JUDGMENT
V. K. GUPTA, J. :
An order passed on 31st January, 1995, by the Appropriate Authority of Income-tax, Calcutta, respondent No. 2 in this petition, has been challenged by the petitioner on a number of grounds. However, since this petition is being disposed of on a solitary ground, other grounds need not be taken into consideration. The brief facts are that respondent No. 5, Shrimati Jayanti Mukherjee, was the owner of flat No. 10, Block-B, situated on the 4th floor in a multi-storeyed building known as Sunny Park Co-operative Housing Society, situated at 6, Sunny Park, Calcutta. By an agreement dt. 21st October, 1994, she decided to sell this property to the petitioner, Shrimati Sita Cheriyan Mukerji, for a consideration of Rs. 16.50 lakhs. Since the apparent consideration of the property in question exceeded the then prescribed limit of Rs. 10 lakhs at the relevant time, the vendor and the vendee both filed Form No. 37-I on 21st October, 1994, before respondent No. 1, as was required under s. 269UC of the IT Act, 1961. However, respondent No. 1 did not accept the value reflected by the petitioner and respondent No. 5 in the aforesaid agreement for sale and instead passed an order on 31st January, 1995, whereby the said property was purchased by the Central Government at the amount of Rs. 16,03,500 which was an amount equal to the amount of effective apparent consideration. This purchase actually was in the nature of a pre-emptive purchase effected by the Central Government through respondent No. 1 in terms of s. 269UD(1) of the IT Act, 1961. It is this order which is under challenge in this petition filed by the petitioner, the vendee, under Art. 226 of the Constitution of India.
2. As observed, the learned advocate for the petitioner initially raised a number of questions relating to the correctness and the validity of the impugned order, but ultimately the case was argued by the parties only on a single question, that is, the non-observance of the provisions contained in s. 269UG of the Act relating to the failure on the part of the respondents in tendering to the seller of the property, that is, respondent No. 5, the amount of consideration payable in accordance with the provisions of s. 269UF within the prescribed period, i.e., one month starting from the end of the month in which the property became vested in the Central Government under sub-s. (1) of s. 269UE of the Act. It is alleged by the petitioner that despite an order having been made under s. 269UD(1) of the Act for the pre-emptive purchase of the property and despite the fact that as on the date of such order, in terms of the provisions contained in s. 269UE(1) of the Act, the property stood vested in the Central Government, the amount of consideration which was required to be paid to the seller was not tendered to her within the period prescribed under s. 269UG of the Act. This factual assertion has not been denied by the respondents. The defence of the respondents is that even though the order of pre-emptive purchase was passed on 31st January, 1995, and the said order was served upon the vendor on 8th February, 1995, on 6th February, 1995, respondent No. 1 requested the vendor to hand over possession of the property in question to the authorised officer. By the said letter, the vendor was also requested to submit the original deed of conveyance of the property on or before 14th February, 1995. However, the vendor did not comply with the aforesaid requirements. In the meantime, an Inspector was deputed to find out whether there was any liability in respect of the property in question. He submitted a report that an outstanding liability amounting to Rs. 9.24 lakhs against the vendor in respect of the tax payable to the Calcutta Municipal Corporation was in existence. As per cl. 15 of the agreement, the vendor was liable to pay all the municipal taxes including arrears. The defence of the respondents is that since the vendor did not either deliver the conveyance deed or the possession of the property and further since there was an outstanding liability of Rs. 9.24 lakhs and additionally since five per cent. of the value of the property was to be paid to the Sunny Park Co-operative Housing Society, the Chief CIT directed that the cheque in lieu of the consideration amount be made in favour of respondent No. 1 rather than the vendor. It is further stated by the respondents that they received a communication dt. 14th February, 1995, from the solicitors and advocates whereby the respondents were informed that the present writ petition would be moved on 16th February, 1995, in this Court and that the petitioner would ask for an interim relief. In fact, it is revealed from the affidavit-in-opposition that on 24th February, 1995, a cheque for Rs. 16,03,500 was sent to respondent No. 1 apparently towards the consideration price of the aforesaid property. It is claimed by the respondents that the amount of consideration was not tendered to respondent No. 5, the vendor, in terms of s. 269UG(3) of the Act since there was a dispute as to the title of the person concerned to receive the amount of consideration. It is worthwhile to mention that the CBDT, New Delhi, vide its communication dt. 26th April, 1995, had enquired from the Chief CIT-II, Calcutta, as to why the consideration amount was deposited in the account of the Appropriate Authority. The text of this letter reads as under :
“I am directed to refer to your letters No. CC-II/AA/Cal/1136/October, 94/94/1591, dt. 22nd/1st March, 1995, and 3rd April, 1995, on the above subject and to request you to intimate the reasons for depositing the apparent consideration in this case in the account of the Appropriate Authority.
