali 4100 Sq. yds. 14-1-93 68,00,000 1. Three smallportiontenanted since 21-1-93 Road New Delhi 1970 @ Rs. 770 p. m. 550p. m. and 500 p. m. Rest of property with vacant posses- sion. 2. 3071 172,jorbagh 375 sq. 20-11-92 50,00,000 2. Ground floor P. M sine 7-12-76 First 23-11-92 New Dilhi yds. Floor@ Rs. 375 P. M. Since 1959. Barsti floor vacant3. 2960 21,community 127. 46. sq. 10-8-92 90,00,000 3. Ground floor M/s. Chemical Universe 24-8-92 Lok Vsaant mts. Pvt. Ltd. @ Rs. 9600 p. m. Rs. 11. 525 vihar N. Delhi increased in 4/83. and again increased Commercial plot to Rs. 14,400 in 4/87 and again incr-eased in 4/90 to Rs. 27,440 (b) First Floor-M/s. I. T. C. Ltd. @ Rs. 21,592 p. m. since 3/1980. 4. R-2873 203,golf Links,375 sq. 31-5-92 50,00. 000 4. Ground Floor @ Rs. 150 p. m. since p. m. 11-6-92new Delhi yds since 1975. First Floor @ 950 p. m. since 1978. 5. 2583 183,golf Links,575 sq. 15-10-91 1,42,00,000 Ground floor tenant to Sh. Yashovardhan New Delhi. yds. K. Zaveri since 10/1991 @ Rs. 6000 p. m. First and 2nd Barsati Floor vacant. 6. 2142 46,ring Road, 760 sq. 17-7-90 95,00,000 Rented For more than Rs. 3500 p. m. Lajpat Nagar, yds. III N. Delhi. 7. 2082 3,raj Narain 792 sq. yds. 48,78,000 Tenanted to Sh. . J. C. Chandok and Family Road, Civil Lines for more than Rs. 3500 p. m. 8. R-1880 A-46,gulmohar 300 sq. yds. 21-12-80 23,00,000 Fully single storeyed building Park, N. Delhi tenanted to Mr. Pradeep Dutta since 1978 on a monthly rent @ Rs. 1500 p. m. Fair Market value was worked out in this case at Rs. 35. 00 lacs by A. A. and yet NOC was granted because the basis of rent capitalisation was later on adopted. 9. 3042 45, Ring Road,760 sq. yds. 15-10-92 95,50,000 Only ground floor tenanted a Lajpat Nagar I Rs. 2500 p. m. Upper floor vacant,10. 3061 B-l,northern 1157sq. yds. 29-10-92 1,10,00,000 @ Rs. 2500 p. m. First and Barsati Schemetenanted, Ground floor vacant. 11. 3062 B-l, Block-1, 2563sq. yds. 27-10-92 2,20,00,000 @ Rs. 8750 p. m. first floor tenanted since 1991 to Puja International Pvt. Ltd While ground floor vacant. 12. 3091 Krishna 1800 sq. yds. 30-11-92 1,55,00,000 Rent p. m. Rs. 3061 B-l,northern 1157sq. yds. 29-10-92 1,10,00,000 @ Rs. 2500 p. m. First and Barsati Schemetenanted, Ground floor vacant. 11. 3062 B-l, Block-1, 2563sq. yds. 27-10-92 2,20,00,000 @ Rs. 8750 p. m. first floor tenanted since 1991 to Puja International Pvt. Ltd While ground floor vacant. 12. 3091 Krishna 1800 sq. yds. 30-11-92 1,55,00,000 Rent p. m. Rs. 13,485 since Bhawan H-Block 1970. ( 58 ) IN paragraph 51 of the grounds the approach of theappropriate Authority is challenged by the petitioners in thefollowing terms:-"that the Appropriate Authority betore paying the Purchase Order dated 18-4-1991 had got the valuation report prepared from the departmental valuer and according to departmental valuer and according to the said valuation report, the fair market value of the suit property was worked out at Rs. 1,11,63,234. 00 but when the then Finance Minister vide his note dated 9-4-91 appended on letter dated 19-3-1991 directed the Appropriate Authority to pass the Purchase Order in respect of the suit property at the instance of Shri Vinod Jain and some Members of the Parliament, another valuation report was procuredand falsely manipulated according to which the alleged fair market value of the suit property was worked out at Rs. 4. 77,67. 461. . 00. As already submitted in the previous writ petition, though the thenmembers of the Appropriate Authority had already made an inspection of the suit property and on that basis, the valuation report was asked for from the departmental valuer who after considering all the facts and circumstance of the case assessed determinedthe fair market value of the suit property at Rs. 1,11,63,234. 00 but after the receipt of directions of the then Finance Minister vide his note dated 9-4-1991, a second inspection was made by the then Members of the Appropriate Authority on 14-4-1991for the purpose of manipulating and fabricating another valuation, report from the Departmental Valuer to tailor the purchase order which was required to be passed, as directed by the then Finance Minister at Rs. 4,77,67. 461. 00. The said valuation report was. ex facie illegal, wrong, manipulated and malafide got prepared for ulterior motive and to supercede the earlier valuation report genuinely and correctly prepared at Rs. 1,11,63,234. 00 In the present show cause notice, the said illegal and malicious valuation report valuing the suit property at Rs. 4,77,67,461. 00 has been repeated and made the basis tor passing the impugned purchase order. 1,11,63,234. 00 In the present show cause notice, the said illegal and malicious valuation report valuing the suit property at Rs. 4,77,67,461. 00 has been repeated and made the basis tor passing the impugned purchase order. "the petitioners challenged the impugned order referring to thereasoning given by the Appropriate Authority with reference to48 Friends Colony which was relied on by petitioners. In paragraph 73 of the grounds, the petitioners made an attempt to highlight how the Appropriate Authority had acted in an arbitraryfashion:--"that the malafides, the arbitrary discrimination, and thedeliberate adoption of a wrong method of determiningfair market value of the suit property on the part ofthe respondents 1 and 2 shall be evident from one ofthe remanded cases (remanded by the High Courtafter C. B. Gautam's case) viz. , the case of propertybearing No. 37/73, Punjabi Bagh. New Delhi havingcase No. R. 656 of the Appropriate Authority thatwhen instance case was confronted to the parties andfull details of construction. covered area and the rateapplied with recommended cost index were provided,the following errors /omissions were found and wereaccordingly pointed out in the valuation of the instancecase as valued by the Departmental Valuer:- (i) The covered area taken by Appropriate Authority. was itself wrong to the extent of about 1300 sq. ft; (ii) The trained structured building was evaluated bythe Appropriate Authority as load bearing buildingwhile it was not so. (iii) The basic rate applied as per CPWD norms waswrong. (iv) The cost index was taken adopted, wrongly with theabove mistakes pointed cut with reasoning, the landrate arrived at from the instance case was reducedby more than 20% which resulted into the issuanceof NOC for the said property and but for this. purchase order for its alleged undervaluation ofapparent consideration by more than 15% wouldhave been passed. The petitioners submit that therespondents No. 1 and 2 acted illegally, discriminately and in violation of principles of naturaljustice in not giving valuation report to the petitioners. The non-supply of the material placed onthe file to the parlies but considered by theappropriate Authority amounts to non providinga reasonable opportunity of hearing and in Fact andlaw is in utter disregard of the principles of naturaljustice and terms of C. B. Gautam's case. The non-supply of the material placed onthe file to the parlies but considered by theappropriate Authority amounts to non providinga reasonable opportunity of hearing and in Fact andlaw is in utter disregard of the principles of naturaljustice and terms of C. B. Gautam's case. "a In paragraph 75 of the grounds the petitioners have projected thewrong approach made by the Appropriate Authority :-"that at the time of hearing, it was pointed out to theappropriate Authority that the instance relied uponof 60. Friends Colony had been wrongly stated in theshow cause notice and relied upon by the Respondents. When the attention of the members was drawnto the fact that the said property was agreed to besold in September 1991 tor 2. 40 crore while on 5/12/1990 it was agreed to be sold at Rs. 2. 65crores and that the purchaser after having realisedthat he had paid much higher price for the saidproperty, realised back from the agreement and preferred the earnest money of Rs. 25 lacs paid by him to be forfeited and the entire premises and assumptions made in the notice were incorrect, and the saidinstance, case could not be made basis for assessingthe fair market value of the suit property, it was alsopointed out that the Appropriate Authority knew thisfact very well that the earlier agreement of December. 1990 was for Rs. 2. 65 crore and the purchasercancelled the agreement and preferred the earnestmoney forfeited and the subsequent agreement withanother purchaser in September 1991 was Rss. 2. 40crore, and granted the NOC yet in the show causenotice it was falsely alleged that the instance propertywas agreed to be sold in December 1990 for Rs. 2. 60crore and deliberately suppressed the fact of the subsequent events that took place and so the instance caseshould not be made basis. The Members of theappropriate Authority and in particular respondentno. 2 to the above submissions had no answer andwrongly and rudely remarked that he was concernedwith the earlier agreement and not with the subsequent one and asked the petitioners counsel to state his points further and not to talk about it and refusedto consider the most material facts, and rudely andcontemptuously scuffled the submissions. The petitioners submit that the Respondents 1 and 2 besidesthe above, totally ignored the relevant facts includingthe drawback of the instance taken. The very factthat NOC was issued after 9 months for Rs. " 2. The petitioners submit that the Respondents 1 and 2 besidesthe above, totally ignored the relevant facts includingthe drawback of the instance taken. The very factthat NOC was issued after 9 months for Rs. " 2. 40crore makes the value as on the date of the agreementof the subject property on 1-2-1991 at Rs. 2 croreonly on the basis of the method of valuation whichthe Appropriate Authority in other case has beenadopting relating to drawback since the very inceptionof its constitution in 1986. " ( 59 ) ABOUT the offer from third parties and how the Appropriateauthority had assumed things without any justification is statedby the petitioners in paragraph 87 of the grounds :-"that in the previous Purchase Order dated 18-4-1991though it was observed by the Appropriate Authoritythat the offers of price more than the apparent consideration cannot be considered because the Appropriateauthority can neither sell the property directly norcan get the cheque of the kind sent encashed but theappropriate Authority arbitrarily and for ulteriormotives and purposes discriminated the petitioner'scase and singled it out arbitrarily and passed the impugned Purchase Order on the basis of offer madeby M/s. Bishwanath Traders, the proprietor of whichis the father-in-law of the younger brother of Shrivinod Jain the tenant. Even with regard to the present impugned Purchase Order, the respondent No. 2procured a letter from Shri Vinod Jain offering topurchase the suit property for Rs. 4. 5 crores. Thepetitioners submit that the offer of M/s. Bishwanathtraders and Investment Ltd. in the case of the previouspurchase Order and also now the offer of Shri Vinodjain were and are wholly bogus and a manipulationruse and a pretext for the Appropriate Authority toacquire the suit property under Section 269-UD ofthe Act. It may be stated that Shri Rajiv Guptaadvocate in the case of the property bearing No. 42-44, Sunder Nagar. New Delhi sent his offer muchhigher than the apparent consideration but theappropriate Authority refused to consider the saidoffer as it had done so in all other cases, with theconsequence that the Appropriate Authority granted No Objection Certificate on the basis of the apparentconsideration. New Delhi sent his offer muchhigher than the apparent consideration but theappropriate Authority refused to consider the saidoffer as it had done so in all other cases, with theconsequence that the Appropriate Authority granted No Objection Certificate on the basis of the apparentconsideration. In all these cases, whenever a higheroffer has been made than the apparent considerationlo the Appropriate Authority, the Appropriate Authority has always ignored such offers and the cheque sent by the voluntary purchasers but in the presentcase, the previous Purchase Order and the presentpurchase Order have been passed considering and onthe basis of the bogus offers made by M/s. Vishwanathtraders and Shri Vinod Jain respectively as statedabove. " ( 60 ) , On these averments, the petitioners sought to get theimpugned order quashed. . ( 61 ) IN the counter affidavit filed by the Appropriate Authority, the allegations made in the petition are denied. In paragraph 12 of the counter it is stated that all the three membersacted in unison and all the relevant aspects were considered bythem. In paragraph 17. it is stated :-"a show cause notice dated 21-5-93 after the inspectionof the subject property on 19-5-1993 v/as givento the effected parties, namely transferor, transfreeand the tenant fixing the hearing for 26-5-93. In the said show cause notice, details of a sale instance namely, 60, Friends Colony (East) were givenand comparison was made between apparent consideration of subject property 25, Friends Colony (West ). In the sale instance of 60, Friends Colony,the sale consideration was Rs. 2,65 crores for plotarea of 21173. 91 sq. metres as per agreement of saledated 5-12-1990. After deduction of value ofstructure, land rate per sq. metre worked out lors. 21. 586 in. the sale instance. However land rateof subject property, after similar adjustment came tors. 6271 per sq. metre. Even after adjustment of (+) 2% for side open (+) 10 per cent potentialfor basement (-) 5% for nearness to railway track. (-) 5% for size of plot are given, market rate persq. metre works out to Rs. 4,180 which gives landvalue of Rs. 6. 68 crores for 2764. 37 sq. metres ofland of subject property (after deduction 830. 95 sq. metres excess land under ULCR Act out of total areaof 3595. 32 sq. metres ). As the subject property wastenanted, deduction was allowed of the 2023 croresand net value arrived at Rs. 4,55 crores. Addingsalvage value of Rs. 1. 6. 68 crores for 2764. 37 sq. metres ofland of subject property (after deduction 830. 95 sq. metres excess land under ULCR Act out of total areaof 3595. 32 sq. metres ). As the subject property wastenanted, deduction was allowed of the 2023 croresand net value arrived at Rs. 4,55 crores. Addingsalvage value of Rs. 1. 64 lakhs, the market value wascomputed at Rs. 4. 564 which was 160% above the apparent consideration of Rs. 1. 75 crores. "this is only a repetition what is stated in the show casenotice. About the subject property being under tenancy, it isstated in paragraph 24:-"in the purchase order dated 28-5-93, it was also brought out that the lease agreement of the tenant Shri Vinodkumar Jain dated 1-12-1983 was for a period of fiveyears w. e. f. 1-1-1984 and that the said lease agreementhad expired on 1-1-1989 and had not been renewedand therefore the tenancy was on month to monthbasis after 1-1-1989. "it is asserted by the respondents 1 and 2 that the petitionershave no locus standi. It is stated in paragraph 28 :-"it is further submitted that the intending purchase has onlyright to be heard. It was held in Rajata Trust (1992)193 ITR 220 (Karn.) that person who had enteredinto agreement for purchase of property is not a"person interested in the property" within the meaningof Section. 269ua defining person "and only personsclaiming or entitled to claim an interest in theconsideration payable as a result of the propertyvesting in the Central Government are personsinterested". It was held that neither by reasonof Section 269ud (2) nor Section 269ul (3)could a transferee contend that he has securedan interest in. the immovable property, contrary to thesettled law as adumbrated in Section 54 of Transferof Property Act, and various rulings of Supreme Court. Merely because Section 269ud (2) says "every otherperson whom the Appropriate Authority knows to beinterested in the property", it does not being a transferee who has no interest in the property and in whosefavour no interest is created by reason of the contractfor sale, into the picture. " ( 62 ) THE petitioners filed rejoinder traversing the allegations inthe counter affidavit. ( 63 ) ON 30-3-1995 Mr. Sanjay Gupta filed an affidavit onbehalf of the petitioners stating that in respect of property bearingno. 9, Kasturba Gandhi Marg where the apparent considerationwas Rs. 7. 20 crores and the application, in Form No. 37-1 was filedon 28-11-1994. " ( 62 ) THE petitioners filed rejoinder traversing the allegations inthe counter affidavit. ( 63 ) ON 30-3-1995 Mr. Sanjay Gupta filed an affidavit onbehalf of the petitioners stating that in respect of property bearingno. 9, Kasturba Gandhi Marg where the apparent considerationwas Rs. 7. 20 crores and the application, in Form No. 37-1 was filedon 28-11-1994. No Objection Certificate was granted and the fairmarket value of the property was assessed at the Appropriate Authority at Rs. 4,77,67,138 as against the apparent consideration ofrs. 7. 20 crores. A photo copy of the No Objection Certificatedated 21-2-1995 was also produced by the petitioners. This isonly to show how the Appropriate Authority acted in an indiscreetmanner. ( 64 ) THE learned senior counsel Mr. L. R. Gupta cited a numberof cases to give an outline of the scope of the power of the Appropriate Authority under Chapter XX-C. The learned senior counselsubmitted that before issuing show cause notice the Appropriateauthority should have reasons to believe that there has been anattempt to evade tax. The learned senior counsel referred toincome-tax Officer. I Ward, Distt VI, Calcutta (12) and Othersvs. Lakhmani Mewal Das 103 ITR 437 (13) (SC), Gangasaran and Sons (14) Pvt. Ltd. vs. Income-Tax Officer and Others,130 ITR I (SC ). He also submitted that the valuation reportby itself cannot lead to reasonable belief of concealment of incomeand he referred to the judgment of the Supreme Court in Bariumchemicals (15) Ltd. and another vs. Company Law Board andothers, AIR 1967 SC 295 . He also referred to Smt. Amaladas (16) vs. Commissioner of Income-tax, Patiala-II and another,146 ITR 216 to show that the valuation, report is nothing but anopinion. He also referred to Durga Sharan (17) Udho Prasad vs. Commissioner of Income-tax Bihar. 103 ITR 271, All Indialakshmi Commercial Bank Officers' Union (18) and Another vs. Union of India and Others 150 I and Commissioner of Income-taxvs. Arun Mehra, (19) 157 ITR 308. ( 65 ) THE learned senior counsel Mr. L. R. Gupta also dwelt atlength on the question of burden of proof and he referred to thefollowing decisions :-1. K. S. Nanji and Co. vs. Jatashankar Dossa and others,air 1961 SC (20) 1474. 2. A. Raghavamma and another vs. A. Chenchamma andanother, AIR 1964 SC 136 (21 ). 3. Ramji Davawala and Sons (P) Ltd. vs. Invest Import, air 1981 SC 2085 (22 ). 4. K. S. Nanji and Co. vs. Jatashankar Dossa and others,air 1961 SC (20) 1474. 2. A. Raghavamma and another vs. A. Chenchamma andanother, AIR 1964 SC 136 (21 ). 3. Ramji Davawala and Sons (P) Ltd. vs. Invest Import, air 1981 SC 2085 (22 ). 4. Smt. Prem Lata vs. Arhant Kumar Jain, AIR 1973sc 626 (23 ). 5. Harmes and another vs. Hinkson. , AIR (33 ) 1946 P. C. 156 (24 ). 6. Kumbhan Lakshmanna and others vs. Tangirala Venkateswarlu and others, AIR (36) 1949 P. C. 278 (25 ). ( 66 ) WE did not find it necessary to refer in detail the facts inthe above cases because question in this batch of cases is to bedecided in the light of the judgment of the Supreme Court in C. B. Gautam's case and the question is whether the Appropriate Authority has violated the basic principles i'n determining the fair marketvalue of the subject property. For the view that there has beena under valuation with a view to evading tax, it is common groundthat as per the dictum laid down by the Supreme Court it is theduty of the Appropriate Authority to act in accordance with thewell known principles in this behalf. The learned senior counsela referred to the following cases to bring to our notice the scope ofsection 269-C :-1. Commissioner of Income-tax vs. Arun Mehra, 157 ITR308 (Delhi ). 2. Inspecting Assistant Commissioner of Income-tax vs. National Flag Perfumery Works, 159 ITR 737 (Karnataka ). ( 67 ) THE learned senior counsel submitted that initiation of proceedings for compulsory purchase must be passed on clear evidenceand cannot be on assumptions. According to him, the fair marketvalue of a property should be on well established legal principlesand misapplying the legal principles would amount to no fixationof fair market value in the eyes of law. He referred to Subbasmalharirao Kachure (26) Vs. Inspecting Assistant Commissionerof Income-tax, 159 ITR 726. He submitted that the Appropriateauthority failed to keep in mind the principle that under valuationand the presumption of tax evasion are two different concepts andthe authorities cannot proceed on surmises. He referred to Sarabhai M. Chemicals Pvt. Ltd. vs. P. N. Mittal. He referred to Subbasmalharirao Kachure (26) Vs. Inspecting Assistant Commissionerof Income-tax, 159 ITR 726. He submitted that the Appropriateauthority failed to keep in mind the principle that under valuationand the presumption of tax evasion are two different concepts andthe authorities cannot proceed on surmises. He referred to Sarabhai M. Chemicals Pvt. Ltd. vs. P. N. Mittal. Competent Authority, Inspecting Assistant Commissioner of Income-Tax, Acquisitionrange-11, Ahmedabad, and another, 126 ITR (27) I, Josephvallooran (28) vs. Commissioner of Income-tax 108 ITR 544,tube Mill (India) Pvt. Ltd. and another vs. Inspecting Assistant Commissioner of Income-tax and another 122 ITR 72 (29 ). ( 68 ) ELABORATING on the point as to how the Approprite Authority should appreciate the principles of valuation and how the lawexpects them to Act, the learned senior counsel referred to Commissioner of Wealth Tax Mysore vs. V. C. (30) Ramachandran,60 ITR 103. In that case the Court took the view that the appropriate method of valuation is to capitalise the annual rent by certainof years of purchase in case the property is tenanted. ( 69 ) THE learned senior counsel also referred to Controller ofestate Duty West Bengal (31) vs. Radha Devi Jalan, 67 ITR 761:referring to Jaswant Rai vs. Commissioner of Wealth Tax, (32)Patiala, 107 ITR 477 (Punjab) the learned senior counsel submitted that the benefit of the method which is most favourable to theassessee should be allowed and the choice should be left to theassessee. In 108 ITR 544 (supra), it is held that the burden lieson the Revenue to prove under 269-UC that the apparent valueadopted in the sale deed fell short of the fair market value by morethan 15%. The Orissa High Court has also stated as to whatis The market value. He also referred to Bedi Prasad Fodder vs. Commissioner of Wealth Tax, West Bengal IIIrd, Calcutta, 109itr 760 (Calcutta) (33) wherein the Calcutta High Court heldin respect of property in possession of the tenants the appropriatemethod would be capitalising the annual rent of certain numberof years purchase. He also referred to Commissioner of Income Tax. , (34) West Bengalvs. Smt. Ashima Sinha, 116 ITR 26 (Calcutta ). The leanedsenior counsel referred to Commissioner of Income Tax. Gujarat II vs. Smt. Vimlabenbhagwan Das Patel. (35) Smt. Kamlaben Kanjibhai Patel, 118itr 134 (Gujarat) which was in Chapter XX-A of the Incometax Act, 19. 61. He also referred to Commissioner of Income Tax. , (34) West Bengalvs. Smt. Ashima Sinha, 116 ITR 26 (Calcutta ). The leanedsenior counsel referred to Commissioner of Income Tax. Gujarat II vs. Smt. Vimlabenbhagwan Das Patel. (35) Smt. Kamlaben Kanjibhai Patel, 118itr 134 (Gujarat) which was in Chapter XX-A of the Incometax Act, 19. 61. The Gujarat High Court held at page 136 --"the conditions precedent for the exercise of jurisdictionto initiate acquisition proceedings are :- (i) transfer of immovable property worth more thanrs. 25,000 in value; (ii) fair market value of the property exceeding theapparent consideration by 15%: (iii) ulterior motive of tax evasion or concealment ofincome for such untrue statement of apparent consideration in the instrument of transfer for such property; (iv) recording of reasons by the competent authority. "the Gujarat High Court had also noted the penal provisionsin the Act and also the nature of the power. The Court observed :-"having regard to the nature of the power which is penal,and also having regard to the nature of the proceedings which are quasi-judicial, the competent authoritymust be held to be a quasi-judicial authority. In anenquiry under Chapter XX-A, the principle of natural justice must be followed. It is axiomatic to say thatthe rules of natural justice are not inflexible rules noris there any strait jacket formula in that behalf. Byand large, it can be said that in an inquiry underchapter XX-A. the transferor and/or transferee aswell as the occupant and any other known interestedpersons should be told the nature of allegations againstthem including the material collected so far by thecompetent authority, and be furnished copies of thestatements recorded and those of the documents collected by the competent authority on which he intendsto rely so as to give the person interested or affected,an opportunity to state his case and to correct orcontrovert the material sought to be relied upon. ""in the perspective of acquisition proceedings under Chapter XX-A of the I. T. Act, which are penal provisionshaving far-reaching repercussions, the competentauthority must be satisfied and assured by cogent. reliable and relevant evidence that the fair marketvalue of the property in question exceeds the apparentconsideration by a prescribed margin. It would be too hazardous to prefer one of the recognised methodsof valuation which may be advantageous to the causeof the revenue and arrive at an estimate of fair marketvalue of a property on the basis thereof. reliable and relevant evidence that the fair marketvalue of the property in question exceeds the apparentconsideration by a prescribed margin. It would be too hazardous to prefer one of the recognised methodsof valuation which may be advantageous to the causeof the revenue and arrive at an estimate of fair marketvalue of a property on the basis thereof. Such alopsided approach on the part of the competent authority would not be in consonance with the burden ofproof required to be discharged in such quasi criminalproceedings. It would be virtually acting on tooslender a material since the decision of the competentauthority to acquire would expose not only the transferee to the consequences of being deprived of theproperty but also the transferor to the liability ofcapital gains under Section 52 of the I. T. Act. "the Court also observed :-"in the context of Section 269c of the I. T. Act, thecompetent authority must have reason to believe aboutthe ulterior motive of the transferor of tax evasionor tax reduction or the transferee about the concealment of income which he should disclose for taxpurposes. This is an objective fact about which thecompetent authority must be satisfied besides anotherobjective fact that the fair market value of the propertyin question exceeds by the prescribed margin theapparent consideration thereof. "the Court also held that the objector prove that theconsideration has not been untruly stated by proving thatthe fair market value does not exceed the apparent considerationby 25% and the consideration was fixed not with any ulteriormotive of tax evasion. The Court also noticed that the Competentauthority did not furnish to the transferee the valuation reportof the Valuation Officer inspite of repeated requests. ( 70 ) THE learned senior counsel also referred to Commissionerof Income-Tax West Bengal III, Calcutta vs. Punchanan Dass,116, ITR 272 (36) (Calcutta ). The Court held that the rentcapitalisation method should be adopted when there are tenantand there is no question of adding up valuation arrived at rentalmethod with any deferred value. The learned senior counsel alsoreferred to Commissioner of Income Tax. Delhi-II vs. New India Construction Co. , 123itr 68 (37) (Delhi High Court) for the same purpose. The Incometax Appellate Tribunal quashed the proceedings under Chapterxxa taking the view:-"that a building with vacant possession and a building with tenants are two different things altogether, sofar as the market value is concerned. Delhi-II vs. New India Construction Co. , 123itr 68 (37) (Delhi High Court) for the same purpose. The Incometax Appellate Tribunal quashed the proceedings under Chapterxxa taking the view:-"that a building with vacant possession and a building with tenants are two different things altogether, sofar as the market value is concerned. In the case ofa building with tenants specially in an area whererent Control Statutes Prevail. The prospects of gettinga good price for the building were held to be far from bright. On the other hand, a building with vacantpossession offers immediate and attractive optionseither as a capital investment or business venture. Themarket value of the two types of building was heldto be not comparable. "the Department filed the appeal to this Court and this Courtupheld the order of Tribunal holding that the proper course wasto have resorted to the method of capitalisation of rental valueof multiplying a number of years yield and that the value adoptedby the transferors Valuer could not treated us under valuation. The learned senior counsel referred to Commissioner of Income Tax. vs. Inderjit Singh,153 ITR 372 (38) (Punjab and Haryana ). A Division Bench ofthe High Court of Punjab and Haryana took the same view that thecapitalisation method should be adopted where there are tenantsin the property. He also referred to Commissioner of Income Tax. Gujarat III vs. Sumantilal Chhotalal Shah. 124 ITR 862 (39) (Gujarat) where it washeld that the burden of proof about the fixation of fair marketvalue in proceedings for acquisition of properly under Chapterxx-A of the Income Tax Act is on the Revenue. The Court alsotook the view :--"the proceedings are penal in nature and the burden ofproof about the fair market value of the property ison the Revenue. It has to be established by therevenue that the sale consideration is less by theprescribed margin than the fair market value and itis only then the presumption arises aboat tax evasion. It is equally true that the onus would shift to thetransferor or transferee or any other interested persononly when the presumption prescribed under Section269c (2) arises. "the view is followed by the same High Court in C. LT. Jullundervs. Amrit Sports Industries, (1984) 145 ITR 231 (40) (Punjab ). He referred to Commissioner of Income-Tax, Kanpur-I vs. Premnarain Tandon, 145 ITR 359 (41) (Allahabad ). "the view is followed by the same High Court in C. LT. Jullundervs. Amrit Sports Industries, (1984) 145 ITR 231 (40) (Punjab ). He referred to Commissioner of Income-Tax, Kanpur-I vs. Premnarain Tandon, 145 ITR 359 (41) (Allahabad ). The Courtobsderved:-The provisions of Chapter XX-A of the income-tax Act affect the property right of a citizen. These provisionsare stringent which resuit in an appropriation of theproperty by the State. The authorities administeringthese laws should not lightly invoke these provisions. When proceedings for acquisition of property of acitizen are initiated by the competent authority, theprovisions of the Act should be strictly followed. "the Court also observed :-"the mode of determining the value of the building onthe basis of annual rental value is well recognised. Even the Legislature has prescribed this method underthe Wealth-tax Rules. The Tribunal, in our opinion,was right in determining the market value of theproperty on the basis of annual rental value. " 7-1. The learned senior counsel referred to Manr Singh Avtarsingh vs. Inspecting Assistant Commissioner of Income Tax (Acquisition Range) Chandigarh, 151 ITR 233 (42) (Punjab andharyana.), Unique Associates Cooperative Housing Society Ltd. vs. U. O. I and Others. 