Hans Raj Agarwal And Anr v. Chief Commnr. Of Income Tax And Ors

HANS RAJ AGARWAL AND ANR. v. CHIEF COMMNR. OF INCOME TAX AND ORS. DECEMBER 20, 2002 B [RUMA PAL AND B.N. SRIKRISHNA, JJ.] Income Tax Act, 1961-Chapter XX-C-Section 269-UC, 269-UD and 2(47)-Purchase of immovable property by Central Government in cases of C transfer involving under valuation -Appropriate Authority passing purchase orders-High Court quashing the first purchase order-Challenge to the second purcl;ase order rejected..:_ Validity of-Held, in the circumstances of the case, High Court was right in rejecting the challenge to the second purchase order. One Land her sisters- agreed to sell certain property jointly owned D by them, to the appellants. L died before the conveyance deed was executed. On the basis of L's will, the executor entered into fresh agreement with appellants to sell L's one-third undivided share. Other siste.rs appointed appellants as their power of attorney, who sold demarcated portions of the property to their nominees. Subsequently, Chapter XX-C of Income Tax Act came into force which provided for the E compulsory purchase of immovable properties in certain cases of transfer by Central Government. Thereafter, appellants and the executor filed a joint statement under section 269-UC in Form 37-1 in respect of L's share. The Appropriate Authority did not accept the statement and passed a filing order refusing to exercise its power under section 269UD(I) or 269UL(3), F which was accepted hy the parties. The appellants and the executor then filed a second statement. The Appropriate Authority accepted the same and passed a purchase order for purchase of the property. Within a month the Central Government deposited the consideration amount and possession of property was handed over to it. Aggrieved, the appellants filed writ petition for setting aside of the purchase order. High Court G quashed the fir$t purchase order. The Appropriate Authority then passed a second purchase order. The appellants filed a writ application challenging the second purchase order. High Court rejected the same. Hence the present appeal. The appellants contended that the first purchase order was issued beyond the prescribed time; that in the second purchase order the A Appropriate Authority had wrongly purported to purchase a demarcated share in the premises which was neither the subject matter of agreement nor the statement filed under section 269-UC; that oral partition was impermissible in law; that complete transfer had taken place before Chapter XX-C came into operation in the State, thus the Appropriate Authority could not initiate proceedings in respect of L's property; that B the consideration amount reflected the true market value of the property; and that the Central Government had not deposited the consideration money nor paid it to the transferor. The respondents contended that it was not open to the appellants to C co'.!_tend that the first purchase order had been issued beyond the period of limitation since they had never raised this issue in the writ petition; that the appellants had accepted the 'filing order' of the Appropriate Authority and submitted a second statement without protest; that in terms of the direction issued in C.B. Gautam 's case the date of disposal of the appellants' first writ petition was to be taken as the date of filing of the D statement and, therefore, the Appropriate Authority had issued the second purchase order within the statutory period; that the appellants had admitted that the property had been orally partitioned between the three owners and also the sale deeds of the other two owners stated so; that the appellants had given up the argument that complete transfer had taken E place under Section 2(47) of the Act prior to coming into force of Chapter XX-C which had been recorded by High Court; that the documents on record and finding of the Appropriate Authority shows that appellants had not taken possession of L's share pursuant to the agreement of sale; that they had «=11tered into possession of demarcated portions of L's sisters' property after the execution of sale deeds by the appellants; that F Appropriate Authority had considered the material on record which showed that the stated consideration amount did not represent the true market \•alue of the property; and that the Central Government had deposited the purchase money with the Appropriate Authority which had been subsequently withdrawn by the transferor against a bank guarantee G executed by the appellants and this issue was not raised by the appellants in the writ petition. Dismissing the appeal, the Court HELD: I.I. The respondents' subm.issions are entirely