An immediate reply in the matter is requested.
Yours faithfully,
(Sd.) (Arvind Kumar).
Under Secretary (OT)
Central Board of Direct Taxes.”
The reply of the Chief CIT to the aforesaid communication was sent on 12th/18th May, 1995, which reads thus :
“Shri Arvind Kumar,
Under Secretary (OT),
Central Board of Direct Taxes,
New Delhi.
Subject : Pre-emptive purchase of property at 6, Sunny Park, Calcutta – Reg.
Ref. : Your letter F. No. 316/28/95-OT dt. 26th April, 1995.
With reference to the letter quoted above I have been directed to intimate that the payment in regard to the property located at 6, Sunny Park, Calcutta, was made to the Appropriate Authority on the grounds mentioned below :
1. The transferee has gone to the High Court challenging the acquisition of the property under s. 269UD(1). This was mentioned in para 6 of CCIT-IIs D.O. to Shri C. V. Gupta, Member (R&A), vide No. CC.II/AA/Cal/1136/October 94/94-95/1591 dt. 22nd February, 1995/1st March, 1995.
2. As per cl. 15 of the said agreement the transferor has to pay off the liability of municipality tax including arrears and all other outgoings of any nature whatsoever including arrears up-to-date of the possession. The order under s. 269UD(1) has not mentioned details of such outstanding liabilities which should be deducted from the effective apparent consideration. So this office did not know the outstanding dues on statutory heads.
Under the circumstances, a decision to make payment to the Appropriate Authority was taken.
(Sd.) (A. K. Basu),
Asstt. CIT, Hqrs.-II, Calcutta,
for C.C.I.T.-II, Calcutta”.
Even though in the affidavit filed on behalf of the respondents there was no definite stand as to why the consideration money was not paid to respondent No. 5 and why it was deposited with respondent No. 1, the aforesaid reply sent to the CBDT reveals the stand of the respondents with regard to this issue.
3. Sec. 269UG of the Act clearly lays down that the amount of consideration payable in accordance with the provisions of s. 269UF shall be tendered to the person or persons entitled thereto, within the period prescribed therein. The proviso to sub-s. (1) stipulates that if any liability for any taxes is discovered, payable by the person entitled to the consideration money, the Appropriate Authority may in lieu of the payment of the amount of consideration set off the amount of consideration or any part thereof against such liability after giving an intimation in this behalf to the person entitled to the consideration. The other relevant provision contained in s. 269UG is that if the person entitled to the amount of consideration does not consent to receive it or, if there is any dispute as to the title to receive the amount of consideration, the Central Government shall deposit with the Appropriate Authority the amount of consideration within the period specified in sub-s. (1) of 269UG. Sub-s. (3) of s. 269UG reads thus :
“269UG(3) Notwithstanding anything contained in sub-s. (1), if the person entitled to the amount of consideration does not consent to receive it, or if there is any dispute as to the title to receive the amount of consideration, the Central Government shall deposit with the Appropriate Authority the amount of consideration required to be tendered under sub-s. (1) within the period specified therein :
Provided that nothing herein contained shall affect the liability of any person who may receive the whole or any part of the amount of consideration for any immovable property vested in the Central Government under this Chapter to pay the same to the person lawfully entitled thereto …”
4. As will be seen, under the proviso to sub-s. (1) of s. 269UG the setting off of any liability for payment of any amount towards taxes is the prerogative of the Appropriate Authority. It is only in the order that the Appropriate Authority passes, either resorting to pre-emptive purchase or otherwise, that it may order the setting off of the amount against any such liability for any tax. The Central Government is not empowered to do so. Despite such stipulation in the proviso to sub-s. (1) of s. 269UG, the respondents resorted to this act. Even this defence is not tenable because ultimately they actually tendered the entire consideration amount to the Appropriate Authority, which means that the amount towards the liability of the tax was not set off even by the respondents. That leaves us to consider the remaining question regarding the existence of a dispute relating to the title to receive the amount of consideration. The respondents contended that since the petitioner filed the present petition in this Court, that amounted to the existence of the dispute relating to the title to receive the compensation amount and, therefore, they did not tender the amount to the vendor, and instead deposited it with the Appropriate Authority. The respondents have relied upon the Division Bench judgment in the case of Mrs. Sooni Rustam Mehta vs. Appropriate Authority (1991) 190 ITR 290 (AP) 160. The facts are different because the writ petition in that case was filed by the vendor himself whereas in the present case before us the writ petition has been filed not by the vendor but by the vendee.