152. ITR 114 (43) (Bombay ). The -Bombayhigh Court also held that. the burden lies on the Revenue to showthat there is under statement of the consideration and the secondcondition is that the assessee had actually received more thanwhat is declared by him. He also referred to Jehangir Mahomedalichagla. and Another vs. M. V. Subrahmanian, Additional First Assistant Collector Estate Duty and Others, 155 ITR 637 (44) (Bombay), 157 ITR 308 (Delhi), Subbas Malharirao Kachure vs. Inspecting Assistant Commissioner of Income-Tax, 159 ITR 726 (45 ). (Karnataka) and 166 ITR 485 (46) (Allahabad ). The learnedsenior counsel also referred to Commissioner of Income Tax. vs. Balram Prasad, 150itr 687 (Allahabad) wherein the Allahabad High Court tookthe view that the burden is on the Revenue to establish that the fair market value is an excess of 15% than the apparent saleconsideration and that the understatement was made with theobject of evasion of tax and the assessee actually received more than what was declared in the document. The Revenue has toestablish that these two conditions are satisfied, following thedictum of the Supreme Court in K. P. Verghese vs Income Taxofficer, Ernakulam and Another, 131 ITR 597 (47) whereinsupreme Court posited :-"merely by showing that the first condition is satisfied, the Reveonue cannot ask the Court to presume that the second condition too is fulfilled, because even in a case where the first condition of 15% difference is satisfied, the transaction may be a-perfectly honest and bonafide transaction and there-may be no understatement of the consideration. . . . . . . . . It is well settled rule oflaw that the onus of establishing thatthe conditions of taxability are fulfilled is always on the revenue and the second condition being as much a condition of taxability, the burden lies on the revenue to show that there is an understatement of the consideration and second condition is fulfilled. . . . . This burden is discharged by the revenue by establishing facts and circumstances from which a reasonableinference can be drawn that the assessee has notcorrectly declared or disclosed the considerationreceived by him and there is an understatement, orconcealment of consideration in respect of thetransfer". The learned senior counsel also referred to Smt. Sabita Mohannagpal vs. Commissioner of Wealth Tax. 160 ITR 751 (48) (Rajasthan ). Malabar Hill Cooperative Housing Society Ltd. vs. U. O. I. and Another. 184 ITR 216 (49) (Bombay ). The learnedsenior counsel referred to Commissioner of Income Tax. vs. Duncans Agro Industriesltd. . 192 TTR Vol. 310 (50) (Delhi) where this Court had laiddown that the provisions of Chapter XX-A are in the nature ofpenal provisions and are to be strictly applied. This Court alsoobserved that various factors are to be taken into considerationfor fixing the fair market value. He also referred to Dwarkaprasad vs. C. W. T. 97 ITR 541 (51) (Delhi): ( 71 ) THE learned senior counsel referred to Indian Dvestuffindustries Ltd. vs. Inspection Assistant Commissioner of Income-Tax and Another, 206 TTR 485 (52) - The Court observed--"in the context of Section 269c of the Income-tax Act the Competent authority must have reason to believe about the ulterior motive of the transferor of tax evasion or tax "eduction or of the transferee about the concealment of income which he should disclosefor tax purposes. This is an objective fact about whichthe competent authority must be satisfied besides another objective fact that the fair market value of the576property in question exceeds by the prescribed marginthe apparent consideration thereof. . . . . . Conditionsmentioned in Section 269c (1) and Section 269d (i)should be fulfilled before proceedings can beinitiated. . . . . . (ii) Excess fair market value of the property over the apparent consideration by 15% (iii) Ulterior motive tax evasion of concealment ofincome for such untrue statement of apparent consideration in the instrument of transfer of suchproperty,"the Court observed "the authority must have reason to believeabout the ulterior motive of the transferor of tax evasion or taxreduction or of the transferee about the concealment of incomewhich he should disclose for tax purposes. This is an objective factabout which the competent authority must be satisfied. " The learnedsenior counsel referred to U. O. I, and Another vs. Smt. Vidya R. Bijur and Others. 209 ITR 803. (53) The Court observed following the C. B. Gautam's case :-"the provisions of Chapter XX-C can he resorted to onlywhere there is a significant undervaluation of theproperty to the extent of 15% or more in the agreement of sale as evidenced by the apparent consideration being lower than the fair market value by 15%or more. Although a presumption of an attempt toevade tax may be raised by the appropriate authorityconcerned in a case where the aforesaid circumstancesare established, such a presumption is rebuttable. . . . The very fact that an imputation of tax evasion ariseswhere an order for compulsory purchase is made andsuch an imputation casts a slur on the parties to theagreement to sell leads to the conclusion that, beforesuch imputation can be made against them, they mustbe given an opportunity to show cause that the undervaluation in the agreement for sale was not with aview to evading tax. "the Court also observed :-"that the party agrerieved in the proceeding before theappropriate authority acquires knowledge of the reasonand. "the Court also observed :-"that the party agrerieved in the proceeding before theappropriate authority acquires knowledge of the reasonand. in a proceeding before the High Court or thesupreme Court (since there is no right of appeal orrevision), has a opportunity to demonstrate that thereasons which persuaded the authority to pass an orderadverse to his interest were erroneous, irrational orirrelevant: (ii) That the obligation to record reasons and convey thesame to the party concerned operates as a deterrantagainst possible arbitrary action by the quasi-judicialor the executive authority invested with judicialpowers. " ( 72 ). The learned senior counsel referred to Vimal Aggarwalvs. Appropriate Authority and Others, 210 ITR 16 (54) (Bombay)wherein the Bombay High Court held "that the onus of establishingthat the under valuation is with a view to evade fax is on the Revenue. An imputation of tax evasion arises in a case where anorder of compulsory purchase is made which casts a slur on theparties to the agreement. Such an imputation cannot be mademechanically without due regard to the explanation of the affectedparties. The presumption of undervaluation in case of under-valuation of 15% or more being a rebutable one, the evidenceled by the intending seller or purchaser assumes great importance. The Court also took note of the limited time available to theappropriate Authority and observed that it cannot be construedto confer power on the Appropriate Authority to pass an orderwithout carefully considering the facts and circumstances set out by the intending seller or purchaser and analysing the comparablecases cited by such persons. " The Court further observed:-"the very historical setting in which the provisions ofchapter XX-C were enacted suggest that it wasintended to be resorted to only in cases where thereis an attempt at tax evasion by significant undervaluation of immoveable property agreed to besold. . . . . . The reasons must bs germane to the objectfor which Chapter XX-C was introduced in theincome-tax Act. namely, "to counter attempts to evadetax". The same proposition about the burden is on the Revenue to satisfythe two important conditions is accepted by the Rajasthan Highcourt in Commissioner of Income-tax vs. Raja Narendra (1994)210 ITR 250. (55) The Court observed:---''unless there is evidence that the consideration actuallyreceived by the assessee was more than what was disclosed or declared by him. no higher price can betaken to be the basis for computation of capital gains. (55) The Court observed:---''unless there is evidence that the consideration actuallyreceived by the assessee was more than what was disclosed or declared by him. no higher price can betaken to be the basis for computation of capital gains. The onus is on the Revenue to prove that a particularhigher amount was in fact received, must be basedon such material from which an irrestible conclusionfollows. " ( 73 ) THE learned senior counsel submitted that in fixing the fair market value the Appropriate Authority had not followed the basic principle of valuation and therefore, the order is vitiated. ( 74 ) THE learned senior counsel dealing with the question of locus standi relied upon the judgment of the Karnataka High Courtin Appropriate Authority and others vs. Mass Traders Pvt. Ltd. and Others, (1993) 202 ITR 741 (56) wherein the Court tookthe view that the proceedings under Chapter XX-C are quasi-judicial in nature and both the vendors and the intending purchaserare entitled to show cause and are entitled to be heard. Thekarnataka High Court disapproved the view taken by the samecourt in Rajata Trust vs. Chief Commissioner of Income Tax andothers. (1992) 193 ITR 220 (57) which held that the purchasercannot file a writ petition. The Calcutta High Court referred to this aspect of the matter and observed that the purchasers havelocus standi to challenge the order of Appropriate Authority. Inc. W. 3489/89 a Division Bench of this Court expressed disagreementwith the judgment of the Karnataka High Court in Rajata Trust vs. Chief Commissioner of Income Tax and Others, 193 ITR220 (58) (supra ). According to the learned senior counsel it isnot open to the Appropriate Authority to urge in the light of thesettled legal position that the petitioners have no locus standi tochallenge the order. ( 75 ) ONE more aspect which requires to be considered in thiscase is that the Appropriate Authority held the auction purchaserhad deposited the money with the Department and the High Courthad confirmed the auction. The learned senior counsel submittedthat the Supreme Court, no doubt, confirmed the purchase butthat was only subject to final decision in the writ petition. Thesupreme Court did not intend to dismiss the writ petition on the ground that the auction had been confirmed by the Supreme Court. The learned senior counsel submittedthat the Supreme Court, no doubt, confirmed the purchase butthat was only subject to final decision in the writ petition. Thesupreme Court did not intend to dismiss the writ petition on the ground that the auction had been confirmed by the Supreme Court. A perusal of the order of the Supreme Court would also show thattheir Lordships of the Supreme Court were not pleased to dealwith the merits of the case and the highest bid was confirmed by. Their Lordships. It is well known that whatever happens during the pendency of any proceeding is subject to the ultimate decisionreached by the Court in the main case. Therefore, no elaborateexposition of law is required for the purpose of finding out whether. Their Lordships of the Supreme Court intended to dispose of the writ petition finally while confirming the highest bid. Theirlordships had confirmed the highest bid because in the event ofthe writ petition being dismissed by this Court the Department could straightaway take further proceedings on that basis. Theirlordships also did not think it fit to withdraw the writ petition tothe file of the supreme Court and Their Lordships had not beenpleased to observed that the writ petition would stand disposedof in view of the confirmation of the highest bid by Their Lordships. In the light of this admitted position it is not open to the Appropriateauthority to contend that in view of the order passed by the Supreme Court confirming the bid nothing survives in the writpetition and the writ petition is liable to be dismissed. We areunable to accept the submission made on behalf of the Revenue. Their Lordships of the Supreme Court, if is beyond any doubtfrom a perusal of the order, did not dispose of the writ petition. The confirmation of the bid was only subject to the ultimatedecision in the writ petition. Therefore, the Revenue cannot relythat fact to non suit the petitioners in this writ petition. ( 76 ) THE tenant has filed an application C. M. 3199/94 to implead himself as a party in the writ petition. He cannot claimhimself to be a person interested in subject matter. He is neithera necessary not property party. We have no hesitation is dismissingthe application. ( 77 ) IN this writ petition the petitioner M/s. Chauhan Buildersand Constructions Pvt. Ltd. entered into an agreement with respondents3,4 and 5. He cannot claimhimself to be a person interested in subject matter. He is neithera necessary not property party. We have no hesitation is dismissingthe application. ( 77 ) IN this writ petition the petitioner M/s. Chauhan Buildersand Constructions Pvt. Ltd. entered into an agreement with respondents3,4 and 5. The subject property is A-6 Chirag Enclave, New Delhi. The area of the plot is 1468 sq. mts. The construction is11/2 storeyed building on an extent of 4300 sq. ft. The apparentconsideration is Rs. 2. 70 crores plus other expenses includingunearned increase. On 29-4-1994 the parties filed the applicationis Form No. 37-I. On 6-7-1994 show cause notice U/s 269udwas issued. 2-3 sale instances are mentioned in the show causenotice. Regarding the first sale instance, it is stated in the showcause notice:-" Your attention is invited to agreement of sale dated20-10-93 in respect of immovable property located at4, Palam Marg, Vasant Vihar, New Delhi which wasagreed to be sold for Rs. 6,76,78,884. 00 inclusive ofunearned increase. If the salvage value is taken atrs. 2,61,760. 00 of this sale instance property, the landrate declared ones to Rs. 41,284. 00 per sq. mtre. Ifadjustment on account of time gap of (+) 6%, lessside open of the subject property (-) 5% andassumed difference on account of location - 20% (total-19%) is made, the unit land rate works out to Rs. 41,284x0. 81=33,440. 00 per sq. metre. On this basis, the value of the subject property worksout to Rs. 1,468x33,440=rs. 4,90,89,978. 00, If the salvage value of Rs. 86,060. 00 is added the total valueof the subject property comes to Rs. 4,91,67,030. 00 asagainst the apparent consideration of Rs. 3,25,36,567. 00which is 51% above the apparent consideration. " Regarding the second sale instance, it is stated :- "your attention is also invited to another sale instance of immovable property bearing No. N-119, Panchsheel Park, New Delhi having plot area of 1200 sq. yards on a 45 feet wide road which was agreed to be sold for Rs. 3,25,00,000. 00 ( + ) UEI of Rs. 52. 54,050. 00 (total apparent consideration Rs. 3,77,54,050. 00) as per agreement dated 29-9-93. This sale instance property is only one side open and is facing park. The declared land rate of this sale instance property with FAR of 100 comes to Rs. 37,520. 00 per sq. metre if the salvage value of the sals instance property is taken at Rs. 1,06,080. 00 (total apparent consideration Rs. 3,77,54,050. 00) as per agreement dated 29-9-93. This sale instance property is only one side open and is facing park. The declared land rate of this sale instance property with FAR of 100 comes to Rs. 37,520. 00 per sq. metre if the salvage value of the sals instance property is taken at Rs. 1,06,080. 00 Rs. (3,25,00,000 (+) 52,54,050 - 1,06,080 divide 1003. 4 ). For arriving at fair land rate adjustment of (+) 6. 5% on account of time gap, FAR (+) 14% (116-100 divide 116), extra side open (+) 5% colony difference of-10% and sale instance property facing park ( - ) 5% [total (+) 10. 5%] is made and the land rate works out to 37,520x1. l05=41,459. 5 or say Rs. 41,460. 00. Therefore, the land value of the subject property works to 41,460x1,468 = Rs. 6. 08,63,280. 00. "it is stated that the total value of the subject property would cometo Rs. 6,09,49. 340. 00, as against the consideration ofrs. 3,25,36,567. 00 which is 87% higher than the apparentconsideration. Regarding the third sale instance, it is stated :- "your attention is also invited to another sale instance of immovable property located at A-95, Neeti Bagh consisting of plot area of 857. 77 sq. yards on 45 wide with only 2 sides open for an apparent consideration of Rs. 2,10,00. 000. 00 (+) UEI of Rs. 35,79,296. 00 (total A. C. Rs. 2,45,79,296) as per agreement dated 28-10-93. The declared land rate of this sale instance property works out to Rs. 34, 172. 00 per sq. metre [2,10,00,000:- (+) 35,79,269 (-) 71. 740 divide 717. 18], if the salvage value of the structure of the sale instance property is taken at Rs. 71,740. 00. For finding out present land rate of the sale instance properly, adjustment on account of time gap (+)6% FAR (-) 14% location difference on accountof the subject property being on wider road ( + )10% ( Total + 30%) has to be made and the landrate works out to Rs. 34,172 x 1. 30 = Rs. 44,424. 00 per sq. metre. On this basis the land value of thesubject property comes to Rs. 44,424x1,468=rs. 6,52,13, 844. 00. If the salvage value of the subjectof Rs. 86,060. 00 is added, the total value comes tors. 6,52,99,904. 00 as against the apparent consideration of Rs. 3,25,36,567. 34,172 x 1. 30 = Rs. 44,424. 00 per sq. metre. On this basis the land value of thesubject property comes to Rs. 44,424x1,468=rs. 6,52,13, 844. 00. If the salvage value of the subjectof Rs. 86,060. 00 is added, the total value comes tors. 6,52,99,904. 00 as against the apparent consideration of Rs. 3,25,36,567. 00 which is almost 100%higher than the apparent consideration. On 15-7-1994 an explanation was given by the petitioner and thevendors disputing the method of valuation arrived at by the Appropriate Authority. It is stated in the show cause notice that thebuilding was constructed in the year 1970-71. The possession ofthe property is with the one of the co-owners and the other twoco-owners did not have any access to the property. The saletransaction could materialise because of the efforts of the purchaserwho had been able to bring all the vendors together and this factorhas to be taken into consideration. The subject property is locatedin Chirag Enclave, adjacent to the locality of Palam Posh Enclaveand Greater Kailash En-clave I and facing the colony of Kalkajiand Chitranjan Park. Therefore, the colony is comparable eitheradjoining colonies or the colonies facing the subject property. Itis further stated in the reply that the comparable properties shouldbe similar in size, nature, having similar characteristics and insimilar locality. Referring to the decision in Commissioner ofincome-Tax vs. Duncans Agro Industries Ltd. , (1991) 192 ITR310 (59) evaluation of fair market value ignoring comparable instances of sale in the same area is erroneous. It is further stated (hat the first sale instance property No. 4, Palam Marg, Palamvihar is situate in a very superior colony and comparing the subjectproperly with that property and making adjustments is not at allpermissible in law. The second sale instance property No. N-119,panchsheel Park is also not comparable. The third instance propertya-95, Neeti Bagh is also not comparable to the petitioner andnumber of storeys and the FAR. According to the petitioner andthe vendors, the three sale instances are situate in posh coloniesin South Delhi and the PDA had categorised the above said referredcolonies in the bracket of highest rates and Chirag Enclave havebeen categorised as belonging to lower category for the purposeof fixing rates for unearned increase. It is also stated that theappropriate Authority had in its possession sufficient instances ofcomparable cases but deliberately had failed to take then intoaccount. It is further stated that on 25-1-1994 Bharat Petroleum. It is also stated that theappropriate Authority had in its possession sufficient instances ofcomparable cases but deliberately had failed to take then intoaccount. It is further stated that on 25-1-1994 Bharat Petroleum. A a Government of India Undertaking purchased the house wherethe area of the plot is 500 sq. yds. The market value would workout at Rs. 3,14,86,200. 00 as detailed below :-"working of Fair Market Value on the basis of Instance at B-13, Greater Kailash Enclave-1, New Delhi. Date of Agreementland Areaconsiderationu. E. I. Total considerationvalue of structurevalue of landland rate derivedadjusted for FAR (1. 16:1. 90)Adjusted for co-ownership (As perclause-3)Adjusted for Time Gapland rate achievedfair market value on this basis of thesubject propertyplus value of buildingtotal Value17-01-1994500 sq. yds. (418. 06 sq. mtrs)Rs. 1,55,00,000 plus UEIRs. 20,90,000 approx. Rs. 1,75,90,000rs. 13,25,000rs. l,62,65"000rs. 38,905 per sq. mts.-39%-10%for 3 months, 3%rs. 21,009 per sq. mtr. Rs. 3,08,41,200rs. 6,45,000rs. 3,14,86,200the sale consideration of the subject property would come to Rs. 3,25,37,000. 00 which is lower than the apparent considerationof that property. This calculation is adopted only as per themethod adopted by the Appropriate Authority. ( 78 ) THE other instance given in the explanation is with reference to B-6, Panchsheel Enclave, i. e. on 31-5-1993. This property islocated on the same road. The valuation as per the method adoptedby the Appropriate Authority would be Rs. 3,18,82,600. 00. Thecalculation is as follows :-"working of Fair Market Value on the basis of Instance at B-6, Panchsheel Enclave, New Delhi. Date of Agreementland Area27. 05. 1993800 sq. yds. (668. 9 sq. mtrs.)Considerationu. E. I. Total consideration :value of structure :value of land :land rate derived :adjusted for FAR (1. 16:1. 90) :adjusted for co-ownership (As perclause-3) Adjusted for Time Gap:land rate achieved :fair market value on this basis of thesubject property:value of building :total Valueauthority Income Tax 583rs. 1,60. 00,000 plus UF. IRs. 34. 94,000 approx. Rs. 1,94,94,000rs. 5,16,000 approx. Rs. 1,89,78,000rs. 28,372 rcr sq. mts.-10%for 11 months, 11%rs. 21,279 per sq. mtr. Rs. 3,12. 37,600rs. 6. 45,000rs. 3. 18,82,600"the third sale instance given in the explanation is with referenceto B-4, Greater Kailash-I situated on the same road. The valuewould come to Rs. 2,93,20. 300. 00 as per the details below :--"working of Fair Market Value on the basis of instance atb-4. Greater Kailash Enclave-1. New Delhi. Date of Agreementland Areaconsiderationu. E. LTotal considerationvalue of structurevalue of landland rate derivedadjusted for FAR (1. 16:1. The valuewould come to Rs. 2,93,20. 300. 00 as per the details below :--"working of Fair Market Value on the basis of instance atb-4. Greater Kailash Enclave-1. New Delhi. Date of Agreementland Areaconsiderationu. E. LTotal considerationvalue of structurevalue of landland rate derivedadjusted for FAR (1. 16:1. 90)Adjusted for co-ownership (As perclause-3);adjusted for Time Gapland rate achievedfair market value on this basis of thesubject propertyvalue of buildingtotal Value12,05,1994500 sq. yds. (418. 06 sq. mtrs)Rs. 1. 16,00,000 plus UEIRs. 20,90,oo0 approx. Rs. 1,36,90,000rs. 5,16,000rs. 1,31,14,000rs. 31,512 per sq. mts.-39/-10%for 11 months, 11%rs. 19,537 per sq, mtr. Rs. 2. 86,80,300rs. 6,45,000rs. 2. 93. 35. 300" ( 79 ) ON 28-7-1994 the Appropriate Authority passed the orderof compulsory purchase. In the impugned order the reasoning givenin the show cause notice is adopted. The Appropriate Authorityhaving stated in the show cause notice that considering first saleinstance property No. 4 Palam Marg, the apparent consideration of the subject property shown in the sale agreement is less than51%, now by adopting some adjustments, without accepting thecontentions of the petitioner it is stated that apparent considerationof the subject property is less by 32. 5%. Whatever may be thenature of the reasoning or the adjustments made by the Appropriateauthority when there is no definite rule or norms, the authoritycannot arrive at a value by making adjustments in an arbitraryfashion. ( 80 ) DEALING with the sals instances given by the petitioner,the Appropriate Authority had rejected them by a process ofreasoning which cannot at all be accepted. A perusal of paragraphs 9. 10, 11, 12 and 13 which are given below would showthat the reasoning given by the Appropriate Authority is not inaccordance with the established principles :-- "the Ld. Representative has also relied on certain othersale instances. One such instance is of property at B-6,panchsheel Enclave, New Delhi. This sale instanceproperty had plot re of 668. 9 sq. metres. Even thoughthe sale instance was under valued, the Appropriateauthority considered it not a fit case for several otherreasons, e. g. , this property was located at the fact ofthe fly-over, the title was not very clear inasmuch asmutation was not done in the names of transferor andthere was a nullah just a little away from the subject property. No such deprecing factors are present inthis case. Therefore, the comparison with propertyat B-6, Panchsheel Enclave, New Delhi is not justified. The Ld. No such deprecing factors are present inthis case. Therefore, the comparison with propertyat B-6, Panchsheel Enclave, New Delhi is not justified. The Ld. counsel has also tried to rely on sale instance of the property located at B-13, Greaterkailash Enclave-1 and B-4, Greater Kailash Enclavenew Delhi. Both these properties are of only 418. 6sq. metres. For arriving at a proper valuation, adjustment of as much as (-) 39% has been made infar only. It is a fact that all properties which arcundervalued are not purchased unless the differenceis more than 15 % between the Apparent Considerationand the value of such properties. Even such properties which are understated by more than 15% neednot be purchased if the Appropriate Authority is of theview that it will not be expedient to do so by thecentral Government. In the case of these two properties in Greater Kailash Enclave, it is clear thatthey are located much below the main road level. Noadjustment has been made by the Ld. Representativefor this purpose. Besides, both the properties ofgreater Kailash Enclave are of a small plots andthere is a high demand for higher plots on outer Ringread in South Delhi. Therefore, these sale instancesare held as not comparable. It has been also argued as per written submissiondated 22-7-1994 that the subject property was vacatedby the tenants on 31-10-1992. Therefore, the ownercannot sell the property for a period of 3 years as thetenant can claim the restoration of his tenancy rights. As period of 18. 1/2 months remained unexpired onthe date of agreement to sell. Therefore, interest ofrs. 83,25. 000. 00 be considered. The claim appears to be misconceived. The Ld. Representative has not filed any judgment of the Courtand any other relevant papers. Only a copy of letterdated 11-10-1985 has been filed. This does not givethe invited to Section 19 (2) of the Delhi Rent Controlact, 1958. Therefore, interest ofrs. 83,25. 000. 00 be considered. The claim appears to be misconceived. The Ld. Representative has not filed any judgment of the Courtand any other relevant papers. Only a copy of letterdated 11-10-1985 has been filed. This does not givethe invited to Section 19 (2) of the Delhi Rent Controlact, 1958. This reads as under:--" (2) Where a landlord recovers possession of any premisesas aforesaid and the premises are not occupied bythe landlord or by the person whose benefit thepremises are held, within two months of containingsuch possession, or the premises having been sooccupied are, at any time within three years fromthe date of obtaining possession of the Controllerunder Sub-section ( 1 ) or the possession of suchpremises is transferred to another person for reasonswhich do not appear to the Controller to be bona-fide, the Controller may, on an application madeto him in this behalf by with evicted tenant withinsuch time as may be prescribed, direct landlord toput the tenant in possession of the premises or topay his such compensation as the Controller thinksit is interesting to note that section 19 relates to recoveryof possession for occupation and re-entry. The purposebehind the provision contained in Section 19 appearsto be that a person who gets possession of his property for his bonafide use should not let out to a personother than the earlier tenant. No evidence in this casehas been placed whether sale is also covered u/s 19 (2)of the Act because letting out is different than saleof the property. A copy of letter described as under-taking dated 18-4-1994 has been filed from thetransferee which specifically mentions that-"we have examined the title and authority of the ownersof property bearing No. A-6, Chirag Enclave, Newdelhi and are satisfied ourselves with regard to theauthority and power of the owners to sell and thetransfer the said property",it means that if any permission was required, that hasalready been obtained. It also means that such permission) may not be required in the case of sale. Therefore, the plea raised by the Ld. Authorisedrepresentative is not relevant at all and has to berejected. "this is challenged in the writ petition stating that the apparentconsideration as agreed was without any intention of evading taxand it was done in the normal course. There are absolutely nomaterials to form any opinion about this aspect of the case. Theapparent consideration of the subject property is Rs. 3,65,81,149. Authorisedrepresentative is not relevant at all and has to berejected. "this is challenged in the writ petition stating that the apparentconsideration as agreed was without any intention of evading taxand it was done in the normal course. There are absolutely nomaterials to form any opinion about this aspect of the case. Theapparent consideration of the subject property is Rs. 3,65,81,149. 00 and not Rs. 3,25,75,000. 00 as assumed by the Appropriateauthority. The sale instances cited are not at all comparable withthe subject property and they do not provide proper indices ofthe fair market value of the subject property. The adjustmentfor plus and minus factor cannot make totally incomparableproperties comparable. The position of the parties and the difficultyof the other co-owners in getting possession and. therefore, theywere inclined to sell the property had not been. considered in theirproper perspective. . ( 81 ) THE determination of fair market value on the basis of saleinstances cited by the Appropriate Authority is wholly illegal. The fact that the Appropriate Authority had not been followingthe same standard is highlighted in the writ petition in the followingterms:-"the reasoning that for arriving at fair market value onthe basis of instances relied upon by petitioner adjustment of as much as (-) 39% has been made infar only. It is submitted that adjustment of 39%in FAR cannot be the reason of ignoring the instances587 cited by petitioner because Appropriate Authorityitself has been making of 40% and even more. Inrespect of property No. F-12a, Kailash Colony,appropriate Authority vide its notice bearingno. AA/r-3677/94-95/132 dated 6-5-94 proposed 40% adjustment in FAR. In respect of property at20, Hanuman Read, New Delhi adjustment as highas 68% was proposed vide notice bearing No. AA/r-3245/93-94/349 dated 21-6-1993. The true copiesof aforesaid notice are attached to this petition and collectively marked as Annexure-P9. In view ofaforesaid practice of Appropriate Authority in providing adjustment in FAR, the adjustment of 39%made by petitioner for arriving at fair market valuewas not uncommon and as such, cannot be the ground for ignoring the sale instances which otherwise arecomparable. "annexure P. 9. referred to above, reads as under :- GOVERNMENT OF INDIAOFFICE OF THE APPROPRIATE AUTHORITYINCOME TAX DEPARTMENTJanpath Bhawan, 8th Floor. 'b' Wing, New Delhi-110001. No. AA/r-3677/94-95/132 Dated- 6-5-1994to (1) Mrs. Samarjeet Sandhu "]w/o Late Sh. G. S. Sandhu R/o HS-36, 1st Floor Kailash Colony New Delhi. (2) Lt. Col. M. S. Dhillon, Transferors. R/o F-12a, Kailash Colony,inew Delhi. (3) Mrs. referred to above, reads as under :- GOVERNMENT OF INDIAOFFICE OF THE APPROPRIATE AUTHORITYINCOME TAX DEPARTMENTJanpath Bhawan, 8th Floor. 'b' Wing, New Delhi-110001. No. AA/r-3677/94-95/132 Dated- 6-5-1994to (1) Mrs. Samarjeet Sandhu "]w/o Late Sh. G. S. Sandhu R/o HS-36, 1st Floor Kailash Colony New Delhi. (2) Lt. Col. M. S. Dhillon, Transferors. R/o F-12a, Kailash Colony,inew Delhi. (3) Mrs. Amarjeet Lehal, W/o Sh. Harmeet Singhlehal,r/o 65, Fielding Road Action London (U. K. .) J (1) Sh. Om Prakash Khandawal, transferees. (2) Smt. Geeta Khandelwalr/o2/101,roopnagar Delhi-7. 588 Subject: Show cause Notice u/s 269ud (1) of the Income-taxact, 1961 in respect of property No. F-12a, Kailashcolony, New D2lhi-48. Under the instructions of the Appropriate Authority, Delhii am to state as under :-That the statement in Form No. 37-1 under Rule48-L of the Income-tax Rules, 1962 in respect of the subject property was filed in the Appropriate Authorityalong with an Agreement to sell on 23-2-1994. Thestatement was signed by (1) Mrs. Samarjeet Sandhu,lt. Ccl, M. S. Dhillon and Mrs. Amarjeet Lehal, astransferors and by Sh. Om Prakash Khandelwal and Smt. Geeta Khandelwal as transferees. The apparentconsideration appears to be under stated. . You are also informed that a property at A-40,kailash Colony was sold as per Sale Agreement dated13-2-1993 situated at a colony road with one side open. The plot area of this property is 877. 915 sq. Mtr. and the sale consideration was Rs. 1. 5 crore. After deducting the salvage cost of the structureestimated at Rs. 1,07,60,0007-, the land late for thisproperty works out to Rs. 16,971. 