NITIN DOSHI Vs. S N L AGARWALA

JUDGEMENT

(1.) THIS petition is directed against the order dated 27th March 1995 passed by the respondent nos.1 to 3 (Appropriate Authority) under section 269UD of the Income Tax Act, 1961 acquiring the property bearing flat no. 56 in 'C' Wing of a building known as Mandhana Manor at Mahim (for short 'the said flat').

(2.) THE petitioner is a purchaser of the said flat and the respondent no.5 is the builder and seller. The respondent nos.1 to 3 are the members of the Appropriate Authority constituted under Chapter XXC of the Income Tax Act. The respondent no.5 was engaged in the business of processing of fabric and had a processing unit situated at Mughal Lane, Mahim. As the Bombay Municipal Corporation refused to renew the licence, the processing unit was required to be closed down and the respondent no.5 shifted its activities to Tarapore. The property at Mahim was sought to be developed by it by constructing a building known as 'Madhana Manor'. Construction commenced in the year 1993 and the respondent no.5 started selling various flats in the building under construction. By an agreement dated 22nd December 1994, the respondent no.5 agreed to sell to the petitioner the said flat admeasuring about 680 sq.ft. (772 sq. ft. built up area) for a consideration of Rs.22,75,000/-. The agreement provided that the constructed would be completed within 2 years. The petitioner paid to the respondent no.5 Rs.15,00,000/- being about 65% of the total consideration as earnest money on the date of execution of the agreement of sale and the balance of Rs.7,75,000/- was to be paid on obtaining no objection certificate from the Appropriate Authority. On 30th December 1994, the petitioner filed an application in Form 37-I as required under section 269UC of the Income Tax Act and the Rules. After issuing a show cause notice and after hearing the objections raised by the petitioner and the respondent no.5 for the proposed acquisition, the respondent nos.1 to 3 passed an order on 27th March 1995 proposing to acquire the said flat. That order is impugned in the present petition.

(3.) LEARNED counsel for the respondent nos.1 to 4, however, submitted that during the relevant period, the prices of the properties were going on exponentially and the prices had gone up by more than 100% in a year. In the present case, the transaction in question was effected at a premium of only 34% of the prevailing price in February 1994. Increase of 34% in 10 months was too less and the Appropriate Authority had rightly come to the conclusion that the increase in the prices was at least 100%, and so the true market value of the said flat would be Rs.5500/- per sq. ft. To buttress his submission that the rates of the properties had gone up by more than 100%, learned counsel for the respondents invited our attention to the rate of rise of other properties in other areas. He invited our attention to the sale instances quoted in Annexure-B to the order of the Appropriate Authority. He pointed out that in respect of the property known as 'Great Eastern Royale' at Tardeo, the rates of the properties had gone up from Rs. 6877/- per sq. ft. in November 1993 to Rs.11,372/- per sq. ft. in May 1994. In respect of the property known as 'Kalpataru Heights' situated at Bombay Central, the rates of the property had gone up from Rs.7172/- per sq. ft. in April 1994 to Rs.12,438/- in December 1994, and this showed the rate at which the prices of properties in Mumbai were appreciating in the years 1993 and 1994. He therefore submitted that the estimation of the market price made by the Appropriate Authority on the basis of these rising rates cannot be said to be unreasonable. We are unable to agree. It is true that when the prices of properties in a city start increasing, they generally rise all over the city. However, large metropolitan and capital cities having a population of several millions are spread over a large area. Some areas of the city are prime areas, some acquire new prime status, some areas are business areas while some are developed as residential areas, some residential areas are populated by people belonging to high income group, some areas are populated by people belong to low income group and some suburbs are populated by people belonging to middle and lower income groups. Some far flung suburbs develop almost as independent townships and some become satellite towns. The rate of rise in the price of immovable properties in different areas of city are not necessarily the same. Prices in some areas rise much faster than the prices in other areas. Therefore, the rate of rise of price in one area of a city may not always be a sufficient guide to predict the rate of rise in other areas of the city. There may be several reasons for this difference in the rate of rise and it is not necessary to enumerate the reasons therefor. Suffice it to say that the rates of rise are not necessarily uniform.