5. The following observations of their Lordships shall be relevant to understand the true context in which the issue regarding the dispute to title was discussed in the aforesaid judgment :
“But the question still remains as to whether, in this case, there is a bona fide dispute as to the title of the petitioners to receive the amount of consideration. It is true that there are no rival claimants. But the question still is whether there can be said to be any dispute as to the title of the executors to receive the amount of consideration.
In our view, the word title in sub-s. (3) of s. 269UG should be considered not merely as relating to the ownership of the part or whole of the consideration but as referable to the entitlement of the persons to receive the consideration. The word entitlement would necessarily give a wider meaning to the word title, thereby taking in even a dispute as to the entitlement of the person challenging the provisions of the Act or the order of vesting earlier passed by the authorities. The position is that when a person challenging the vires of the provisions relating to compulsory acquisition under the IT Act, is consequentially challenging the validity of the order of vesting, or is independently challenging the order of vesting, it would, in our view, be not unreasonable for the IT Department to say that such a person is not unconditionally entitled to receive the apparent consideration within the period specified in s. 269UG(1) and that there is a dispute as to the entitlement of the person to receive the consideration. In such an event, it would be open to the Department not to tender the apparent consideration under s. 269UG(1) but to deposit the same before the Appropriate Authority under sub-s. (3). If a person is questioning the validity of the provisions relating to compulsory acquisition or the order of vesting, he could not claim to receive the apparent consideration as a matter of right or unconditionally even before a decision is rendered as to the vires of the provisions or as to the validity of the order of vesting. If a deposit could, therefore, be made under s. 269UG(3), the provisions relating to revesting in the apparent manner under s. 269UH would not be attracted. The position is similar to a case where a person files a writ petition and challenges the validity of s. 4 of the Land Acquisition Act or a notification made thereunder. Such a person cannot, while the writ is pending, seek to receive the compensation. So also if a vendor is challenging an agreement of sale executed by him as bad, he cannot, before the said question is decided, seek to receive the entire consideration. The position here is analogous. If the amounts are paid, in the meantime, before the said disputes are decided, it might indeed become difficult to recover them back again”.
6. It is nobodys case that the petitioner was the person who could claim the consideration money or who had the title to receive consideration amount. It is the undisputed case of the parties that respondent No. 5 alone, in her capacity as the vendor, was the person who had the undisputed title to receive the consideration amount.
7. In the case of Prima Realty vs. Union of India (1997) 223 ITR 655 (SC), their Lordships of the Supreme Court have clearly held that the provision of s. 269UF of the Act are mandatory and if the Central Government fails to tender the amount of consideration as required under s. 269UG(1) of the Act, the order to purchase the property by the central Government passed under s. 269UD(1) of the Act shall stand abrogated and the property shall stand revested in the transferor after the expiry of the period prescribed therein. The following observations from the aforesaid judgment may be quoted with advantage :
“The appellant/transferee is a partnership firm with the name Prima Realty but the cheque described the payee as Prime Reality Ltd. which referred to different legal entity, a limited company, instead of a firm. The tender of the cheque could not, therefore, be treated as tender to the appellant. It was reasonable to assume that the cheque would not be honoured by the banker to credit the amount of that cheque to the account of the appellant, since it would relate to another legal entity, a limited company. In such a situation, the appellants were justified in taking the view that the cheque was not meant for them, and they could not lawfully require the bank to deposit the amount of the cheque in their account. The result is that the tender of the amount of consideration was short to the extent of Rs. 60 lakhs for which amount this cheque was made. There was, thus, clear non-compliance with the requirement of s. 269UG(1) of the Act. The consequence envisaged by s. 269UH of the Act ensued.
