JUDGMENT
C.K. Thakker, J.
1. Rule, Mr. Mihir Thakor, instructed by R. P. Bhatt and Co., appears and waives service of rule on behalf of respondent No. 1. Mr. N. R. Divetia, appears for respondent No. 2 and waives service of rule on his behalf. In the facts and circumstance of the case, the matter is taken up for final hearing to day.
2. This petition is filed by the petitioner for an appropriate writ, direction and/or order quashing and setting aside orders, annexures “G” and “H” passed by the appropriate authority, respondent No. 1 herein, under section 269UE(2) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), being illegal, ultra vires and contrary to law.
3. It is the case of the petitioner that Kanaiyalal Ganapatram Upadhyay, respondent No. 2, entered into an agreement to sell his property to the petitioner bearing final plot No. 6 Town Planning Scheme No. III of Usmanpura admeasuring 420 sp. yds. with old construction of 98.80 sq. mts. Banabhat was entered into on May 12, 1994, for consideration of Rs. 25,20,000. After the agreement to sell was made, the parties filled in From No. 37-I and furnished necessary particulars. The first respondent, who is an appropriate authority, issued show-case notice under section 269UD(1A) of the Act, inter alia, stating therein that against apparent consideration of Rs. 7,028 per sq. mtr. of property under consideration (“PUC” for short), the rate of sale instance property (“SIP” for short) (final plot No. 98 of Town Planning Scheme No. 3/5, Madhuram Co-operative Housing Society Ltd. Usmanpura, Ahmedabad) was Rs. 10,104 per sq. mtr. It was also stated that the PUC was a corner plot abutting a 40′ wide road from Usmanpura to Vadaj and a 20′ wide road on the other side. The sale instance property was also a corner plot abutting a 40′ wide road taking off from Usmanpura road. According to the first respondent, therefore, the apparent consideration appeared to be under-estimated by more than 15 per cent. It was, therefore, prima facie, considered to be a fit case to issue notice under section 269UD(1A) of the Act. The parties were called upon to show cause as to why an order under section 269UD(1) should not be made. It was further stated that in the case of failure by the parties in submitting representations or submissions, the authority would be constrained to presume that they had no objection to the proposed order being passed under section 269UD(1).
4. The second respondent submitted his reply, on March 28, 1995, to the show-cause notice wherein he clarified that the PUC was located near Usmanpura village which was much interior to the main Ashram road. It was nearer to the old Vadaj where commercial development was comparatively less than the area covered between Paldi and Income-tax. Reliance was also placed on comparable sale instances. It was stated that the property of Budhalal Trust being S. P. No. 287, F. P. No. 287, T. P. S. 15 of Champaner Society, near Usmanpura Char Rasta, was sold at the rate of Rs. 2,471 per sq. mt. and that valuation was accepted by the authorities. The property situated at S. P. B/2, F. P. 23/B/Part belonging to Smt. Shardaben and others was sold as per the agreement dated June 16, 1994, at the rate of Rs. 6,041. It was submitted that the quoted for comparison by the first respondent in the show-cause notice was situated on the main road in Madhuram Society which was a highly developed commercial area. That sale instance was hence not comparable. In the light of all the facts and circumstances mentioned in the reply, it was a prayed that it was a fit case to allow the transfer of property as mentioned in Form No. 37-I of the application. It was, therefore, prayed to issue the necessary certificate in accordance with law. A reply was also filed by the petitioner on March 29, 1995, contending therein that no reasonable time was granted Ashram road and was residential while the authority has compared it with a highly developed commercial area which was not proper. Finally, it was stated that after considering all the attending circumstances the fair market value was determined in accordance with law. It was, therefore, prayed that the necessary certificate should be issued.
5. The first respondent passed the impugned order on March 31, 1995 (annexure “G”). After “carefully” considering the submissions of the transferor, it observed as under :
“(1) So far as the first contention regarding that PUC is not comparable to the SIP is concerned, it is stated that the location of SIP is superior to the PUC. Considering this fact even if reasonable deduction of 10 per cent. is considered the rate of SIP would work out to Rs. 8,046. Considering this fact the apparent and discounted consideration has been understated by more than 15 per cent.
(2) The first sale instance relied upon by the transferor is not comparable because in that case the transferor is a charitable trust which was agreed to be sold after obtaining the permission from the Charity Commissioner and hence there is no chance for under-statement of the consideration. The second sale instance relied upon is also not comparable because in that property the plot was in the occupation of the tenant who was running his business in an entire plot.”
6. It was then observed that the authority was satisfied that the property under consideration was fit for pre-emptive purchase under Chapter XXC of the Act. Therefore, in exercise of the powers vested under section 269UD(1) of the Act, it was ordered to purchase the property in question by determining is price at Rs. 24,62,834. Consequential order was passed on the same day at annexure “H”. The above two orders have been challenged in the present petition.
