Dr. B.P Saraf, J.:— By this writ petition the petitioner has challenged the order of Appropriate Authority dated 26th February, 1993 under sub-section (1) of Section 269-UD of the Income Tax Act, 1961 (‘the Act’) directing the purchase of the property in question by the Central Government. The facts of the case briefly stated are as follows:

2. The petitioner is the owner of a flat being Flat No. 403, Parishram, situated at 320, Pali Hill. Bandra, Bombay. The petitioner entered into an agreement dated 5th February, 1990 for the sale of the above flat with Shri Amarnath, Smt. Kamala Amarnath and Shri Rakesh Kapoor (‘the purchasers’). By the said agreement of sale, the petitioner agreed to sell and the purchasers agreed to purchase the said flat along with five shares of Rs. 50/- each held by the petitioner in the Co-operative Housing Society for a consideration of Rs. 29.50 lakhs. Of the said consideration, an amount of Rs. 1 lakh was payable as the earnest money on the execution of the agreement while the balance amount of Rs. 28.50 lakhs was to be paid on the completion of the sale. Clause 8 of the said agreement provided that the sale would be completed on the payment of the balance consideration of Rs. 28.50 lakhs by the purchasers to the petitioners within seven days of the receipt of the approval of the Appropriate Authority under Section 269-UD of the Act. The petitioner filed a statement in Form No. 37-I together with a copy of the agreement of sale in the office of the Appropriate Authority on 19th December, 1990. The Appropriate Authority, on the basis of the said statement passed an order under Section 269-UD(1) of the Act on 26th February, 1991 for purchase of the aforesaid property by the Central Government. Aggrieved by the above order, the petitioner filed a writ petition in this Court which was numbered as Writ Petition No. 912 of 1991. The said writ petition was disposed of by a Division Bench of this Court by order dated 16th December, 1992 following the decision of the Supreme Court in (C.B Gautam v. Union of India)1, 1993 (199) I.T.R 530 and the matter was remanded to the Appropriate Authority to be decided afresh in the tight of the directions contained in the said judgment. Thereafter, a show cause notice dated 4th January, 1993 was issued to the petitioner and the intending purchasers by the Deputy Commissioner of Income-tax attached to respondent No. 1, the Appropriate Authority, Bombay, calling, upon them to attend or to make written submissions before the Members of the Appropriate Authority on 20th January, 1993 to show cause as to why order should not be made in their case in accordance with the provisions of Section 269-UD(1) of the Act. Along with the said notice, the reasons recorded in writing before making the order of purchase earlier on 26th February, 1991 were conveyed to the petitioner and the intending purchasers. In the reasons annexed to the show cause notice it was stated that the said reasons were the reasons recorded in the file at the time of making the earlier order under Section 269-UD(1) for making the said order. The same were treated as the reasons recorded for initiating proceedings and to issue the show cause notice in question. In the above reasons, it was stated, inter alia, that the flat in question had been inspected by the Valuation Officer on 15th January, 1991 and by the Members of the Appropriate Authority on 22nd February, 1991 and in the facts and circumstances of the case including the report of the Valuation Officer dated 23rd January, 1991 and note dated 29th January, 1991 of the Deputy Commissioner of Income-tax, Appropriate Authority. Bombay and the report dated 21st January, 1991 of the Inspector of Appropriate Authority had been carefully considered. It was pointed that:

“The building is situated in important locality of Pali Hill, Bandra. The space planing is modern. Accommodations consists of 2 spacious bed rooms, a spacious hall, 2 attached toilets, a kitchen, servant space, 3 balconies and a terrace. Flat is well maintained.”

3. It was also stated that the Appropriate Authority relied upon the following transactions:

Sr. No. Case No. Date of agreement Description of the property Consideration Rate Sq. ft. BUA Remarks (1) (2) (3) (4) (5) (6) (7) 1. 4262 30-3-89 Flat No. 2 Rs. 23,79,000/- 2537 2nd floor obstructed sea view, (Transaction 1 year 9 months old) 2. 4443 10-5-89 Flat No. 10, 5th floor, Reshma Apartments Pali Hill, Bandra Rs. 40,23,529/- 2504 5th floor Distant sea view (Transaction 1 year 7 months old) 3. 6250 3-8-90 Flat No. 41A, Land Breeze, Pali Hill, Bandra. Rs. 28,98,537/- 2505 4th floor No sea view.