00 per sq. mtr. Making adjustments for time-gap of 12 months @ 1%[ (+) 12% the FAR (+) 40% as the FAR ofthe subject property is 140 whereas of the sale instanceproperty quoted above, it is only 100. side open (+)5% (the subject property has two sides open whereasthe sale instance property has two sides open whereasthe sale instance property is one side open), the netadjustments come to (+) 57%. On the basis of thissale instance, the land rate for the subject propertyworks out as:rs. 16971 X 1. 57=rs. 26,644. 00 per sq. mt. Therefore, the land value works out to:rs. 26. 644x422. 23 sq. Mtr. =11249896. . 001 Add:salvage cost of structure estimated 54000. 0011303896. 00589 which is 25% above the apparent consideration ofrs. 90 lac. On the basis of thissale instance, the land rate for the subject propertyworks out as:rs. 16971 X 1. 57=rs. 26,644. 00 per sq. mt. Therefore, the land value works out to:rs. 26. 644x422. 23 sq. Mtr. =11249896. . 001 Add:salvage cost of structure estimated 54000. 0011303896. 00589 which is 25% above the apparent consideration ofrs. 90 lac. It may be mentioned that according to theclause (3) of the Agreement to Sell, file alongwiththe 37-I, the time for performance of the Agreementis 6 months, therefore, the apparent consideration hasto be suitably discounted in that case. The differencebetween the FMV and the Effective discountedapparent consideration would still increase further. Therefore, the apparent consideration appears to bevery much under-stated. You are, therefore, hereby given an opportunityof being heard and to show cause as to wny a preemptive purchase order under section 269ud (1) ofthe Income-tax Act may not be passed. For this, you may appear before the Appropriate Authority on18-5-1994 at 11. 30 A. M. cither personally or throughyour authorised representative. You are also requestedto produce before the Appropriate Authority on theaforesaid date and time, the original Title Deed's ofthe property together with photo copies thereof, forverification and return. In case of failure to arrangerepresentation. on the aforesaid date and time, necessary orders will be passed in accordance with law onthe basis of material already available on recordwithout any further reference to you. " ( 82 ) MR. Rajiv Sahai, Deputy Commissioner, Income Tax filedcounter affidavit traversing the allegations in the writ petition. Inthe counter affidavit it is stated that the unearned increase wasrs. 55,36,567. 00. It is stated that the apparent consideration comesto Rs. 3,25,36,5671 -. The stand taken in the show cause noticeand the impugned order is maintained in the counter. The petitionerfiled rejoinder to the counter affidavit. ( 83 ) MR. Syalli, learned counsel for the petitioner submittedthat the fixation of fair market value by the Appropriate Authoritywas illegal and once the very basis of the fixation cannot besupported in law the issuance of show cause notice itself is notsustainable. ( 84 ) MR. Rajendra, learned Sr. Standing Counsel for Income Taxsubmitted that the order passed by the Appropriate Authority isperfectly in order and the Appropriate Authority had taken intoaccount the relevant aspects in this behalf. At the time of thearguments on 26-3-1996 Mr. ( 84 ) MR. Rajendra, learned Sr. Standing Counsel for Income Taxsubmitted that the order passed by the Appropriate Authority isperfectly in order and the Appropriate Authority had taken intoaccount the relevant aspects in this behalf. At the time of thearguments on 26-3-1996 Mr. Rajendra, learned counsel producedthe letter dated 25-7-1995 from DDA to the Office of theappropriate Authority which is in the following terms :-"kindly refer to your letter/d. O. No. AA/r-3786/95-96/303 dated 21-7-95. It is stated that the earlier demandof Rs. 95,81,1491- may please be treated as withdrawn as the payment has not been received in thisdepartment. Moreover, the earlier demand sent wasalso provisional and the validity as deemed sale permission has expired. The final amount of unearnedincrease can be worked out on the basis of actualtransaction price as reflected in the disposal cost ofthe property. Therefore, you are requested tointimate the details of final transaction includingtransaction value, structure value and date ofdisposal. "this only shows that the unearned increase has not beendefinitely fixed by the D. D. A. C. W. No. 3139/93 ( 85 ) DR. A. K. Garg and his wife Dr. (Mrs.) Neelu Garg are the petitioners. They are Doctor's by profession. They are workingin Saudi Arabia. They wanted to settle down in India and werein search of a suitable accommodation. In or about the year 1989they came to know that the first respondent M/s. Kailash Nathand Associates were putting up a multi-storeyed apartments atferoze Shah Road in the name of Adiswar Apartments. Therewas an arrangement for the purchase of a flat in the Complex. The total consideration agreed was Rs. 18 lakhs plus otherincidental charges. The cost worked out at Rs. 1,200. 00 per sq. ft. On 11-4-1989 the petitioner paid a sum of Rs. 5,20,005. 00 to thefirst respondent towards the purchase money. On 7-3-1989 anagreement to sell was entered into for the purchase of flat No. 7on the 11th floor plus a garage. The first respondent agreed togive possession within three years i. e. by the 6th of March, 1992. On 19-6-1989 the petitioners wrote to the first respondent seekinginformation about the progress of the work. On 7-7-1989 thefirst respondent builder informed the petitioners that the authorities had not sanctioned the plans. Again on 10-9-1990 the firstrespondent wrote to the petitioners stating that the N. D. M. C. hadnot sanctioned plans beyond 7th floor. On 19-6-1989 the petitioners wrote to the first respondent seekinginformation about the progress of the work. On 7-7-1989 thefirst respondent builder informed the petitioners that the authorities had not sanctioned the plans. Again on 10-9-1990 the firstrespondent wrote to the petitioners stating that the N. D. M. C. hadnot sanctioned plans beyond 7th floor. The petitioners came downto India to finalise the transaction and met the first respondent. (For remaining part of the Judgement, PI. See next issue ofdecember, 1997 ). MGIPRRND-347 HCD 99-Sec. III--20-5-99- 610 Books. It was at that time the first respondent offered to sell a flat mnilgiri Apartments, Barakhamba Road. The petitioners acceptedthe proposal. On 27-4-1991 the first respondent builder confirmedthat it would sell a flat in Nilgiri Apartments, Barakhamba Road. On 25-6-1991 an agreement was executed between the petitionersand the first respondent for the purchase of the flat bearing No. 2on the 4th floor in Nilgiri Apartments. Barakhamba Road for aconsideration of Rs. 29 lakhs plus 15% extras and the finalconsideration would come to Rs. 34 lakhs. In addition, to the above,the petitioners were obliged to pay under the contract, the groundrent, house tax, municipal tax and mutation charges. What isstated by the petitioners in the writ petition, is to be noticed -"it is pertinent to mention here that with regard to earlieragreement the petitioners have furnished requisite information under Section 269 UD (1) and the authorities haveissued No Objection Certificate. Thus the rate approvedby the Income Tax Department comes to Rs 1200 sq. feetin the year 1988. Since the petitioners were not gettingthe flat after negotiations the respondent No. 1 agreed tochange the booking from 34 Feroz Shah Road, New Delhito Nilgiri Apartments. The petitioners agreed to payrs. 34 Lakhs tor 1800 sq. feet alongwith other usualcharges. Correspondence including a copy of the letterdated 27/04/1991 by which the Respondent No. 1confirmed the change of flat from earlier one to presentone By this time, the money put in by the petitionerswith, the respondent No. 1 would have risen to more thanrs. 7. 5 lacs and since the money was in foreign exchangeit would have been more than 15 lacs by that time sincelhe value of the foreign exchange appreciatie considerably. After agreeing this, the petitioners paid further sum ofrs. 7. 5 lacs and since the money was in foreign exchangeit would have been more than 15 lacs by that time sincelhe value of the foreign exchange appreciatie considerably. After agreeing this, the petitioners paid further sum ofrs. 10 lacs approx, and further agreed to pay the amountas under: (a) Amount already paid by way of deposit towards provisional booking of space prior to the date of signingthis agreement. Rs. 15,00,000 (Rupees Fifteen Lakhs only ). (b) Rs. 3,00,000 (Rupees Three Lakhs only) in August1991. (c) Rs. 3,00,000 (Rupees Three Lakhs only) in November1991. (d) Rs. 3,00,000 (Rupees Three Lakhs only) in February1992. (e) Rs. 4,00,000 (Rupees Four Lakhs only) in June,1992. (f) Rs. 1,00,000 (Rupees One lakh only), in July. 1992. (g) Balance payable at the time of handing over thepossession of the residential flat and garage to thebuyer (s ). It was further agreed between the parlies that Hie amountearlier paid i. e. Rs. 5,20,005 for the flat situated at 34ferozshah Road would be adjusted for this Hal" ( 86 ) ON 26-6-1991 the application in Form 37-1 was filed by theparties before the Appropriate Authority. ( 87 ) ON l-7-1991 the Valuation Officer of the Income Tax Department called upon the first respondent builder to produce document rearding the property. The first respondent did not bringto the notice of the Appropriate Authority about the ealier transaction. On 23-8-1991 purchase order was passed by the Appropriateauthority. Challenging the purchase order C. W. 2836/91 was filedby the first respondent builder are C. W. 980/92 was filed by the petitioners. On 1-3-1993 this Court following the judgment of thesupreme Court in C. B. Gautam's case quashed the order dated23-8-1991 and remitted the matter for reconsideration by the Appropriate Authority. On 10-5-1993 the Appropriate Authority issuedshow cause notice to the first respondent and the petitioners stating:--You are also informed that the Appalent Consideration asdisclosed in Form No. 37-A filed by you is low if compared to other sale transactions in the same complex. Flat No. 4 on the third floor of the same complex (R-2439)was agreed to be sold for Rs. 38 lakhs, as per agreementto sell dated 30-5-91. The actual built up area of thatflat was 1341 sq. ft. which gives unit rate of Rs. 2834 persq. ft. Even after making adjustment for time gap + 1%and floor level differerce -1%, the rate remains the same. 38 lakhs, as per agreementto sell dated 30-5-91. The actual built up area of thatflat was 1341 sq. ft. which gives unit rate of Rs. 2834 persq. ft. Even after making adjustment for time gap + 1%and floor level differerce -1%, the rate remains the same. The actual area of the subject property is 1. 11 sq. fton that basis, the value of the subject property worksout to Rs. 283. 1 x 1411 Rs. 39,98,774. 00 or sayrs. 39. 99 lakhs. The value so worked out of the basisof comparative sale instance )'s in excess by about 20%of the apparent cons deration. Besides, the subject property is located in the Front Block whereas the propertyof the sale instance is in the rear Block. "on 18-5-1993 the petitioners filed the explaination recounting the factsculminating in the execution of the agreement. In paragraph 4 of theexplanation, the petitioners stated:-"it is further pertinent to note that in 1989 no objection letterswere issued by your honour in respect of a couple of flatslike Flat No. 2 on 3rd floor for 1800 sq. ft. (vide NOCNo. AA/88-89/r-1650/184 dated 7-8-1989) at a sale consideration price of Rs. 20,50,000. Therefore, even if anappreciation rate of 12% per annum (as indicated in yournotice) is taken into acccount the fill market value of ourflat would be Rs. 25. 42 lacs which is far. below theapparent consideration as montioned above. "the petitioners clearly mentioned how the consideration was workedout by the parties :-"that as per the terms and conditions of the agreement filedwith your honour, the total cost of the flat to the vendeeworks out to Rs. 39,90,600. 00 as detailed under:-A. Apparent Consideration 29,00,000. 00b. 15% extra as per clause 3on page 7 of the agreement 435,000. 00c. Escalation as per clause 6on page 8 of the agreement2. 00,000. 00d. L. and D. O. Charges as perclause 7 on page 9 of thisagreement. 18,000. 00e. File Fighting Charges as perclause 17 on page 13 63,000. 00f". Electricity Sub Stationcharges as per Clause 17on page 13 54,00000g. Charges for Unfilteredwater live as perclause 17 on page 13. 13,000. 00h. Marble Charges as perclause 18 on page 13of the agreement. 36,000. 001. Security Deposit as perclause 16 on page 12 5,000. 00j. Interest on Rs. 5,20,000. 00@18% from the date ofpayment to date of agreementi. e. 25-6-91 (As per End. I) 2,61,600. 0039,90. 600. Charges for Unfilteredwater live as perclause 17 on page 13. 13,000. 00h. Marble Charges as perclause 18 on page 13of the agreement. 36,000. 001. Security Deposit as perclause 16 on page 12 5,000. 00j. Interest on Rs. 5,20,000. 00@18% from the date ofpayment to date of agreementi. e. 25-6-91 (As per End. I) 2,61,600. 0039,90. 600. 00the petitioners explained that if the increase of value in U. S. Dollarsvis-a-vis Indian currency is taken into account from the dates ofrespective advance payments upto the date of agreement the petitionerswould spend an extra amount of Rs. 2 lakhs (The dollar rate in 1988was Rs. 16 whereas in 1991 the same was Rs. 22 ). ( 88 ) ON 28-5-1993 the Appropriate Authority passed the purchaseorder taking the same view as in the show cause notice. In paragraph6, it is stayed by the Appropriate Authority:-"we have carefully considered the various submissions madeon behalf of the transferors and the transferees. We arcunable to accept in full the contention of the learned representative with regard to the value of the car parkingspace because car parking space does not have the samerise in cost as the main flat- Therefore, the value of theear parking space is estimated at Rs. 1,00,000. On thisbasis, the per sq. ft. rate of the sale instance works outto Rs. 2,860. " ( 89 ) THE view taken by the Appropriate Authority is that the subject flat is located in the Front Block of the Complex whereas the saleinstance flat is in Rear Block of the Complex and, therefore, the valueof the subject flat can reasonable be expected to be higher by 5%that is the rate could be fixed at Rs. 3000 per sq. ft. Regardingthe representation by the petitioners about the rate of interest, theappropriate Authority dealt with the same in the following manner:-The assumed interest of Rs. 2,65,000 on Rs. 5,20,000 at therate of 18% is also not correct in view of the prevailingfixed deposit bank rats of 10% at that time. It that rateor interest is taken, !t works out to Rs. 1,47,000. Theassumption of Rs. 2,00,000 on account of fluctuation inthe exchange rate is also not acceptable. It is so becausethe payment is stated to be in terms of Indian rupees inthe agreement. Therefors, the effective considration worksout to Rs. 29,00,000 + 1,47,000 +4,35,000=rs. 34,82,000. This gives a per eq. ft. rate of Rs. 1,47,000. Theassumption of Rs. 2,00,000 on account of fluctuation inthe exchange rate is also not acceptable. It is so becausethe payment is stated to be in terms of Indian rupees inthe agreement. Therefors, the effective considration worksout to Rs. 29,00,000 + 1,47,000 +4,35,000=rs. 34,82,000. This gives a per eq. ft. rate of Rs. 2,458as against the fair market rate of Rs. 3,000 per sq. ft. arrived at earlier on the basis of sale instance. This is inexcess by 21. 6% of the apparent consideration. " ( 90 ) WHEN the attention of the Appropriate Authority was drawnlo the sale of flat No. 2 in the first floor where No Objection Certificate was granted by the Appropriate Authority the Appropriateauthority rejected the argument by saying -"the learned representative has also placed reliance on the saleinstance of Flat No. 2 on first floor which was sold forapparent consideration of Rs. 20,50,000 (The date offilling Form No. 37-I before the Appropriate Authority is14-6-89) and also sale of Flat No. 2 on third floor withan apparent consideration of Rs. 20,50. 000 (Date of agreement to sell being 3/07/1989 ). These are cases muchprior to the date of agreement of the subject property. Therefore, they do not help the contention of the partyif suitable adjustment is made on account of time gapetc. " ( 91 ) THIS. order is challenged in the writ petition. The petitionershave submitted that the whole approach of the Appropriate Authorityis erroneous in law. There is absolutely no reasoning by the Appropriate Authority to come to an arbitrary rate of Rs. 3,000 per sq-ft. arid there is absolutely no reason to come to any conclusion that therewas any tax evasion. The reasoning given by the Appropriate Authority does not at all appear to be reasonable. When a flat in a Complexis offered for sale there are so many factors and unless there are somematerials with the Appropriate Authority for fixing the valuation ofthe flat the fair market value of a flat consisting of several flat in acomplex cannot be on the basis of subjective satisfaction of the Appropriateauthority. If that is so in a democratic country like ours there isno room for rule of law. We have no hesitation in coming to the conclusion that the order of the Appropriate Authority is absolutely arbitrary and it cannot at all be sustained. ( 92 ) MR. If that is so in a democratic country like ours there isno room for rule of law. We have no hesitation in coming to the conclusion that the order of the Appropriate Authority is absolutely arbitrary and it cannot at all be sustained. ( 92 ) MR. Soli Sorabjee, learned senior counsel for the petitioner,in addition to the arguments on merits, submitted that the Appropriateauthority, had not complied with Section ?69ug of the Income Taxart, 1961 by paying the amount within the time prescribed. We don'tgo into that question as we quash the order on other grounds. ( 93 ) THE suit property is the first floor of the house No, N-84,creater Kailash-I, New Delhi, the consideration is Rs. 24 lakhs. On23-4 1994 the agreement to sell was between the petitioner andrespodents 3 and 4 Mr. K. S. R. Chari and Smt. Maithili Chari respectively. who are permanently residing in Bangalore. The purpose ofhe sale by the third respondent was that he was 75 years old. Heretired from Govt. service as Secretary, Govt. of India. He wanted tosettle down in Bangalore after selling the subject property. After theagreement for sale with the petitioner, the third respondent had enteredinto an agreement to sell a property in Bangalore. On 26-4-1994the application in Form 37-1 was filed with the Appropriate Authorityfor the issuance of No Objection Certificate. On 5-7-1994 the Appropriate Authority issued show cause notice to respondents 3 and 4 andthe petitioner. The Appropriate Authority came to the conclusion thatby virtue of a comparison of the subject property with S-237,greater Kailash the apparent consideration is 40. 43% less thanthe fair market value and on a comparison with the second sale instanceproperty E 547, Greater Kailash-II the fair market value of the subject property is less than 75. 99%. Regarding the first instance saleproperty, the view of the Appropriate Authority is expressed in thefollowing terms:-''your attention is invited to the sale of first floor of propertyat S-237, Greater Kailash-I with a built-up area ofj200 sq. feet which was agreed to be sold for an apparentconsideration of Rs. 24. 00,000 as per agreement dated26-11-93. This property was also on a 40 feet wideit ad with only two sides open, therefore, if adjustments onaccount of time gap of + 5%) and additional side openof + 5% (total +10% is made the adjusted rateworks out to Rs, 2,000 x 1. 10-Rs. 2,200. 24. 00,000 as per agreement dated26-11-93. This property was also on a 40 feet wideit ad with only two sides open, therefore, if adjustments onaccount of time gap of + 5%) and additional side openof + 5% (total +10% is made the adjusted rateworks out to Rs, 2,000 x 1. 10-Rs. 2,200. On thisbasis the value of the subject property works out to1532 x 2200-Rs. 35,70,400 as against disclosed apparent consideration of Rs. 24,00,000 and is 40. 43% than the apparent consideration disclosed. "regarding the second side instance property. the Appropriateauthority expressed its views stating:-"your attention is also invited to mother sale instance of residential flat on first floor of property at E-547. Greaterkailash-II, New Delhi which was agreed to be sold forrs 65,00. 000 as per agreement to sell dated 6-12-1993. This sale instance property was also on a plot area ofs. q. yards on a 40 feet wide road with only 2sides open. The declared build area rate of the sale597instance property consisting of 1570 sq. feet was, atrs. 65,00,000 = Rs, 2, per sq. feet If adjustment on2570account of +4% and side open of + 5% (total9% ) is made, the adjusted built area works out tors. 2529 x 1. 09-2756. 6 say Rs. 2. 757 per sq. feet. On the basis of this sale instance the value of the subjectproperty works out of Rs 1532 x 2757=rs. 42,23,724is against apparent consideration of Rs. lakhshigher by 75. 99% of the disclosed apparent consideration. " ( 94 ) ON 17-5-1984 the transferors and the transferee sent theirexplanation, It is stated that the building was constructed with a verypoor specification and a poor structural design and look and. thereforeis not at all comparable with newly constructed flats The transferorsmade advertisements in the newspapers 3 or 4 tinies and there wasno good response. The transferor Mr. K. S. Chari. Retd. Secretaryfrom the Govt. of India became a Consultant to the World Bank inunited Nations after retirement in the year 1977. he wanted to settledown in Bangulore. They were in need of money and they wantedthe payment to be made on or before 31-3-1994. They furtherstated "the main condition of the transferors was, therefore, thatthey needed about 75% payment upto 31st March andwould sign the agreement only when 75% payment isreceived. The transferee made the payment ofrs. 5. he wanted to settledown in Bangulore. They were in need of money and they wantedthe payment to be made on or before 31-3-1994. They furtherstated "the main condition of the transferors was, therefore, thatthey needed about 75% payment upto 31st March andwould sign the agreement only when 75% payment isreceived. The transferee made the payment ofrs. 5. 10,00,000 i. e. more than 20% of the considerationon 22-3-94, still the transferors refused to sign the agreement. The transferee made further payment ofrs. 11,00,000 making the total to Rs. 16 lacs upto11-4-94 i. e. 2/3rd of the total consideration still they didnot sign the agreement unless they received furtherrs. 90,000 on 23-4-94 and got the assurance in writingwith interest clause for the balance Rs. . 1,00,000 within30 days. This being a peculiar transaction. cannot be compared with newly constructed normal flats available forsale with sufficient margin of tune for making payment. There fore, the date of transaction of the sale is 22-3-94when more than 20% payment was made"they also brought to the notice of the Appropriate Authority the lastdate for making payment for the Bangalore flat by 31-3-1994 whichwas extended just by 10 days. The flat is being sold to its immediateneighbour on the second floor with whom the transferors had goodrelationship and the transferors could also save commission to theextent of 398 About the accommodation available. nature of construction and the electricity available, it is stated :-"that flat under sale has only two bathrooms and one store asagainst, three bathrooms mentioned in the agreement to. sell- One bathroom was converted into store and thereare no fittings, washbasin or W. C. which the Hon'blemembers must have noticed at the time of inspection. "this bathroom was converted into store also because ofthe reason that there is no window, exhaust or ventilation to this bathroom as is evident from the copy of planavailable in the file. Besides, the flat has mosaic flooringgenerally and one or two places where marble has beenused that is of 1' x 6" adana pieces of very low qualityof Rs. 10 per sq. ft. The fittings are all aluminiumfittings, without tubes and printed tiles. The tiles used arc4'x4" white tiles used generally in DDA flats or. Govt. constructions. The transferors has to remove fewgysers and other fittings as per the understanding. Besides. there are lot of complaints of leakage and regular complaints of ground floor occupants. 10 per sq. ft. The fittings are all aluminiumfittings, without tubes and printed tiles. The tiles used arc4'x4" white tiles used generally in DDA flats or. Govt. constructions. The transferors has to remove fewgysers and other fittings as per the understanding. Besides. there are lot of complaints of leakage and regular complaints of ground floor occupants. "they also brought to the notice of the Appropriate Authority that theflat was constructed on the terrace rights and, therefore, the ownerof the ground floor had not allowed any access to the front lawn andthe rear court-yard and there was no parking inside the building, evena scooter, or motor cycle cannot be parked. In the show cause noticeit is stated that the area of the flat is 1532 sq. ft. whereas the actualarea was 1402 sq. ft. Therefore, the rate per sq. ft. works out atrs. 1712 per sq. ft. and not Rs. 1560 as mentioned in the snow' causenotice. ( 95 ) ABOUT the first sale instance property, it is stated :-"the instance compared in the show cause notice at S-237,greater Kailash-I, New Delhi is much superior construction with servant quarter and car parking. Moreover, theuseable area of the flat is also better and higher. Becauseof load bearing walls of subject property lot of space hasbeen wasted in 9" brick walis. We could manage theworking drawings of the property at S-237, Greaterksilash-I, New Delhi and it is very interesting to notethat the bedroom useable area of S-237 G. K-I is 180 sq. ft. , 155. 75 sq. ft. and 154 sq. fit. , 140. 25 sq. ft. and135. 85 sq. ft. in the subject property. The smallest bedloom of S-237 is the biggest bed room of the subject property. The toilet sizes are 41. 93 s. q. ft. , 39. 37 sq. ft and39. 87 sq. ft. as against 27. 95 sq. ft. 23,50 sq. ft. anddepartment and Ors. 42. 5 sq. ft. in the subject property case. All the toilets arewell ventilated in S-237 whereas one toilet is without evena window and size of 23. 5 sq. ft. could not be used attoilet, so has been converted into store. The overalluseable area of S-2370. K-I excluding walls and passagesis 1014. 92 sq. ft. whereas it is only 968. 58 sq. ft. in thesubject case. All the toilets arewell ventilated in S-237 whereas one toilet is without evena window and size of 23. 5 sq. ft. could not be used attoilet, so has been converted into store. The overalluseable area of S-2370. K-I excluding walls and passagesis 1014. 92 sq. ft. whereas it is only 968. 58 sq. ft. in thesubject case. "it is also stated that the specification in that property is Kota stonewith marble strips in drive-way, complete white marble flooring everywhere in the flat and no mosaic is used in the whole building. Thedoors and windows are of teak woods with brass fittings and there isalso servant quarter. Therefore, according to the explanation thereis no comparison at all with the subject property. ( 96 ) ABOUT the second sale instance, it is stated :-"the second instance quoted in the show cause notice is notat all relevant. The locality is different, the flat is brandnew constructed with specification of a Five Star Hoteland year of construction is 1993. Besides, it was purchased by Bharat Petroleum and the transaction involvesfew factors which cannot be highlighted. Therefore, tomake comparison with the said flat at Greater Kailash-IIis not relevant, particularly when the sufficient instanceare available in Greater Kailash-I As per the rulingsof the Courts only similar and identical and comparablesale instance must be used for arrivng at the fair marketvalue. " ( 97 ) THE explanation would further, slate that the Appropriateauthority had received a sale instance factor E-23, Greater Kailashon 51-3-1993 (Vide R. No. 3220) the ground floor of this propertywas sold for Rs. 17,55,000. The area is 1250 sq. ft. The rateworks out at Rs. 1400 sq. ft. When adjusted with time gap, it gives rateof Rs. 1572 which is lower than the subject property. Therefore, itwas stated that the Appropriate Authority should drop further proceedings. On 28-7-1994 the Appropriate Authority passed the orderof compulsory purchase. ( 98 ) RETARDING the advertisement made by the transferors, theappropriate Authority has stated :-We find from the newspaper cuttings of Hindustan Times of 17/03/1994, 20th March, 1994 and 23r 23/03/1994, that the advertisement read"; as under:__'greater Kailash corner/1st flour area 300 without basement, 3 bed rooms, drawing-dining'. The above advertisement does not even specify whether the subject property was in Greater Kailash-I or in Greater Kailash-IL Further, this advertisement does not mention the expected price tor the property nor the covered area. The above advertisement does not even specify whether the subject property was in Greater Kailash-I or in Greater Kailash-IL Further, this advertisement does not mention the expected price tor the property nor the covered area. We also do not know what was the response of such advertisements and whether any willing purchaser contacted the transferor and if so the price for which he was prepared to purchase the property. No evidence has been filed before us showing the response of these advertisements and accordingly the contention that in pite of advertisements no willing buyer was prepared to pay more than the apparent consideration finally agreed has to be rejected. " ( 99 ) THE reasoning is not at all connect. The view by the Appropriate Authority that no evidence has been filed showing the responseof the advertisements cannot at all be sustained because no one noramally keeps the record of the response and there is no reason to rejectthe case of the petitioners. Regarding the payment made to the vendorin Bangalore it is stated :- "as a matter of fact about 70% of the payment was received by the transferors only by 23/04/1994 and if the advance payments tor the subject property were to be utilised by them for making payment at Bangalore. they could have done only within the extended period by 10/04/1994. Since the advance payment agreegating to a sum of Rs. 17,00,000 (5,10,000 + 11,00,000 + 90,000) was received by the transferors for the subject property only by 23-4-94 no direct nexus can he established between the receipt of 70% of the apparam consideration for the subject properly and the payment that was required to be made for purchase of the properly at Bangalore. However, since the payment to the extent of 70% had been received in this case by the transferor* by 23/04/1994 as advance, as against the prevallwnt practice. of receiving 15% to 20% as advance only, the interest on the excess payment of about Rs. 13,40,000 has to be taken into account, which works out to about Rs. 33. 000 for the period of three months calculated at the rate of 10%, which is very nominal considering the apparent consideration of Rs. 24,00,000 to" which the subject pro, perty was agreed to be sold. "this reasoning also is no reason at all. 610department and Ors. 13,40,000 has to be taken into account, which works out to about Rs. 33. 