JUDGMENT
C.K. Thakker, J.
1. This petition is filed by the petitioners for quashing and setting aside the order dated February 23, 1995, passed by the respondent-appropriate authority under section 269UD(1) of the Income-tax Act, 1961 (hereinafter referred to as “the Act), being illegal, ultra vires and unconstitutional.
2. It is the case of petitioners Nos. 1-A to 1-D that they are the owners of a piece of agricultural land admeasuring 6,252 sq. mts. in the city of Baroda. Since, they were desirous of selling the said land to petitioners Nos. 2-A to 2-B they entered into an agreement to sell on December 27, 1993, for an amount of Rs. 1,91,00,000. Since, the price exceeded Rs. 10 lakhs, a statement in Form No. 37-I of the Act was filled in by the parties on November 30, 1994. No action was taken by the appropriate authority for more than two months except that of sending some officers for inspection of the property. On February 10, 1995, a show-cause notice was issued under section 269UD(1A) of the Act, inter alia, alleging that the apparent and discounted rate of purchase price of the property under consideration was understated by more than 15 per cent. For the said allegation, reliance was placed on the sale instance property said to have been sold on December 27, 1993. It was alleged that the apparent consideration of the property under consideration was Rs. 3,055 per sq. mt. whereas the apparent consideration of the sale instance property was Rs. 4,961 per sq. mt. Similarly, the discounted consideration of the property under consideration was Rs. 2,793 per sq. mt. while the discounted consideration of the sale instance property was Rs. 4,828 per sq. mt. The appropriate authority, in these circumstances, prima facie, formed an opinion, that there was understatement of consideration of the property under consideration to the extent of more than 15 per cent. The petitioners were, therefore, called upon to show cause as to why an order in accordance with the provisions of section 269UD(1) of the Act should not be passed and the property should not be purchased by the appropriate authority. The petitioners were called upon to submit their reply by availing of the opportunity of being heard. It was stated that if no reply and/or written submission would be filed, the appropriate authority would be constrained to presume that the petitioners had no objection to the proposed oreder to be passed against them.
3. It is the case of the petitioners that they had received the notice on February 16, 1995, and even though there was no sufficient time, they had submitted two replies on February 21, 1995, and February 22, 1995, respectively. It was contended in the said replies that the property under consideration was agricultural land and the cost of converting the said land into non-agricultural land and the cost of converting the said land into non-agricultural land was required to be considered before the forming of any opinion by the appropriate authority regarding its market value. It was also contended that before the land could to be converted into non-agricultural land, permission under section 20 of the Urban Land (Ceiling and Regulation) Act, 1976 (hereinafter referred to as “the U. L. C. Act”), was required to be obtained from an appropriate authority. As per the provisions in that Act, the area of more than 1,500 sq. mts. of land would vest in the Government for which nominal compensation would be paid to the owner. The said fact would also affect in fixing notional value of the land. Regarding the sale instance property, it was submitted that it was a small plot admeasuring 520 sq. mts. Again, it was included in a finally sanctioned town planning scheme. Placing reliance on a decision of this court in Mulubhai Malbhai v. State of Gujarat [1992] 1 GLH 514, it was contended that a small piece of land would fetch a much higher price than a big piece of land. It was also submitted that the property under consideration was not included in the Final Town Planning Scheme. At the time of inclusion of the property under consideration in the Town Planning Scheme, under the provisions of the relevant Act, some area would be deducted in accordance with law. The petitioners also placed reliance upon two sale instances of properties bearing No. BRD-25 and BRD-50, which were agreed to be sold in March, 1992, and October, 1992, respectively, at the rate of Rs. 1,722 and Rs. 1,711 per sq. mt. It was pointed out that both the sale instance properties were adjacent to the property under consideration and, hence, were more comparable to the sale instance properties relied upon by the appropriate authority. Therefore, even if the price rise during the time gap between 1992 and 1993 would be considered, then also, the apparent and discounted considerations of the property under consideration could not be said to be understated by more than 15 per cent. as alleged by the appropriate authority. On all these grounds, it was submitted that it was not a case to exercise the power under section 269UD(1) of the Act and proceedings were required to be dropped by granting the necessary certificate.
4. The appropriate authority, after considering the show-cause notice and replies submitted by the petitioners passed an order on February 23, 1995, in exercise of the powers under section 269UD(1) of the Act, whereby the property under consideration was sought to be purchased. In paragraph 4, considering the submissions of the petitioners, the appropriate authority observed :
“The above submissions of the transferor have been carefully considered by us and the same are discussed in the following paragraphs :
The first submission made, as summarised above, is that the property under consideration is an agricultural land and there would be cost for converting into non-agricultural use. We do not dispute this proposition. The legal authorities/State Government has fixed converting charges for different areas of Baroda City and accordingly conversion would be allowed on payment at the rate applicable to the area in which the present property is located. The applicants have not given as to how much cost would be involved and, therefore, we are unable to give our opinion on the same.