4. It was observed that the apparent rate of Rs. 2,189/- per sq. ft. of B.U.A for the flat in question was obviously low compared to sale instances Nos. 1, 2 and 3 and that the transfer was obstensibly proposed to take place at substantially low rate and that in the circumstances, the Appropriate Authority was satisfied that it was a fit case for exercise of pre-emptive right of purchase by the Central Government.

5. The petitioner filed detailed written submissions before the Appropriate Authority. Briefly stated, the case of the petitioner before the Appropriate Authority was that there was extensive litigation between the Co-operative Housing Society wherein the flat in question is situated and the petitioner. The litigation had commenced as a result of an extension made by the petitioner to the parapet wall of the terrace annexed to the said flat. The society raised an objection to the said construction and, ultimately, at the behest of the society the petitioner was served with a notice by the Bombay Municipal Corporation being notice dated 21st February, 1990 under section 354-A of the Bombay Municipal Corporation Act, to forthwith stop execution of the said construction work. A civil suit was also filed in the City Civil Court at Bombay and an interim order was granted by the said Court restraining the Corporation from taking action in pursuance of the said notice. There was also a dispute between the petitioner and the society, as a result of which his membership came to be terminated on 27th July, 1990. As a result of this litigation and the attitude of the society, the petitioner was unable to find a purchaser for the said flat from any one of the existing flat owners at consideration of Rs. 29.50 lakhs at which the petitioner has agreed to sell the same to the eventual purchasers.

6. According to the petitioner, the sale of the flat was a distress sale, as at or about the time of the said sale, the petitioner has proposed to shift his residence to New Delhi where his father was in a critical condition. A number of circumstances were pointed out which would affect the market value of the existing building as a result of which the price per sq. ft. would be much lower than the one estimated by the Income-tax Department. The following factors were mentioned in support of the above contentions. The area surrounding the building was hilly as a result of which the access was narrow and steep. The said flat was entirely landlocked without any proper ventilation, sea-view or ground area. There was little open space for the members of the society and there was no possibility of two way traffic. The construction of the building was not strong and the society was considering to make repairs to the building. The open terrace could not be used for any practical purposes as the sewerage pipes which ran along the terrace caused a severe nuisance to its user and there was no privacy as the same was surrounded all around.

7. The petitioner also relied upon a number of sale instances to show that the consideration reflected in the agreement of sale entered into between the petitioner and the intending purchasers was by no means inadequate. The petitioner also pointed out the difference between the flat of the petitioner and the flats in the sale instances mentioned in the show cause notice and stated that the building in which the flats referred to in the sale instances were situated were most affluent and luxurious buildings. The petitioner also cited the following instances of sale of flats in the same locality wherein No Objection Certificates had also been granted by the Appropriate Authority.

Sr. No. Bidg/Flat No. Date of Agreement Rate/Sq. ft. Parties (1) (2) (3) (4) (5) 1. Flat No. A-21, Sunset Heights, Pali Hill, Bandra, Bombay. 3 Bedroom Hall, Kitchan Flat, admeasuring 1350 sq. ft. 27-9-1990 1740/- Dwarkasath & H. Keni 2. Flat No. A-1 Crescent, Pali Hall, Bandra, Bombay. Very well maintained Flat of 2200 sq. ft. 10-1-1991 2083/- Mohankanan Nirvani. 3. 7th Floor, B-wing Girnar Pali Hill, Bombay, very well maintained flat admeasuring 1605 sq. ft. flat area with terrace of 350 sq. ft. having full sea view. Jan. 1991 2134/- Not known. 4. Nibhana Annexe. Jan. 1991 2205/- JM Chatterjee & Mukesh Gupta.

8. The Appropriate Authority rejected all the above contentions of the petitioner including the plea of distress sale as well as the minus factors of the building in question pointed out by the petitioner. It was pointed out that on inspection of the flat in question it was found that both the location as well as the condition of the building was very good. It was further observed that it was located in one of the best areas of Bombay and the surroundings were clean and green. The flat was located on the fourth floor of the building with open terrace and the specifications were quite rich. In regard to the sale instances given by the petitioner, the Appropriate Authority mentioned that B.U.A (Built up Area) rate in the 4th sale instance as per their Case No. 6678 was Rs. 2,367/- and not Rs. 2,205/- as mentioned by the petitioner. No other factor was pointed out to distinguish the flats mentioned in the sale instances furnished by the petitioner from the flat of the petitioner. It appears that there was no application of mind in regard to the sale instances furnished by the petitioner which is evident from the cavalier manner in which the said sale instances were brushed aside with the following general observations:

“Furthermore, we have seen the various flats in Bandra area and the building under consideration viz. Parishram Premises Co-operative Society is superior to any of these buildings. Besides, merely because the orders of purchase were not made in the above causes, it cannot be assumed that the declared race therein represents fair market value. The orders of purchase under Section 269-UD(1) are made only is such cases, where the Appropriate Authority is fully convinced that after allowing some margin for error, the far market value is definitely more by 15% than the apparent consideration.”

