Jugal Kishore Jajodia Karta Of The Jugal Kishore Jajodia (Huf) Indian Inhabitant v. S.c. Prasad, Chief Engineer, 2. S.c. Tiwari, Commissioner Of Income Tax 3. C.m. Betgeri, Commissioner Of Income Tax, All Members Of The Appropriate Authority, C

Diksha Rane DigitallyIN THE HIGH COURT OF JUDICATURE AT BOMBAYsigned byDIKSHADIKSHADINESHORDINARY ORIGINAL CIVIL JURISDICTIONDINESHRANERANEDate:2021.10.0116:54:18WRIT PETITION NO. 1018 OF 1993+0530 Jugal Kishore Jajodiakarta of the Jugal Kishore Jajodia (HUF)Indian Inhabitant, residing at4, Jagmohan Mallik Lane, Calcutta. ..Petitioner. VS.1.S.C. Prasad, Chief Engineer,2.S.C. Tiwari, Commissioner of Income Tax3.C.M. Betgeri, Commissioner of Income Tax,all members of the Appropriate Authority,Constituted under Chapter XXC of the Income-tax Act, 1961, having their OfÏce at Mittal Court, A ning,3[rd] foor, Nariman Point,Bombay 400 021. 4.Union of India5.Rev. Pramod H. naskar6.Robert Reid7.G. Cornelias5.Rev. Pramod H. naskar6.Robert Reid7.G. Cornelias 8.Suman Dhalwani9.Lorence Smith9.Lorence Smith 10.Ebesemer S. Lall 11.Paul Jairaj Trustees for the time being of The Evangelical Alliance MinistriesTrust, having its ofÏce at TutorsBungalow, Shaharnpur,Nashik 422 002. ..Respondents ------------ Mr. Ankit Lohia a/w. Mr. Sachin Kudalkar and Ms. Aditi Bhati/b. Madekar & Co. for petitioner. Mr. Ashok Kotangale i/b. Mr. A.K. Saxena for respondents –Revenue. ------------ ORAL JUDGMENT : C0RAM : K. R. SHRIRAM M. S. KARNIK, JJ.DATE : SEPTEMBER 23, 2021 This is a Petition impugning an order dated 28[th] April,1993 passed by respondent nos. 1, 2 and 3 under sub-section (1) of Section 269UD of the Income Tax Act (the Act). Section 269 UD contained in Chapter XX-C as it was then inforce reads as under : “Order by appropriate authority for purchase by CentralGovernment of immovable property. 269UD.(1) Subject to the provisions of sub-sections (1A)and (1B), the section (3) of section 269UC in respect of anyimmovable property, may, notwithstanding anything containedin any other law or any instrument or any agreement for thetime being force, make an order for the purchase by the CentralGovernment of such immovable property at an amount equal tothe amount of apparent consideration : Provided that no such order shall be made in respect of anyimmovable property after the expiration of a period of twomonths from the end of the month in which the statementreferred to in section 269UC in respect of such property isreceived by the appropriate authority : Provided further that where the statement referred to insection 269UC in respect of any immovable property is receivedby the appropriate authority on or after the 1[st] day of June,1993, the provisions of the frst proviso shall have efect as if forthe words “two months”, the words “three months” had beensubstituted : Provided also that the period of limitation referred to in thesecond proviso shall be reckoned, where any defect as referredto in sub-section (4) of section 269UC has been intimated, with 207. wp 1018-93.doc reference to the date of receipt of the rectifed statement by theappropriate authority : Provided also that in a case where the statement referred to insection 269UC in respect of the immovable property concernedis given to an appropriate authority, other than the appropriateauthority having jurisdiction in accordance with the provisions ofsection 269UB to make the order referred to in this sub-sectionin relation to the immovable property concerned, the period oflimitation referred to in the frst and second provisos shall bereckoned with reference to the date of receipt of the statementby the appropriate authority having jurisdiction to make theorder under this sub-section : Provided also that the period of limitation referred to in thesecond proviso shall be reckoned, where any stay has beengranted by any court against the passing of an order for thepurchase of the immovable property under this Chapter, withreference to the date of vacation of the said stay. Provided also that the period of limitation referred to in thesecond proviso shall be reckoned, where any stay has beengranted by any court against the passing of an order for thepurchase of the immovable property under this Chapter, withreference to the date of vacation of the said stay. (1A)Before making an order under sub-section (1), theappropriate authority shall give a reasonable