7. Mr. J. P. Shah, learned counsel for the petitioner, contended that the impugned order is contrary to law and therefore is an error apparent on the face of the record in making the order on the grounds which are irrelevant and extraneous and not germane to the issue. The first respondent has also committed an error of law in not relying upon the sale instances relied upon by the parties. In our opinion, the petition requires to be allowed on more than one ground.
8. As is clear from the extracted portion of the order, we are satisfied that there is an error apparent on the face of the record on the part of the first respondent in passing the impugned order. Nowhere has the first respondent reached a positive conclusion and/or satisfaction as to on what material he has reached the conclusion that the estimated marked rate or real consideration of the property in question was more than the apparent consideration disclosed in the agreement in question by more than 15 per cent.
9. Reliance sought to be placed on a comparative instance of SIP 1 as mentioned in the show-cause notice was seriously disputed by the petitioner. It was stated in the reply that the case of the SIP was not similar to the case of the PUC. According to the transferee, the PUC was located near Usmanpura village which was much interior to the main Ashram road and nearer to old Vadaj where commercial development was comparatively lower than the area covered between Paldi and Income-tax. It was specifically averred that SIP was situated nearer to Income-tax Char Rasta which was a highly developed commercial area. Similarly, Madhuram Society bungalows were situated only at about 100 mts. from Income-tax Char Rasta whereas the PUC was situated at about 1,000 mts. away from Income-tax Char Rasta. The first respondent in the impugned order did not refute the above averments. On the contrary, looking to the order, one feels that impliedly the averments have been accepted inasmuch as it is stated in the order that considering the superior location of the SIP, reasonable deduction of 10 per cent. can be allowed to PUC but even then, it would come to about Rs. 8,046 per sq. mt. Yet the difference would be more than 15 per cent. We do not appreciate the above approach and reasoning of the first respondent. When no material whatsoever has been placed on record as to why the deduction of 10 per cent. was considered to be proper, the so called finding can be described as speculative, there being no evidence on record. In our opinion, therefore, ground No. 1 cannot be said to be legal, valid or germane.
10. We are also not impressed by the rejection of the sale instance put forward by the petitioner. Regarding that sale instance, it is interesting to read the reasoning of the first respondent in rejecting the sale instance. According to the first respondent, the sale instance was not comparable because in that case the transferor was a charitable trust which agreed to sell after obtaining permission from the Charity Commissioner and, hence, there was no chance of under-statement of consideration. In our opinion, the reasoning of the first respondent, would support the case of the petitioner. If the property belonged to a public trust and sale was effected in accordance with the provisions of the Bombay Public Trusts Act, after obtaining sanction from the Charity Commissioner and according to the first respondent, there was no chance of underhand dealing, the consideration must be held to be proper and the sale instance must be said to be a comparable one and should have been relied upon. By rejecting the said sale instance, the first respondent has committed an error of law apparent on the face of the record.
11. Apart from the above grounds, in our opinion, Mr. Shah is right in submitting that the satisfaction as contemplated by section 269UD must be based on objective facts. There must be evidence and material to arrive at the conclusion and satisfaction. Rejection of sale instance and/or grounds and/or reasons put forth by the party is one thing. At the most, transferor/transferee. But the law requires something more. In our opinion, it is incumbent upon the appropriate authority to come to a positive and definite conclusion that the property was undervalued. A similar question arose before us in Special Civil Application No. 869 of 1995 (Anagram Finance Ltd. v. Appropriate Authority [1996] 217 ITR 22 (Guj) decided by us on March 30, 1995). Considering the relevant provisions of the Act as also the decision of the Hon’ble Supreme Court in Barium Chemicals Ltd. v. Company Law Board [1966] 36 Comp Cas 639; AIR 1967 SC 295, we observed as under (see at page 28 of 217 ITR).
“A combined reading of section 269UD(1A) and (1B) of the Act leaves on room for doubt that it is a question of objective decision-making process by taking into consideration all the relevant materials which have come before the hearing authority and considering the rival aspects of the matter. Moreover, the requirement of law is to specify the grounds on which the order of pre-emptive purchase is made. That obligation does not stop by merely rejecting the submissions made before it. The rejection of submissions made by the vendors or the transferee or the persons interested in the property, does not lead to a consequence that grounds for making pre-emptive purchase exist. The sine qua non is that the reasons must exist on the material placed before it, for supporting the action taken for pre-emptive purchase under section 269UD of the Act. The order clearly falls short of this requirement.”
12. In our opinion, the point is concluded by the above decision also. Since no satisfaction has been arrived at by the first respondent on the basis of objective facts and no reasons have been recorded for coming to a positive conclusion as to why there was difference of more than 15 per cent., the order cannot be said to be in accordance with law and must be quashed and set aside.
13. For the foregoing reasons, the petition requires to be allowed and is allowed. The impugned orders dated March 31, 1995, at annexures “G” and “H” are hereby quashed and set aside. Respondent No. 1 is directed to complete the necessary formalities within a period of six weeks from the date of receipt of the writ of this court including issuance of clearance certificate. Rule made absolute. No order as to costs.