9. The Appropriate Authority even failed to take note of the fact that the agreement of sale in the instant case had been entered into on 5th December, 1990 and the first instance given by the petitioner was of an agreement of sale dated 27th September, 1990 and the other instances of agreements of sale were all of January, 1991, which were nearest in time to the agreement entered into by the petitioner for the flat in question, whereas the sale instances referred to by the Appropriate Authority in its show cause notice were much older in time. The dates of agreements of sale in the three instances given by the Appropriate Authority are 30th March, 1989, 10th May, 1989 and 3rd August, 1990 respectively. The matter was not examined from this angle. The Appropriate Authority reiterated the sale instances set out in the reasons recorded by it where in case of Navroz building the agreement was signed on 30th March, 1989 and the rate worked out at Rs. 2,537/- per sq. ft. In the case of Reshma Apartment, the agreement was entered into on 10th May, 1989 and the rate worked out at Rs. 2,504/- per sq. ft., whereas in the case of Land Breeze, the agreement was dated 3rd August, 1990 and the rate was Rs. 2,505/- per sq. ft. It was observed that considering the time factor also the rate of Rs. 2,189/- per sq. ft. was obviously very low and there was no material on record to indicate that there were reasonable grounds for such a low price. On the basis of the above observations, the Appropriate Authority formed an opinion that it is a fit case to exercise of right of pre-emptive purchase by the Central Government under Section 269-UD(1) of Chapter XXC of the Act and ordered accordingly.

10. The above order of the Appropriate Authority has been challenged by the petitioner in the present writ petition. The petitioner contends that it is not tenable in law, as the Appropriate Authority has failed to determine the fair market value even on the basis of the material referred to by the petitioner and/or by the Appropriate Authority. The Appropriate Authority failed to arrive at a figure of fair market value of the property in question without which it is impossible to hold that the apparent consideration is lower or more than 15% of the “fair market value”. According to the petitioner, the conclusion has been arrived at in a most cavalier manner without having regard to the directions given by the Supreme Court in C.B Gautam's case. It was further pointed out that even taking the rate per square foot built up area (BUA) of the flats referred to by the Appropriate Authority as sale instances relied upon by it, the apparent consideration in the instant case is not less than 15% thereof. It was pointed out on behalf of the petitioner that the rate of flat of the petitioner which is subject matter of this petition, is Rs. 2,189/- per sq. ft., whereas the per square foot rate after making deduction of 15% from the fair market value in the three cases referred to by the Appropriate Authority comes out to Rs. 2,156.45, 2,128.40 and 2.129.25 Evidently, the apparent consideration of the flat in question is not less than 15% of the sale price of the flats referred to as the instances of prevailing market price of comparable flats by the Appropriate Authority itself. Following calculation was furnished by the petitioner.

“The instances relied and referred to by the Department are as under:

Sr. No. Rate per sq. ft. Less 15% Net amount 1. 2537 (Non-discounted) 380.55 2156.45 2. 2504 375.60 2128.40 3. 2505 375.75 2129.25

The amount per sq. ft. of Item No. 1 is without discounting.

The discounted rate of subject flat of petitioner is Rs. 2,189/- per sq. ft.”

11. On the basis of the above calculation, it is stated that even if the sale instances relied upon by the Appropriate Authority are taken into consideration, there is no undervaluation in excess of 15% of a fair market value which is a condition precedent for exercise of jurisdiction under Chapter XXC of the Income-tax Act. It was further stated by the Counsel for the petitioner that the sale instances given by the petitioner which were nearest in point of time, where No Objection Certificates had been issued by the respondents, were not even considered by the respondents. It was further contended that the Appropriate Authority failed to take into consideration the various disadvantages attached to the property in question as pointed out by the petitioner, especially the disadvantage that there was long standing dispute between the society and the petitioner in consequence of which the membership of the petitioner had been cancelled by the society. The petitioner further contended that the report of the Valuation Officer dated 23rd January, 1991, note of the Deputy Commissioner of Income-tax dated 29th January, 1991 and the report of the Inspector of the Appropriate Authority dated 21st January, 1991 were never supplied to the petitioner to enable him to explain the same. According to the petitioner, the opportunity of hearing given to the petitioner was no opportunity in the real sense.

