JUDGMENT
C.K. Thakker, J.
1. This petition is filed by the petitioner for and appropriate writ, direction and/or order quashing and setting aside the order dated October 27, 1994 (annexure-A), to the petition passed by the appropriate authority, respondent No. 2 herein by which an order was passed in exercise of the power under section 269UD(1) of Income-tax Act, 1961 (hereinafter referred to as “the Act”).
2. It is the case of the petitioner that respondent No. 3 owned a plot of land admeasuring 675 sq. yds situate at Maninagar, Ahmedabad, on which seven shops were constructed. All the shops were let out to different tenants and they were in possession since many years. The petitioner was also one of the tenants. Since respondent No. 3 was willing to sell the property and the petitioner was one of the sitting tenants, the petitioner was interested in buying the property. An agreement to sell was, therefore, entered into between the petitioner and respondent No. 3 on July 21, 1994, for an amount of Rs. 13.13 lakhs. The agreement is annexed to the petition. As the total sale consideration exceeded Rs. 10 lakhs, it was necessary to fill in Form No. 37-I as required under section 269UC(3) of the Act. The appropriate authority issued show-cause notice on October 14, 1994, calling upon the transferor and the transferee as to why the property should not be compulsorily purchased, inter alia, alleging that considering the two sale instances referred to in the notice, “apparent and discounted” consideration of property under consideration was underestimated by more than 15 per cent. The petitioner as well as respondent No. 3, were, therefore, called upon to show cause why an order under section 269UD(1) of the Act should not be passed. The petitioner as well as respondent No. 3 replied to the said show-cause notice on October 21, 1994. In the reply, it was contended that the main road frontage of the property under consideration was occupied by seven tenants since the last more than 30 years. It was not the liability of the vendor to get those tenants evicted. It was also stated that since the purchaser was one of the tenants he had purchased the property. So far as SIP 1 was concerned, it was submitted that there was a very small room on the back side of the plot which did not affect development. Regarding SIP 2, it was mentioned that it was not in a commercial zone but it was wrongly mentioned in the show-cause notice that it was in a commercial zone. In view of the above reasons, it was contended by the petitioner as well as respondent No. 3 that it was not a case to acquire property under section 269UD(1) of the Act and the notice was liable to be revoked.
3. After considering the reply, the appropriate authority passed the impugned order. In paras 4 and 5, it was stated as under :
“4. We have carefully considered the argument advanced by Shri B. K. Jani, advocate, and the submissions made by the transferor and the transferee and the same are not accepted on the following grounds :
The property under consideration can be developed even without disturbing the tenants because the property under consideration is a corner plot and can have separate entrance on 30′ wide road. Though the property is in the residential zone, it has commercial potential. There are seven shops on the front on 50′ wide road and is situated opposite to L. G. Hospital. The sale instance relied upon by the appropriate authority is of the same area and comparable to the property under consideration. As discussed in the show-cause notice, the apparent and discounted rates are low compared to the market rate of the property situated in that area and the apparent and discounted considerations are understated by more than 15 per cent.
We have carefully considered all the relevant facts, material gathered and submission made by the transferor and the transferee and we are satisfied that it is a fit case for pre-emptive purchase of the property, under the provisions of Chapter XXC of the Income-tax Act, 1961. Therefore, in exercise of the powers vested in us under section 269UD(1), we hereby order the purchase of the property.”
4. Mr. S. N. Soparkar, learned counsel for the petitioner, raised various contentions. He submitted that there is an error apparent on the face of the record committed by the appropriate authority in not considering the relevant and material fact that neither SIP 1 nor SIP 2 could be said to be comparable to the property under consideration. The order, therefore, suffers from non-application of mind and requires to be quashed. He also submitted that SIP 1 could not have been taken into account inasmuch as the property under consideration was having seven sitting tenants. Considering that vital fact, the authority was not right in coming to the conclusion and in recording a finding that the discounted rate per sq. mt. of property under consideration would be Rs. 2,236 and SIP 1 Rs. 2,788 and SIP 2 Rs. 3,772.