opportunity ofbeing heard to the transferor, the person in occupation of theimmovable property if the transferor is not in occupation of theproperty, the transferee and to every other person who theappropriate authority knows to be interested in the property. (1B)Every order made by the appropriate authority under sub-section (1) shall specify the grounds on which it is made. (2)The appropriate authority shall cause a copy of its orderunder sub-section (1) in respect of any immovable property tobe served on the transferor, the person in occupation of theimmovable property if the transferor is not in occupationthereof, the transferee, and on every other person whom theappropriate authority knows to be interested in the property.” 2.Section 269UP of the Act says the provisions of thisChapter shall not apply to, or in relation to, the transfer ofany immovable property efected on or after the 1[st] day ofJuly, 2002. 207. wp 1018-93.doc 3.Petitioner purchased a bungalow being bungalow no.4A in Indu-Park Co-operative Housing Society Ltd. at Andheri(nest), Bombay (the said bungalow) along with fve sharesof the said society. The transferor is the Evangelical AllianceMinistries Trust, a Public Trust registered under theprovisions of the Bombay Public Trusts Act (the transferortrust). The transferor trust decided to sell the said bungalowand therefore invited ofers for sale of said bungalow byissuing advertisement in fve prominent local newspapers.The advertisement appeared on 23[rd] June, 1990 and 25[th]June, 1990. The transferor trust received various ofers andtwo ofers were for Rs.22,10,796/- and Rs.18,50,000/-. Thehigher ofer made by petitioner, after some negotiation, wasincreased to Rs.23,10,000/- and the sale was closed. Theacceptance of ofer in response to advertisement wasapproved by a resolution passed by the Board of Trustees ofthe transferor. Since the transferor was a trust, theagreement which was reached on 26[th] July, 1990 wassubject to permission of the Charity Commissioner to beobtained for the proposed sale, the permission from theconcerned society for proposed transfer and receiving a no 207. wp 1018-93.doc objection from the appropriate authority under Section269UC under Chapter XX-C of the Act. 4.An application under Section 36 of the Bombay PublicTrusts Act for sanction was fled on 6[th] May, 1991 and theCharity Commissioner by an order dated 24[th] November,1992 accorded his sanction for the sale of the saidbungalow to petitioner for Rs.23,10,000/-. The society alsogranted its permission vide a letter dated 25[th] January,1993. The no objection under Chapter XX-C of the Act wasrejected by the appropriate authority by an order dated 28[th]April, 1993 which is impugned in this Petition. 5.Petitioner and transferor trust had received a showcause notice dated 13[th] April, 1993 from the ofÏce of theappropriate authority calling upon to show cause as to whyan order should not be made in accordance with theprovisions of Section 269UD (1) of the Act. The show causenotice reads as under : “Sir/Madam, Please refer to your application in form No. 37-Iunder section 269 UC of the Income-tax Act, 1961submitted in this ofÏce on 4.2.1993 in connection withtransfer of property being Bungalow No.4A, Indu Park Co- 207. wp 1018-93.doc op. Housing Society Ltd., of Society Bearing Nos. 106 to110. 5.Petitioner and transferor trust had received a showcause notice dated 13[th] April, 1993 from the ofÏce of theappropriate authority calling upon to show cause as to whyan order should not be made in accordance with theprovisions of Section 269UD (1) of the Act. The show causenotice reads as under : “Sir/Madam, Please refer to your application in form No. 37-Iunder section 269 UC of the Income-tax Act, 1961submitted in this ofÏce on 4.2.1993 in connection withtransfer of property being Bungalow No.4A, Indu Park Co- 207. wp 1018-93.doc op. Housing Society Ltd., of Society Bearing Nos. 106 to110. This letter is to request you to please show cause asto why an order should not be made in your case inaccordance with the provisions of Sec. 269 UD (1) of theIncome-tax Act, 1961. For this purpose, you are requestedto please attend before the Members of the AppropriateAuthority in their OfÏce situated at Mittal Court, A-ning,3[rd] foor, Nariman Point, Bombay 400021 on 23.4.1993 at11.20 a.m. or to make your written submissions so as toreach this ofÏce on or before 23.4.1993 during OfÏcehours.” 