12. In reply to these various contentions of the petitioner, it was stated by the learned Counsel for the respondents that the instances given in the show cause notice were more than 21 months old which is an indicator that the price on the date of the agreement of the flat in question should have been much higher than the prices of the sale instances in question. No reply is, however, available regarding the contention of the petitioner that the sale instances given by him being nearest in time to the case of the petitioner the Appropriate Authority was obliged to give duet weightage to the same and set out the reasons for not accepting the same as instances of fair market value at the relevant time. In the affidavit-in-reply filed by L.D Bharti, Deputy Commissioner of Income-tax in the office of the Appropriate Authority on 18th July, 1994, in reply to the contentions based on the sate instances relied upon by the petitioner, it is stated as follows:

“It is incorrect for the petitioner to state that the particulars furnished by him were complete in all respects as alleged by him in paragraph 2(a) of the Rejoinder. In fact in absence of the particulars regarding the Appropriate Authority's case number even at this stage it is difficult to locate these files though attempts are continuing to do so. However I may point out that the very fact that the impugned order itself records in paragraph 7 regarding the fourth sale instance referred to and relied upon by the petitioner that the rate per sq. ft. was Rs. 2,367/- and not Rs. 2,205/- as alleged, which shows that there could be a need to check regarding the correctness and/or applicability of the other three instances. However, even if someone, has got an unintended benefit or even on undeserved benefit in some instances, it is my respectful submission that this is no ground for the petitioner to claim an advantage based thereon unless mala fides or arbitrariness or deliberate discrimination in favour of these parties were to be alleged.”

13. We fail to appreciate the above contention of the respondents. When the fair market value price is to be determined on the basis of comparable sale instance, every sale instance ??? the Appropriate Authority or by the aggrieved party has to be considered on its own merits. The Appropriate Authority cannot act relying upon the sale instances given by it, ignoring the instances given by the aggrieved parties. In the instant case, the sale instances furnished by the aggrieved party were disregarded without even locating the same and/or making enquiries in regard to the nature and condition thereof and the advantages or disadvantages attached thereto compared to the property under consideration. It is evident from the affidavit of Shri Bharti, the Deputy Commissioner of Income-tax, that the authorities concerned did not even examine the other three sale instances relied upon by the petitioner. The admitted position is that they were not able even to locate their files relating to the same and are not in a position even today to locate the same. We fail to understand how in such a situation, the sale instances relied upon by the aggrieved person can be brushed aside as not applicable or not comparable, more so when they are nearest in time to the agreement of sate of the property under consideration.

14. We have carefully considered the contention of the petitioner as well as the respondents. It was pointed out to us by the learned Counsel for the respondents that in view of the limited time-frame, the enquiry has to be a summary one and detailed investigations and/or scrutiny of the sale instances made in the enquiry in such cases in ordinary course is not possible in such time-bound enquiries.

15. Reliance is placed by learned Counsel for both the parties on the decision of the Supreme Court in C.B Gautam v. Union of India (supra) where the Supreme Court has read down the provisions of Section 269-UD and explained the nature, scope and ambit of powers of the Appropriate Authority under that section. Before we refer to the said judgment, it will be expedient to set out the provisions of Section 269-UC and 269-UD of the Act. Section 269-UC provides that no transfer of any immoveable property of a value exceeding Rs. 5 lakhs or such other amount as may be prescribed shall be effected except after an agreement for transfer is entered into between the person who intends transferring the immovable property and the person to whom it is proposed to be transferred at least three months before the intended date of transfer. sub-section (2) of this section provides that such an agreement as aforesaid must be reduced in writing in the form of a statement and sub-section (3) provides that this statement must be in a prescribed from. Section 269-UC is in the following terms:

“269-UC (1) Notwithstanding anything contained in the Transfer of Property Act, 1882 (4 of 1882), or in any other law for the time being in force, no transfer of any immoveable property of such value exceeding five lakh rupees as may be prescribed, shall be effected except after an agreement for transfer is entered into between the person who intends transferring the immovable property (hereinafetr referred to as the transferor) and the person to whom it is proposed to be transferred (hereinafter referred to at the transferee) in accordance with the provisions of sub-section (2) at least four months before the intended date of transfer.