000 for the period of three months calculated at the rate of 10%, which is very nominal considering the apparent consideration of Rs. 24,00,000 to" which the subject pro, perty was agreed to be sold. "this reasoning also is no reason at all. 610department and Ors. ( 100 ) REGARDING the point that the property was agreed to be soldto the person residing on the second floor, the Appropriate Authorityexpressed the view :-"the contention that the subject flat was sold by the transferors to their immediate neighbour residing on the secondfloor of the some building with whom they had personalrelations, and therefore, a nominal discount should beallowed is also rejected because this was a purely commercial transaction and such transactions are governed bybusiness prudence and are not influenced by any extraneousconsideration. Exception, however is made only u/s. 269ud of the I. T. Act where such transactions are madebetween the relatives on account of natural love andaffection. "the Appropriate Authority had completely ignored the realities ofsituation. . ( 101 ) REGARDING the user' the Appropriate Authority has observed:-"the contention that the subject property did not have threebath rooms as mentioned in the Agreement to sell and infact it had only two bath rooms, the third one havingbeen converted into a store room because in the thirdbath room there was no 'window or other ventilation, isalso not sustainable because n: inspection of the property we found that in fact there were three "bath roomsthe third bath room has sufficient ventilation through theether bath room having a common wall and the waterconnection and pipes were also found to exist and, therefore, this could also be converted into a bath room byinstalling the required sanitary fittings. "if the approach of the Appropriate Authority is adopted in the wayit is done, on the subjective satisfaction of the Appropriate Authorityany property could be compulsorily purchased. ( 102 ) REGARDING the nature of the construction and the life of thebuilding, the Appropriate Authority gives a very curious reasoning:-"while the ground floor of the subject property might havebeen constructed on loan bearing walls in the year 1962on which the first floor is stated to have been built in1986, the contention that the property constructed onload bearing walls has a life of about 60 years, out of. which in the present case 30 years had already expiredleaving an unexpired life of only 30 years is neither relevantnor material because the cost of construction of a property is a very insignificant part of the total value of theproperty, as the plot of land acocunts for more than 90%of the total value of the property. Besides in actual factproperties built on load bearing walls for outlive their lifeof 60 years if properly maintained. " ( 103 ) ABOUT the point of non availability of parking space andthe servant quarters, the Appropriate Authorily has expressed :-"the next contention that the subject property had no parkingspace whatsoever and further that it did not have aservant's quarter is factually correct, but this fact hadduly been taken into account while working out the valueof the subject property. Even in the sale instance property at S-237, Greater Kailash-I, there is no garage,but only an open car parking space and a servant'squarter on the terrace floor, which is unauthorisee. Since the sale instance properly at S-237, Greaterkailash-I, also does not have a garage, and the servant'squarter is unauthorised and since the value of the subjectproperty has been worked out, having regard to the factthat there is no parking space and no servant's quarter,t!ie value of the subject property as compared to the saleinstance property at S-237, Greater Kailash-1 does notcall for any further reduction. " ( 104 ) THIS is not one of the methods for comparing the value ofthe property. About the usable area, the Appropriate Authoritywould further observe :-''the contention that the usable area of the sale instanceproperty at S-237, Greater Kailash-I, is greater thanthe usable area of the subject property, because considerable space has been wasted in the subject property, onaccount of the load bearing walls of the subject propertylias been found to be factually incorrect. It is also notcorrect to say that each of the three bed rooms in thesale instance property at S-237, Greater Kailash-l, andtwo of the three toilets in the sale instance property arebigger in size, than each of the three bed rooms inthe subject property and two of the three toilets in thesubject property. The contention that the overall usablearea in the sale instance property is 1014. 92 sq. feet ascompared to the overall usable area of 968. 69 sq. feet inthe subject property has also been found to be incorrect. The contention that the overall usablearea in the sale instance property is 1014. 92 sq. feet ascompared to the overall usable area of 968. 69 sq. feet inthe subject property has also been found to be incorrect. As per the plan approved by the MCD and submittedalongwith the application in ton" No. 37-1 in the case ofthe subject property as well as in the case of the saleinstance property at S-237, Greater Kailash-I, it hasbeen found that the actual usable area in the subjectproperty including the passage is 1064. 40 sq. feet ascompared to the usable area of 830. 69 sq. feet includingpassage in S-237, Greater Kailash-I. " ( 105 ) REGARDING the specification, the Appropriate Authorityobserved :-We may state that the difference in the value of the propertyon account of inferior or superior specifications is negligible as the cost of the structure is a very insignificant partof the total value of the property, the land valueaccounting for more than 90 per cent of the total valueof the property. " ( 106 ) THE Appropriate Authority rejected comparison with E-280greater Ksilash-11. On this process of reasoning the order for compulsory purchase, was made. ( 107 ) IN the writ petition what is stated in the explanation isreiterated. ( 108 ) WE are of the view that the Appropriate Authority hasnot adopted any standard for ascertaining the fair market value ofthe subject property. Therefore, the show cause notice itself isbad in law. C. W. 3884/94 ( 109 ) IN this Writ Petition Mr. R. C. Chawla and his daughterms. Suchitra Chawla are the petitioners. The subject property isc-590. Defence Colony, New Delhi. On 6-5-1994 agreement forsale was entered into between Mr. J. S. Sawhney and Mr. R. C. Ghawla. The area of the property is 325 sq. yds. with built up single storeyconsisting of three beds D/d along with Garage Block. The consideration mentioned is Rs. 80 lakhs plus conversion charges of Rs 1,03,798. On 6-5-1994 the petitioners paid conversion charges for convertingthe property into freehold amounting to Rs. 1,04,111. On 10-5-1994the third respondent purchased a' house bearing No. A-12, Sector 36,noida on receipt of substantial consideration from the petitioners. Thethird respondent vacated the subject property on 12-5-1994. On15-5-1994 the third respondent gave possession of the property to thepetitioners. On 22-5-1994 a public notice was issued by personsallegedly stated to be the co-owners objecting to the transfer. 1,04,111. On 10-5-1994the third respondent purchased a' house bearing No. A-12, Sector 36,noida on receipt of substantial consideration from the petitioners. Thethird respondent vacated the subject property on 12-5-1994. On15-5-1994 the third respondent gave possession of the property to thepetitioners. On 22-5-1994 a public notice was issued by personsallegedly stated to be the co-owners objecting to the transfer. On27-5-1994 the suit was filed in ths District Court, Delhi. On31-5 1994 an application in Form 37-1 was filed before the Appropriate Authority. On 9-8-1994 the show cause, notice was issuedby the Appropriate Authority. Two sale instances of property aregiven; (1) C-77, Defence Colony and (2) C-86 Defence Colony. About the first sale instance property C-77, the details mentionedare :-Plot Area 271. 70 sq. mts. 22-12-93 Sold for Rs. 99 lakhs including conversion charges. Time Gap 4 months@1% plusincreasesubject property not facing park -5%land rate works outrs. 35,480. 00to this has to be added salvage Rs. 44. 660. 00value of the structure of the subjectproperty. Now the land value: 271,73 x 35,480. 00 =96,40,980. 00 Add 44,660. 00 The total comes 96,85,640. 00 The apparent consideration of the subject property is thus 20% less than the fair market value. About the second sale instance property:-Plot Area: 271. 73 sq. mts. Consideration: 125 lakhsdate of Agreement: 19-7-1994salvage value of the structure. Rs. 1 lakh. Declared land rate works out at: Rs. 45,634. 00. Time gap at a% p. m. 1. 1/2%the property facing park.-5% (Total minus 6. 5%)Land value of the subject property Rs. 42. 668. 00at this rate would work out. As per this calculation the fair 271. 73 x 42668 =market value: 1,15,94,17 5. 00 Thus the apparent considera tion of the subject I-property i. s less than 43. 6% the fair market value of the property. ( 110 ) ON 18-8-1994 the explanation was given by the transferorsand the transferees. Regarding C-86, it is stated that there aretheree independent rooms over the garage and it is a 2. 112 storeyedbuilding and construction is new one. Regarding C-77, it is statedthat it is complete two storeyed building and the accommodationavailable is double than what is available in the subject property. Thesubject property is facing the servant quarters and the garages of thehouse which are situated in E Block. The subject property is 32years old and is in. a dilapidated condition. Regarding C-77, it is statedthat it is complete two storeyed building and the accommodationavailable is double than what is available in the subject property. Thesubject property is facing the servant quarters and the garages of thehouse which are situated in E Block. The subject property is 32years old and is in. a dilapidated condition. In the ground floor thereare two bed rooms with drawing dining, kitchen and on the firstfloor there is only one bed room with drawing and dining. On18-8-1994 a further reply was sent by Mr. R. C. Chawla stating thattitle of the transferor J. S. Sawhney is in dispute. A public noticedated 22-5-1994 was enclosed by him and he brought to the notice ofthe Appropriate Authority the pendency of the suit No. 224/94 inthe Court of Shri P. K. Dham, Additional District and Sessions Judge, Delhiand that the alleged co-owners had obtained order of stay. He alsobrought to the notice of the Appropriate Authority clause 2 of theagreement wherein the litigation was anticipated the parties. On24-8-1994 Mr. R. C. Chawla sent another reply wherein he statedthat he had come across a few cases where with reference to properties situated in Defence Colony Apprpriate Authority had issued noobjection Certificates :-Tin's property is situated on a 'and ad-measuring 325 sq. yds. and is facing a park. Application in Form 37-1 wasfiled in May 1994. The basis of valuation of that theconstruction is 2. 112 storeys-well built up with six bedrooms, the value of the salvage would be 5 lakhs andthe basis of land value is calculated as follows :-Rs. 90,00,000. 00 divide 271. 73 = 31. 280. 05 (-) Rs. 5,00,000. 00 salvage valuers. 85,00,000. 00 divide 271. 73=31. 281. 05 (5) Rs. 31,281. 05 x (-5%) = 29. 717. 00 park facing. The value of the basic land value amount of Rs. 29,717. 00which is compatable to our land value and the permission for this was granted by the appropriate authority. C-530, Defence Colonythis property is situated on a corner plot and the land is360 sq. yrs. This property faces open "round and thehouse is 1. 1 2 storeys with three bed rooms, drawing. dining and two study-rooms with attached bath-rooms. The permission for this was applied in October /november, 1993 for Rs. 93 lakhs. The value was calculatedas follows :-Rs. 93,00,000;- the value can be calculated as follows :-Rs, 93,00,0001- divide 301. yrs. This property faces open "round and thehouse is 1. 1 2 storeys with three bed rooms, drawing. dining and two study-rooms with attached bath-rooms. The permission for this was applied in October /november, 1993 for Rs. 93 lakhs. The value was calculatedas follows :-Rs. 93,00,000;- the value can be calculated as follows :-Rs, 93,00,0001- divide 301. 00 30 01if addition of (+5%) for time mad. : (+) then Rs. 154. 86the adjusted value comes to Rs. 32,441. 86the deduction for corner Plot (-5% ) =rs, 1. 622. 09the adjusted value is==rs, 30,819. 77c-538, Defence Colonythis property is ad-measuring 271. 73-sq. mtrs and was filedon November, 1993 for Rs. 88,00,000. 00. It has got 3bed-rooms, drawing/dining and separate garage blockfor which a salvage value will be around Rs. 2. 00,000. 00basic Value Rs, 88,00,000. 00 divide 271. 73=-Rs. 32,385. 00salvage Value Rs. 2,00,000/:- divide 271. 73=rs. 31. 650. 00if no adjustment an amount of time-gap of (+7%), thevalue shall be Rs. 33,865. 50 per sq. mtr,regd. No. 3792 dated 26-5-1994c-253, Defence Colony, New Delhithis is again 325 sq. yards, south facing, double storeyedhouse, which was filed for a apparent consideration ofrs. 88,00,000. 00 where the house had three bed-roomsattached bath, drawing, dining. The value shall be :rs. 88,00,000 divide 271. 73=rs. 32,285. 08less Rs. 3,00,000 (salvage value.)Rs. . 85,00,000 divide 271. 73---Rs. 31,281. 06the apparent consideration on an adjustment of (+3%)time-gap is made shall be Rs. 32. 225. 00 per sq. mtr. " ( 111 ) HE emphasised the fact that C-86, referred to in the showcause notice, is a centrally air conditioned property with two storeyedconstruction, with a terrace garden, having six bed rooms and aseparate Garage Block, three kitchen with imported fittings. He alsorelied upon NOC granted by the Approriate Authority on 6-5-1994with reference to 182. Golf Links, New Delhi to show that how theappropriate Authority had acted in an arbitrary way. ( 112 ) THE Appropriate Authority passed the order of compulsorypurchase on 31-8-1994 maintaining the same position in the showcause notice and without considering in a propes way the representation made by the writ petitioners. In the writ petition what isstated by the explanation and further explanation is reiterated andit is submitted that the Appropriate Authority had not acted inaccordance with law in fixing the fair market value and that vitiatesthe entire proceedings. In the writ petition what isstated by the explanation and further explanation is reiterated andit is submitted that the Appropriate Authority had not acted inaccordance with law in fixing the fair market value and that vitiatesthe entire proceedings. ( 113 ) THE petitioners filed C. M. P. 8279/94 seeking to place onrecord certain facts. It is stated in the petition that the subject property belonged to late Col. Y. S. Sawhmey. He died in May 1992,as a bachelor. The third respondent J. S. Sawhney inherited theproperty, he being. the only surviving brothers. The step brother oflate Y. Sawhney and the children of his pre-deceased elder brotherhad feed a suit No. 224/94 in the Court of Additional District and Sessionsjudge, Delhi. They had withdrawn that suit and they had institutedsuit No. 2079/94 in this Court propounding a Will alleged to havebeen exceuted by Y. S. Sawhney. It is also stated that with referenceto house No. 11, Road No. 78, Punjabi Bagh, New Delhi whilecomparing the property with property No. 21/77, Punjabi Bagh, Newdelhi had given deduction of 10 per cent on account of litigation inorder dated 12-10-1994. The petitioners in the application have alsoprayed for summoning of the. file in suit No. 20799/4 in this Court. ( 114 ) THE Appropriate Authority lias filed reply to the writ petition traversing the allegations in the writ petition. It is stated inparagraph 4 of the grounds in reply that the averments made aredenied. Even otherwise, as per the calculations submitted by thepetitioners themselves there is a difference of 16. 33 per cent in theapparent consideration to the fair market value. Regarding the property No. 78, Golf Links, it is staled that it is of no relevance. ( 115 ) THE petitioners filed rejoinder affidavit disputing the averments in the counter. ( 116 ) MR. Arun Dua S/o. Late Mr. B. S. Dua had filed an application to implead himself as a party in tiie writ petition staling thathe and Rajinder Singh Sawhney and others had filed a suit forpermanent injunction in the lower court restraining the respondentsfrom setting, transfering and alienating the property. According tohim, the late Col. Y. S. Sawhney had executed a Will. The date ofthe Will is not mentioned and it is stated that the suit filed in thelower court has been withdrawn. A suit for partition has beeninstituted in this Court. Whatever the nature of the dispute betweenj. According tohim, the late Col. Y. S. Sawhney had executed a Will. The date ofthe Will is not mentioned and it is stated that the suit filed in thelower court has been withdrawn. A suit for partition has beeninstituted in this Court. Whatever the nature of the dispute betweenj. S. Sawimey and others Arun Dua cannot seek to implead himselfas a party in this case. He is not necessary party to the writ petition. Therefore, the application of Arun Dua to implead himselfas a party is dismissed. ( 117 ) A perusal of the petition and the counter and other documentsin this case would show that the Appropriate Authority has not at allapplied the principles applicable for fixing of fair market value. Therefore, the order of the Appropriate Authority cannot at all be sus-tained. C. W. 5613/93 ( 118 ) CHIRANJI Estates Pvt. Ltd. has filed this writ petition challenging the crdei of the Appropriate Authority dated 26-11-1993. 8-8-1993 there was an agreement for sale between the third respondentved prakash Marwah and the writ petitioner for purchasing plot No. 3,block A, East of Kailash admeasuring 306 sq- mts. The considerationfixed is Rs. 70 lakhs. On 30-8-1993 here was an application to theappropriate Authority in Form No. 37-1. On 6-9-1993 there wasa supplementary agreement. On 6-9-1993 Appropriate Authority wroteto the petitioner asking it to furnish certain particulars. On 4-11-1993the Appropriate Authority issued show cause notice. The Appropriateauthority based its show cause notice on the following facts to cometo the conclusion that apparent consideration is less by 56. 60% ofthe Fair Market Value : -"if compared to sale transaction of similar properties in thislocality, the apparent consideration disclosed appears to below. Your attention is particularly invited to sale of immovable property E-326, East of Kailash, New Delhi witha plot area of 200 sq. yards or 167 sq. metres which wasagreed to be sold for apparent consideration ofrs. 51,00,000 + conversion charges as per agreement dated23-5-1993. This sale instance property also consisted ofland with building consisting of basement, ground floor andsecond floor. If the salvage value of the sale instance property is considered at Rs. 55,720 and the conversion chargesare considered at Rs. 42,421, the unit land rate works outto Rs. 30,419 per sq. metre (51,00,000 + 42,421 =51,42,421-55,720 = 50,86. 701---167,22 = 30,419 persq metre ). This sale instance property requires tobe further enhanced by + 16. If the salvage value of the sale instance property is considered at Rs. 55,720 and the conversion chargesare considered at Rs. 42,421, the unit land rate works outto Rs. 30,419 per sq. metre (51,00,000 + 42,421 =51,42,421-55,720 = 50,86. 701---167,22 = 30,419 persq metre ). This sale instance property requires tobe further enhanced by + 16. 75%, on accountof time gap + 3% FAR - 18. 75% and location on account of park-5% (total) 16. 75%. Afterthis adjustment, the land value of the subject property onthe basis of sale instance property conies tors. 30,419 X 116. 75 = Rs. 35. 514 per sq. metre. On this basis, the land value of the subject property works out Rs. 35,5114 X 306 = 1,08,67. 284the amount of Rs. 93,600 being the estimated salvagevalue of the subject property has to be further added. Afteraddition of this amount, the total value of the subject property works out to Rs. 1,08,67,284 + 93,600 =1,09,60,884 which is higher by 56. 60% from the disclosedapparent consideration of Rs. 70. 00,000". The subject property is compared only with one sale instance propertythe petitioner filed the explanation on 14-11-1993. It is stated in thereply about E-326, East of Kailash and following objection ismentioned :-"the property at E-326, East of Kailash admeasures 167 sq. mtrs. The building standing on this property is fairly decentand of recent origin. In view of this vital fact the valueof the building as on date of agreement would bers. 10 lakhs. In that way the cost of land would bereduced to Rs. 41 lakhs and the unit cost of the land wouldwork out to Rs. 24520 sq. mtr. The unit cost of the landthus arrived at would have to be subjected to the followingadjustments:- (i) Time Gap-Sale instance was1/2 on 23-5-93. The subject property is of28-8-93. There is gap of 3months. A 1% variation permonth is permissible. Thatwould give a total variationof 3%. . 3% (ii) The FAR of the property ate-326, East of Kailash is 160. The FAR of the subject propertyis 190. This would require anadjustment of 18. 75% 18. 75 %- (iii) The property at E-326 isfacing a Park. The subjectproperty does not face any park,so deduction is at 5% (-- ) 5% (iv) The subject property isfacing the Nallah. Deductionfor the detriment thereforeat 5%. The FAR of the subject propertyis 190. This would require anadjustment of 18. 75% 18. 75 %- (iii) The property at E-326 isfacing a Park. The subjectproperty does not face any park,so deduction is at 5% (-- ) 5% (iv) The subject property isfacing the Nallah. Deductionfor the detriment thereforeat 5%. (-) 5% (v) The subject property issurrounded by jhuggi and jhomprisand Amar Colony which is nota high profile colony. Ascompared to E-326 which isfacing Greater Kailash I onthe one side and Nehru Placeon the other side a deductionof 10% is fair and due. (--) 10% (vi) Subject property is biggerin size as compared to thesale instance. Thus itspotential to attract buyersis comparably less. (-)10% (vii) The sale instance is ofthe property where greatercoverage is permissible onthe ground. The covetage areais 50% according to the DDARules. Therefore, scope ofexpansion is 17. 1% less forwhich due deduction ought tobepermitted. (- ) 17. 1%26 approx. In paragraph 7 of the reply it is stated that property C-111, East ofkailash was transferred by way of collaberation agreement in January1993 at Rs. 24. 50 lakhs where the area of the site is 250. 48 sq. nits. The unit cest in the case of land works out at Rs. 20,000 per sq. mt. and No objection has been granted by the Appropriate Authority. Itis stated that the transaction is a genuine one and no objection shouldbe granted. A further representation was given starting that threeproperties had been cleared by the Appropriate Authority i. e. Is1 (i) A-32, East of Kailash. 355 sq. yds. unit cost Rs. 18,000per sq. mt. (ii) C-III East of Kailash, 300 sq yds. unit cost Rs. 2000 persq. mt. 611 (iii) D-137 East of Kailash. 486 sq, mt. unit cost Rs. 22,500sq. mt. ( 119 ) ON 26-11-1993 the Appropriate Authority passed the orderwhich is challenged. The Appropriate Authority had followed thesame reasoning as mentioned in the show cause notice and had triedto find out some reason to conform to the same. In paragraph 7,the Appropriate Authority stated thus :-"on the date of hearing, the transferee also relied upon thesale instance at D-137, East of Kailash, New Delhi whichwas sold in the last quarter of 1992 and had a plot areaof 486,28 sq, metres and FAR of 190, the same as inthe case of subject property. The land rate in respectof this sale instance after adjustment was arrived atrs. 22. 500. The land rate in respectof this sale instance after adjustment was arrived atrs. 22. 500. It was submitted that the declared landrate of Rs. 22,500 in respect of the subject property compared favourably with this sale instance also. It hasbeen further stated in the written submissions dated14-11-1993 that the property in C. D. and E Blocks aresuperior to the properties in A Block as the propertiesin C, D and E blocks do not have a cluster of jhuggiesfind Jhomparies around them or a nullah facing them. Lastly, it has been stated that since the transferor is adistinguished and meritorious stated that since the transferor is a distinguished and meritorious officer of thei. P. S. and had worked as an Advisor to the Jammu andkashmir Government he could not be expected to indulgein clandestine deals. It has also been submitted thatwhile making a comparison like should be compared withlike and the comparable cases should be in reasonableproximity and should provide similar amenities andadvantages. In paragraph 8, it is stated :-"we have gone through the written submissions dated 14-11-93submitted by the transferee carefully and have also considered the submissions made on behalf of the transfereeon the date of hearing. We accept the proposition thatwhile making a comparison like should be compared withlike and this order of pre-eniptive purchase is being raisedkeeping in view the general proposition that like shouldbe compared with like. Further it is difficult to acceptas a general proposition, the contention that the properties in C, D, and E Blocks in East of Kailash are superiorthan those in A-Block. We are also conscious of thestatus and standing of the Transferor who was a meritorious officer of the Indian Police Service, although thisfactor is extraneous to the issue being dealt with by us. " ( 120 ) REGARDING the adjustments, the following reasons are givenby the Appropriate Authority :-"as regards the adjustments it may be stated that an adjustment of +3% on account of time-gap, adjustment of+ 18. 75% on account of the FAR and an adjustment of (-) 5% on account of park was already proposed inthe Show Cause Notice dated 4-11-1993. Further, anadjustment of (-)5% on account of the subject property facing a nullah across the main road is also beinggiven now. 75% on account of the FAR and an adjustment of (-) 5% on account of park was already proposed inthe Show Cause Notice dated 4-11-1993. Further, anadjustment of (-)5% on account of the subject property facing a nullah across the main road is also beinggiven now. Further, an adjustment of (-) 10% is alsobeing given now as claimed by the transferee as the subject property is bigger in s:?e as compared to the saleinstance property at E-326, East of Kailash, New Delhithe transferee in his written submissions has claimed anadjustment of (-) 10% as the subject property issurrounded by jhuggies and jhomparies and further hasclaimed an adjustment of (- ) 17. 1% as in the saleinstance property greater coverage of 60% is permissible on the ground as compared to the coverage of 50%permissible in the case of the subject property. Theadjustment of (-) 10% on account of the subject property being surrounded by jhuggies and jhomparies cannotbe given as on site inspection of the property made by us,it was noticed that there were in fact no jhuggies andjhomparies and what are described as jhuggies and jhomparies are actually pucca brick double storeyed construction and even this construction is at a reasonable distance. from the subject property. Therefore, no allowance onthis score can be given. As regards the adjustment of (-) claimed on account of greater coverage permissible on the ground in respect of the sale instance propertyat E-326, East of Kailash, New Delhi, we are of theview that no such adjustment is called and as a matter oftact an adjustment of (+)18. 75% on account of FARis required which has already been given. Thus, the adjustments which can be given are only on account otlime gap, AR, Location, Nullah and plot size of thesubject property. The adjustments to be allowed onaccount of these factors works out to (+)18. 75% (+)3% (-) 5% and (-) 10%. The net adjustmentaccordingly works out to (+) 1. 75% which gives a landrate of Rs. 25,702 per sq. mtr. as against the declaredland rate of Rs. 22. 570 per sq. mtr. Accordingly, weadopt a land rate of Rs. 25,700 per sq. mtr. and on thisbasis, the land value of the subject property works out tors. 78. 64,200 to which the depreciated cost of the strueture of Rs. 9,92,618 is to be added which gives themarket value of property at Rs. 88,56,818. 22. 570 per sq. mtr. Accordingly, weadopt a land rate of Rs. 25,700 per sq. mtr. and on thisbasis, the land value of the subject property works out tors. 78. 64,200 to which the depreciated cost of the strueture of Rs. 9,92,618 is to be added which gives themarket value of property at Rs. 88,56,818. The difference between the apparent consideration and the fair-market value accordingly works out to 26. 52%. " . ( 121 ) ABOUT C-111, East of Kailash it is staled that property soughtto be transferred by collaboration agreement ace not comparable tothose which are transferred by outright sale ( 122 ) AS regards property A-32, East of Kailash. it is stated:"this property was in occupation of one Sh. D. N. Katyal. The agreement to sell in respect of this property alsoprovided that the purchaser shall be liable to take physical possession of the plot from Sh. D. N, Katyal at hisown cost. Even if, Sh. D. N. Katyal was in occupationof the property No. A-32, East of Kailash, New Delhias a licensee, the purchaser purchased this property alongwith the occupation of Sh. D. N. Katyal whom he hadagreed to evict at his own cost. This factor clearlydistinguishes property No. A-32, East of Kailash, Newdelhi from the subject property in which there is neithera bonafide tenancy non an occupancy of a third party. The apparent sale consideration of property No. A-32,east of Kailash would have been much higher but forlhe possesesion of the property by Sh. D. N. Katyal. Therefore, the sale instance of A-32, East of Kailashcited by the transferee is not comparable to. he subjectproperty. " ( 123 ) THE Appropriate Authority deal with the sale instance citedby the writ petitioner with reference to property D-137, East ofkailash which had been agreed to be sold for a apparent consideration of Rs. 1,12,50,194 including unearned increase as per agreementto sell dated 13-10-1992 a peculiar reasoning is adopted by theappropriate Authority to nay that the fair market value of the subjectproperty is 37% higher than the sale instance property:"this property was on a plot of 468. 22 sq. mtrs. which was amuch bigger slot as compared to the plot area of 306sq. mtrs. of the subject properly. 22 sq. mtrs. which was amuch bigger slot as compared to the plot area of 306sq. mtrs. of the subject properly. If the subject property iscompared to the property at D-137 East of Kailash, Newdelhi, the unit land rate of the sale instance propertyis to be enhanced by 10% on account of time gap andhas to be further enhanced by at least 10% on accountof the smaller plot size of the subject property and onaccount of approach to service lane in the case of property No. D-137, East of Kailash, New Delhi. Thedeclared land rate of sale instance property No. D-137after deduicting salvage value works out to Rs. 23,419 persq. metre. On this basis, the unit land rate of the subject property would work out to Rs. 28. 103 per sq. mtr. (23419 x 20% ). The total value of the subject property on a comparison with D-137 East of Kailash, Newdelhi would thus work out to Rs. 95,92,136 (8599518 +992618 ). The fair market value of the propertyso worked out is higher than the apparent considerationby 37%. Thus, even on comparison with D-137, Eastof Kailash, New Delhi, the apparent consideration islower by 37%. " ( 124 ) IT may be noticed from the above that it is admitted by theappropriate Authority that adjustments can be given only on accountof time gap, FAR, location, Nullah, and plot size of the subject property. If the same thing is adopted in all cases one can appreciatethe view of the Appropriate Authority. A consideration of the orderspassed in the batch of writ petitions would show that the Appropriateauthority has never been consistent. ( 125 ) IN the writ petition the averments made in the reply andthe view taken by the Appropriate Authority are repeated and, therefore, it is unnecessary to deal with the averments in the writ petitionin reply also the Appropriate Authority has maintained the same reasoning that is given in the impugned order. C. W. 4357/93 ( 126 ) IN this writ petition the order for compulsory purchase dated28-5-1993 is challenged. On 21-5-3987 respondents 5 and 6smt Jeet Kaur and Mr. Mohan Singh respectively agreed to sell tothe first petitioner Express Towers (P) Ltd the second petitionermr. R. C. Goel is the director of the first petitioner, property No. B-7/118, Sardarjung Enclave Extension for a consideration ofrs. 23,50,000. The area of the land is 375 sq. mts. On 21-5-3987 respondents 5 and 6smt Jeet Kaur and Mr. Mohan Singh respectively agreed to sell tothe first petitioner Express Towers (P) Ltd the second petitionermr. R. C. Goel is the director of the first petitioner, property No. B-7/118, Sardarjung Enclave Extension for a consideration ofrs. 23,50,000. The area of the land is 375 sq. mts. The construction consists of a single storey house including a double storeyed outhouse of covering area of 2300 sq. ft. On 27-5-1987 the parties filedthe application in Form No. 37-1 for issuance of No Objection Certificate. On 10-7-1987 the Appropriate Authority passed the orderfor compulsory purchase. ( 127 ) CHALLENGING that order the petitioners filed C. W. 2275/87in this Court. On 1-3-1993 a Division Bench of this Court allowedthe writ petition in view of the judgment of the Supreme Court inc. B. Gauram's case. On 3-5-1993 the petitioners applied to theappropriate Authority requesting it to furnish the reasons for notissuing No Objection Certificate. On 11-5-1993 the Appropriateauthority issued show cause notice. The basis of the show causenotice is :- "you are also informed that the apparent consideration disclosed by you in Form 37-I is low if compared to other sale transactions of similarity property in that area during that period. It may be recalled that immovable property located to B-7/118, Safdrajung Enclave Extn. , New Delhi is a Single Storey Main building with Double Storey Out House on a free-hold plot of land measuring 375 sq. mtrs. (450 sq. yds.) on the basis of declared consideration after excluding the estimated by value of construction of Rs. 3,41,000 at the rate of Rs. 5,357 per sq. mtrs. The land rate per sq mtrs. in respect of immovable properly 8-1116, Hauz Khas. New Delhi which was one side open and the sale took place in February, 1987 worked out to Rs. 9,813 per sq. mtrs. , the per sq. mtrs. land rate in respect of inmovable property sold on 10-4-87 located at J-10, Green Park, New Delhi Near Historical Monunent worked out to Rs. 7,267 after adjustments on account of F. A. R. time gap and location, the net land rate works out to Rs. 7,752 and Rs. 8,357 per sq, mtr. respectively, there is yet another sale instances of immovable property located at B-2/2, Safdarjung Enclave, New Delhi admeasuring 376. 