JUDGMENT
S. Radhakrishnan, J.
1. By this petition, the petitioners are challenging the order dated February 24,1993, passed by the Commissioner of Income-tax under Section 269UD(1) of the Income-tax, Act 1961 (hereinafter referred to as “the Act”). The petitioners have also prayed for a direction to respondent No. 1 for grant of “No Objection Certificate” in respect of the transaction in question, and for a further direction that respondent No. 1 should determine the consideration payable by the Government including the reduced amount of Rs. 1,04,905 and Rs. 13,75,000 being the consideration for the transfer of furniture, fittings and fixtures. The petitioners have further prayed that the Central Government be directed to make good the loss caused to the petitioners and pay the amount with interest. It is further prayed by the petitioners for an injunction restraining the respondents from proceeding further by way of taking possession of the said property, in pursuance of the impugned order.
2. The brief facts of the case are that petitioner No. 1 had purchased the property being flat No. 6A, “A” Wing, Gazdar Apartments, Juhu Tara Road, Juhu, Bombay-400 049 (hereinafter referred to as the “said property”) from Shri Jimmy Gazdar under a tripartite agreement dated July 28, 1986, between petitioner No. 1, the landlord Shri Jimmy Gazdar and the builders for a consideration of Rs. 17,31,200, accordingly, petitioner No. 1 had become a member of the Juhu Gazdar Co-operative Housing Society and had occupied the said flat.
3. It is the case of the petitioner, that thereafter petitioner No. 2 had offered petitioner No. 1 to purchase the said property along with furniture, fixtures and fittings for a sum of Rs. 71,99,000 out of which Rs. 13,75,000 was towards the cost of furniture, fixtures and fittings. Petitioner No. 2 was ready and willing to pay the full amount immediately. The petitioners were under a bona fide impression that the immovable property referred to in Section 269UC of the Act and the consideration referred to therein is pertaining to the said property excluding the furniture, fixtures and fittings. Accordingly, they had entered into an agreement dated May 22, 1992, fixing a consideration of Rs. 58,24,000 for the said flat excluding the said furniture, fixtures and fittings. It is mentioned in the agreement that the consideration for the said furniture, fixtures and fittings would be separately fixed by the parties.
4. It is further submitted by the petitioners that, as required under the provisions of Chapter XX-C of the Act, the petitioners had filed Form No. 37-1 in the office of the first respondent on June 19, 1992. Thereafter, respondent No. 1 had sought further information and clarification regarding the agreement between the petitioners. Therefore, on July 22, 1992, the petitioners had furnished necessary information and clarification including a copy of the proposed agreement for transfer of furniture to respondent No. 1.
5. It appears that on August 27, 1992, respondent No. 1 had passed an order under Section 269UD(1) of the Income-tax Act, which was received by the petitioner on August 28, 1992, ordering the purchase of the said property by the Central Government for a consideration of Rs. 57,19,095. It was stated in the said order that the consideration for transfer of immovable property in question was Rs. 58,24,000. The Central Government had worked out the consideration amount at Rs. 53,76,145, after deducting an amount of Rs. 1,04,905 and an amount of Rs. 2,93,700 and Rs. 49,250 were ordered to be retained in the account of the respondents.
6. Aggrieved thereby, the petitioners had challenged the above order dated August 27, 1992, by filing a Writ Petition No. 2039 of 1992, and this Court had set aside the aforesaid order dated August 27, 1992, passed by the respondents, and the respondents were permitted to issue fresh show-cause notice.
7. Thereafter, on January 15, 1993, the petitioners had received a letter dated January 4, 1993, issued by the respondents requiring the petitioners to show cause as to why an order should not be passed under Section 269UD(1) of the Income-tax Act, however while issuing such a letter, no reasons of whatsoever nature for passing an order under Section 269UD(1) of the Income-tax Act had been furnished in the said letter. In pursuance of the said letter dated January 4, 1993, the petitioners had filed their written statement, specifically asking for material particulars and reasons for issuance of the said letter. Thereafter, respondent No. 1 had passed an order of purchase under Section 269UD(1) of the Income-tax Act on February 24, 1993. Hence, the present petition has been filed by the petitioners, inter alia, praying for quashing and setting aside the impugned order dated February 24, 1993.
8. Mr. Bhujale learned Counsel for the petitioners pointed out that the respondents’ show-cause notice dated January 4, 1993, was not a show-cause notice at all, but an order under Section 269UD(1) of the Act, as the following part makes it clear:
Consequently, we are satisfied that this is a fit case for exercising the pre-emptive right of purchase by the Central Government under Section 269UD(1) of Chapter XX-C of the Income-tax Act, 1961, and an order under Section 269UD(1) is being passed accordingly.
9. The above portion clearly shows that an order under Section 269UD(1) of the Act is being passed accordingly. Mr. Bhujale also pointed out that the petitioners in their reply dated January 19, 1993, had specifically sought details, particulars of two sale instances referred, which were never furnished to the petitioners.
10. Hence, Mr. Bhujale strongly contended that the impugned order was a pre-determined order and clearly violative of principles of natural justice.