(2) The agreement referred to in sub-section (1) shall be reduced to writing in the form of a statement by each of the parties to such transfer or by any of the parties to such transfer acting on behalf of himself and on behalf of the other parties.

(3) Every statement referred to is sub-section (2) shall,

(i) be in the prescribed form;

(ii) set forth such particulars as may be prescribed; and

(iii) be verified in the prescribed manner,

and shall be furnished to the Appropriate Authority in such manner and within such time as may be prescribed by each of the parties to such transaction or by any of the parties to such transactions acting on behalf of himself and on behalf of the other parties.”

16. Rule 48-L of the Income-tax Rules, 1962 deals with the statement to be furnished under Section 269-UC(3) and Sub-rule (2) of Rule 48-L provides that such statement in Form No. 37-I shall be furnished, in duplicate, to Appropriate Authority. Sub-rule (2) of Rule 48-L also deals with the time limits within which ??? under Section 269-UC(3) must be furnished. Section 269-UD deals with the ??? Appropriate Authority to make an order for purchase by the Central Government of such immoveable property at an amount equal to the amount of apparent consideration. Section 269-UD reads as follows:

“269-UD(1) Subject to the provisions of sub-section (1-A) and (1-B), the Appropriate Authority, after the receipt of the statement under sub-section (3) of Section 269-UC in respect of any immoveable property, may, notwithstanding anything contained in any other law or any in statement or any agreement for the time being in force, make an order for the purchase by the Central Government of such immoveable property at an amount equal to the amount of apparent consideration:

Provided that no such order shall be made in respect of any immoveable property after the expiration of a period of two months from the end of the month in which the statement referred to in Section 269-UC in respect of such property is received by the Appropriate Authority:

Provided further that where the statement referred to in Section 269-UC in respect of any immoveable property is received by the Appropriate Authority on or after the 1st day of June, 1993, the provisions of the first proviso shall have effect as if for the words “two months”, the words “three months” had been substituted:

Provided also that in a case where the statement referred to in Section 269-UC in respect of the immoveable property concerned is given to an Appropriate Authority, other than the Appropriate Authority having jurisdiction in accordance with the provisions of section 269-UB to make the order referred to in this sub-section in relation to the immoveable property concerned, the period of limitation referred to in the first and second provisions shall be reckoned with reference to the date of receipt of the statement by the Appropriate Authority having jurisdiction to make the order under this sub-section:

Provided also that the period of limitation referred to in the second proviso shall be reckoned, where any stay has been granted by any Court against the passing of an order for the purchase of the immoveable property under this Chapter, with reference to the date of vacation of the said stay.

(I-A) Before making an order under sub-section (1), the Appropriate Authority shall give a reasonable opportunity of being heard to the transferor, the person in occupation of the immoveable property if the transferor is not in occupation of the property, the transferee and to every other person whom the Appropriate Authority knows to be interested in the property.

(1-B) Every order made by the Appropriate Authority under sub-section (I) shall specify the grounds on which it is made.

(2) The Appropriate Authority shall cause a copy of its order under sub-section (1) in respect of any immoveable property to be served on the transferor, the person in occupation of the immoveable property if the transferor is not in occupation thereof, the transferee, and on every other person whom the Appropriate Authority knows to be interested in the property.”

17. The validity of these sections was challenged before the Supreme Court in C.B Gautam v. Union of India (supra). The Supreme Court upheld the validity but read down the provisions of the sections in the manner set out therein. It was pointed out by the Supreme Court that the very historical setting in which the provisions of Chapter XXC were enacted suggested that it was intended to be resorted to only in cases where there is an attempt at tax evasion by significant undervaluation of immovable property agreed to be sold. Considering the stand of the Union of India and the Central Board of Direct Taxes, it was observed by the Supreme Court that the powers of compulsory purchase conferred under Section 269-UD of the Act were being used and intended to be used only in cases where in an agreement to sell an immoveable property in an urban area to which the provisions of the said Chapter apply, there is a significant undervaluation of the property concerned, namely, 15% or more. It was held:

“If the Appropriate Authority concerned it satisfied that, in an agreement to sell immoveable property in such areas as set out earlier, the apparent consideration shown in the agreement for sale it less than the fair market value by 15 per cent, or more, it may draw a presumption that this undervaluation has been done with a view to evade tax. Of course, such a presumption is rebuttable and the intended seller or purchaser can lead evidence to rebut such a presumption. Moreover, an order for compulsory purchase of immoveable property under the provisions of Section 269-UD requires to be supported by reasons in writing and such reasons must be germane to the object for which Chapter XX-C was introduced in the Income-tax Act, namely, to counter attempts to evade tax.”