25 sq. mtr. which was sold on 18-2-87. 7,267 after adjustments on account of F. A. R. time gap and location, the net land rate works out to Rs. 7,752 and Rs. 8,357 per sq, mtr. respectively, there is yet another sale instances of immovable property located at B-2/2, Safdarjung Enclave, New Delhi admeasuring 376. 25 sq. mtr. which was sold on 18-2-87. This property is a lease hold one but even then the land rate worked out to Rs. 8,350 per sq. mtr. after a adjustment of land tenure (lease-hold and free-hold) F. A. R. time gap and location the net land rate works out to Rs. 7,432 per sq. mtr. If average of these three sale instances taken into account the land rate works out to Rs. 7,850 per sq. mtr. Therefore, on this basis the land value works out to Rs. 7. 850 X 375 = 29,43,750. If the value of structure of Rs. 3,41,000 is further added the total value so worked out comes to approxi nately Rs. 32,85,000 against the declared consideration of Rs. 23,50,000 which is an excess by 28. 5 %. "on 18-5-1993 the petitioners and respondents 5 and 6 filed the explanation about the situation of the property. It is stated : "that the locality where the said property is situated is known as Safdarjung Enclave Extension. New Delhi. It is submitted that this locality was not developed by an government agency or by any private colonizer. It is a part of old village known Arjun Nagar which grew in. an unplanned manner with unauthorised constructions around by all sorts of people and mostly by labour and wage earners. In the days of Emergency, the said area was demolished for planned development but it could not be taken up as the successor Janta Govt. reversed the decision and handed over the area to the respective parties holding possession before demolition. However, some developments were undertaken by D. D. A. to improve roads etc. So the locality consists of all sizes of plots varying from 36 sq. mtrs. to 500 sq. mtrs. with small approach roads surrounded by old Arjun village and labour jhuggies. That the property under reference was owned by Sardar Mohan Singh. Due to political adverse atmosphere the transferors were anxious for expeditious disposal of his property and to leave the country to join his daughter living abroad. mtrs. to 500 sq. mtrs. with small approach roads surrounded by old Arjun village and labour jhuggies. That the property under reference was owned by Sardar Mohan Singh. Due to political adverse atmosphere the transferors were anxious for expeditious disposal of his property and to leave the country to join his daughter living abroad. In pursuance of his planning he was making desperate efforts to sell the property. But because of defective situation, small approach roads, substandaid habitation, labour juggies around and over and above unhealthy surroundings of the village, there was no preference by the buyers for purchase of the said property. At the relevant time adjoining plots were occupied by jhuggi dwellers on both the sides of the plot in question. These jhuggies still exist at the site. A photo taken of the site is produced for kind perusal. A site plan copy is also enclosed. " ( 128 ) IN the explanation the difference between Safdarjung Enclave Extension and Safdarjung Development Enclave is pointed out. In the explanation the details about the property sold in the localityin or about 1987 are given below :-Property Average land rate1. Vacant Plot of land No. B-7/26 Rs. 3,429. 00this is an open plot of land of 70 sq. mtrs, sold for. Rs. 2,40,000 vide sale deed dt. 13-2-87 regd. as document No. 1177 in Book No. 1, Vol. No. 5731 on pages 188-196- Sellers Allied Builders (P) Ltd. and purchasers Mrs. Parmila Bhandari. 6172. Vacant Plot No. B-7/68area 100. 7 sq. mtrs. sold forrs. 4. 25,000 vide sale deedregd. as documents No. 5586 Vol. 5878 on pages 94-101 dated 3-7-87-Seller Shri S. D. Sharma andpurchasers Shri Vijay Kumar Gupta. Rs. 4,220. 003. Vacant Plot No. B-7/103area 174. 8 Sq. mtrs. sold forrs. 9. 10,000 vide regd. saledeed being document No. 1050. Book No. 1, Volume No. 6034 atpages 49--65 seller-Smt. Chanderkali, Purchasers MI's. Rajhansdevelopers (P) Ltd. dated17-2-88. Rs. 5,200. 00it is submitted that in thiscase proceedings were initiatedunder Chapter XXC of the I. T. Actby the Appropriate Authority andon being satisfied with the value,proceedings were dropped. Copiesof notice and order of theappropriate Authority are enclosed. 4. Vacant Plot No. B-7/26plot area 70 sq. mtrs. sold forrs. 3,15,000. 00 on 28-2-88 Rs. 4. 500-5. Vacant Plot No. B-7/119area 238 sq. mtrs. sold forrs. 17,00,000. 00 on 13-10-92. Rs. 7. 142. Copiesof notice and order of theappropriate Authority are enclosed. 4. Vacant Plot No. B-7/26plot area 70 sq. mtrs. sold forrs. 3,15,000. 00 on 28-2-88 Rs. 4. 500-5. Vacant Plot No. B-7/119area 238 sq. mtrs. sold forrs. 17,00,000. 00 on 13-10-92. Rs. 7. 142. 00 ( 129 ) ABOUT the sale instance property, it is staled in theexplanation :-"b-1/66, Hauz Khas, New Delhi-firstly this is situated ina different posh colony. The property is of 163 sq. mtrs. sold on February, 87 giving land rate at Rs. 9741 as pershow cause notice. While the adjoining property No. B-1/17 Hauz Khas was area 196. 66 sq. yds. sold on21-1-87 for Rs. 12,50,000 giving rate of ks. 6. 377. Similar is the position of other instances cited by the Cell,they differ in their situation, size etc. In any case, it is submitted that these instances are not appropriate for the purposes particularly when sale instancesof the same locality are available. It is submitted that the sale consideration as recorded in theagreement to sell represents the fair market value andis not a fit case where provisions for preemptive purchaseof property by Central Govt. are altracted. "on 28-5-1993 the order of compulsory purchase was passed. ( 130 ) DEALING with the sale instance quoted by the petitioners,the Appropriate Authority stated :-"before dealing with the submissions on behalf of the transferee it will be relevant to note that the subject properlyis 375 sq. mtr. or 450 sq. yds. Therefore, it is not appropriate to compare it with sale instances of 70 sq. mtrs. 100. 7 sq. mtrs. , 174. 8 sq. mtrs, 70 sq. mtrs. mentioned at Sl No. 1, 2, 3 and 4 ofthe proceeding paragraph. So far as sale of adjoiningplot No. B-7/119 of 238 sq. mtrs. is concerned, thetransferee, it is regretted, has not properly stated thefacts. The sale deed in respect of ''1/2 undivided share"was sold on 31-7-92. The property was tenanted andthe monthly rent as per sale deed was only Rs. 600. 00. The remaining "112 undivided share out of the saidproperty" was sold on 13-10-92. Even at that time, property was tenanted with a monthly rent of Rs, 600. 00. Besides the sale in respect of this property was not scrutinised by Appropriate Authority as the apparent consideration in sale deeds dated 31-7-92 and 13-10-92 werebelow Rs. 10 lakhs and therefore no statement on Form37-I was filed. Even at that time, property was tenanted with a monthly rent of Rs, 600. 00. Besides the sale in respect of this property was not scrutinised by Appropriate Authority as the apparent consideration in sale deeds dated 31-7-92 and 13-10-92 werebelow Rs. 10 lakhs and therefore no statement on Form37-I was filed. "it could be seen from the reasoning of the Appropriate Authorityhow the adjustments could be elongated and reduced, dependingupon the subjective satisfaction of the Appropriate Authority fromthe way in which the Appropriate Authority had dealt with the saleinstance property B-2/2 Safdarjung Enclave. The Appropriateauthority stated :-"in respect of property No. B2/2, Safdarjung Enclave, anadjustment of +22 per cent on aceount of land tenure (the subject property being free-hold ano the sale inslance property being lease-hold), + 3 per cent onaccount of time gap (the sale of instance was 18-2-87),61931% on account of FAR (1. 625) and--10%on account of location (sale instance being on mainroad was made and not adjustment of- 16% wasarrived at. Therefore, the rate arrived at worked outrs. 8350 X0. 8 per cent = Rs. 7014 per sq, metre. Onthis basis, the value of land works out to Rs. 7014 X375 = Rs. 26,30. 250. The total value after addition ofdepreciated value of structure come; to Rs. 26. 30. 250 +3,41,000 =rs. 29,71,250 even without considering othertwo sale instances given in the show cause notice. Thevalue so worked out is 26 per cent in excess, of theapparent censideration. Rs. 29, 71. 250 --- 23,50,000 = 62. 12. 500 X 100 ). 23,50,000. On the facts stated above the apparent consideration is clearly understated. "it is not necessary to expatiate on the scope of adjustments becausethere is no law governing the adustments. In the writ petition theorder is challenged en various grounds and we need not deal withall the points and it is enough to be highlight the broad challengemade by the petitioners. It is submitted that the Appropriate Authority did not disclose to the petitioners how did it fix 22 per cent asrate for conversion of the lease hold plot into freehold plot by addingthe same in the sale price of the sale instance property B-2/2 Safdarjung Enclave which is a leasehold property to bring it at par withthe subject property to arrive at the rate of Rs. 7,014 per sq. mt. It is submitted that the formula evolved by the Govt. 7,014 per sq. mt. It is submitted that the formula evolved by the Govt. of India forconversion rate leasehold into freehold is 10. 4% and, therefore, there was an error on the part of the Appropriate Authority. The Appropriate Authority had not given the basis on which it hadarrived at the cost of super structure at Rs. 3. 41. 000 while as perthe calculation of the petitioners the value of the super structurecomes to Rs. 1,25,000. The Appropriate Authority had also conveyed in what manner if had calculated + 10 and + 31 per cent forlocation, FAR etc. The Appropriate Authority had acted contraryto the established principles by comparingt the subject property withproperties situate in colonies like Hauz Khas, Green Park or Safdarjung Enclave which were fully developed more than 10 years prior tothe agreement in 1987. The Apprepriate Authority had not alsoconsidered the existence of jhuggies and the irregular size of theplot in this area and the vendors were anxious to sell the propertiesas they wanted to go abroad to live with their (daughter in their oldage. ( 131 ) ON 13-10-1/993 the petitioners filed CM. 1857/93 for theamendment of the writ petition seeking leave to add certain groundsof challenge. It is stated that the amendment petition that the620 ( 132 ) THE petitioners filed C. M. 2043 /93 again for the amendment of the writ petition on the basis of the order passed by theappropriate Authority on 5-11-1993 rejecting the. petition filed bythe petitioners under Section 269-UJ of the Income-Tax Act, 1961. ( 133 ) THE Appropriate Authority filed a reply to the amended writpetition reiterating the stand taken by it in the show cause notice andthe impugned order. Regarding the adjustments of +22 from leasehold to freehold the Appropriate Authority would state :-"as regards the contention now raised regrding conversioncharges of lease hold land into freehold on the basis ofnotification dated 14-2-1992 issued by the Ministry ofurban Development, the same cannot constitute thebasis for any rectification. Firstly this contention wasnot raised at the time of hearing on 18-5-1993 duringthe course of proceedings under section 269ud. Besidesthis notification cannot be relied upon and made thebasis for arguing that on adjustment of only plus 10 percent is called for converting leasehold land into freeholdas against the adjustment of plus 22 per cent made bythe Appropriate Authority on this score. Besidesthis notification cannot be relied upon and made thebasis for arguing that on adjustment of only plus 10 percent is called for converting leasehold land into freeholdas against the adjustment of plus 22 per cent made bythe Appropriate Authority on this score. Secondly thisnotification is for a limited period upto 31-3-1994 forregularising land deals prevalent in Delhi. " ( 134 ) FROM a reading of the order of the Appropriate Authorityand the show cause notice, we are clear that in assessing the fairmarket value of the property, well established principles had beenignored. Therefore, there was absolutely no basis in law for theappropriate Authority to issue the show cause notice and the orderof compulsory purchase. ( 135 ) THE learned senior counsel Mr. Madan Bhatia, besideschallenging the order on the merits after a very great research andindustry and on well thought out line of reasoning formulated pointswhich were very instructive, apart from being very interesting andlearned. He submitted the right to acquire property is part of personal liberty under the Constitution and that cannot be. taken awayby resorting to Chapter XX-C Income Tax Act, 1961. He reliedon the following authorities :-1. The State of West Bengal vs. Subodh Gopal Bose anaolhers, 1954 SCC 587 (60),2. Kharal Singh vs. State of U. P. and others, AIR 1963 SC1295 (61 ). 3. Rustem Cavasjee Cooper and another vs. Union of India, air 1970 SC 564 (62 ). 4. Smt. Maneka Gandhi vs. Union of India and another, AIR1978 SC 597 (63 ). 5. State or Himachal Pradesh and another vs. Umed Ramsharma and others, (1986) 2 SCC 681 (64 ). 6. Supreme Court Legal Aid Committee representingundertrial Prisoners vs. Union of India and Others, JT1994 (6) SC 544 (65 ). 7. Messrs, Shantistar Builders vs. Narayan Khimalal Totae andors. , JT 1990 (1) SC 106 (66 ). 8. Prabhakaran Nair etc. etc. vs. State of Tamil Nadu andothers, AIR 1987 SC 2117 (67 ). 9. Miss Mohini Jain vs. State of Karnataka and Ors. , JT 1992 (4)SC 292 (68 ). 10, Vincent Fanikurlangare vs. Union of India and Ors. , JT 1987 (1) SC 610 (69 ). 11. Ramsharan Autyanuprasi and Anr. vs. Union of India and Ors. ,jt 1988 USC 577 (70 ). 12. All India Imam Organization and Ors. , vs. Union of India andors. . JT 1993 (3) SC 536 (71 ). 13. 10, Vincent Fanikurlangare vs. Union of India and Ors. , JT 1987 (1) SC 610 (69 ). 11. Ramsharan Autyanuprasi and Anr. vs. Union of India and Ors. ,jt 1988 USC 577 (70 ). 12. All India Imam Organization and Ors. , vs. Union of India andors. . JT 1993 (3) SC 536 (71 ). 13. R. Rajagopala @ R. R. Gopal and Anr. vs. State of Tamilnadu and Ors. JT 1994 (6) SC 514 (72 ). ( 136 ) THE learned senior counsel submitted that unguided power,whoever is the authority to exercise it is arbitrary and is violative ofarticle 14 of the Constitution of India and in this case it would constitute excessive delegation of legislature power. He relied upon thefollowing decisions of the Supreme Court :- 1. Messrs, Dwarka Prasad Laxmi Narain vs. The State ofuttar Pradesh and two others, 1954 SCR 803 (73 ). 2. B. B. Rajwanshi vs. State of U. P. and others, (1988)2 SCC 415 (74 ). 3. Thakur Raghubir Singh vs. Court of Wards, Ajmer andanother, 1953 SCR 1049 (75 ). 4. A. N. Parasuraman etc. vs. State of Tamil Nadu AIR 1990sc 40 (76 ). 5. S. G. Jaisinghani vs. Union of India and others. 1967 (2)SCR 703 (77 ). 6. The State of Punjab vs. M/s. Ramchander Jagdish Chander, air 1974 SC 543 (78 ). 7. Ail India vs. Nergesh Meerza and others, AIR 1981 SC1829 (79 ). 8. Hari Chand Sarda vs. Mizo District Council and another, air 1967 SC 829 (80 ). 9. Hari Krishna Bhargav vs. Union of India and another, AIR1966 SC 619 (81 ). ( 137 ) HE also submitted that arbitrariness in State action is violalive of Article 14 of the Constitution of India when we are governedby rule of law which should be in accordance with the constitutionalparameters. He relied upon the following decisions of the Supremecourt :- 1. E. P. Royappa vs. State of Tamil Nadu and another, AIR1974 SC 555 (82)2. Amarjit Singh Ahluwalia vs. The State of Punjab and Ors. , 1975 (3) SCR 82 (83 ). 3. Ramana Dayaram Shetty vs. The International Airportauthority of India and others, AIR 1979 SC 1628 (84 ). 4. Union of India and another vs. Tulsi Ram Patel, (1985)3 SCC 398 (85 ). 5. Olga Tellis and others vs. Bombay Municipal Corporationand others, (1985) 3 SCC 545 (86 ). 6. , 1975 (3) SCR 82 (83 ). 3. Ramana Dayaram Shetty vs. The International Airportauthority of India and others, AIR 1979 SC 1628 (84 ). 4. Union of India and another vs. Tulsi Ram Patel, (1985)3 SCC 398 (85 ). 5. Olga Tellis and others vs. Bombay Municipal Corporationand others, (1985) 3 SCC 545 (86 ). 6. Paradise Printers and others vs. Union Territory of Chandigarh and ethers, (1983) 1 SCC 440 (87 ). 7. Mahesh Ghandra vs. Regional Manager U. P. Financial Corporation and others, (1993) 2 SCC 279 (88 ). S. The State of Bihar vs. K. K. Misra and others, AIR 1971sc 1667 (89 ). ( 138 ) THE learned senior counsel submitted that the citizen whosoever is aggreved can challenge not only on the ground that the lawshoulld be reasonable but also the order passed on the basis of thatlaw. He relied upon the decision of the Supreme Court in Oudhsugar Mills Ltd. , etc. vs. Union of India and others, AIR 1970 SC1070 (90 ). He next submitted that the made of determination marketvalue is part of procedure which should be in accordance with law andhe referred to Sections 277 and 295 of the Income Tax Act, 1961and Income Tax (Seventh Amendment) Rules, 1986 and submittedthat if the procedure is not in accordance with law the ultimate orderis vitiated and it is null and void. He relied upon the following authorities apart from relying upon Black's Law Dictionary :-1. A. K. Gopalan vs. State of Madras, AIR (37) 1950 SC27 (91 ). 2. P. Vajravelu Mudaliar and others vs. The Special Deputycollector for Land Acquisition, West Madras and another, air 1965 SC 1017 (92 ). 3. Commissioner of Wealth-Tax, Kanpur vs. Laxmipat Singhania, 111 ITR 272 (93 ). 4. Commissioner of Wealth Tax vs. Smt. Taraaben R. Patel,198 ITR 657 (94 ). 5, Jaswant Rai vs. Commissioner of Wealth Tax, Patiala-I,107 ITR 477 (95 ). 6. Commissioner of Income-Tax vs. Smt. Vimlaben Bhagwandas Patel and another, 118 ITR 134 (96 ). ( 139 ) HE further submitted that determination of fair market valuein law cannot depend on speculative, subjective and fanciful adjustments and that too without any support of law on the point. He reliedupon the following authorities:-1. Commissioner of Income-Tax vs. Arun Mehra, 157 ITR308 (97 ). 2. Commissioner of Income-Tax, Delhi-11 vs. New India Construction Co. , 123 ITR 68 (98 ). 3. He reliedupon the following authorities:-1. Commissioner of Income-Tax vs. Arun Mehra, 157 ITR308 (97 ). 2. Commissioner of Income-Tax, Delhi-11 vs. New India Construction Co. , 123 ITR 68 (98 ). 3. A. Periakaruppan Chettiar (Minor) vs. The State of Tamilnadu and others, AIR 1971 SC 2085 (99 ). 4. Fariyarand Pareekanni Rubbers Ltd. vs. State of Kerala, (1991) 4 SCC 195 (100 ). ( 140 ) HE submitted that no authority much less quasi-judicial authority can confer jurisdiction on itself by deciding a jurisdictional factwithout any basis and the orders of the quasi judicial authorities aresubject to judical review. He placed reliance upon the followingjudgment of the Supreme Court :-1. M/s. Raza Textiles Ltd. , Rampur vs. The Income-lax Offcer, Rampur, AIR 1973 SC 1362 (101 ). 2. Anisminic Ltd. vs. The Foreign Compensation Commissionand another, 1969 (1) All E. R. 208 (102 ). 3. Union of India vs. Tarachand Gupta and Bros. , AIR 1971sc 1558 (103 ). 4. The State of West Bengal vs. Mis. Bela Banerjee and others, 1954 SCR 558 (104 ). 5. Mrs. Sarojini Ramaswami vs. Union of India and Ors. , JT1992 (5) SC1 (105 ). 6. Union of India and another vs. Raghubir Singh (Dead) bylrs, etc. , (1989) 2 SCC 754 (106 ). 7. Rukmanand Bairoliya vs. The State of Bihar and others, air 1971 SC 746 (107 ). 8. Bhagwathulasamanna and others vs. Special Tahsildar andland Acquisition Officer. , Visakhapatnam Municipality,visakhapatnam, (1991) 1 SCC 506 (108 ). . ( 141 ) WE have no doubt that the orders of the Appropriate Authority are subject to the judicial review and as a matter of fact thelearned counsel Mr. Rajendra and Midha appearing for the Revenuedid nut contest that proposition. The learned senior counselmr. Madan Bhatia almost went to the extent of challenging Chapterxx. C before us. The argument no doubt is attractive and absorbingconsidering it in the context of the categorical pronouncements by Theirlordships of the Supreme Court of India. Evenso, when the Supremecourt in C. P. Gautam's case had upheld the constitulional validity ofchapter XX-C, we refrain ourselves from entering that arena. Weare of the view that the order of the Appropriate Authority cannot besustained in law. C. W. 3594/90 ( 142 ) IN this writ petition on 27-11-1989 the order for compulsorypurchase was made. Respondents 4 and 5 filed C. W. 3459/89. Weare of the view that the order of the Appropriate Authority cannot besustained in law. C. W. 3594/90 ( 142 ) IN this writ petition on 27-11-1989 the order for compulsorypurchase was made. Respondents 4 and 5 filed C. W. 3459/89. On10-5-1990 this Court passed the following order when they wanted towithdraw:--"for reasons stated in the application the same is allowed, thewrit petition is dismissed as withdrawn. The interimorders are vacated as of today tlie. effect of this would bethat as if order u/s. 269ud (1) is deemed to have beenpassed today for the purpose of limitation and other consequences. Later on, the petitioner had filed the present writ petition. The thirdrespondent Appropriate Authority had filed an application CM. 6632193staling in paragraph 7:-"it is submitted that after the decision of the Supreme Courtin C. B. Gautam's case (199 ITR 530) the issue is onlyof academic interest because the order passed in thiscase u/s. 269ud will have to be set aside for passing freshorder after giving proper hearing and communication ofa reasoned order". In the show cause notice the Appropriate Authority in arriving at thefair market value had not followed the well settled principles. Followingthe reasoning given by the Gujarat High Court in (1966) 217 ITR274 and 219 ITR 146 (supra), we don't think it fit to remit thematter back to the Appropriate Authority. The order is set asideand this writ petition is also allowed. ( 143 ) WE could look into the decisions rendered by the Hon'blejudges of other High Courts in 1995, 1996 and 1997. We derivedbenefit from their rich experience and learning and we could see veryincisive analysis of law and facts by the learned Judges and we arereally inspired by the exposition of law by the learned Judges. Thecentral theme that runs in all the decisions is the supremacy of therule of Jaw, the justicialbility of the orders of the Appropriate Authorities, the reasonableness of approach of the Appropriate Authorities infixing the fail market value in accordance with the known principlesin the field. The message we get from the learned Judges, which isclear arid pronounced is, that it might have been once upon a time,rex was Lex but now we are firmly rooted in the dictum that. Lexis Rex. The message we get from the learned Judges, which isclear arid pronounced is, that it might have been once upon a time,rex was Lex but now we are firmly rooted in the dictum that. Lexis Rex. ( 144 ) IN Angram Finance Ltd. vs. Appropriate Authority andanother (1996) 217 ITR 22 (109) which is ajudgment rendered on30-3-1995 by the Division Bench of Gujarat High Court consistingof C. K. Thakkar and Rajesh Balla JJ. Jn the writ petition the olderdated 31-1-1995 passed by the Appropriate Authority was challengedin and by which compulsory purchase was made. The Bench notedthe contentions on behalf of the petitioner in the following terms :__"three-fold contentions have been raised before us by thepetitioner. Firstly, it is contended that the petitioner wasnot afforded adequate opportuniiy of hearing by nottaking proceedings promptly within the lime frame prescribed under the Act and, therefore the order is vitiatedhaving been made in breach of the principles of naturaljustice in hot haste at the close of the time barrier. Secondlyit has been contended that the appropriate authority wasunder obligation to determine the fair market value ofthe property in question before it could order pre-emptivepurchase. Determination of the air market value of theproperty sought to be dealt with under Chapter XX-C isa condition precedent before the property can be sopurchased and for arriving at a satisfaction as to understatement of apparent consideration. For this purpose,reliance has been placed on the recent decision in the caseof Sarwarben Temas Khanibata vs. Appropriate Authority (1995) 216 ITR 850 (Guj.) being Special Civil Application No. 11697 of 1994 decided on 8/03/1995. Itwas lastly contended that the bare reading of the orderpreeluded the satisfaction that the apparent considerationof the property in question appears to be understated bymore than 15 per cent, and is, therefore, a fit case formaking pre-emptive purchase under the provisions ofchapter XX-C of the Act and has been arrived at without application of mind inasmuch as, from the order, it isapparent that the facts which are necessary for arrivingat such satisfaction, are non-existent. " ( 145 ) THE learned Judges observed :-'we have given our anxious consideration to the contentionsraised before us and perused the material placed beforeus. As will be discussed presently, in our opinion, thelast contention of learned counsel for the petitioner iswell-founded and the petition should succeed on that countalone. Hence, we do not propose to go into othercontentions. " ( 145 ) THE learned Judges observed :-'we have given our anxious consideration to the contentionsraised before us and perused the material placed beforeus. As will be discussed presently, in our opinion, thelast contention of learned counsel for the petitioner iswell-founded and the petition should succeed on that countalone. Hence, we do not propose to go into othercontentions. "the learned Judges observed :-It is further to be noticed that even where the taking of actiondepends upon the subjective satisfaction of the authority,the basic requirement is that such subjective satisfactionmust be founded on existing material and when a challengeto such subjective satisfaction is raised, the existence ofmaterial, which has resulted in such subjective satisfaction,is to be shown. A reference in this connection may bemade to the decision of the apex court in the case ofbarium Chemicals Ltd. vs. Company Law Board (1966)36 Comp Case 639; AIR 1967 SC 295 . Here, it is nota case of subjective satisfaction. Section 269ud (1a)and (1b)of the Income-tax Act, 1961 reads as under :" (1a) Before making an order under sub-section (1), theappropriate authority shall give a reasonable opportunity of being heard to the transferor, the person in62 7occupation of the immovable property if the transferoris not in occupation of the property the transferee andto every other person, whom the appropriate authorityknows to be interested in the property. (1b) Every order made by the appropriate authority undersub-section (1) shall specify the grounds on which itis made. "it is the requirement of the statute that before making anyorder for pre-emptive purchase, the appropriate authorityhas to give reasonable opportunity of being heard to thetransferor, the person who is in occupation of the propertyand the transferee and also to every person whom theappropriate authority knows to be interested in the property and thereafter he has not only to reach his satisfaction but record specific grounds for taking, action underthat provision. A combined reading of section 269ud (1a) and (1b) ofthe Act leaves no room for doubt that it is a question ofobjective decision-making process by taking into consideration all the relevant materials which have come beforethe hearing authority and considering the rival aspects ofthe matter. Moreover, the requirement of law is to specifythe grounds on which the order of pre-emptive purchase ismade. The obligation does not stop by merely rejecting thesubmissions made before it. Moreover, the requirement of law is to specifythe grounds on which the order of pre-emptive purchase ismade. The obligation does not stop by merely rejecting thesubmissions made before it. The rejection of submissionsmade by the vendors or the transferee or the persons interested in the property, does not lead to a consequencethat grounds for making pre-emptive purchase exist. Thesine qua non is that reasons must exist, on the materialplaced before it, for supporting the action taken for preemptive purchase under section 269ud of the Act. Theorder clearly falls short of this requirement. The order nowhere specifies the grounds on which the appropriate authority has decided to take action underchapter XX-C, while the appropriate authority rejects thesubmissions made by the objectors against the proposedaction, as discussed earlier, the action is not supported Byany material on which it can be said that the appropriateauthority could reach a conclusion that the estimatedmarket rate or the real consideration of the first floon of acommercial building, similarly situated as the property inquestion, is more than the apparent consideration disclosed in the agreement in question by 15 per cent. Therefore, the order must fail on its own reading. 