acceptable and H A the High Court had correctly rejected the appellants' writ application. The Appropriate Authority had passed the 'filing order' refusing to exercise its power under section 269UD(l) pr 269UL(3). The appellants could have challenged such refusal. They chose not to do so till date. lpstead they voluntarily filed a fresh statement in Form 37-1. The necessary implication B according to the parties was that the first statement was not a proper one. The fact remains that parties had filed a second statement in Form 37-1 and they requested Appropriate Authority to act on it. The transferor who was a party to the second statement has never contended that the second statement was not valid nor have the appellants either before the High Court or before this Court contended otherwise. There is no question of C the Anpropriate Authority having extended the time under the first proviso to Section 269-UD nor did it do so. Whatever the reason for their doing· so, it was appellants and transferor's act of filing a fresh statement under Section 269-UC which gave rise to a fresh period of limitation. Under the first proviso to Section 269UD(I) time is to be computed from the receipt of"the statement" under Form 37-1. In the instant case the statement was D the second one. It was open to the Appropriate Authority, in such circumstances, to act on the second statement and pass a compulsory purchase order within a period of two months from the receipt of that statement. Thus the first purchase order could not be said to be invalid on this ground. Besides, the appellants' challenge to the first purchase E 'order does not really survive after the disposal of the first writ petition. There is no appeal from this order. As the first purchase order has been set aside without protest, the appellants' present grievance that the first purchase order is otherwise invalid is ill founded. 1660-F-H; 661-A-EI 1.2. Having quashed the purchase order, the High Court had directed F that Form 37-1 filed by the appellants would be deemed to have been filed as on that date. No doubt, the High Court records that the deeming fiction as to the date of filing of the statement was without prejudice to the appellant's contention that the first purchase order was passed beyond the period of limitation. However, in preserving the appellants' right, the G High Court directed the Appropriate Authority to determine the contention in keeping with the decision in C.B. Gal/lam's case. In the light of the decision in C.B. Gautam's case, the appellants' challenge to the first purchase order was misconceived. 1661-H; 662-AI 1.3. The appellant's submission that the second purchase order H directed the purchase of something which was not the subject matter of the agreement for s,ale or Form 37-1 stateinent is unacceptable. The A appellants cannot dispute that the shares of the three owners of premises had been demarcated prior to the second purchase order, if not even prior to the filing of the first statement. The 'nature of interest or right proposed to be transferred' was described as 'Absolute' and 'Ownership' property. There was no reference to the undivided interest of the sisters. The recital B portion of each deed referred to an oral partition and also that the property sold consisted of a specified area "as detailed in the schedule and the annexed plan". Boundaries were given and demarcated on the plan in respect of each of the sisters' share which was indicated on the plans forming part of the sale deeds. The Executor had filed an affidavit affirming the fact of oral partition giving in detail the demarcated portion C of the premises owned by L. The Appropriate Authority had also inspected the premises prior to issuing the purchase order and had found that property was in fact demarcated as recorded in the order. The reason why the share of L has been mentioned as undivided in the agreement of sale has been explained by the appellants themselv'es in the eight sale deeds executed by them. 1662-A-GI D 1.4. Oral partition had taken place before the agreement of sale. For the Appropriate Authority to have issued the purchase order in respect of the undivided share, in these circumstances, would mean not only the disruption of the established state of fact but also a reopening of the appellants' title to the undivided portions of premises. Jn any event, the E appellant cannot contend in the face of these facts that L's share was at any material time in fact undivided. Further the submission of the appellants that an oral partition was impermissible in law is erroneous. 