The next point raised is that the urban land ceiling permission is for agricultural use and the moment the land is converted into non-agricultural use, fresh permission will have to be sought under the Urban Land Ceiling Act. We again agree with the basic principle. It may, however, be noted that as per the present policy of the Government, the necessary permission is granted under the Urban Land (Ceiling and Regulation) Act on compliance with the terms and conditions laid down while granting exemption under section 20/21 of the Urban Land (Ceiling and Regulation) Act. Thus, it is a mere formality and would not reflect on the value of the land merely because the land is in excess of 1,500 mts., which is the limit prescribed under the Urban Land (Ceiling and Regulation) Act for Baroda City.
The third submission is that the sale instance property is a small plot of 520 sq. mts. while the property under consideration plot is of 6,252 sq. mts. and it is submitted that there should be a deduction of 40 per cent. In support of this, a reference is made to the decision of the Gujarat High Court in the case of Mulubhai Malbhai v. State of Gujarat [1992] 1 GLH 514. We would like to clarify that the case before the Case before the Gujarat High Court was under the Land Acquisition Act, 1894, and there the Gujarat High Court was required to decide as to whether the deduction of 40 per cent. while computing compensation payable was justified. This case is not applicable to the present case for the simple reason that there is no question of compliance under the Land Acquisition Act. Although, the Gujarat High Court had observed in that case that the land is situated in Gram Panchayat and there are no industrial activities/residential activities and, therefore, deduction of 40 per cent. while working out the compensation amount was considered fair and reasonable. The present land is not situated in Gram Panchayat. It is very much in the heart of Baroda City and it is in the most posh area, i.e., in the vicinity of the race course and, therefore, the observation of the Gujarat High Court would have no application, even if a national attempt is made to work out the compensation payable. Even, after taking a liberal view, we allow, say deduction of 15 per cent. for the fact that this is a large plot and clearance from the urban land ceiling is yet to be obtained. Even then the adjusted rate would work out to Rs. 3,513 per sq. mt. (Rs. 3,055 + 15 per cent. or Rs. 3,055).
The next point raised is that the sale instance property land is in a Final Town Planning Scheme, while the property under consideration is not in a Final Town Planning Scheme. Though no evidence has been made available to show that the property under consideration is not within the Town Planning Scheme yet, without conceding, if it is presumed that the property under consideration is outside the Town Planning Scheme still it is not clear as to how 30 per cent. deduction is claimed for this fact. During the inspection of the property under consideration, it was found that there are roads on three sides and all around, there were residential buildings including multi-storeyed and the area is just adjacent to the posh race course area of Baroda City, therefore, bringing the area under the Town Planning Scheme itself would not entail deduction of 40 per cent. as claimed.
The next submission is that, if necessary, adjustment for urban land ceiling permission, etc., is considered, the national value of the property under consideration would work out to Rs. 6,000 per sq. mt. This submission is wishful thinking. No basis has been shown and further, no evidence has been made to show that clearance from urban land ceiling would entail expenses to such extent. We have already allowed 15 per cent. adjustment to be made as mentioned above.
The last point raised is that there were sale instances where the rate of Rs. 1,722 and Rs. 1,711 per sq. mt., respectively, for Files Nos. BRD-25 and BRD-50 were considered reasonable and no objection certificate granted.
We have perused the material available on the record in sale instance files quoted by the counsel and we find that these transactions were of March, 1992, and October 19, 1992, and, therefore, those rates will have no application to the case where the agreement is made in November, 1994. We would hasten to add that if the above rates are properly increased for the time gap of nearly 2 1/2 and 2 years, respectively, the rate would work out to more than Rs. 4,500 per sq. mt. Hence, these sale instances do not help the applicants in any manner.”