115. In Forbes Porbes Campbell and Co. Ltd. , and Another vs. Nishar Ahmed, IAC and Another, (1996) 217 ITR 103 (110) thedivision Bench of the Bombay High Court (M. L. Pendse and S. M. jhunjhunuwala, JJ) and the judgment was delivered on 12-10-1994. In this case before the Bombay High Court the notice issued by theappropriate Authority, was challenged and the learned Judges quashedthe notice on the same process of reasoning as adopted by the Gujarathigh Court. ( 146 ) IN all the cases before us in the batchthere was no difference in the consideration of the materials by theappropriate Authority at the time of the issue of notice and passingfinal orders. As noticed by the other High Courts, the Appropriateauthority in these cases had only restated the reasons given in thenotice and in the purchase order and confirmed it as staled in thenotice rejecting the contentions of the parties and adopting a reasoning which cannot at all be sustained in law. The Appropriate Authority, as pointed out by the other High Courts, had stuck to its standwithout taking into account the well settled principles in fixing thefair market value. The Appropriate Authority, as pointed out by the other High Courts, had stuck to its standwithout taking into account the well settled principles in fixing thefair market value. ( 147 ) IN Krishankumar Agarwal and another vs. Appropriateauthority and another, (1966) 217 ITR 274 (111) the Division Benchof the Gujarat High Court consisting of Rajesh Balia and M. B. Shahjj rendered the judgment on 19-9-1995. The Bench had followedthe judgment of the Division Bench delivered on 30-3-1995 (217 ITR22 ). The Appropriate Authority passed the order of compulsorypurchase on 28-4-1995 and that was challenged before the Bench. The order was passed without affording any opportunity to the petitioner against the proposed action of purchasing the property. Thecourt observed :-"section 269ud (1b) enjoins a duly on the appropriate authority to specify the grounds on which it decides to passan order under section 269ud (1 ). That includes withinit an obligation to consider all the relevant materials whichare before the appropriate authority in deciding two cardinal premises before it can decide to purchase the property. The foundational facts on which the appropriateauthority must be satisfied had been succinctly stated bytheir Lordships of the Supreme Court in C. R. Gautamvs. Union of India, (1993) 199 ITR 530. It was said that the provisions of Chapter XXC can be resorted to only where there is a significant uner-valuation ofthe property. Under-valuation to the extent of 15 percent, or more in the agreement of sale, as evidencedby the apparent consideration being lower than the fairmarket value by 15 per cent, or more, as spelt out in theboard's circular has been considered to be fair. Secondly,it was held that the very historical setting in which theprovisions of this Chapter were enacted indicates that itwas intended to be resorted to only in cases where thereis an attempt at tax evasion by significant under-valuationof the immovable property agreed to be sold. "the Court further observed :-"the impugned order, in our opinion, does not even whisperabout the satisfaction of the appropriate authority aboutthe under-valuation being with an intention to evade tax. It must be noticed that the presumption is a rebuttableone and what evidence is required to rebut it dependsupon the facts and circumstances of each case. The presumption may even be rebutted, without leading evidence,on the basis of material already available on record. It must be noticed that the presumption is a rebuttableone and what evidence is required to rebut it dependsupon the facts and circumstances of each case. The presumption may even be rebutted, without leading evidence,on the basis of material already available on record. Theposition regarding discharging the burden to displace therebuttable presumption has been succinctly explained incit v. Vinaychand Harilal, (1979) 20 ITR 752 (Guj ). That was a case where there was a statutory provisionfor raising a presumption against the assessee under theexplanation to section 271 (1) (c) about concealment ofparticulars of income by the assessee. The court said (at page 758) :"in order to rebut the presumption raised by the Explanation to section 271 (1) (c), it is open to the assesseeto point to the record of the case and point to materialson the record which would enable him to show thathe had not concealed the particulars of his income orfurnished inaccurate particulars of his income. "the court further observed (at page 762) :"it is also not necessary that any positive maaterial should beproduced by the assessee in order to discharge thisburden which rests upon him. The assessee may claim to have discharged the burden by relying on the material which is on record in the penalty proceedings. "a somewhat similar view was expressed by the Rajasthan Highcourt in Additional Commissioner of Income Tax v. Noor Mohd. and Co. (1974) 97itr 705 (at page 714) :"what quantum of evidence would rebut a legal presumption in a given set of facts does not admit of any rigidrule. "in the present case, on undisputed facts we find that in orderto arrive at the finding of the fair market price of theproperty in question, the mater was referred to by theappropriate authority to the Department's own valuer andaccording to the valuer's report, the very premise of raising a presumption of evasion was not there inasmuchas according to undisputed pleadings, the apparent consideration disclosed in the agreement was equal to the fairmrket value of the property determined by the officialvaluer. In the face of a fair marker value of the property under consideration itself having been determined,what weighed with the appropriate authority to discardthe fair market value of the property under consideration and to fall back on the consideration of SIP and tosubstitute the consideration of SIP ipso facto withoutnoticing all other material facts as to the fair market valueof PUC is not discernible. Thus, it is not only a caseof not merely not giving an opportunity of hearing to theaffected parties, but it is also a case of non-applicationof mind on existing material before the appropriate authority within the time framework permitted under law,which by itself is sufficient to vitiate the order on themerits. The order also does not conform to the norms required of anorder under section 269ud (1) as per the decision ofthis court in Anagram Finance Ltd. v. Appropriate Authority (1996) ITR 22 (Spacial Civil Application No. 869of 1995, decided on 30/03/1995) which said (atpage 28) :"a combined reading of section 269ud (1a) and (1b) ofthe Act leaves no room for doubt that it is a questionof objective decision-making process by taking into consideration all the relevant materials which have comebefore the hearing authority and considering the rivalaspects of the matter. Moreover, the requirement oflaw is to specify the grounds on which the order ofpre-emptive purchase is made. The obligation doesnot stop by merely rejecting the submissions made before it. The rejection of submissions made by thevendors or the transferee or the persons interested inthe property, does not lead to a consequence thatgrounds for making pre-emptive purchase exist. Thesine qua non is that reasons must exist on the materialplaced before it, for supporting the action taken forpre-emptive purchase under section 269ud of theact. The order clearly falls short of this requirement. "in the above facts and circumstances of the present case, weare not inclined to refer the matter back to the appropriate authority. The petition accordingly succeeds. Theimpugned order dated 20/04/1995 (annexure-M) isquashed. Respondent No. 1 will issue the necessary certificates including the no objection certificate within sixweeks, from the date of furnishing the certified copy ofthe order of writ reaching the appropriate authority. whichever, is earlier. Rule made absolute with no orderas to costs. The petition accordingly succeeds. Theimpugned order dated 20/04/1995 (annexure-M) isquashed. Respondent No. 1 will issue the necessary certificates including the no objection certificate within sixweeks, from the date of furnishing the certified copy ofthe order of writ reaching the appropriate authority. whichever, is earlier. Rule made absolute with no orderas to costs. ( 148 ) IN Surya Kiran Association vs. Appropriate Authority andanother, (1996) 218 ITR 29 , the Division Bench of Gujarat Highcourt (C K. Thakker and Rajesh Balia, JJ.) 'dealt with the matterand the judgment was rendered on 26-6-1995. In this case the orderof the Appropriate Authority dated 28-4-1995 was challenged. Dealing with the challenge, the Court observed :-"various contentions were raised by Mr. J. P. Shall, learnedcounsel for the petitioner. It was submitted that the exercise of the power was beyond jurisdiction as there wasno allegation of avoidance and evasion of tax by theparties. In the absence of such allegation, exercise ofthe power was bad in law, Mr. Shah also submitted thatno positive finding has been recorded by the appropriateauthority as to how it came to a definite conclusion thatthe apparent and discounted consideration of the propertyunder consideration was understated by more than 15per cent. This is a sine qua non or condition precedentfor exercise of the power under Chapter XXC and as thesaid condition is not fulfilled, the order requires to bequashed. Mr. Shah vehemently contended that the appropriate authority has committed serious error in placingreliance; on sale instance property. Considering the location, shape, area, frontage and commercial developmentof the sale instance property and the property under consideration, no reasonable and prudent man would compare proper under consideration with the sale instance properly. On all aspects which can be said to be relevantand germane for fixing the market price, the sale instance property was better situated and price of the property under consideration could not have been fixed onthat basis. The impugned order, therefore, also requiresto be interfered with. Mr. Shah submitted that relianceplaced by the transferee on two sale instances were relevant and considering those two sale instances the authority ought to have held that the apparent as well as dis-632counted consideration of the property under considerationcould not be said to be understated by more than 15per cent. "the Court further observed :-"on the facts and in the circumstances of the case, the petition requires to be allowed. "the Court further observed :-"on the facts and in the circumstances of the case, the petition requires to be allowed. Apart from any other reason, in our opinion, the appropriate authority has committed a grave error of law apparent on the face of therecord in placing reliance on the sale instance propertyand in passing the impugned order on that basis. As isclear, while passing the impugned order, the appropriateauthority has referred to and relied upon considerationand market price of the sale instance property. However, it is the case of the petitioner that the sale instanceproperty could not be said to be a comparable sale instance, Regarding the situation of the sale instance property and the property under consideration, the appropriate authority observed that both the sale instance property and the property under consideration were situated in a commercial zone. The property under consideration was situated behind Mount Carmel High School ina commercial zone, it is indeed a relevant factor whetherthere is commercial development around property underconsideration. Likewise, it is also important to bear inmind whether the frontage available to sale instance property was much more than the one available to the property under consideration. The appropriate authorityobserved:"though the frontage is narrow, it does not affect the valueof the property under consideration substantially compared to the sale instance property. . . . . . . . . "mr. Shah rightly contended that it cannot be said that thenarrow frontage does not affect value of the property. Regarding shape also, the appropriate authority was notright in not allowing deduction particularly when it didnot dispute the submission of the petitioner that the property under consideration was having an odd shape. Again, the appropriate authority has committed an error oflaw on the face of the record in observing that thoughthe frontage of the property under consideration wasnarrow on the 30' wide T. P. Road, whereas the saleinstance property was having a wide road. It would notaffect the value of the property under consideration subs-633tautially compared to the sale instance property inasmuchas the sale instance property, due to its proximity to thehigh Court, suffered from the problem of traffic and vehicular pollution. Ordinarily, wide frontage should be considered as beneficial to the property than narrow frontage. It is true that heavy traffic or vehicular pollutionmay adversely, effect the property but then there mustbe some material or evidence on record on the basisof. Ordinarily, wide frontage should be considered as beneficial to the property than narrow frontage. It is true that heavy traffic or vehicular pollutionmay adversely, effect the property but then there mustbe some material or evidence on record on the basisof. which, the appropriate authority may form an opinionby recording a definite finding to that effect. In the absence of such finding or material on record) no inferencecan be drawn nor conclusion can be arrived at that because of proximity to a particular, place, there would bea problem of traffic and vehicular pollution. Despite these facts, the appropriate authority in sub-para (4)of para 5 compared the property under consideration withthe sale instance property and no deduction from therate of the sale instance property was allowed to the property under consideration. The above approach of theappropriate authority cannot be said to be legal and inaccordance with law. The appropriate authority has also erred in not relying uponsale instances of sale instance property-land sale instanceproperty-2 on which reliance was placed by the petitioner. Sale instance property-1 is situated at the end of C. G. Roadwhich, according to the petitioner is a commercially developed area. The property under consideration is situatedon Ashram Road but on to wide T. P. Road taking offfrom Ashram Road. Similarly, sale instance property-2is situated on 40 T. P. Road taking off from C. G. Roadwhich is also occupied by the two tenants and it oughtto have been considered in its proper perspective. Mr. Shah is right in submitting that the fact that the transferexpenses were to be borne by the purchaser is a relevantfact and it ought to have been given due importance. Theauthority was not right in observing that it would notaffect the value of the property. Apart from the above grounds, in our opinion, Mr. Shah isright in submitting that the satisfaction as contemplatedby section 269ud (1) must be based on objective fads. There must be evidence and material to arrive at the conclusion and satisfaction. Rejection of sale instances and/or grounds and/or reasons put forth by the party is onething. At the most, it can be said to be a negative finding for not accepting the case of the transferor634transferee. But, the law requires something mode. In ouropinion, it is incumbent upon the appropriateauthorityto come to a positive finding and definite conclusion thatthe property was undervalued. At the most, it can be said to be a negative finding for not accepting the case of the transferor634transferee. But, the law requires something mode. In ouropinion, it is incumbent upon the appropriateauthorityto come to a positive finding and definite conclusion thatthe property was undervalued. In the absence of sucha finding or conclusion, no order under section 269ud (1)can be made. A similar question arose before us inspecial Civil Application No. 869 of 1995-Anagramfinance Ltd. v. Appropriate Authority (1996 217 ITR22 (Guj) decided by us on 30/03/1995. Consideringthe relevant provisions of the Act as also the decision ofthe Hon'ble Supreme Court in Barium Chemicals Ltd. v. Company Law Board (1996) 36 Comp Case 639; AIR1967 SC 295, we observed (at page 28):"the combined reading of action 269ud (1a) and (1b)of the Act leaves no room for doubt that it is aquestion of objective decision-making process by takinginto consideration all relevant materials which havecome before the hearing authority and considering therival aspects of the matter. Moreover, the requirementof law is to specify the grounds on which the order ofpre-emptive purchase is made. That obligation doesnot stop by merely rejecting the submissions made beforeit. The rejection of submissions made by thevendors on the transferee or the person interested in thepropertly, does not lead to a consequence that groundsfor making pre-emptive purchase exist. The sine quanon is that reasons must exist, on the material placedbefore it, for supporting the action taken for pre-emptivepurchase under section 269ud of the Act. The orderclearly falls short of this requirement. In our opinion, the point is concluded by the abovedecision also. Since no satisfaction has been arrivedat by the respondent on the basis of objective facts andno reasons have been recorded for coming to a positiveconclusion as to why there was diffcrence of morethan 15 per cent. , the order cannot be said to be inaccordance with law and must be quashed and setaside. " ( 149 ) IN Natvaral Dayarjibai Patel vs. Union of India and others, (1996) 218 ITR 226 (113) the same Bench of the Gujarat Highcourt delivered judgment in a similar matter on 25-7-1995. Here theorder of the Appropriate Authority dated 27-10-1994 was challenged. Dealing with the challenge the Court observed :-635"apart from the above grounds, in our opinion. Mr. Soparkaris right in submitting that the satisfaction as contemplatedby section 269ud (1) must be based on objective facts. Here theorder of the Appropriate Authority dated 27-10-1994 was challenged. Dealing with the challenge the Court observed :-635"apart from the above grounds, in our opinion. Mr. Soparkaris right in submitting that the satisfaction as contemplatedby section 269ud (1) must be based on objective facts. There must be evidence and material to arrive at theconclusion and satisfaction. Selection of sale instancesand/or grounds and/or reasons put forward by the partyis one thing. At the most, it can be said to be a negative finding fort not accepting the case of the transferor/transferee. The law, however, requires something more. In our opinion, it is incumbent upon the appropriate authority to come to a positive and definite conclusion that theproperty was undervalued. A similar question arose beforeus in Special Civil Application No. 869 of 1995-Anagramfanance Ltd. vs. Appropriate Authority (1996) 217 ITR22 (Guj) decided by us on 30/03/1995. Consideringthe relevant provisions of the Act as also the derision ofthe Hon'ble Supreme Court In Barium Chemicals Ltd. vs. Company Law Board (1996) 36 Comp Case 639: AIR1967 SC 295. we observed (at page 28):a combined reading of section 269ud (1 A) and (1b) ofthe Act leaves no room for doubt that it is a questionof objective decision-making process by taking into consideration all relevant materials which have come beforethe hearing authority and considering the rival aspects ofthe matter. Moreover, the requirement of law is to specifythe grounds on which the order of pre-emptive purchaseis made. That obligation does not stop by merely rejecting the submissions made before it. The rejection ofsubmissions made by the vendors or the transferee or theperson interested in the property, does not lead to a consequence that grounds for making pre-emptive purchaseexist. The sine qua non is that reasons must exist, onthe material placed before it, for supporting the actiontaken for pre-emptive purchase under section 269ud ofthe Act. The order clearly falls short of the requirement. In our opinion, the point is concluded by the above decision also. Since no satisfaction has been arrived at bythe respondent authority on the basis of obiective factsand no reasons have been recorded for coming to apositive conclusion as to why there was difference of morethan 15 per cent. , the order cannot be said to be inaccordance with law and must be quashed and setaside. " ( 150 ) IN Hindumal Balmukund Investment Co. , the order cannot be said to be inaccordance with law and must be quashed and setaside. " ( 150 ) IN Hindumal Balmukund Investment Co. Pvt. Ltd. vs. Appropriate Authority and Others, (1966) ITR 146 (114) the Divisionbench of the Gujarat High Court (Rajesh Balia and M. S. Shah636 (j) dealing with the challence of the order passed by theappropriate Authority delivered judgment on 19-9-1995 followingtheir earlier view in, the matter and allowing the writ petition quashingthe order and directing the issue of No Objection Certificate. ( 151 ) IN Laboni Developers vs. Appropriate Authority and Others,the same Division Bench rendered another judgment on 19-10-1995. (115) The Bench observed-"in our view, the appropriate authority has not given anypositive finding to the effect that. there was an attempt toevade tax or that the apparent consideraion was lower thanthe real consideration. The authority could have raiseda presumption about intention to evade tax in the showcause notice. After hearing the partics, the authoritycould have held that the presumption was not rebuttedand given the finding that the apparent consideration mentioned in the agreement was understated with a view toevade tax. However, since the mandatory requirement ofgiving such a positive finding is not complied with, in ouropinion, the order deserves to be quashed and set aside. " ( 152 ) IN Shriniketan Members Association and Anujmembers Association vs. Appropriate Authority and others, (1996) 219 ITR 359 (116) the same Bench of thegujarat High Court delivered judgment on 20-10-1995. The Courtfollowed the judgment in (1966) 219 ITR 146 (supra) emphasisingthe points stated earlier in the following terms :-It may further been noticed that if in ths estimated of the appropriate authority the apparent consideration of the pro-perty stated in the agreement to sell is less by 15 per centor more of its fair market value, the presumption of understatement having been made with the intention to evadethe tax may be raised by it. However, such a presumption is not a statutory presumption which ismandatory required to he drawn in allcase. . . . mere finding of understatement. without recording the conclusion of the appropriate authority himself, about a nexus between understatement of consideration and attempt to tax evasion, it is not permissible toraise presumption that the appropriate authority has alsofound that such understatement was an attempt to evadethe tax when such an order is challenged before courts. . . . mere finding of understatement. without recording the conclusion of the appropriate authority himself, about a nexus between understatement of consideration and attempt to tax evasion, it is not permissible toraise presumption that the appropriate authority has alsofound that such understatement was an attempt to evadethe tax when such an order is challenged before courts. Itis also to be seen that for element of a nexus being present with the understatement of consideration and attempt to evade tax, it is essential that the apparent considerationis not the real consideration. Therefore, merely on thefinding that the apparent consideration is less than fairmarket value without there being any satisfaction that theapparent consideration is not the real consideration, thenexus cannot be established with an attempt to evade tax. Therefore, it is also necessary in the chain of decisionmaking not only to arrive at the conclusion of the differentiation between the fair market value and the apparentconsideration but it is required that the fair market valueof the property concerned is arrived at and a conclusionis reached that the apparent consideration is not the realconsideration. "after referring to the impugned order therein the Bench observed:-" There is not a whisper about the satisfaction of the authorityas to whether the difference between the apparent consideration and the fair market value is on account of anyattempt or intention to evade tax. The order, therefore,clearly falls short of the requirement that the power undersection 269 UD of the Act. is to be exercised only in thecase where the apprtopriate authority has arrived at thefinding that the difference between the apparent consideration and the fair market value is with a view to evadingtax. In view of the above discussion, the impugned ordersdated 31/07/1995, at annexures "f" and "g" arequashed and set aside. Respondent No. 1 is directed toissue no objection certificate as contemplated under section 269ul of the Act within a period of six weeks fromthe date of furnishing of certified copy of this order orsix weeks from the date of receipt of writ of this courtwhichever is earlier. " ( 153 ) IN Vijay Kumar Sharma vs. Appropriate Authority, (1996)220itr 509 (118) the Division Bench of the Allahabad High Courtdealt with the aspect and that judgment was delivered on 20-9-1994the order of compulsory purchase was made on 24-3-1993 withoutaffording opportunity to the parties. " ( 153 ) IN Vijay Kumar Sharma vs. Appropriate Authority, (1996)220itr 509 (118) the Division Bench of the Allahabad High Courtdealt with the aspect and that judgment was delivered on 20-9-1994the order of compulsory purchase was made on 24-3-1993 withoutaffording opportunity to the parties. The Court posed the question"we first deal with the question whether the petitioner has been givena reasonable opportunity of being heard before making the impugnedorder of compulsory purchase of the property in question. " The Benchreferred to the judgment of the Supreme Court in C. B. Gautam's case. The learned Judges rested their view on the observations of the Gujarathigh Court in Commissioner of Income Tax vs. Vimlaben Bhagwandas Patel (Smt.) (1979118 ITR 134 (119) (Guj.) wherein if was observed:-"in the perspective of this settled legal position of law, we haveto examine as to what would be the contents of the principles of natural justice in the inquiry before the competent authority. By and large,it can be said that in the enquiry underchapter XX-A of the Income-tax Act, 1961, the transferor and/or transferee as 'veil as the occupant and anyother known interested person should be told the nature ofallegations against him including the material collected sofar by the competent authority, and be furnished copiesof the statements recorded, and those of the documentscollected by the competent authority on which he intendsto rely so as to give the person interested or affected anopportunity to state his case and to correct or controvertthe material sought to be relied upon, and the competentauthority should act in a just manner at all stages of suchinquiry which would necessarily imply that the authorityshall furnish any other additional material which it mighthave collected after the initiation of the proceedings inthe course of the inquiry to the person interested or affected by the proposed acqiisition. . . . And then the Bench observed that "we are in respectful agreementwith the above observation. " The Allahabad High Court set asidethe order and quashed the order on the ground that two monthsperiod had expired and, therefore, it was not a fit case for remittal. ( 154 ) IN Gangadhar alias Tatya Shed Bhawnnrao vs. Appropriateauthorities and others (1996) 220 ITR 579 (120) the Gujarat Highcourt had again an occasion to deal with the point. The Benchconsisted of B. C. Patel and R. M. Doshit JJ and the judgment wasrendered on March 29 and 30, 1996. ( 154 ) IN Gangadhar alias Tatya Shed Bhawnnrao vs. Appropriateauthorities and others (1996) 220 ITR 579 (120) the Gujarat Highcourt had again an occasion to deal with the point. The Benchconsisted of B. C. Patel and R. M. Doshit JJ and the judgment wasrendered on March 29 and 30, 1996. The order of compulsorypurchase was quashed holding "the sine qua non is that reasons mustexist, on the material placed before it, tor supporting the action takenfor preemptive purchase under section 269ud of the Act. Theorder clearly falls short of this requirement. " ( 155 ) IN E. Vittal and Another vs. Appropriate Authority andothers, (1996) 221 ITR 760 (121), a Division Bench of the Andhrapradesh High Court consisting of Shyed Shah Mohammed Quadriand B. Sudershan Reddy JJ delivered the judgment on 17-6-1996. The order of compulsory purchase was passed on 25-9-1994. Thecourt held :-"in our view, the appropriate authority had relied upon thedocuments to record the finding of understatement of thesale consideration, in all fairness, the copies of thedocuments should have been furnished to the agreementholders particularly when they have brought to the noticeof the authority that in spits of efforts they were not in aposition to secure the same. We may observe here thatwhere a statutory authority relies upon a document in aproceeding but denies a copy of the same to the effectedparty, he violates the principles of natural justice as theopportunity of being herd should be an effective opportunity but not an empty formality. Had copies of thosedocuments been given to the petitioners, they wouldhave been in a position to show that the considerationmentioned therein was overstated or would have broughton record circumstances under which a higher consideration was agreed upon between the parties, which didnot represent fair market value. In the absence of theagreements relied upon by the appropriate authority, theagreement holders were handicapped to explain the same. It may be noticed that if the documents relied upon bythe appropriate authority are excluded from discussion,there is no material to support the finding of understatement of consideration by more than 15 per cent, in theagreement in question, recorded by the appropriateauthority to record an adverse finding against the agreement holders amounts to denial of opportunity of beingheard resulting in violation of the principles of naturaljustice which would vitiate the proceedings. " ( 156 ) IN Smt. Varshaben Bharatbhai Shah vs. Appropriate Authority and Others, (1996) 221 ITR 819 (122) the Division Benchof the Gujarat High Court consisting of B. C. Patel and R. M. Doshit J. T. and the judgment was delivered on February 5 and 6,1996. The Court considered the question about non-observance ofprinciples of natural justice. The Court noted "the Appropriateauthority took into consideration the material provided by the valuation Officer in detail but the same is not. supplied to the petitioner. "the Court also noted "it is not disputed that the reports in detailsare not supplied to the petitioner. " At page 831 the Court posed thequestion and answered it in the following terms :- "can it be said that sufficient Opportunity is afforded evenwhen parties are called upon to contradict the conclusion arrived at fort valuation without providing the reports of the Valuation Officer consisting of details ofthe properties, with detailed measurements and the cost?is it sufficient to inform the conclusions based on thereport?as held by a catena of decisions that if the adjudicator isgoing to rely on any material, evidence or document forbasing his decision against the individual, then the samemust be placed before him for comments and rebuttal. It. is regarded as a fundamental principle of natural justice that no material should be relied on against a partywithout giving him an opportunity of explaining thesame. The right to know the materials on which theauthority is going to take a decision is a part of the rightto defend oneself. Non-disclosure of evidence to theaffected party had been held to be fatal to the hearingproceedings. "it is interesting to notice that the Bench had considered earliercases of Supreme Court and observed :"the apex court in the case of Dhakeswari Cotton Mills Ltd. v. Commissioner of Income Tax (1954) 26 ITR 775: OIR 1955 SC 65 consideredthe question amongst others whether the Tribunal actedwithout jurisdiction in relying on the data supplied bythe Income-tax Department behind the back of the appellant company, and without giving it an opportunityto rebut or explain the same? The court considered thecase decided by the Full Bench of the Lahore High Courtin the case of Seth Gurmukh Singh v. CIT, AIR 1944lah. 353. The court considered thecase decided by the Full Bench of the Lahore High Courtin the case of Seth Gurmukh Singh v. CIT, AIR 1944lah. 353. (1944) 12 ITR 393, wherein it is held thatthe Income-tax Officer though not bound to rely on evidence provided by the assessee as he considers to befalse; yet, if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose tothe assessee the material on which he is going to foundthat estimate and that in case he proposes to use againstthe assessee the result of any private inquiries made byhim, he must communicate to the assessee the substanceof the information so proposed to be utilised to such anextent as to put the assessee in possession of the fullparticulars of the case he is expected to meet and thathe should be further given ample opportunity to meet it. in the instant case, the appropriate authority did not discloseto the petitioner the valuation report submitted by itssubordinate officer and in the absence of furnishing sucha report, it cannot be said to be a real hearing or a fairhearing but can be said to be an empty formality," ( 157 ) IN Ashish Mukerji v/s Union of India and Others (1996)222 ITR 168 (123) a Division Bench of the Patna High Court (D. P. Wadhwa C. J. (as His Lordship then was) and S. J Mukhopadhayaj.) considered the validity of the order passed by the Appropriateauthority on 11-7-1996. The Division Bench besides quashing theorder of the Appropriate Authority set aside the order of taking possession of the property and declared that the property shall revest inthe writ petitioner. ( 158 ) IN Mrs. Nirmal Laxminarayan Grover vs. Appropriateauthority Income-Tax Department) and 124 Others, (1997) 223itr 572 (124) the Division Bench of the Nagpur Bench of the Bombayhigh Court had an occasion to deal with the challenge on the orderpassed by the Appropriate Authority. The Division Bench came to theconclusion that in the absence of specific rules and guidelines theappropriate Authority would act only arbitrarily. The passage atpage 586 brings home the point :-"moreover, there is no material to show that in a period ofone year and two months, the market value of the landin the Civil Lines area would appreciate and that tooto the extent of 12 per cent per annum. The passage atpage 586 brings home the point :-"moreover, there is no material to show that in a period ofone year and two months, the market value of the landin the Civil Lines area would appreciate and that tooto the extent of 12 per cent per annum. Even the appropriate authority has not followed uniformity in givingsuch appreciation in land nates in the Civil