6.If one sees this show cause notice, it is bereft of anymaterials or details. It does not contain any material toshow as to why the appropriate authority felt that an orderunder Section 269 UD(1) was required to be made. Replywas fled on 22 April 1993 on behalf of the transferor trustand petitioner. In the impugned order the appropriateauthority has relied upon a valuation report. Admittedly thesame was not provided to petitioner. Moreover, theappropriate authority has given six sale instances but noneof these details were provided to petitioner with the showcause notice or at any stage. 7.The appropriate authority has accepted that theCharity Commissioner has accorded his sanction for sale ofthe said bungalow but the appropriate authority simply 207. wp 1018-93.docdismisses the same by saying that the order passed by theCharity Commissioner only has persuasive efect but is notbinding. In the impugned order the appropriate authoritysays that even if the bungalow had remained unoccupiedand required heavy repairs, in its opinion, this could afectthe price only marginally, say to the extent of Rs.100/- persq.ft. which amount would be sufÏcient to renovate andbeautify the row house. But there is nothing to show howthey arrived at the fgure of Rs.100/- per sq.ft. Noopportunity was given to petitioner to respond to saidrenovation cost. 8.It is settled law that issuance of a show-cause notice isnot an empty formality. Its purpose is to give a reasonableopportunity to the afected persons to contend that theapparent consideration as per the agreement to sell is themarket price or that there is no undervaluation because ofpeculiar facts. The appropriate authority should give to theperson likely to be afected by the order proposed to bemade a notice of the action intended to be taken, informhim about the materials on the basis of which the 207. wp 1018-93.doc 8.It is settled law that issuance of a show-cause notice isnot an empty formality. Its purpose is to give a reasonableopportunity to the afected persons to contend that theapparent consideration as per the agreement to sell is themarket price or that there is no undervaluation because ofpeculiar facts. The appropriate authority should give to theperson likely to be afected by the order proposed to bemade a notice of the action intended to be taken, informhim about the materials on the basis of which the 207. wp 1018-93.doc appropriate authority proposes to take action for pre-emptive purchase and give a fair and reasonableopportunity to such person to represent his case and tocorrect or controvert the material sought to be relied uponagainst him. Hence, in the show-cause notice under Section269UD of the Act, provisional conclusions are required to bebriefy specifed. These provisional conclusions are requiredto be briefy specifed so that the afected persons couldcorrect or controvert the same efectively. If a vague show-cause notice is given without specifying anything as hasbeen done in this case or without specifying the grounds forholding that the property is required to be purchased underSection 269UD of the Act, then it can be held thatreasonable opportunity of showing cause has not beengiven. The transferor and transferee would be totallyunaware of the grounds which had prompted theappropriate authority to arrive at prime facie conclusion thatthe power under Section 269UD(1) of the Act was requiredto be exercised and the property should be compulsorilypurchased. The Division Bench of Gujarat High Court in OmShri Jigar Association vs. The Union of India and “7. In our view, considering the findings given above, it isnot necessary to deal with the aforesaid contentionexhaustively. However, it should be noted that issuance of ashow-cause notice is not an empty formality. Its purpose isto given a reasonable opportunity to the affected persons tocontend that the apparent consideration as per theagreement to sell is the market price or that there is noundervaluation because of peculiar facts. Therefore, beforetaking any action under section 269UD(1) of the Income-taxAct, the appropriate authority should give to the personlikely to be affected by the order proposed to be made anotice of the action intended to be taken, inform him aboutthe material on the basis of which the appropriate authorityproposes to