11. Learned Counsel appearing on behalf of the petitioners contended that the impugned order passed by the Commissioner of Income-tax was on the basis of rates wrongly determined and, therefore, the said order is bad in law. According to him, the rate of Rs. 3,124 per sq. ft. of the said property was wrongly determined and the correct rate should have been Rs. 3,325 per sq. ft. Learned Counsel for the petitioners also submitted that after including price for marble flooring and staircase the rate will be increased further by Rs. 175 per sq. ft., and in fact the appropriate authority had wrongly determined the rate of Rs. 3,124 per sq. ft. by reducing discount, registration fees, stamp duty and transfer fees. Learned Counsel has further submitted that in the instant case, there was no understatement of consideration. Learned Counsel for the petitioners further contended that the transactions relied on by respondent No. 1 are not valid basis, as the first transaction of sale referred to in paragraph No. 4 of the recorded reasons in respect of flat No. 21 of B-Wing, Gazdar Apartment, was not in existence, and as regards the other two transactions, those were prima facie not comparable, as is apparent from the facts regarding flat No. 103. Learned Counsel for the petitioners contended that even if the rate of Rs. 3,325 per sq. ft. is taken into account, there would be difference of less than 15 per cent. It is also contended that for comparison, Rs. 3,386 per sq. ft. should be taken as the rates of the three instances relied on by the appropriate authority seems to be basic rates.
12. It is further submitted by learned Counsel for the petitioners that the comparable transactions in the Gazdar Apartments proving thereby that there was no understatement of consideration, relied upon by the petitioners were not considered at all. According to learned Counsel for the petitioners, the instances referred to in the notice issued by the appropriate authority were not comparable with the subject property, and hence the order of purchase is not valid. Learned Counsel for the petitioners has contended that the relevant material being the valuation report, note of the Deputy Commissioner of Income-tax and material/information regarding transactions relied on by the appropriate authority were not at all furnished, though demanded by the petitioners’ reply dated January 19,1993. Therefore, learned Counsel for the petitioners contended that the impugned order was clearly violative of the principles of natural justice, as the material relied upon by the respondents were never furnished to the petitioners.
13. It is further case of the petitioners that the market value of the subject property was not determined and only an observation was being made that the apparent consideration was low. Learned Counsel for the petitioners has submitted that it was not sufficient to prove understatement or that the difference was more than 15 per cent, and there was no valid basis for presumption of attempt to evade tax. Lastly, learned Counsel for the petitioners has submitted that the impugned order dated February 24,1993, is invalid and void ab initio, as there was no positive finding that there was an attempt to evade tax, and, accordingly, the impugned order is liable to be quashed and set aside.
14. In reply to the contentions of the petitioners, learned Counsel for the respondents Mr. Ashokan, relied on the affidavit-in-reply stating that all the procedural as well as material formalities, which were required to be carried out, were so carried out by the appropriate authority and thereafter, a speaking order was passed, wherein the respondents have recorded reasons for passing such an order. It is the case of the respondents that while passing the impugned order, adequate care was taken after giving a reasonable opportunity of hearing. Mr. Ashokan contended that the respondents had personally visited to the site in question before passing the order under Section 269UD of the Income-tax Act. However, Mr. Ashokan could not controvert the contention of the petitioners that all relevant materials and particulars relied upon by the respondents were never furnished to the petitioners. Mr. Ashokan also could not justify on what basis the show-cause notice itself passes an order under Section 269UD(1) of the Act.
15. We have also perused the judgment of this Court in the case of Mrs. Nirmal Laxminarayan Grover v. Appropriate Authority (Income-tax Department) , wherein this Court had dealt with the issue of purchase of immovable property by the Central Government by a notice under Section 269UD of the Income-tax Act. In the aforesaid judgment, this Court had categorically held that the order of an appropriate authority passed pursuant to such a defective show-cause notice was illegal and vitiated for not being in consonance with the basic principles of natural justice. The appropriate authority had not proved by clear and cogent material that the land in question was significantly undervalued and hence, the court held that the order of compulsory purchase was liable to be quashed. The court had observed that it was necessary for the appropriate authority to refer to the details in the show-cause notice so that the transferor and/or transferee would have real and proper opportunity to meet the case of the Department. The court had further observed that it was necessary to see that issuing a show-cause notice is not merely an empty formality. The conclusions of the authority at the stage of giving a show-cause notice are always prima facie or tentative conclusions and if it is not so, its ultimate order would suffer from its bias, i.e., pre-determined mind.
16. In the present case, we are fully convinced that it was not a show-cause notice, but a pre-determined order, over and above all relevant materials were never furnished to the petitioners, thereby violating the principles of natural justice.
17. The aforesaid judgment of this Court is squarely applicable in the present case. Under these facts and circumstances of the case and in view of the abovereferred judgment of this court, the impugned order is liable to be quashed and set aside. Accordingly, the impugned order dated February 24, 1993, is quashed and set aside, and the petition is allowed and rule is made absolute in terms of prayer Clauses (a), b(i), (ii) and (c), with costs.