Lines areasitself as in other cases in this group of writ petitions,i. e. , Writ Petition No. 715 of 1993, Writ Petition No. 1260 of 1993 and 1264 of 1993 with 2088 of 1993,the appreciation given by it without there being anymaterial on record is 10 per cent per annum. In fact,in the older passed by the appropriate authority, whichis the subject-matter of challenge in Writ Petition No. 1264 of 1993 and the connected Writ Petition No. 2088of 1993 decided today, the same sale instance whichis relied upon by it in the instant case is taken as acomparable sale instance for the suit land in the saidcase which is also situated in Civil Lines, Nagpur. Therate of appreciation, however, given to the same saleinstance is at the rate of 10 per cent per annum and not12 pen cent. "after discussing the sale instance the Court observed :--"it is thus necessary to see that the Income-tax Departmentmust make genuine efforts to find proper material orproper sale instances which are comparable time-wiseand location-wise With the sale transaction of the property in question under the agreement of sale beforeproposing its pre-emptive purchase; so that the bona fidepurchasers are not harassed and the bona fide transactions are not hampered as in the instant case wherebecause of the reliance placed by the appropriate authority upon. the sale instance which does not compare withthe suit transaction, the parties to the transaction arerequired to suffer because of the delay in completion ofthat transaction caused by the court proceedings. Theappropriate authority must keep in mind the instructionsissued by the Central Board of Direct Taxes referredto above in which the object of compulsory purchase ofthe immovable properties, which is pointed out, is toprevent proliferation of black money in real estate transactions and evasion of taxes by gross undervaluation ofthe immovable property in question. Theappropriate authority must keep in mind the instructionsissued by the Central Board of Direct Taxes referredto above in which the object of compulsory purchase ofthe immovable properties, which is pointed out, is toprevent proliferation of black money in real estate transactions and evasion of taxes by gross undervaluation ofthe immovable property in question. It is, therefore,necessary that recourse to compulsory purchase of theimmovable property in question under Chapter XX-C ofthe Act should be taken only in clear cases of grossundervaluation from which the inference must clearlyflow that it is done for evasion of taxes. As regards the principles relating to the comparable sale instances, the said principles are well settled by the judgments of the Supreme Court regarding the determinationof market value of the acquired land under the Landacquisition Act which principles can carefully be resorted to in determination of the question of gross undervaluation of the market value of the property in questionwhich are the subject-matter of compulsory purchaseunder Chapter XX-C of the Act. As pointed out herein before, the sale instance relied upon by the appropriate authority cannot be said to be a comparable saleinstance and, therefore, cannot furnish a good guide fordetermining the market value of the suit land. "the Court further observed :-"there is also force in the contention raised on behalf of thepetitioner that in the absence of the particulars of thematerial or the reason (s) being disclosed in the showcause notice for entertaining a tentative or a prima facieview that the value of the suit land is grossly understated in the agreement of sale between the parties thetransferor and the transferee have no real opportunity tomeet the case of the appropriate authority or the Income-tax Department concerned in that regard and hencethere is non-compliance with the basic principles ofnatural justice. The show-cause notice issued by thedepartment for pre-emptive purchase by the Centralgovernment under Chapter XX-C of the Act must dis-close how the tentative or prima facie conclusion is arrived at by the appropriate authority that the propertysought to be compulsorily purchased is significantlyundervalued which means lint if any particular sale instance (s) is/are relied upon to show how the property inquestion is significantly under-valued, it is necessary forthe appropriate authority to refer to the said details inthe show-cause notice so that the transferor and/or thetransferee have real and proper opportunity to meet thecase of the Department. It is necessary to see thatissuing a show-cause notice is not merely an empty formality which is incorporated in Section 269ud (1) of theact to save it from its invalidity but the opportunity toshow cause has to be read and substantial which meansthat the transferor and the transferee concerned mustknow as to why the appropriate authority is holding thattheir immovable property under ths agreement of saleis significantly under-valued. When an obligation is cast upon an authority to give a noticeto show cause before reaching any final conclusionagainst the person affected by its action, the purposeand the requirement of such a show-cause notice is twofold (i) the notice must get an opportunity to meet thecase against him and (ii) he must have an opportunityto set forth his own case to show why an order averseto him should not be passed. In this regard, de Smithin his Judicial Review of Administrative Action (Fourthedition) has observed at page 196 as follows :"natural justice generally requires that persons liable to bedirectly affected by proposed administrative acts, decisions or proceedings be given adequate notice ofwhat is proposed, so that they may be in a position- (a) to make representation on their own behalf; or (b) to appear at a hearing or inquiry (if one is to beheld) ; and (c) effectively to prepare their own case and to answerthe case (if any) they have to meet. "it must be then seen that the conclusions of the authorityat the stage of giving a show-cause notice are alwaysprima facie or tentative conclusions for if it is not so,its ultimate order would suffer from its bias, i. e. , its predetermined mind. However, because its conclusion atthe stage of show-cause notice are only prima facie ortentative conclusions, it would not mean that they arenot required to be disclosed in the show-cause notice. The above stand taken by the respondents in their return is thus wholly misconceived and is untenable. In. fact, it betrays the ignorance of the. respondents aboutthe basic tenets of the principles of natural justice whichwe have referred to above as requirements of a propershow-cause notice. The above stand taken by the respondents in their return is thus wholly misconceived and is untenable. In. fact, it betrays the ignorance of the. respondents aboutthe basic tenets of the principles of natural justice whichwe have referred to above as requirements of a propershow-cause notice. " ( 159 ) DEALING with the contentions on behalf of the Revenue thatthe inquiry was summary in nature and, therefore, the Appropriateauthority was justified in adopting its own procedure and methods,the Court observed :-"as regards the other reason given by the respondents tordispensing with the requirement of giving reason (s) ormaterial in the show-cause notice on the basis of whicha prima facie or tentative conclusion is reached by theappropriate authority that the property in question isgrossly undervalued, viz. , that the enquiry contemplatedby the Supreme Court before taking action under section 269ud (1) of the Act is a summary or a limitedenquiry, it may be seen that when the principles of natural justice are engrafted upon Section 269ud (1) of theact, its basic requirement, as hereinbefore referred to,is that the transferor! and the transferee must have afair and proper opportunity to meet the case of the Department about the undervaluation of their property inquestion and to have also a fair and proper opportunityto put forth their case to show how the considerationagreed to between them represents the fair market valueof the property in question for if not so, to put forthreasons therefor. The enquiry envisaged by section269ud (1) of the Act is summary in nature in the sensethat no elaborate procedure of enquiry, i. e. , leading elaborate evidence, etc. , is contemplated by it. However,surely it cannot mean that because the enquiry is summary in nature its very basic requirement, viz. , the observance of the minimal principles of natural justice referred to above is dispensed with. Otherwise, such anenquiry would become an empty formality and wouldnot be meaningful and effective. "the Court pointed out the duty enjoined on the Appropriateauthority in the following words :- "it may be seen that as pointed out hereinbefore in regard tothe reasons of time restraint even in a summary or limited inquiry, the appropriate authority or the concernedincome-tax Department has no make and in fact makesan enquiry and collects material on the basis of which it comes to a tentative conclusion on the question whether the property in question is grossly undervalued ornot. If such an enquiry is essential even in a summaryor limited enquiry, there is no reason why the materialcollected through such an enquiry should not be disclosed to the transferor and the transferee before takinga final view in the matter. Since the material on thebasis of which the appropriate authority holds the primafacie view that the property in question is grossly undervalued has to be thus in its possession before taking action under section 269ud (1) of the Act, the question of time-frame and summary nature of enquiry has norelevance to the question of incorporating in the showcause notice the particulars of the material in the possession of the appropriate authority on the basis of which it entertains a view that the property in question is grossly undervalued. The petitioner is, therefore, clearly prejudiced in her defencesince the relevant material upon which the prima facieview of the appropriate authority that the property inquestion is undervalued is based is not disclosed in theshow-cause notice given to her. The impugned orderof the appropriate authority passed pursuant to such adefective show-cause notice is thus illegal and is vitiatedfor not being in consonance with the basic principles ofnatural justice. In the light of the view taken by the above, it cannot he heldthat the appropriate authority has proved by clear andcogent material on record that the suit land is significantly undervalued, which is a criteria laid down by thesupreme Court for compulsory purchase of immovableproperty under section 269ud (1) of the Act in C. B. Gautam's case (1993) 199 ITR 530 (SC ). The impugned order of the appropriate authority cannot thusbe sustained and is liable to be set -aside. " ( 160 ) IN Gurbux Gianchand Motwani vs S. C. Prasad and Others. (1997) 225 ITR 134 (125) a Division Bench of the Bombay Highcourt set aside the order of compulsory purchase on the ground ofnon application of mind. The Gujarat High Court in Ketki Landholdings Pvt. Ltd. vs. Appropriate Authority and Another, 227 ITR227, 825 (126) and the Allahabad High Court in Ajeet Singh andanother vs. Appropriate Authority and Others, 226 ITR 230 (127)and Manikchand Sethia vs. Union of India and Others, 226 (128) ITR411 have taken the same view. . The Gujarat High Court in Ketki Landholdings Pvt. Ltd. vs. Appropriate Authority and Another, 227 ITR227, 825 (126) and the Allahabad High Court in Ajeet Singh andanother vs. Appropriate Authority and Others, 226 ITR 230 (127)and Manikchand Sethia vs. Union of India and Others, 226 (128) ITR411 have taken the same view. . ( 161 ) ON a careful consideration of all the materials availableand considering them in the light of the law laid down by thesupreme Court followed by all High Courts, we are of the viewthat the conclusion is irresistible that the Appropriate Authority hadnot at all discharged the initial burden or establishing in all casesthat the apparent consideration in the agreement for sale is less than15% of the fair market value and there has been an intention toevade tax. We have no hesitation in setting aside the orders passedby the Appropriate Authority in all the writ petitions and the Appropriate Authority shall issue no objection certificates to the parties inall the cases, as requested by them in the application in Form 37-1. There shall be no order as to costs. ( 162 ) D. V. Writs allowed. ( 163 ) Y K. SABHARWAL, J.--The challenge in all these writpetitions is to the legality of orders of pre-emptive purchase made bythe appropriate authority (hereinafter referred as 'the authority') inexercise of powers under Section 269ud (1) of the Income-Tax Act,1961 (for short 'the Act' ). ( 164 ) THE facts of each case, the historical background of enactingchapter XX-C, the relevant statutory provisions, the contentions urgedand judgments cited by learned counsel for the parties have beennoticed in detail in the judgment of Brother Justice Ramamoorthy,and, therefore, I do not consider it necessary to again notice the samein any detail. Thus I would only summarise my conclusions on someof the legal issues involved and briefly deal with the individual cases. First, on legal issues : ( 1 ) Condition precedent for passing an order under Section269ud (1) of the Act is under-statement of apparent consideration to the extent of atleast 15% and with a viewto evade tax or conceal income. (2) There is rebuttable presumption of tax evasion where fairmarket value of the subject property exceeds the apparentconsideration by 15%. First, on legal issues : ( 1 ) Condition precedent for passing an order under Section269ud (1) of the Act is under-statement of apparent consideration to the extent of atleast 15% and with a viewto evade tax or conceal income. (2) There is rebuttable presumption of tax evasion where fairmarket value of the subject property exceeds the apparentconsideration by 15%. (3) Passing of a pre-emptive purchase order under Section269ud (1) of the Act implies tax evasion and imputation of tax evasion adversely affects the reputation andimage of the concerned parties and, therefore, purchaseorder shall not be made lightly and in routine. (4) Burden lies on t authority to establish that apparent consideration falls short of market value by mere than 15%and it never shifts; only the onus continues shifting fromone to another. (5) Parties are entitled to be supplied entire material reliedupon by the authority including the valuation reports onrecord. (6) The imputation of tax evasion or concealment of incomecannot be mechanically or rightly made without due regard to the explanation of the affected partics and meticulous examination of instance of comparable propertiescited by the affected parties and peculiar circumstancesresulting in the reduction of the value of the property. (7) It is impermissible to pass an pre-emptive purchase orderwhere material is placed before the authority showing thatthere was no occasion for making under valuation of aproperty with a view to evade tax or conceal income. (18 ) Since no appeal has been provided for in the Act, theauthority is required to be more cautious in its approachwhile passing a pre-emptive purchase order. (9) The discretion of passing a pre-emptive purchase orderis to be exercised by subjective satisfaction of objectivefacts. (10) Except in glaring and clear cases or gross under valuation and large scale tax evasion, purchase order undersection 269ud (1) of the Act in respect of propertieswith bonafide tenancy of long standing cannot be made. (11) Where the explanation offered in response to show causenotice is plausible, the plea that there is no tax evasiondeserves to be ordinarily accepted. (12) While exercising powers of judicial review under Article226 of the Constitution of India, though the case is notto be examined as an Appellate Court, but at the same. time it has to be kept in view that a citizen has no alternative remedy. (12) While exercising powers of judicial review under Article226 of the Constitution of India, though the case is notto be examined as an Appellate Court, but at the same. time it has to be kept in view that a citizen has no alternative remedy. It is permissible to examine whether extraneous matters have been considered by the authority andrelevant matters have not been taken into consideration. (13) Constitutional validity of Chapter XX-C of the Act cannot be questioned in view of the decision of the Supremecourt in C. B. Gautam's case, 199, ITR 530. (14) The Court can also look into the files of the authority to satisfy as to whether the order is perverse or not. (15) Normally such cases where the pre-emptive purchase orders are passed in violation of the principles of naturaljustice may be remanded for fresh decision by the authority but in cases where reasons given by the authority in the order are found to be erroneous, ordinarily the question. of remand would not arise and the said cases would be decided on the basis of material on record. (16) The mode, manner and method of arriving at a valuation of a property is a part of procedure, which has to be fair, just and reasonable. (17) Ordinarily, for determining fair market value of a tenanted property no comparison can be made with the sale instance of a vacant property. (18) The offer received in respect of subject property from a third party after the date of agreement or at the auctionof the same property later, cannot ordinarily be taken into consideration for determining its fair market value. (19) General guidelines and criteria to make adjustments on account of time, locations, size of plot etc. for comparing value of different properties, to determine fair market value of the subject property, shall be made known to the public and shall not be as a guarded secret. (20) In determining fair market value of a property, regard must be had to the field realities, such as long delays taking place in Courts in getting possession from bonafide tenants in cases where tenants have protection of Rent Laws and also in cases where suits for possession are filed under Transfer of Property Act. (20) In determining fair market value of a property, regard must be had to the field realities, such as long delays taking place in Courts in getting possession from bonafide tenants in cases where tenants have protection of Rent Laws and also in cases where suits for possession are filed under Transfer of Property Act. (21) Fair market value of a property cannot be determined by theoretical considerations in an abstract manner by applying multipliers and arbitrary adjustments since, as far as possible, the actual value of a property in the market is required to be determined for action under Chapter XX-C of the Act. (22) The element of guess work inherent in most cases involving determining of market value has not to be taken us factor against the citizens. 649 (23) For determining under valuation and tax evasion, events as on the date of the agreement of sale are to be takeninto consideration. (24) Where the seller needs immediate money and agrees tosell his property at a value less than the market value,it would not be permissible to make an order of preemptive purchase. (25) The plea of distress sale. and at the same lime the pleathat property was agreed to be sold at the market value,are not mutually destructive and can be raised as alternate pleas. (26) The failure to tender or deposit the whole or any partof the amount of consideration in terms of Section 269ug (1), attracts Section 269 UH. resulting in the abrogation of the purchase order and re-vesting of the property in the transferor with all consequential results inaccordance with law. ( 165 ) BEARING in view the aforesaid principles now I will brieflydeal with the individual cases :-CW. 5220/93. ( 166 ) IN this case property bearing No. G-4, Maharani Bagh, Newdelhi having ground and first floor on plot area of 800 sq. yards wasagreed to be sold in terms of the agreement dated 1/07/1993 for thesale Consideration of Rs. 74,99,390. 00 inclusive of liabality to pay unearned increase amounting to Rs. 34,99,390. 00. The property is inoccupation of tenants. The agreement provides that physical possession of only roof over the first floor would be delivered to the purchaser and for the rest of the property,. only constructive possessionwas agreed to be delivered. ( 167 ) THE authority has found the property in question to be grossly undervalued. 34,99,390. 00. The property is inoccupation of tenants. The agreement provides that physical possession of only roof over the first floor would be delivered to the purchaser and for the rest of the property,. only constructive possessionwas agreed to be delivered. ( 167 ) THE authority has found the property in question to be grossly undervalued. ( 168 ) IT was not disputed that the tenancies were bonafide and oflong standing. It is not acase of setting up; of fake tenancies toundervalue the property. It is also not in dispute that in none ofthe three properties of which sale instance were taken into consideration, there were tenants. The possession of the said properties was with sellers and it was to be delivered by the-sellers to thepurchasers. ( 169 ) THE authority after working out the fair market value of thesale instance properties has discounted the value of the property inquestion on account of tenancies. The discounted value has beenworked out by applying deferment period of 5 to 6 years at the rateof 8 per cent per annum. As a result of above formula the valuehas been discounted by 32 to 37 per cent: and the market value hasthus been worked out at 68% 163% of the value of sale instance properties. ( 170 ) THE authority has also considered two offers made to itthough it is claimed that said offers were not made the basis of thepurchase order but it only corroborated other evidence on rccordshowing undervaluations. ( 171 ) THE agreement in respect of property of G 8 Maharani Baghbeing one of the sale instance, properties taken into consideration fordetermining the fair market value of the property, had been enteredinto on 25-6-1991. On account of the time gap of 24 months theadjustment of plus 24% was made. In another sale instance property being G-8, Maharani Bagh there was basement potential and,therefore, adjustment of minus 10% was made by the authority onthat count. ( 172 ) THE impugned pre-emptive purchase order is utterly perverse. There is nothing on record to suggest as to what were thespecial reasons for making a purchase order in respect of almostwholly tenanted property. Assuming there was some justification forthe authority to initiate proceedings for the pre-emptive purchase ofthe property under Chapter XX-C of the Act, the method of valuation of the fair market value had to be just and reasonable. Assuming there was some justification forthe authority to initiate proceedings for the pre-emptive purchase ofthe property under Chapter XX-C of the Act, the method of valuation of the fair market value had to be just and reasonable. Theauthority lias compared value of incomparable properties. Whileconsidering comparable instances, the instance of tenanted propertieshad to be taken into consideration and not vacant properties by discounting as was done by the authority for which, in the facts and circumstancesof the case, we find no factual or legal sanction. Further,while considering the comparable instances proximity from timeangle has also to be seen. The agreement in respect of property G-8, Maharani Bagh, New Delhi, had been entered into injune 1991 whereas the agreement of the property in question is dated 1/07/1993. We find no legal basis by adding 24% on the hypothetical basis that there would be an increase of 1% every month. In respect of tenancy, one of the plea takan before us in the affidavitby the respondents is that the purchaser on mutual terms could getthe property vacated from the tenant. We may note that groundfloor tenancy was from the year 1979 and first floor tenancy wasfrom the year 1967. We see no basis for presuming that the tenantswould vacate in 516 years. Further, on the facts of the case. neitherthe offer of the tenants could be taken into consideration for determining the fair market value of the property nor the tenant had anylocus stand to urge before us that the pre-emptive purchase olderdeserves to bemade or was rightly made. Further, if during thependency of proceedings in a court of law questioning the validityof a pre-emptive purchase order, property is put to public auctionby the government, the bidders and/or the highest bidder in theauction do not get any vested right to oppose the writ petition. ( 173 ) FURTHER, the sale instance of property S-39-A, Panchsheelpark, New Delhi, which was substantially tenanted without anyjustification, was not taken into consideration, though rent capitalisation method was applied in the said case. No plausible reason hasbeen given why in one case of tenanted property rent capitalisationmethod was applied to work out the fair market value and in theother case land and building method was applied. ( 174 ) THE impugned order deserves to be quashed. CW. 4153/93. ( 175 ) IN this writ petition the property, in respect of. No plausible reason hasbeen given why in one case of tenanted property rent capitalisationmethod was applied to work out the fair market value and in theother case land and building method was applied. ( 174 ) THE impugned order deserves to be quashed. CW. 4153/93. ( 175 ) IN this writ petition the property, in respect of. which preemptive purchase order has been made, is 25 Friends Colony, Newdelhi with the plot area of 3593. 32 sq. mtrs. including 8300. 95 sq. metrs, declared excess land under Urban Land Ceiling Regulationact. The net area of the plot under the property, therefore, is2364. 37 sq. mtrs. The property was agreed to bs sold for apparent consideration of Rs. 1. 75 crores under agreement dated 1/02/1991. The earlier order for pre-emptive purchase madein respect of this property on 18/04/1991 by the authority wasset aside by this Court on 1/03/1993, in view of decision ofthe Supreme Court in C. B. Gautam's case and the matter remandedto the authority for fresh examination. Thereafter, the show causenotice dated 21/05/1993 was issued by the authority and theimpugned pre-emptive purchase order v/as made on 28/05/1993. ( 176 ) THIS property is also tenanted. The facts noticed in theimpugned order passed by the authority show that from the 1/01/1974 the lessee of the property was M/s. Jain Shudh Vanaspati Ltd. at a monthly rent of Rs. 4,000, for the residence of Vinodkumar Jain who had been in occupation of the said property asdirector of the lessee company. In terms of lease deed dated 1/12/1983 the entire property was leased to Vinod Kumarjain for a period of 5 years at a monthly rental of Rs. 4,000 including Rs. 1. 000 as rent for garages, servants/driver quarters excludingelectricity and water charges various litigations were pending betweenlesson and lessee in respect of the property in question. The impugned order itself shows how strenuously the tenant was contesting proceedings before the authority. The impugned order records the offerof Vinod Kumar Jam to buy the property at a price of Rs. 4. 5 crores. The offer, however, seems to have been given in 1993 whereas theagreement in question is dated 1/02/1991. ( 177 ) THE sale instance of property No. 60, Friends Colony,new Delhi was taken into consideration to arrive at the land valueand the value of the subject property at Rs. 4. 564 crores. Theproperty No. 60 Friends Colony, a? 4. 5 crores. The offer, however, seems to have been given in 1993 whereas theagreement in question is dated 1/02/1991. ( 177 ) THE sale instance of property No. 60, Friends Colony,new Delhi was taken into consideration to arrive at the land valueand the value of the subject property at Rs. 4. 564 crores. Theproperty No. 60 Friends Colony, a? per the impugned order, wasagreed to be sold on 5/12/1990 for apparent considerationof Rs. 2. 65 crores. The area of the said property was 1473. 91 sq. mtrs. After deducting the depreciated value of the structure, theland rate of the sale instance property was worked out to Rs. 21,586' per sq. mtrs. and after some adjust on account of time gap, basement,'. potential and the location of the land etc. , the land rateof the property in question was worked out to Rs. 24,140 persq. mtr. Again the sale instance property was not tenanted whereasthe subject property was tenanted and, therefore, its value wasdeferred for 5 years at the rate of 8 per cent interest and that ishow the value of Rs. 4. 55 crores was worked out and after deductingthe salvage value of Rs. 1. 64,000 of the. structure the value of property wa's worked out to Rs. 4. 65 crores. ( 178 ) THIS case again demonstrates wholly illegal, irrational andarbitrary approach adopted by the authority. Firstly there is nospecial reason for making a pre-emptive purchase order ?n respectof a property which is wholly tenanted and is subject to variousjitigations. Curiously the authority deals with this aspect by statingthat-transferee should haye bee^ happv to get out of adeal of aproperty which is encumbered by litigation. Be that as itmay and assuming there was some justification for issuing showcause notice to consider pre-emptive purchase order being madein respect of property in question, the method of valuation adoptedby the-authority is also wholly arbitrary and irrational. In respectof the subject property whereof there is so much of litigation, theauthority labours under the belief that period of lease agreementhaving already, expired and tenancy after the lease period beingmonthly, there, could be no question of tenant being not evicted.- Under these circumstances 5 vears deferment formula was appliedfor 'determining the market value and not rent capitalisation methodit has to be borne in mind that the monthly rent was only Rs. 4. 000. 4. 000. It also deserves to be notticed that though the sale instanceof property No. 60 was taken into consideration for determiningthe fair market value of the property in question but it is now"come on record that in resnect of prooprty No. 60 Friends Colonyagreement dated 5/12/1990 for Rs. 2. 65 crores did notmaterialise. The seller forfeited R. 25 lakhs and the said agreement was capeelled and under a subsequent agreement of Sentember, 1901 the property was sold at Rs. 2. 40 crores. On that asreement'no Objection Certificate' was granted by the appropriateauthority. According to the approach of the authority, if on accountof nominal rent of Rs. 4. 000 like the one in respect of property' inquestion and on account of various litigations betveen tenant andthe owner, the owner sells the property, then too it is not "pressingcircumstance" for sale of the property. Moreover "the petitionerhad given instances of at least 12 tenanted properties in 'respectof which the permission was granted and the same were valuedas per the averments made by the petitioner applying rent capitalisation method. There is nothing in the reply of the respondent toexplain those cases. Further in the CWP No. 5220/93 referredto above, deferment period of 6 years was applied and in this casedeferment period of 5 years was applied. What is the rational, wedo not know ? These matters cannot be left to the undisclosed,unguided and uncontrolled discretion of the authority. 'i am alsounable to appreciate the contention that valuation report/dataprepared by the staff was not necessary to be supplied to the transferor and transferee even when asked for. There is also no justification to deny opportunity to parties to file valuation reports 'on theground that it is not required by the authority and, therefore, it isnot necessary to allow transferor and transferee to file such a reportfrom a Government recognised valuer. Regarding the non-supplyof valuation report the approach of the authority is clear from itsfollowing observations : "it is alleged the reasons recorded had notbeen supplied and copies of the valuation report have also notbeen supplied to the transferees. There is no need to aflow inspectionof the Government records unless some evidence is being usedwithout confronting to the parties. In this case the show causenotice clearly indicates the reasons as to why apparent considerationwas considered low". There is no need to aflow inspectionof the Government records unless some evidence is being usedwithout confronting to the parties. In this case the show causenotice clearly indicates the reasons as to why apparent considerationwas considered low". ( 179 ) THE whole approach of the authority in the matter is clearlyperverse and thus the impugned order deserves to be quashed. C. W. 4589/94 ( 180 ) THE property in question in this petition is A-6, Chiragenclave, New Delhi, which was agreed to be sold for sum ofrs. 2. 