take action for pre-emptive purchase and give afair and reasonable opportunity to such persons to representhis case and to correct or controvert the material sought tobe relied upon against him. Hence, in the show-cause noticeunder section 269UD of the Income-tax Act, provisionalconclusions are required to be briefly specified. If a vagueshow-cause notice is given without specifying anything orthe grounds for holding that the property is required to bepurchased under section 269UD of the Income-tax Act, thenit can be held that reasonable opportunity of showing causeagainst an order for pre-emptive purchase being made bythe appropriate authority was not given, because thetransferor and the transferee would be totally unaware ofthe grounds which had prompted the appropriate authorityto arrive at prime facie conclusion that the power undersection 269UD(1) of the Income-tax Act was required to beexercised and the property should be compulsorilypurchased. Issuance of a show-cause notice is thepreliminary step which is required to be undertaken beforegiving opportunity of hearing under Section 269(UD)(1)ofthe Income-tax Act. 8. While considering the contents of show-cause notice inthe matter arising in connection with a disciplinaryproceeding under the Punjab Civil Services (Punishment andAppeal) Rules, 1952, the Supreme Court has in the case ofB.D. Gupta v. State of Haryana, (1973) 3 SCC 149 : AIR1972 SC 2472 observed as under (at page 2474) : 8. While considering the contents of show-cause notice inthe matter arising in connection with a disciplinaryproceeding under the Punjab Civil Services (Punishment andAppeal) Rules, 1952, the Supreme Court has in the case ofB.D. Gupta v. State of Haryana, (1973) 3 SCC 149 : AIR1972 SC 2472 observed as under (at page 2474) : "There is nothing, however, in the 'Show-Cause Notice'of 26[th] October 1966 to indicate clearly that the 11994 SCC OnLine Guj 77 dissatisfaction of Government with the appellant'sreply of 18 December 1956 had nothing to do withCharge 1(a). The 'Show-Cause-Notice' merely states invague general terms that the appellant's reply to thecharges and allegations was unsatisfactory. Even if wewere to assume, though there is no reasonable groundfor this assumption, that Government did not have inmind the contents of Charge 1(a) while serving this'Show-Cause-Notice', there is nothing in the 'Show-Cause-Notice' to give any indication that the particularallegations regarding which the appellant had failed tofurnish a satisfactory explanation were referable onlyto Charge 1(b). The notice is vague on other groundsas well. As one reads the first paragraph of the notice,the questions that at once assail one's mind aremany : In what way was the explanation of theappellant unsatisfactory ? Which part of the appellant'sexplanation was so unsatisfactory ? On what materialsdid the Government think that the appellant'sexplanation was unsatisfactory ? It is to our mindessential for a 'Show-Cause-Notice' to indicate theprecise scope of the notice and also to indicate thepoints on which the officer concerned is expected togive a reply." 9. The same would be the position here. It would be difficultfor the transferor and the transferee to show cause as towhy the property should not be compulsorily purchased orto point out that there is no undervaluation of the propertyor even if there is undervaluation, it is because of thepeculiar facts regarding the property. 9.As regards the efect of the sanction granted by theCharity Commissioner, the Division Bench of this Court inMadhukar Sunderlal Sheth and others vs. S.K. Lauland others[2]held that approval by the CharityCommissioner ensures reasonableness of the agreement of sale and it was a factor which has to be borne in mind by 21992 SCC OnLine Bom 283 207. wp 1018-93.doc the Income Tax authorities while exercising its power underSection 269UD of the Act. The Court held that the CharityCommissioner, under the Bombay Public Trusts Act, isrequired to give his sanction bearing in mind interest,beneft and protection of the trust. He has to apply his mind,inter alia, to the price at which the property is to be soldunder the agreement and the Charity Commissioner has thepower, in a given case, to come to the conclusion that theprice at which the trustees have agreed to sell the propertyis not the price which would secure adequate beneft to thetrust