5. Mr. Soparkar, learned counsel for the petitioners, raised various contentions. He submitted that no reasonable opportunity of being heard was afforded to the petitioners before passing the impugned order. Reliance sought to be placed on the sale instance property was misconceived. The sale instance property could not be said to be a comparable sale instance for the purpose of determining the market price of the property under consideration. There is, therefore, an error apparent on the face of record committed by the appropriate authority in basing its decision on that sale instance. It was also contended that the property under consideration was an agricultural land. Before putting it to non-agricultural use, necessary permission for non-agricultural use was required to be obtained. Substantial amount of expenses and costs also would have to be incurred by the petitioners. The appropriate authority had not applied its mind to the said fact which had vitiated the order. It was argued that the necessary permission under the Urban Land Ceiling Act was also required to be obtained in accordance with the provisions of that Act, it is for the authority under the Urban Land Ceiling Act to pass an order granting or rejecting permission either under section 20 or section 21 of the Urban Land Ceiling Act. But even if such permission is granted, the provisions of the Urban Land Ceiling Act would have to be borne in mind. It also cannot be forgotten that in cases of excess land of more than 1,500 sq. mts. a nominal compensation would be paid to the owners. So far as the sale instance property is concerned, according to Mr. Soparkar, it was a very small piece of land admeasuring 520 sq. mts. No comparison could have, therefore, been made while forming an opinion about adequate consideration of the property under consideration which was a very big plot of land admeasuring more than 6,000 sq. mts. (more than ten times). In similar circumstances, this court held in Mulubhai Malbhai’s case [1992] 1 GLH 514 that no such comparison could be made. The authority ought to have followed the said decision. There is an additional reason also why no reliance could have been placed on the sale instance property. The sale instance property was included in the Final Town Planning Scheme whereas the property under consideration was not. As and when the property under consideration would be included in the Final Town Planning Scheme, a notional value will be fixed after making deduction in accordance with law. Hence, on the basis of the sale instance property, adequate consideration of the property under consideration was not possible. On the other hand, according to counsel, the two sale instance on which reliance was placed by the petitioners were very much comparable and they ought to have been considered in their proper perspective. They were sale instances of 1992 and even if it is assumed that there was a price rise after the period of sale of those two properties and before the sale of the property under consideration, there was noting to show that apparent and discounted considerations were understated by more than 15 per cent. as alleged by the appropriate authority. It was also contended that no allegation was made by the appropriate authority that the understatement of consideration was made with the object of tax evasion which was a condition precedent for the exercise of power. Finally, it was argued that the no positive finding has been recorded by the appropriate authority as to why it was satisfied that there was understatement of apparent and discounted considerations by more than 15 per cent. and on that ground also, the order requires to be quashed.
6. Mr. B. J. Shelat, learned counsel, instructed by R. P. Bhatt and Co., on the other hand, supported the order passed by the appropriate authority. He submitted that after considering all the facts and circumstances and by recording reasons, in bona fide exercise of the powers in accordance with law, the authority has come to a conclusion that there was understatement of apparent and discounted considerations by more than 15 per cent. and, accordingly, an order of pre-emptive purchase was passed. He also submitted that this court is not hearing an appeal against the order passed by the appropriate authority. In exercise of the extraordinary jurisdiction under article 226 of the Constitution of India, even if this court is satisfied that there is some substance in the contention raised by the petitioner, this court will not substitute its opinion for the opinion formed by the appropriate authority and cannot upturn the order. The petition, therefore, requires to be dismissed.
7. Having given anxious consideration to the facts and circumstances of the case, we are of the opinion that the petition requires to be allowed.
8. Regarding the first contention that no reasonable opportunity was given to the petitioners, we are not impressed by the arguments of Mr. Soparkar. As is clear, notice was issued by the appropriate authority on February 10, 1995. It is the case of the petitioners that they received the notice on February 16, 1995. According to the petitioners, three days were holidays thereafter but the last date for submission of the written statement/written submissions was February 21, 1995. Looking to the urgency of the matter, in the light of the relevant provisions of the Act, it cannot be said that the time available to the petitioners can be said to be inadequate or insufficient. In fact, a reply was filed by the petitioners on 21st as well as on February 22, 1995, and both of them were also considered by the appropriate authority. The said contention, therefore, cannot be upheld and is hereby rejected.
9. On the merits, however, we are of the view that the impugned order is contrary to law and requires to be interfered with. It is not disputed by the appropriate authority that the property under consideration is an agricultural land. Therefore, before putting the said land to non-agricultural use, requisite permission is required to be obtained from the competent authority for converting the lands into non-agricultural use. The appropriate authority was conscious of the said fact. It observed : “We do not dispute this proposition”. It was, however, observed that the local authorities/State Government have fixed conversion charges for different areas of Baroda City and, accordingly, conversion would be allowed on payment at the rate applicable to the areas in which the property is located. It was then stated that the applicants had not mentioned as to how much cost would be involved and, therefore, the appropriate authority was unable to form any opinion on that aspect. Mr. Soparkar is right in contending that when the appropriate authority formed an opinion that there was understatement of consideration by more than 15 per cent., it was the duty of the authority to form such opinion on the basis of material available on record. It was incumbent on the appropriate authority to pass an order after considering all the relevant factors including conversion charges, if it was of opinion that in spite of conversion charges, there would be understatement of consideration by more than 15 per cent. Since it was not done, the opinion formed cannot be said to be bona fide and in accordance with law.