70 crores besides unearned increase payable by the purchaserunder the agreement dated 18-4-1994. The built up area of theproperty is 4300 sq. ft. By show cause notice dated 6-7-1994 thetransferor and transferee were granted opportunity to show causewhy pre-emptive purchase order under Section 209-UD (1) of theact be net made. The impugned order of pre-emptive purchasewas made by the authority on 28-7-1994. The sale instances givenin the show cause notice and confirmed under the impugned orderfor determining the fair market value of the property are :- (1) 4, Palam Vihar Vasant Vihar. (2) N-l19, Panchsheel Park. New Delhi. (3) A-95, Neeti Bagh, New Delhi. . ( 181 ) IN respect of Vasant Vihar property the agreement tosell was dated 20-8-1993; in respect of Panchsheel park propertythe agreement was dated 29-9-1996, and in respect of Neeti Baghpreperty the agreeement was dated 28-10-1993. After plus andminus adjustments on account-of time gap, locational differenceof the colony-and the plot etc. the unit land rate per sq. meterwas worked out to Rs. 33,440-by applying the sale instance ofvasant Vihar property, Rs. 41,460 On the basis of Panchsheel Park property and Rs. 34,172 per sq: meter on the basis of Neetibagh. property. The sale instances given by 'the transferor" andtransferee in respect of property B-13, Greater Kailash Enclave I,b-16, Panchsheel Park, and B-4, Greater Kailash Enclave I, wherethe agreements had been executed on 17-1-1994,27-5-1993 and12-5-1993 respectively were not accepted as according to theappropriate authority there was FAR difference as high as 39 percent in respect of the sale instances relied upon by the transfereeand transferor and also that the size of the plots of sale instancesrelied- upon by the transferor/transferee was smaller. In respect ofthe said sale instances the plotted area was about 418 meter inrespect of two plots and 668 in respect of the third plot. In respect ofthe said sale instances the plotted area was about 418 meter inrespect of two plots and 668 in respect of the third plot. ( 182 ) IT has to be borne in mind that while considering thesale instances there should be basic similarity of the two propertiesparticularly in respect of the characteristic of the localities i. e. colonies, location and aproximity of time. The sale price of twototally dissimlar properties cannot be taken into consideration andvalue of the subject property arrived at by making adjustments. Theadjustments cannot be made to remove the basic and fundamentaldifferences. The value of a property cannot be stated in' an abstractform. By adjustment for plus and minus factors two totally incomparable properties cannot be made equal and price compared. ( 183 ) A judicial notice can be taken, of the fact of the basicdifference between the colonies like Vasant Vihar and Panchsheelenclave on one hand and Chirag Enclave on the other, the formerbeing considered to be much better colonies. ( 184 ) FURTHER there were genuine disputes about the amount ofunearned increase payable to DDA. As per letter of the DDAdated 5-9-1994, the unearned increase payable was 95. 81,149whereas the unearned increase taken into consideration by theappropriate authority for arriving at the fair market value wasrs. 55,66. 537. ( 185 ) THE sale instances of Greater Kailash I-Enclave propertieswere not accepted mainly for the reason that plots were smallerin size and there was 39 per cent adjustment had to be made in. FAR in arriving at a fair market value. Both the grounds areex-facie erroneous. Ordinarily smaller plots have more value thanthe bigger plots. Regarding the 39 per cent FAR, in other casesparticulars whereof have been placed on record by the petitioners,the authority itself had made adjustment of FAR to the extentof 40 per cent. Greater Kailash Enclave-I is adjacent to the subjectproperly and in any case better comparable than Vasant Vihararea. The authority has compared two incomparables. The impugned order thus cannot be sustained and deserves to be quashed. C. W. 3139193 ( 186 ) THE property in issue in this petition is Flat No. 2 on. 4th Floor Neelgiri Apartments, 9, Barakhamba Road, New Delhi. The petitioners who are purchasers are husband and wife. Theyare. doctors by profession. . Under the agreement dated 25-6-1991the flat in question was agreed to be sold to the petitioners for asum of Rs. 4th Floor Neelgiri Apartments, 9, Barakhamba Road, New Delhi. The petitioners who are purchasers are husband and wife. Theyare. doctors by profession. . Under the agreement dated 25-6-1991the flat in question was agreed to be sold to the petitioners for asum of Rs. 29 lakhs plus 15 per cent other charges. The preemptive purchase order made by the authority on 23-8-1991, was set aside by this court by judgment dated 1/03/1993 in view of the decision of the Supreme Court in C. B. Gautam's case. Thereafter, show cause notice dated 10-5-1993 was issued to thetransferor and transferee relying upon the sale instance of Flatno. 4 of the third floor of the same building said to have beenagreed to be sold for Rs. 38 lakhs, as per agreement, dated30-5-1991, and having the built up area of 1341 sq. ft. Thebuilt-up area of the flat in question is 1411 sq. ft. The unit rateof the sale instance flat was worked out at Rs. 2834 per sq. ft. and on that basis value of the subject flat was '. worked out atrs. 39. 99 lakhs and apparent consideration was said to be lessby about 20 per cent. The apparent consideration of the subjectflat was taken at Rs. 34,82,000 by adding lo. Rs. 29 lakhs, asum of Rs. 4,35,000 representing 15 per cent increase as per theagreement and Rs. 1,47,000 towards the interest on the amountpaid by the petitioners to the seller earlier in respect of agreementfor purchase ,of another flat, which deal did not materialise. Inthis regard, it may be noticed that earlier by agreement dated 7/03/1989 the petitioners were to purchase from the same sailerflat No. 7. on the 11th floor of Ferozeshah Road plus. a Garage. However, the plain beyond 7th floor in respect of the said building. it is claimed, were not sanctioned. The vacant possession of theflat under the agreement dated 7/03/1989 was to be deliveredto the petitioners by 6/03/1992. Under that agreement, thepetitioners had paid on 11-4-1989 a sum of Rs. 5,20,005 out oftotal amount of Rs. 18 lakhs plus incidental charges, payable forthe said flat It is in respect of this payment of Rs. 5,20,000 thatthe petitioners were claiming interest at Rs. 2,65,000 at the rateof 18 per cent but it was allowed at 10 per cent on the prevalingfixed bank rate to determine the value of the flat in question. 18 lakhs plus incidental charges, payable forthe said flat It is in respect of this payment of Rs. 5,20,000 thatthe petitioners were claiming interest at Rs. 2,65,000 at the rateof 18 per cent but it was allowed at 10 per cent on the prevalingfixed bank rate to determine the value of the flat in question. ( 187 ) THOUGH in the show cause notice the value of the saleinstance flat was stated at 2,834 and on that basis the value of thesubject flat was worked out, but in the impugned order it wasworked out at Rs. 3,000 per sq. ft. slating that. subject propertywas located on the front block of the complex whereas sale instanceflat was located in the rear block of the complex. This additionwas made without grant of any opportunity to the petitioners. ( 188 ) FURTHER, by reducing the value of the comparable flatno. 4 by Rs. I lac on account of the value of the car parkingspace, the value of the comparable flat would work but at Rs. 37lacs. On these calculations assuming the! addition of 5;per centof on account of the flat in question being in front complex can belegally made. the apparent consideration would still be within thepermissible range of 15 per cent. In. fact the 'apparent considerationpaid by the authority for the flat in question was Rs. 38. 34 lacs. The per 'square feet rate thus would be Rs. 2,717 and difference. if compared with the rate of comparable flat at Rs. 2,898 wouldbe 6. 25 per cent. It may also be noted that the case of the petitioners before the authority was that Barakhamba Road being avery busy road, it is subject to heavy air and noise pollution andhence' the flat of residential purpose in the front, complex has disadvantage. ( 189 ) THE authority erroneously rejected the value of the flaton the first and third floor in respect of which permission has beengranted on the ground that the said sales were much prior to thedate of agreement. In other cases noticed hereinbefore the authorityhad by applying adjustment taken into consideration the instancesof the sale affected about two years prior-to the date of the'agreement. ( 190 ) FURTHER, 'from the material placed on record, it appears,that Rs. In other cases noticed hereinbefore the authorityhad by applying adjustment taken into consideration the instancesof the sale affected about two years prior-to the date of the'agreement. ( 190 ) FURTHER, 'from the material placed on record, it appears,that Rs. 23,30,924 was tendered by the Central Government tothe vendor on 6/09/1993 which was beyond the stipulatedperiod under Section 269 UG ( 1 ), thereby attracting the rigours ofsection 269 UH resulting in the abrogation of the purchase order. ( 191 ) THE purchase order deserves to be quashedcwp 3726/94. ( 192 ) FLAT No. 84 in. Greater Kailash Part-1; New Delhi on thefitst floor was agreed to be sold under the agreement dated 2 3/04/1994 for Rs. 24 lacs. The transferors Mr. K. S. R. 'chari andmrs.-Chari are permanent resident of Bangalore. The authoritypassed' the impugned order on- considering the sale instances ofproperty nos. S-237 Greater Kailash Part-1 and E-547 Greaterkailash Part-II. The property S-237 had built up area of 1200sq. feet and was agreed to be sold for Rs. 24 lacs under agreement dated 2 6/11/1993. The sale instance was takeninto consideration by the authority and by making adjustment onaccount of time gap and location etc. the fair market value ofthe property in question was worked out by the authority at aboutrs. 35 lacs. By comparing the value of the property with E-547greater Kailash Part-II which was agreed to be sold for Rs. 65lacs as per agreement to sell dated 6/12/1993 and bymaking adjustments on account of time gap, location etc. the failmarket value of the subject property was worked out by the authority at about Rs. 42 lacs. ( 193 ) THE explanation given that the transferor was 75 yearsold who had retired Secretary from Government of India andbecame consultant with the World Bank, UN after retirement in1977; he wanted to settle down at Bangalore and was in needof money to make payment before 31st March, 1. 994 for Hat hehad agreed to purchase at Bangalore; the flat was sold to theimmediate neighbour of the second floor and the parties alsosaved commission to the extent of 3 per cent; the nature ofcontstruction etc. was much inferior as compared to the one in thesale instances properties and that unlike sale instance propertiesthere was no parking inside the subject building, even for a scooter)motor cycle; actual area of the flat was 1402 sq. feet and not1532 sq. was much inferior as compared to the one in thesale instances properties and that unlike sale instance propertiesthere was no parking inside the subject building, even for a scooter)motor cycle; actual area of the flat was 1402 sq. feet and not1532 sq. feet; the bed rooms are of very small size; despiteadvertisement offers were not coming; payment to the extent ofabout 70 per cent were received by 23/04/1994 as advancefrom the transferee because of the need of the transferor wereall rejected by the authority. ( 194 ) THE approach of the authority, to say the least, is not inconformity with the object underlying Chapter XX-C ; of the Act. The sum and substance of view point of the authority is as to whymr. and Mrs. Chari entered into a deal to purchase property atbangalore when they did not have arrangements of money. Thequestion, however, is not about the prudence of the transferors tosell the property to the transferee because transferors wantedimmediate payment but is whether there is any attempt to evadetax. The factor that the subject property was agreed to be soldto immediate neighbour who also gave about 70 per cent amountas advance, cannot be rejected only on the ground that onlytransactions between, the relatives on account of natural love andaffection can be considered for a value lesser than market value. The whole concept of distress sale, insofar as applicable to suchmatters, has been completely misunderstood by the authority. ( 195 ) FURTHER, the subject flat was constructed in the year 1986and was compared by the authority with a flat constructed in theyear 1993 alleged to have specification of a Five Star Hotel bymerely stating without any material on record, that the difference ofspecification in construction was negligible. At the same time thesale instance of Flats at E-273 Greater Kailash in ground floorunder Agreement dated 31/03/1993 for Rs. 17,55,000relied upon by the parties was ignored on the ground that the construction was old. The sale instance of property No. E-280greater Kailash Part-1 relied upon by the transferor and transfereewas ignored by the authority on the ground that sale instance ofthat property was more than one year old. In many other cases,as noticed hereinbefore, the authority had taken the sale in-stanceof properties sold more than two years prior to the date of theagreement under consideration by the authority. In many other cases,as noticed hereinbefore, the authority had taken the sale in-stanceof properties sold more than two years prior to the date of theagreement under consideration by the authority. ( 196 ) IT is not for the authority, as was contended before us,lo judge whether the action of the transferors to purchase propertyat Bangalore without arrangements for funds was immature andunwise act or not it is irrelevant consideration to state that allowing such a plea would open a flood gate for the purposes of pur-chases orders under Chapter XX-C. Such an approach of theauthority cannot be sustained. The authority has primarily to seewhether there is tax evasion or attempt to conceal the income whenthere is under statement of value. ( 197 ) MOREOVER, it was admitted that there was parking spaceand servant quarter facilities available in sale instance propertyat S-237 Greater Kailash Part I but no adjustment was given onthe ground that the parking space was open an. d that the servantquarter on the terrace was unauthorised. This approach againis erroneous since what has to be examined by the authority iswhether the facilities in sale instance property as con-tended by theparties were available or not and if so its effect on the fair marketvalue of the subject property and not whether the parking spaceis in open and whether the servant quarter on the terrace is authorised or unauthorised. ( 198 ) THE entire approach of the authority in these cases showthat somehow or the other, the order of pre-emptive purchaseshall be made because the show cause notice had been issued tothe transferor itransferee. The impugned order deserves to bequashed. C. W. P. 3884/94 ( 199 ) A single story property with plot area of about 325sq. yds/275 sq. meters, No. C-590 Defence Colony, New Delhi,was agreed to be sold to the petitioners in terms of agreement tosell dated 6/05/1994 for a sale consideration of Rs. 80 lacsplus conversion charges of about Rs. 1,04,000. The saleinstance of properties situate at C-77 and C-86 Defence Colonyhave been taken into consideration by the authority for coming tothe conclusion that the apparent consideration disclosed is understated by more than 15 per cent. The land rate of the subjectproperty has been worked out at Rs. 29,659 per sq. mtr. Theland rate of C-77 agreed to be sold at Rs. 99 lacs includingconversion charges as per agreement dated 22-12-1993 has beenworked out at Rs. The land rate of the subjectproperty has been worked out at Rs. 29,659 per sq. mtr. Theland rate of C-77 agreed to be sold at Rs. 99 lacs includingconversion charges as per agreement dated 22-12-1993 has beenworked out at Rs. 35,838 per sq. mtr. and it is concluded thatthe total value of the subject property is about 20 per cent higherthan the apparent consideration. It is stated to he lower by43. 6 per cent when compared to the sale instance property C-86agreed to be sold for Rs. 1. 25 crores as per agreement dated19-7-1994. ( 200 ) IT was strenuously contended before the authority by thepetitioners that the sale instance properties were not comparableon account of various factors including the nature of constructionand disadvantage of the location of the subject property, the samefacing the servant quarters of E-Block and also that the subjectproperty was under litigation and the proceedings were pendingin a Court of law. The authority ignored the pending litigation,factor by, interalia, stating that the order dated 27/05/1994passed by additional District Judge restraining the sole, transferor parting with possession of the property was only temporaryinjunction and that the pending litigation was not material. Thereason for pending litigation not being material is per authorityseems to be that under the terms of the agreement the transferorhad undertaken to indemnify the transferee, of any lossand damage on account of litigation. The step-brothersof the transferor were challenging the title of the transferor andthereby his right to sell and transfer the subject property. Theyhad also filed an application in these proceedings for beingimpleaded as a party. . ( 201 ) I fail to understand how the factor of pending litigationcould be ignored and brushed aside while determining the fairmarket value on the ground that the injunction was temporaryor that the transferor had agreed to indemnify the transferee. Noone would like to purchase a property in respect of which there isa litigation or there can be genuine litigation, which may ultimatelyfail, unless the price is considerably reduced. It deserves to benoticed that it was nobody's case that the litigation was engineeredto show that the value of the property was less. The case of engineered litigation with the object of circumventing the provision?of Chapter XX-C would, of course, be different. It deserves to benoticed that it was nobody's case that the litigation was engineeredto show that the value of the property was less. The case of engineered litigation with the object of circumventing the provision?of Chapter XX-C would, of course, be different. The pending orimpending litigation in respect of property cannot be altogetherignored while determining fair market value on the ground thatthe transferor had agreed to indemnity the transferee or that inthe long run the litigation will fail. ( 202 ) THE agreement to sell had mentioned the apprehensionof litigation and challenge to the title of seller by his relatives whoit seems, had knowledge that the seller wanted to sell the property. By notice published in. newspaper dated 22-5-94 by the seller'srelatives, they had claimed the co-ownership in the property andon 27-5-94 they had obtained ex parte order of injunction restraining the sale of property from the Additional District Judge. Asalready stated they had also moved an application for beingimpleaded as a party though the said application was rejected bythis court. In other cases the authority has been discounting thefair market value of the property on. account of litigation. Theaforesaid ground on which such discounting has been declined inpresent case, are wholly erroneous. If the value on account oflitigation had been, discounted by 10 per cent as was done in othercases while considering the fair market, the apparent considerationof the subject property would have been within permissible limits. when compared with the sale consideration of property No. C-77,defence Colony. ( 203 ) APART from the above, the authority without any justcause rejected the explanation pertaining to property at C-86 thatit was a centrally air-conditioned property and thus not comparableby merely observing that the said fact only showed that the valueof the property C-86 was slightly more. It failed to consider thatthe value of a centrally air-conditioned property could not havebeen taken- into view to value the subject property. ( 204 ) LOOKING from any angle, we find it difficult to sustain the impugned order of pre-emptive purchase and, therefore, the sameis set aside. C. W. P. 5613/93 ( 205 ) UNDER agreement dated 28/08/1993 respondent No. 3-Ved Prakash Marwaha agreed to sell to the petitioner the property A-3 East of Kailash measuring 300 sq. mtrs. for Rs. 70 lacs. C. W. P. 5613/93 ( 205 ) UNDER agreement dated 28/08/1993 respondent No. 3-Ved Prakash Marwaha agreed to sell to the petitioner the property A-3 East of Kailash measuring 300 sq. mtrs. for Rs. 70 lacs. The sale instance considered by the appropriate authority forcoming to the conclusion that there is understatement of the valueof the property is that of property No. E-326 East of Kailashwhich is situate in a different block and has a smaller plot of 167sq. mtrs that was agreed to be sold for Rs. 51 lacs under agreement dated 23-5-93. In the show cause notice the salvage valueof the sale instance property was taken- at about Rs. 55,000. 00 andthat of the subject property it was taken at about Rs. 93,000. 00. Inreply to the show cause notice filed before the authority it was. inter alia, stated by the transferor/transferee that the value of thebuilding on properly E-326 as on the date of the agreement, wouldbe about Rs. 10 lacs and that is to be taken into considerationwhile working the land value, and also that the subject property issurrounded by jhuggi jhopri as compared to property E-326 whichfaces Greater Kailash on one side and Nehru Place on the otherand that the size of the plot of the subject property was bigger. Itwas also claimed before the authority that value of the propertieswhich are in C, D and E Block of East of Kailash is more as compared to the value of the property in Block A which plea wasrejected by merely stating that it is difficult to accept such a sub-mission. ( 206 ) THOUGH the salvage value of building of the subjectproperty as given in the show cause notice was Rs. 93,000- butin the impugned order it has been taken at about Rs. 9. 92 lakhs,for coming to the conclusion that the fair market value was beyondthe permissible 15 per cent limit. Neither the fact nor the basisfor concluding that the building value was Rs. 9. 92 lakhs wasdisclosed, to the parties. Thus the principles of natural justicewere clearly violated. Besides this, it appears from the twovaluation reports obtained before the issue of show cause notice, thatthere was no undervaluation and, therefore, we fail to appreciateas to on what basis the authority came to the prima facie viewthat there was understatement of the apparent consideration. 9. 92 lakhs wasdisclosed, to the parties. Thus the principles of natural justicewere clearly violated. Besides this, it appears from the twovaluation reports obtained before the issue of show cause notice, thatthere was no undervaluation and, therefore, we fail to appreciateas to on what basis the authority came to the prima facie viewthat there was understatement of the apparent consideration. Further, the in-stance of property No. A-32 relied by parties wasrejected for irrelevant reasons. A-32 was not only the propertyin the same block but its valuation was relied upon for determining the value of property E-326 and, therefore, it could not beignored. The value of the subject property was worked out bynot only violating the principles of natural justice but also bycomparing incomparables and declining to compare the instance ofcomparable properties. In this view the impugned order of preemptive purchase deserves to be quashed. ( 207 ) UNDER agreement dated 21/05/1987 property bearingno. B-7/118 Safdarjung Enclave Extension having plotted areaof 375 sq. mtr. was agreed to be sold for 23. 50 lacs. The orderof pre-emptive purchase made on 10/07/1987 was set-asidein CWP. 2275187 decided on 1st March, 1093 in view of Supremecourt decision in C. B. Gautam's case. Thereafter the authorityissued show cause notice dated 11/05/1993 wherein it wasstated that prima facie apparent consideration of the subiect property was low as compared to other sale transactions, Referencehas been made by the authority in the show cause notice tothe land rate per sq. mtr. in respect of property No. B-1/16 Hauz. Khas. New Delhi which sale took place m February, 1987: saleinstance of property No. J-10 Green Park and yet another saleinstances of B-2/2 Safdurjung Enclave sold in February, 1987. The average of three sale instances was taken into account to workout the land rate of 7850 per sq. mtr. and it was concluded thatthe fair market value of the subject property was in excess by28. 5 per cent. ( 208 ) THE transferor and transferee in reply, inter alia, statedthat Safdarjung Enclave Extension where the property was situatewas neither developed by any Government Agency or a privatecoloniser; it was part of old village known as Arjun Nagar whichgrew in an unplanned manner with unauthorised constructionssurrounded by all sort of people - labourers and wage earnersand, therefore, the plot areas varied from 36 sq. mtr. to 500 sq. mtr. mtr. to 500 sq. mtr. with small approach roads surrounded by old Arjun Nagar Villageand labourers jhuggies: the property was owned by Sardar Mohansingh who due to political adverse atmosphere was anxious todispose of the property and to leave the country to join hisdaughter abroad and, therefore, he was desparate to sell it. According to the transferor and transferee property could not becompared with the properties at Hauz Khas, Green, Park orsafdarjung Enclave because of defective situation, small approachroads, sub-standard habitation, jhuggies and unhealthy surroundings of the subject property. The sale instances of properties soldin the same colony i. e. Safdariung Development Enclave werealso cited by the transferor/transferee to show as to what was thefair market value of the subject property. ( 209 ) MOST of the sale instances of the properties in the samecolony were rejected by the authority on the ground that the samepertain to small plots whereas the plot area of the subject propertywas bigger. ( 210 ) FOR more than one reason, we find it difficult to sustainthe impugned order. Firstly the authority has not considered atall the explanation that the owner was desparate to sell the property to go' abroad to settle with his only daughter in America. Secondly sale instances of incomparable properties in differentcolonies were taken into consideration. The question of adjustment arises only when there is basic similarity between the proper-ties in two different colonies. Thirdly, the sale instances of properties in the same colony were rejected on account of irrelevantconsideration, namely smaller size of sale instance propertiesstating that fair market value of bigger plot size properties is morethan those on smaller size plots. ( 211 ) IN my view. one of the reasons for comparing incomparable sale instances has been absence of any guidelines, norms andstandard to determine the fair market value of the properties. Themode and manner for determining the fair market value has to befair, just and reasonable and not arbitrary. The authority hasbeen applying different yardsticks in different cases. Though indetermining fair market value of a property, there has to be someelement of guess work but that does not mean that the basic factsto be taken into consideration should differ from case to case andshould depend upon as to who are the Members of the authority. Such a course would be arbitrary and violative of Article 14. Though indetermining fair market value of a property, there has to be someelement of guess work but that does not mean that the basic factsto be taken into consideration should differ from case to case andshould depend upon as to who are the Members of the authority. Such a course would be arbitrary and violative of Article 14. Thereis reasonable likelihood of arbitrariness stepping in while determining the fair market value of properties in the absence of anynorms and guidelines for addition and/or deduction. ( 212 ) THE impugned order deserves to be quashed. ( 213 ) IN this case the impugned pre-emptive purchase orderdated 27/11/1989 has been made by the authority inrespect of Property No. 756 Asian Game Village which was agreedto be sold for Rs. 20 lacs in terms of the agreement dated 1 4/09/1989. ( 214 ) THE respondents stated that they have no objection forsetting aside of the impugned order and the matter being decidedafresh by the authority after affording an opportunity to the partiesin terms of the decision of the Supreme Court in C. B. Gautam'scase. The impugned order in this case was made prior to thesuprenie Court decision in C. B. Gautam's case. According to thepetitioner, it is not necessary to remand the matter for the freshdecision by the authority since the impugned order stands abrogated. It was sirenuously contended for the pettitionerthat. for want of deposit of the full amount of Rs. 20 lacs by due date i. e. by 30/06/1990, the order of pre-emptive purchase stands abrogated under Section 269 UH of the Act. In case the plea ofabrogation is accepted, it would not be necessary to examinewhether the case deserves to be remanded for fresh decision ofthe authority, ( 215 ) A writ petition (CWP No. 3459/89) earlier filedchallenging the order of pre-emptive purchase was dismissed aswithdrawn on 10/05/1990. The court directed that interimorders granted in the said petition are vacated as on 10/05/1990 and that the effect of it would be that the order under Section 269 UD (1) would be deemed to have beer. passed on 10thmay, 1990 for the purpose of limitation and other consequences. In this view the amount of consideration under Section 269 UGadmittedly was liable to be paid or deposited by 30/06/1990. A sum of Rs. 8. 5 lakhs was given to respondents 4 and 5 on 6/07/1990 and Rs. 11. passed on 10thmay, 1990 for the purpose of limitation and other consequences. In this view the amount of consideration under Section 269 UGadmittedly was liable to be paid or deposited by 30/06/1990. A sum of Rs. 8. 5 lakhs was given to respondents 4 and 5 on 6/07/1990 and Rs. 11. 5 lakhs payable to the petitioner accordingto the petitioner, was deposited with the authority after 30/06/1990. ( 216 ) ASSUMING that the amount of apparent consideration wasrs. 20 lacs and not more as contended by the petitioner, the question is whether it was paid or deposited by 30/06/1990 or not. In view of the fact that the letter of deposit in respect of Rs. 8. 5lakh is dated 29th June/ 2/07/1990, it is difficult to accept thecontention that the amount was tendered on 29/06/1990. Had it been so the date ' 2/07/1990' in. the letter would havebeen meaningless. Further the letter of authority of Mr. Francismarry Elizabeth Sinha authorising her husband to collect thecheque itself is dated 6/07/1990. Further respondents 4 and 5have stated in their counter-affidavit that they were never contactedby respondents 2 and 3 before 30/06/1990 and they had metdeputy Commissioner of Income-Tax in the office of respondentno. 2 on 2/07/1990 to find out about the refund of Rs. 8. 5lakh and that the cheque of Rs. 8. 5 lakh was collected by themon 6/07/1990. Further the affidavit of respondent No. 3 dated 12/02/1991 refers to only deposit of Rs. 11. 5 lacs on 29/06/1990 and not the deposit of Rs. 8. 5 lakhs. There wasno dispute about the payment of Rs. 8. 5 lakhs. It was payableon or before 30/06/1990. In the face of these facts the pleathat the sum of Rs. 8. 5 lacs was deposited in the names of respondents 4 and 5 with the authority en 29th June. i990 cannot beaccepted. The point regarding effect of non-payment within stipulated period is covered against the respondents by decision ofsupreme Court dated 17/02/1995 in the case of Shrichand V. Raheja and another Vs. Union of India and others. Civilappeal arising out of Special Leave Petition (C) Nos. 18415-16 of 1994. In thisview the order of pre-emptive purchase stands abrogated and,therefore the writ petition deserves to be allowed. Union of India and others. Civilappeal arising out of Special Leave Petition (C) Nos. 18415-16 of 1994. In thisview the order of pre-emptive purchase stands abrogated and,therefore the writ petition deserves to be allowed. ( 217 ) FOR the aforesaid reasons, I agree with the conclusions of brother Ramamoorthy, J, that all the writ petitions deserve to beallowed leaving the parties to bear their own costs.