and he may reject the agreement on that ground. Eventhe terms of the agreement of sale which the trustees mayhave entered into, are also liable to be examined by theCharity Commissioner at the time when he grants sanction.The Charity Commissioner’s sanction cannot be simplydisregarded by the appropriate authority by saying thatthough it has persuasive efect, it is not binding upon them.The appropriate authority ought to have dealt in its order asto why the Charity Commissioner was not correct. Paragraph5 of Madhukar Sunderlal Sheth and others (supra) reads asunder :- “5. The Charity Commissioner, under the Bombay PublicTrusts Act is required to give his sanction bearing in mindthe interest, beneft and protection of the trust. He has toapply his mind, inter alia, to the price at which the propertyis to be sold under the agreement. The CharityCommissioner has the power, in a given case, to come tothe conclusion that the price at which the trustees haveagreed to sell the property is that the price at which thetrustees have agreed to sell the property is not the pricewhich would secure adequate beneft to the trust and hemay reject the agreement on that ground. Even the termsof the agreement of sale which the trustees may haveentered into, are liable to be examined by the CharityCommissioner at the time when he grants his sanction.Approval by the Charity Commissioner ensures thereasonableness of the agreement of sale. These factors willalso have to be borne in mind by the income-taxauthorities while exercising their power under section269UD. The discretionary power under that section cannotbe exercised arbitrarily. It will have to be exercised bearingin mind the purpose for which it is conferred. Hence, thesubmission of the petitioner that if there is delay on thepart of the Charity Commissioner in granting sanction, andthere is a rise in the property market, the purchaser of sucha property will be at a disadvantage, loses its force. Thequestion of consideration has to be considered by theincome-tax authorities in the context of the specialcircumstances which accompany a sale by a public trust.The purchaser can also apply in accordance with law forearly sanction by the Charity Commissioner.” 10.Respondents have not fled any reply. Mr. Kotangalesubmitted that there was no requirement to give details ofthe sale instances referred to in paragraph 5 of theimpugned order to petitioner because three of the instancesare of bungalows in the same complex where the saidbungalow is situated and therefore, petitioner should bedeemed to be aware of the sale instances. ne are not 207. wp 1018-93.docimpressed by Shri Kotangale’s submissions. First of all, thatis not the case of the appropriate authority in the impugnedorder. Secondly, the appropriate authority is duty bound togive all materials on the basis of which it proposes to takeaction of pre-emptive purchase. It cannot absolve of its dutyand responsibility to give all materials on the basis of whichit proposes to take action. It cannot give a vague showcause notice and thereby deprive petitioner of a reasonableopportunity to efectively correct or controvert the materialsought to be relied against him. 11.Mr. Kotangale relied upon a judgment dated 10[th]March, 1993 in Smt. Vimla Devi G. Maheshwari vs. S.K.Laul, Chief Engineer and others[3] to submit that it wasthe obligation of petitioner to furnish sale instances to provethat value he agreed to pay to the trust was a correct valueand there was no undervaluation. The judgment is of nohelp to Mr. Kotangale since in that case petitioner reliedupon certain sale instances and hence the Court held that itwas for petitioner to adduce appropriate material in supportof his contention. 3Writ Petition No. 514/1993 (unreported) 207. wp 1018-93.doc 12.In the circumstances, the impugned order dated 28[th]April, 1993 is hereby quashed and set aside. 13.The appropriate authority is directed to issue ‘noobjection certifcate’ under sub-section (1) of Section 269ULof the Act to petitioner within four weeks of receiving a copyof this order. If there is no such authority, this order shouldbe considered as ‘no objection certifcate’ for the transfer. 14.All to act on copy of this order authenticated by theAssociate of this Court and not to insist on a certifed copy. 15.Petition disposed with no order as to costs. (M.S.KARNIK, J.) (K.R. SHRIRAM, J.)