5. In the affidavit-in-reply, filed on behalf of the respondent, the deponent took into account the fact regarding sitting tenants in the property under consideration but has stated as under :
(3)(c) With reference to paras 2.1 and 3.2 (a) it is submitted that the grounds raised therein are not tenable. The property is corner plot abutting on a 50′ road and 30′ wide road and hence can be developed even without disturbing the tenanted shops abutting the 50′ wide road. The net discounted rate of property under consideration after deducting the area occupied by the tenants and after considering the capitalised value of the tenanted portion the rate per sq. mtr., of FSI comes to Rs. 3,140, the statement giving the working is annexed hereto and marked annexure 1. Comparing this rate with the rate of SIP 2 there is an understatement by more than 15 per cent.”
6. According to the respondent, even if the property under consideration could not be compared with SIP 1, it could be compared with SIP 2. Mr. Soparkar submitted that looking to the affidavit-in-reply, it is clear that the appropriate authority itself was of the opinion that the apparent consideration of the property under consideration mentioned in the show-cause notice (Rs. 2,236) would then come to Rs. 3,140 per sq. mtr. Obviously, therefore, reliance placed on SIP 1 could not be pressed in service. In our opinion, Mr. Soparkar is right in submitting that in that case, the petitioner could place reliance on that instance in support of his contention, particularly when it is not the case of the appropriate authority that in the case of SIP 1, the apparent consideration was understated. When in the case of SIP 1 where the discounted consideration was Rs. 2,788 per sq. mtr., and no steps were taken, it was open to the petitioner to place reliance on that instance as comparable with the property under while deciding the case in question. On that ground, therefore, the petition requires to be allowed by upholding the contention of Mr. Soparkar.
7. The matter, however, does not end there. Even with regard to SIP 2, the contention of the petitioner is well founded. As stated by us hereinabove, in reply to the show-cause notice itself, it was mentioned by the petitioner as well as respondent No. 3 that the property under consideration could not be compared with SIP 2 inasmuch as the property under consideration was in a residential zone whereas SIP 2 was in a commercial zone. In the impugned order, it was stated that the property under consideration was having commercial potential. It did not state specifically anything about SIP 2. However, in the affidavit-in-reply, it was stated :
“3. (e) With reference to ground (c), the averments made therein are not accepted. It is submitted that SIP 1 is abutting 40′ wide road on L. G. Hospital-SIP 2 is situated behind Swaminarayan Temple in Maninagar area. Both are lying in residential zones. Both the SIPs are therefore comparable to the property under consideration.”
8. Thus, from the affidavit-in-reply also the case of the respondent is that the property under consideration as well as SIP 2 both are in residential zone and both are, therefore, comparable. The petitioner has filed an affidavit-in-rejoinder and in that rejoinder, he has stated that the property under consideration is in a residential zone but SIP 2 is in a commercial zone. Reliance is placed on a certificate issued by the Town Development Officer, Ahmedabad Municipal Corporation, Ahmedabad (local authority), dated November 23, 1994. In the said certificate, it was mentioned that SIP 2 was situated in a local commercial zone.
9. In view of the above facts coupled with the certificate issued by the local authority, it is established that SIP 2 is located in a commercial zone. In our opinion, therefore, SIP 2 also cannot be compared with property under consideration and hence reliance placed on SIP 2 also cannot be said to be legal. It is not a sale comparable one and in passing the impugned order on the basis of SIP 2, the respondent authority has committed an error apparent on the record.
10. Apart from the above grounds, in our opinion, Mr. Soparkar is right in submitting that the satisfaction as contemplated by section 269UD(1) must be based on objective facts. There must be evidence and material to arrive at the conclusion and satisfaction. Rejection of sale instances and/or grounds and/or reasons put forward by the party is one thing. At the most, it can be said to be a negative finding for not accepting the case of the transferor/transferee. The law, however, requires something more. In our opinion, it is incumbent upon the appropriate authority to come to a positive and definite conclusion that the property was undervalued. A similar question arose before us in Special Civil Application No. 869 of 1985, (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 Supreme Court in Barium Chemicals Ltd. v. Company Law Board [1966] 36 Comp Cas 639; AIR 1967 SC 295, we observed as under (at page 28 of 217 ITR :
“A combined reading of section 269UD(1A) and (1B) of the Act leaves no 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.”
11. In our opinion, the point is concluded by the above decision also. Since no satisfaction has been arrived at by the respondent authority 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.
12. For the foregoing reasons, the petition requires to be allowed and is accordingly allowed. The impugned order dated October 27, 1994, passed by the appropriate authority at annexure-A is 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 order of the court including issuance of the clearance certificate. Rule made absolute. No order as to costs.
