MANSAROVER BUILDERS PRIVATE LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The house property in question, A-208, Defence Colony, New Delhi, belonging to the third respondent stood on a piece of land measuring 285 sq. yards .The land underneath the house was originally acquired by the third respondent's predecessor in-interest from L&DO by means of a lease deed dated January 20,1960, superseded by deed dated October 13, 1978. By virtue of an agreement dated April 7,1993 the - third respondent agreed to sell the property to the petitioner at an apparent price of Rs.57.50 lacs. At the. time of execution of the agreement to sell the petitioner paid a sum of Rs. 8 lacs to the third respondent. Regarding payment of the remaining amount by the petitioner, the agreement provided that a sum of Rs.49 lacs would be paid on receipt of the permission of the Appropriate Authority for the sale of the property and the balance of Rs.50,000.00 at the time of registration of the sale deed. The agreement also required the petitioner to obtain the requisite permission from the Appropriate Authority under Chapter XXC of the Income Tax Act, 1961 and that of the L&DO within a period of nine months of the signing of the agreement to sell. It further stipulated that the parties shall complete the sale of the property within thirty days of the receipt of all the necessary permissions and clearances from the Income tax Department and the L&DO.The agreement to sell also postulated handing over of the physical possession of the property, except a room on the ground floor, allegedly let out to one Anand Goswami at a monthly rental of Rs.225.00 , with effect from July 1, 1986, to the petitioner at the time of the registration of the sale deed. The deed further recited that the property was free from all encumbrances.

(2.) On April 19,1993, the petitioner Filed a statement in form 37-1 under Rule 40L of the Income Tax Rules,1962 together with a copy of the agreement to sell dated April 7, 1993 before the Appropriate Authority. The statement was signed by the third respondent and the director of the petitioner-company. On consideration of the material on the record the Appropriate Authority was prima facie of the view that the ostensible consideration was low. Accordingly a show cause notice dated June 7,1993 was issued to the petitioner as also the third respondent. In this notice it was stated that after adjusting the salvage value of the structure standing on the instant land amounting to Rs.26,000.00 , the land rate as per apparent consideration worked out to Rs.24,022.00 per sq.mtr. Show cause notice referred to the sale incidents of C-538 Defence Colony, and A-20, Defence Colony. New Delhi for the purpose of comparison with the transaction in question. It noticed that C-538, Defence Colony, having land area of 271.73 sq. Mts. (325 sq. yards) was agreed to be sold as per agreement to sell dated February 2, 1993 for an amount of Rs.88 lakhs. The Appropriate Authority after adjusting the salvage cost of the structure and the time and the location factors worked out the land rate of C-538, which came to Rs.36,969.00 per sq. mtr. The Appropriate Authority also noticed that A-20, Defence Colony measuring 181.44 sq.mts. ( 217 sq. yards) was auctioned on July 26,1991 for an amount of Rs.55.05 lacs. The Appropriate Authority after adjusting the salvage cost of the structure and time and location factors of the property, worked out the land rate of that property at Rs.31,494.00 per sq.mt. In view of these sale instances the parties to the agreement to sell dated April 7, 1993 were called upon to show cause why orders should not be passed in accordance with sub section (1) of Section 269UD of the Income Tax Act. Pursuant to the show cause notices the parties Filed their replies. While the third respondent, the intending vendor, stated in his reply dated June 17,1993 that the sale price of Rs.57.50 lacs in respect of the property in question was a fair one, the petitioner raised a number of pleas in its reply dated June 21, 1993.T-he petitioner took the .stand that the show cause notice was not signed by the Appropriate Authority; that the instances of the sales referred to in the show cause notice were not relevant; that the rates of C&D blocks of Defence Colony were higher by 30% than those of A block as the plots in those blocks were allotted to senior officers of the armed forces while the plots in A Block were allotted to junior officers of the armed forces: that C&D blocks abut on the Ring Road and Lal Bahadur Shastri Marg, facing Lajpat Nagar but A block faces slums of Kotia Mubarkpur and quarters of 4th class employees of Sewa Nagar, that in the circumstances the sale instance of C-538, Defence Colony was not comparable and that the price fetched by property .No.A-20, Defence Colony in the auction does not indicate the real market rate. Besides the petitioner relied upon sale instances of immovable properties located at A-2 Defence Colony, A-175 Defence Colony, D-364 Defence Colony and D-319 Defence Colony. After the receipt of the replies to the show cause notices the Appropriate Authority gave the petitioner an opportunity to make oral submissions before it, pursuant to which the petitioner appeared and made submissions through counsel and also requested the Appropriate Authority to summon Anand Goswami, who was said to be the tenant of a room in the proeprty in question. The Appropriate Authority inspected the property and also recorded the statmenmet of Anand Goswami. On consideration of the matter, the Appropriate Authority by its order dated June 30,1993 decided to purchase the property at the ostensible value of Rs-57.50 lacs on the ground that the disclosed value of the properly was 15% below its fair market price. While doing so it rejected the stand of the petitioner with respect to the comparable sale instances relied upon in the show cause notice. With regard to the reliance placed by the petitioner on the two out of three sale instances of immovable properties, namely A-2 and A- 175, Defence Colony, New Delhi the view of the Appropriate Authority was that even these sale instances indicated that instant properly was agreed to be sold at an apparent consideration which was less than the apparent sale consideration of these properties. In so far as A-2,Dcfencc Colony was concerned, the Appropriate Authority noted that the date of the agreement to sell was July 31, 1992 and the declared land rate was Rs.22,561.00 . On making adjustment of 9% + 5% + 5% + 2% + 2% + 2% + 1% + 1% on account of time gap, shape, joint ownership, and location being near to (i) sewer (nalha), (ii) railway line, (iii) taxi stand, (iv) Gas depot and (v) jhuggies respectively, the Appropriate Authority came to the conclusion that the land rate for the properly would work out to Rs. 28,552.00 per sq. mt.which was higher by 19% in comparison to the disclosed apparent consideration of the instant property.

(3.) In regard to property No.A-175, Defence Colony the Appropriate Authority look cognizance of the fact that the agreement to sell was dated October 29,1992 and the declared land rate, after adjusting the salvage value of the structure standing thereon, was Rs.25,786.00 per sq. mt. On making further adjustments on account of factors like time gap (plus 5%) and location facing park ( plus 5% ) the Appropriate Authority came to the conclusion that the land rate worked out to Rs.28,364.00 per sq. mt., which was again 18% above the apparent consideration of the instant property. In regard to the incident of sale of D-319 (which was mentioned as D-139) Defence Colony, New Delhi the Appropriate Authority did not dilate on it in view of the submission of the petitioner that the properties in D Block, Defence Colony were not comparable with properties in "A" block thereof.