18. Dealing with the requirement of giving a reasonable opportunity of being heard or to show cause being given to the parties adversely affected by an order of purchase under Section 269-UD(1) vis-a-vis the context of time frame within which the order of compulsory purchase has to be made, it was observed by the Supreme Court:

“It is true that the time-frame within which the order for compulsory purchase has to be made is a fairly tight one but, in our view, the urgency it not such as would preclude a reasonable opportunity of being heard or to show cause being gives to the parties likely to be adversely affected by an order of purchase under Section 269-UD(1). The enquiry pursuant to the explanation given by the intending purchaser or the intending seller might be a somewhat limited one or a summary one but we decline to accept the submission that the time limit provided is so short as to preclude an enquiry or show cause altogether.”

19. In the light of the above observations, the Supreme Court concluded as follows:

“We are clearly of the view that the requirement of a reasonable opportunity being given to the concerned parties, particularly, the tending purchaser and the intending seller must be read into the provisions of Chapter XX-C. In our opinion, before an order for compulsory purchase is made under Section 269-UD, the intending purchaser and the intending seller must be given a reasonable opportunity of showing cause against an order for compulsory purchase being made by the Appropriate Authority concerned. As we have already pointed out, the provisions of Chapter XX-C can be resorted to only where there is a significant undervaluation of property to the extent of 15 per cent, or more in the agreement of sale, as evidenced by the apparent consideration being lower than the fair market value by 15 per cent, or more. We have further pointed out that, although a presumption of an attempt to evade tax may be raised by the appropriate authority concerned in case of the aforesaid circumstances being established, such a presumption is rebuttable and this would necessarily imply that the concerned parties must have an opportunity to show cause as to why such a presumption should not be drawn. Moreover, in a given transaction of an agreement to sell, there might be several bona fide considerations which might induce a seller to sell his immoveable property at less than what might be considered to be the fair market value. For example: he might be in immediate need of money and unable to wait till a buyer is found who is willing to pay the fair market value for the property. There might be some dispute as to the title of the immoveable property at a result of which it might have to be sold at a price lower than the fair market value or a subsisting lease in favour of the intending purchaser. There might similarly be other genuine reasons which might have led the seller to agree to sell the property to a particular purchaser at less than the market value even in cases where the purchaser might not be hit relative. Unless an intending purchaser or intending seller is given an opportunity to show cause against the proposed order for compulsory purchase, he would not be in a position to rebut the presumption of tax evasion and to give an interpretation to the provisions which would lead to such a result would be utterly unwarranted. The very fact that an imputation of tax evasion arises where an order for compulsory purchase is made and such an imputation casts a slur on the parties to the agreement to sell leads to the conclusion that, before such an imputation can be made against the partial concerned, they must be given an opportunity to show cause that the undervaluation in the agreement for sale was not with a view to evade tax.”

20. The provisions of Chapter XX-C of the Act were accordingly read down by the Supreme Court to include the requirement of an opportunity to show cause being given before an order for purchase by the Central Government is made by the Appropriate Authority.

21. The above decision of the Supreme Court, in our opinion, is a complete answer to the controversy in the instant case. The following propositions emerge from the above judgment.

i) The provisions of section XX-C are to be resorted to only when there is significant undervaluation in the agreement of sale with a view to evade tax.

ii) An order of compulsory purchase of immoveable property can be made only if the Appropriate Authority is satisfied that in this agreement to sell immoveable property, the apparent consideration as shown in the agreement is less man the fair market value by 15% or more. In such a case the Appropriate Authority may draw a presumption that this undervaluation has been done with a view to evade tax.

iii) Though a presumption of attempt to evade tax could be raised by the Appropriate Authority concerned in case the aforesaid circumstances are established, such a presumption is rebuttable and this would necessarily imply that the concerned parties must have an opportunity to show cause as to why such a presumption should not be drawn.