1663-B-CI F 1.5. The second purchase order directed the purchase of '1/3 share/ interest in the property. Although the purchase order goes on to describe the 1/3 share/interest with reference to its boundaries, this would not serve to invalidate the first portion of the order. 1663-H; 664-AI 1.6. The appellants' submission that they were transferees within the G meaning of section 2(47) of the Income Tax Act is unsustainable. Whether there was a transfer or not would depend on whether the appellants had, in part performance of the agreement for sale taken possession of L's property. In each of the eight such sale deeds executed by the appellants of the share of the two sisters of L, it is recorded that the vendor was 'full and absolute owner and possessor of the property conveyed' and that the H SUPREME COU!lT REPORTS (2002] SUPP. 5 S.C.R. A 'vendor has handed over vacant possession to the vendee'. In other words, the appellants or their nominees who were the purchasers of the property conveyed took possession of demarcated portions of the premises pursuant to the eight deeds of sale and not prior thereto. There is no such document which would show that the appellants had ever taken possession of L's share. Besides the question is essentially one of fact and having given up B the case before the High Court, the appellants cannot be permitted to reopen the issue at this stage. 1664-B-EI 1.7. With regard to valuation, the Appropriate Authority had considered sale instances which had taken place at or about the time the agreement of sale was executed, location of property, its frontage and C accessibility and after physical inspection and concluded that the consideration for which L's property had been sold was under-stated. High Court affirmed the valuation. There is no reason to disturb the finding of fact on the basis of the material and also this Court cannot be oblivious to the fact that the property which the appellants had agreed to purchase D at Rs. 15,33,333 in 1988 was agreed to be purchased by the intervenor in 2000 at Rs. Four crores and five lakhs. 1664-F-G I 1.8. The submission that the Central Government had not deposited or tendered the amount within the time required under Section 269-UF read with S.269-UG(I) is an issue of fact. Since it is for the first time raised E by the appellants before this Court it is liable to be rejected. The deposit had been made by the Central Government within one month from the first purchase order and in any case prior to second purchase order. Admittedly the transferor has received the payment without any protest whatsoever. 1664-H; 665-A-BI C.B. Gautam v. Union of India, 119931 I SCC 78; Nanni Bai and Ors., v. Gila Bai, 119591 SCR 479; Appropriate Authority v. Tanvi Trading & Credit (P) lid., (1991) 191 ITR 307; Shankarrao v. Vithalrao, AIR (1988) SC 879 and Roshan Singh and Ors. v. Zile Singh and Ors., AIR (1988) SC 881, referred to. CIVIL APPELLATE JURISDICTION Civil Appeal No. 2121 of 2001. From the Judgment and Order dated 27.4.2000 of the Andhra Pradesh High Court in 10386/94. Joseph Vellapally and L. Nageshwara, G. Ramakrishna Prasad, K.V. H Ramakrishna, Jayanth Muthuraj, K.C. Sundarshan and Mohd. Wasay Khan, HANS RAJ AGARWALv. CHIEFCOMMNR. OF INCOME TAX [RUMA PAL,!.] 653 for the Appellant. T.L.V. Iyer, Rajiv Tyagi and B.V. Balramdass, for the Respondents. Avadh Behari Rohtagi, S.S. Rana, Bimal Bhaskar, Mrs. B. Rana and Ms. Manu Lall for the intervenor. The Judgment of the Court was delivered by RUMA PAL, J. The appellants' challenge under Article 226 to the order passed by the Appropriate Authorities under Section 239 UD (I) of the Income Tax Act, 1961 (referred to hereafter as 'the Act') was turned down by the Andhra Pradesh High Court. They have therefore assailed the decision C of the High Court before us. The property which ~as the subject matter of the order under Section 269 UD (I) was part of premises situated at Road No. 3, Banjara Hills, Hyderabad. The entire premises covered an area of about 7100 sq. mts and was jointly owned by one Leila D. Lean and her two sisters. On 13th March D 1988, the three owners agreed to sel! the entire premises to the appellants. Before the conveyance could be executed, Leila Lean died. The executor named in her will, through a general Power of Attorney Holder, one Sri Armugham, entered into a fresh agreement with the appellants on 27th April 1989 agreeing to sell Leila Lean's 1/3 undivided share in the property. The E two other sisters appointed the appellants as their power of attorney holders. In their capacity as the power of attorney holders the appellants sold demarcated portions of the property to nominees of the appellants by eight separate agreements executed and registered between 28th April 1989 and 31st May 1989.