Accordingly, the order dt. 24th April, 1995, made under s. 269UD(1) by the Appropriate Authority stood abrogated and the property was revested in the transferors in terms of sub-s. (1) of s. 269UH of the Act with the other consequential results including those specified in sub-s. (2) of s. 269UH and sub-s. (3) of s. 269UD. It is not necessary to detail all the consequences which follow as a result thereof, in terms of the IT Act, 1961, and any other law which may be applicable. In view of the fact that the cheque for the amount of Rs. 60 lakhs has not been encashed, the remaining amount of Rs. 2,98,84,384 has become refundable to the Central Government as on 1st June, 1995, which would be refunded by the appellants with interest at 12 per cent. per annum from 1st June, 1995, till the date of payment. It is directed accordingly. All the consequences in accordance with law including the requirement of execution of the conveyance in favour of the appellants follow as already indicated”.
8. The Calcutta High Court in the case of Madhusudhan Das vs. Appropriate Authority of (1997) 223 ITR 351 (Cal) made similar observations by holding that the provisions contained in s. 269UH are mandatory. The following observations support the view that the provisions of s. 269UH are mandatory and the consequences are inevitable :
“In my view, s. 269UG presupposes a valid and lawful tender and valid and lawful deposit and only by either valid and lawful tender or deposit, it is open to the respondent to avoid application of the provisions of s. 269UH(1). The mere fact of deposit if unlawful and invalid is not a deposit under s. 269UG and in the event of unlawful and invalid deposit the provision contained in s. 269UH(2) will apply.
In my view, in order to authorise and warrant deposit, the conditions as specified in s. 269UG(2) or s. 269UG(3) have to be shown to exist and be satisfied. Unless the said conditions exist and are fulfilled, the alleged deposit, if any, will be invalid and attract s. 269UH(1). In this connection, the provisions relating to the Land Acquisition Act and the judgment and decision in the case of Sudhansu Kumar Ghose vs. Land Acquisition Officer AIR 1961 Pat 150, which has already been taken note of appear to be relevant”.
9. The Gujarat High Court in the case of Hotel Mardias Pvt. Ltd. vs. Union of India (1996) 220 ITR 94 (Guj) observed as under :
“Once we have come to the conclusion that the amount of consideration was not tendered within the time prescribed under s. 269UG and there was no ground for making deposit to the Appropriate Authority the consequence which has been provided under s. 269UH would necessarily follow, namely, the order of purchase shall stand abrogated and the immovable property shall stand reverted to the transferor on the expiry of the period in which the amount was to be tendered but has not been so tendered”.
10. From what has been stated above the conclusion becomes inescapable that the respondents had no justification in not tendering the amount of consideration to respondent No. 5 as was required under s. 269UG(1) of the Act and that the stand taken by them is not tenable in law. There was no dispute with regard to the title of the person receiving the consideration money. In any event, as is noticed, in the communication addressed to the CBDT, the respondents have not taken this as a ground in not tendering the amount to the vendor. Only two grounds have been specified, in that communication, firstly, about the filing of the petition by the vendee in the High Court and, secondly, with regard to the liability of the vendor to pay the Calcutta Municipal Corporation tax.
The aforesaid communication of the respondents to the CBDT clearly indicates the reasons which they had in not tendering the amount of consideration to respondent No. 5. The reasons indicated in that communication are binding upon them. These reasons, however, are not relevant at all in not tendering the consideration amount to respondent No. 5. The only legitimate reasons which could possibly be valid for permitting the respondents in not tendering the amount to respondent No. 5 are as contained in sub-s. (3) of s. 269UG of the Act. Admittedly, these reasons do not exist in the present case. The inevitable conclusion is that the rigour of s. 269UH is squarely attracted in this case. The consequence as stipulated in s. 269UH is mandatory and inescapable.
In the result, the writ petition succeeds. By issuance of a writ of certiorari the impugned order dt. 31st January, 1995, is quashed and set aside with all consequences.