10. Likewise, the appropriate authority has committed an error of law apparent on the face of the record, in not considering in its proper perspective the provisions of the Urban Land Ceiling Act. It is the contention of the petitioners that before agricultural land could be permitted for non-agricultural use, permission in accordance with law required to be obtained. Here also, the appropriate authority has conceded the legal position. It observed : “We again agree with the basic principle”. It was thereafter stated that : “it may, however, be noted that as per present policy of the Government, necessary permission is granted under the Urban Land (Ceiling and Regulation) Act on compliance with the terms and conditions laid down while granting exemption under section 20/21 of the Ceiling Act. Thus, it is merely a formality and would not reflect on the value of the land merely because the land is in excess of 1,500 mts. which is the limit prescribed under the Urban Land (Ceiling and Regulation) Act for Baroda City.”
11. We fail to appreciate the reasoning of the appropriate authority. First of all, nothing was pointed out to us, by learned counsel for the respondent either from the Urban Land Ceiling Act or from the Rules made thereunder or from any other Government resolutions/circulars/letters, that grant of exemption under section 20/21 of the Urban Land Ceiling Act is a “mere formality”. If it is not, we do not understand how it would not reflect on the value of the land, particularly in a case of excess land of more than 1,500 sq. mts. which is prescribed as the ceiling for Baroda City.
12. We are also of the view that the appropriate authority has erred in placing reliance on the sale instance property and in ignoring a material fact that it was a small piece of land admeasuring 520 sq. mts. Though the attention of the appropriate authority was drawn to a decision of this court, it was sought to be discarded by the authority on the ground that the judgment which was relied upon was under the Land Acquisition Act and not under the Income-tax Act. The appropriate authority further observed that deduction of 15 per cent. could be allowed as the property under consideration was a large plot but even the there was understatement of consideration by more than 15 per cent. The same reason was put forward by the appropriate authority regarding the argument that the sale instance property was included in the Final Town Planning Scheme whereas the property under consideration was not. It was observed by the appropriate authority that during inspection of the property under consideration, it was found that there were roads on three sides, the area was a posh area surrounded by a residential locality including multistoreyed buildings and the race course in Baroda. Considering that fact, it was though reasonable that the national value of the property under consideration would be counted as Rs. 6,000 per sq. mt.
13. The authority had also committed an error in not placing reliance on the two sale instances SIP-1 and SIP-2 on which the petitioners based their argument that the consideration was adequate and sufficient. It is the case of the petitioners that SIP-1 and SIP-2 were situated in an area which was much more developed than the area in which the property under consideration was located. Yet, in connection with those properties, no action was taken by the appropriate authority. Now, in this connection, it is worthwhile to not that though in the impugned order, it was stated by the appropriate authority that there was a time gap of 2 to 2 1/2 years, in the affidavit-in-reply, some additional facts have been mentioned. As stated by us earlier, the appropriate authority has clearly distinguished the decision of this court in Mulubhai Malbhai’s case [1992] 1 GLH 514 on the ground that though it was a small plot, the ratio laid down by this court would not apply inasmuch as it was a case under the Land Acquisition Act. When the petitioners placed reliance on SIP-1 and SIP-2, the same authority in the affidavit-in-reply sought to argue that the sale instances relied on by the petitioners were not comparable because they were small plots. It is thus clear that when the petitioners wanted to place reliance by describing the sale instance property as small plot, the appropriate authority refused to do so but when the petitioners placed reliance on similar instances, the appropriate authority tried to justify its action on the ground that they were small plots. In our opinion, the appropriate authority cannot blow hot and cold simultaneously.
14. From the above facts and circumstances, it is clear that the appropriate authority has committed an error of law apparent on the face of the record in not considering the relevant and germane facts and in taking into account irrelevant and extraneous considerations and in passing the impugned order. The result is that the impugned order requires to be quashed and set aside.
15. For the foregoing reasons, the petition requires to be allowed and is accordingly allowed. The impugned order dated February 23, 1993, annexure-A, is hereby quashed and set aside. The respondent is directed to complete the necessary formalities within a period of six weeks from the date of receipt of the order of the court including issuance of clearance certificate. Rule made absolute. No order as to costs.