iv) A reasonable opportunity of being hoard and to show cause should be given to the concerned parties, particularly the intending purchaser and the intending seller.

v) There might be several bona fide considerations which may induce the seller to sell his immoveable property at less than the fair market value, such as: (a) he might be in immediate need of money and unable to wait till a buyer is found who is willing to pay the fair market value for the property, (b) there might be some dispute as to the title of the immoveable property, as a result of which it might have to be sold at a price lower than the fair market value; or (c) there might be a subsisting lease in favour of the intending purchaser. These examples are merely illustrative and not exhaustive. There might similarly be other genuine reasons which might have led the seller to agree to sell the property to a particular purchaser at less than the market value even in cases where the purchaser might not be his relative.

22. The Appropriate Authority must consider all the relevant factors carefully and record its reasons for passing of the order. The opportunity of showing cause or reasonable opportunity of hearing mentioned by the Supreme Court should be a real opportunity, not a mere pretext or an empty formality. The reasons given with the show cause notice and/or the sale instances specified therein should be carefully scrutinised by the Appropriate Authority in the light of the submissions made by the aggrieved parties and/or the sate instances furnished by them. The sale instances referred to by the aggrieved person assume more importance if they have already undergone scrutiny in the hands of the Appropriate Authority and No Objection Certificate issued in regard thereto. The instances furnished by the aggrieved parties cannot be brushed aside. No order can be passed without carefully considering the same and stating the reasons for not treating the same as comparable cases. If that is allowed to be done, the hearing given to the aggrieved parties will turn out to be a mere formality. In the instance case, it is clear from the affidavit of the Deputy Commissioner of Income-Tax in the office of the Appropriate Authority that the sale instances referred to by the petitioner were not even considered as the records in that connection could not be located. The grievance of the respondents appears to be that the case numbers of the acquisition proceedings in those cases were not furnished by the petitioner. We fail to understand how an aggrieved party can furnish the case numbers of the acquisition proceedings to the Appropriate Authority the records of which are with the Appropriate Authority itself. All the relevant particulars on the basis of which the Appropriate Authority could have located the properties in question had been furnished by the petitioner. An order passed merely on the basis of the sale instances given by the Appropriate Authority without considering sale instances referred to by the aggrieved parties and setting out cogent reasons for not acting upon them, cannot be a proper and valid order. Moreover, in the instant case it is evident front the chart furnished by the petitioner which has been set out earlier, that the apparent consideration shown in the agreement for sale is not less than the fair market value of any of the properties mentioned by the Appropriate Authority in its show cause notice by 15 per cent or more, which might give rise to the presumption of undervaluation with a view to evade tax.

23. Besides, in the instant case no fair market value of the property in question has been determined by the Appropriate Authority. Merely three instances of sales have been set out in the order, where also the rate per square foot built-up area is Rs. 2,504, Rs. 2,505 and Rs. 2,507 respectively. It is well settled that though certain properties may be similar, each property is unique and two properties can hardly be totally alike. The absolute possession, the physical condition of the property which also depend on the amount of attention given to maintenance and repairs are also relevant factors in determining the fair market value. Therefore, various allowances have to be made for difference in qualities between two properties or flats. The leval of allowance would, of course, depend on the facts of each case.

24. Moreover, in order to draw inference of undervaluation, it is necessary to determine first the fair market value of the property in question in the light of all the attending circumstances. Without doing so, it is not only difficult but impossible to say that the apparent consideration is lower than the fair market value by 15% or more. The determination of the fair market value must be based on evidence on record. It cannot be a guess work. The figure of fair market value cannot be left to conjectures and surmises. To justify an order under Section 269-UD(1), the Appropriate Authority must come to a definite conclusion that the undervaluation is more than 15% of the fair market value. Though the determination of the fair market value at the first instance, necessarily has to be an ex-parte affair and a show cause notice can be issued on the basis of such determination if the apparent consideration reflected in the agreement of sale is found to be lower by 15% or more than the fair market value so determined. But once notice is given and cause is shown by the aggrieved parties, the explanation of the parties has to be considered carefully and judiciously. Various advantages/disadvantages of the property which are subject matter of the sale instance referred to by the Appropriate Authority and/or the advantages/disadvantages of the property under consideration and/or the advantages/disadvantages of the properties of which sale instances are given by the aggrieved parties should be considered carefully before arriving at the final conclusion in regard to the fair market value and consequent undervaluation of the property under consideration, if any. The instances relied upon by the aggrieved parties, more so, in cases where application in Form No. 37-1 has been filed and No Objection Certificates issued, should be meticulously scrutinised as the burden of proving that the said instances are not comparable with the property under consideration is on the Appropriate Authority. The assessment of the Appropriate Authority in this regard should be objective and based on careful analysis of comparable cases and on sound reasons. This is a delicate task, more so because of the fact that ordinarily no two properties are alike. In applying the comparative sale method of valuation, the Appropriate Authority should compare the apparent consideration with the market value reflected in the most comparable instance, whether furnished by the Authority or the aggrieved parties, which provides the index of market value. The proximity from the time angle and proximity from situation angle are also relevant considerations for ascertaining the most comparable instance. Having identified the instances which provide the index of market value, the price reflected therein may be taken as the norm and the market value of the property under consideration may be deduced by making suitable adjustments for the plus and minus factors vis-a-vis property under consideration by placing the two in juxtaposition. The balance sheet of plus and minus factors may be drawn for this purpose and the relevant factors may be evaluated in terms of price variation as a prudent purchaser would do. The fair market value of the property which is subject matter of proceedings under Section 269-UD has thereafter to be deduced by loading the price reflected in the instance taken as norm for plus factors and unloading it for minus factors. The evaluation of these factors of course will depend upon the facts of each case. In the event of failure of the Appropriate Authority to do so an adverse inference may be drawn against it depending upon the facts and circumstances of each case.

25. It is thus clear that in all cases where order is proposed to be passed for purchase of the property by the Central Government under Section 269-UD(1) of the Act, the Appropriate Authority has to determine the figure of fair market value of such property with reference to which it can be ascertained whether the apparent consideration was lower by 15% or more. That has not been done in the instant case. Here, even if the rates at which the properties referred to in the instances relied upon by the Appropriate Authority were sold are taken to be the fair market value on the relevant date, then also even from the highest of the three figures, the apparent consideration of the properly under consideration is not lower by 15% than the fair market value. If the instances relied upon by the petitioner are taken into account, the margin will be much lesser than 15%. In some of the cases the apparent consideration will be even higher than the sale price shown therein. In such a situation, no presumption of undervaluation with a view to evade tax can be drawn. It may also be expedient to observe at this stage that it was never the stand of the Revenue before the Supreme Court that the pre-emptive purchase can be resorted to automatically once the difference between the fair market value and the apparent consideration is 15% or more. On the other hand, the Revenue itself had emphathetically stated before the Supreme Court that the limit of 15% is not to be applied mechanically but a reasonable margin for probable error has to be taken into account. That is because Section 269-UD does not confer an unfettered discretion on the Appropriate Authority to order purchase of any and every property. In other words, the right of pre-emptive purchase under Section 269-UD is not a right of pre-emption simplicitor. It is a right which can be exercised only in cases where there is significant undervaluation in the agreement of sale “with a view to evade tax”. The emphasis is on “attempt at tax evasion”. The onus of establishing that the undervaluation is with a view to evade tax is on the revenue. An imputation of tax evasion arises in a case where an order of compulsory purchase is made which casts a slur on the parties to the agreement. Such an imputation cannot be made mechanically without due regard to the explanation of the affected parties. The presumption of under valuation in case of undervaluation of 15% or more being a rebuttable one, the evidence led by the intending seller or purchaser assumes great importance. The observation of the Supreme Court in C.B Gautam's case to the effect that having regard to the limited time frame enquiry pursuant to the explanation of the seller or the purchaser might be somewhat limited one or summary one cannot be construed to confer power on the Appropriate Authority to pass an order without carefully considering the facts and circumstances set out by the intending seller or purchaser and analysing the comparable cases cited by such persons. However, in the instant case, even that question would not arise as evidently the apparent consideration is not lower than 15% of the fair market value.

26. In that view of the matter, we are of the clear opinion that the impugned order of the Appropriate Authority under Section 269-UD(1) is arbitrary and illegal and the same is liable to be set aside, which we hereby do.

27. In the result, this writ petition is allowed. Rule made absolute in the above terms. There shall be no order as to costs. Shri Sethna, learned Counsel for the respondents, prays for stay of this order for a period of eight weeks. Prayer allowed.

28. Certified copy expedited.

29. Writ petition allowed.