MOHAN ALAGAPPAN,CHENNAI vs. ITO NON CORPORATE WARD 10 (4), CHENNAI

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ITA 1602/CHNY/2018Status: DisposedITAT Chennai05 December 2018AY 2009-1056 pages

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Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

Motors Ltd in 240 ITE 424, CIT Vs. R.Jawahr, 217 ITR 59, CIT v. R.Damodaran
214 ITR 610 · 1995 · HC
5 citing

Income Tax Appellate Tribunal, ‘ B’ SMC BENCH : CHENNAI

Before: SHRI JOGINDER SINGH & SHRI A.MOHAN ALANKAMONY

आदेश / O R D E R

PER JOGINDER SINGH, VICE PRESIDENT:

This is an appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-12,Chennai dated 15.03.2018 for the assessment year 2009-10, on the ground that the rate of properties, maintained by the Registration Authorities, for the purposes of checking evasion of stamp duty upon transfer deeds are not pursuant to the provisions in any statutes relating even to stamp duty and at any rate it cannot be the basis for determination of market value for acquisition.

2. During hearing the ld.Counsel for the assessee S.Sridhar advanced arguments which is identical to the grounds raised by further submitting that the guideline value cannot be basis of the determination of market value for which the ld.Counsel for the assessee relied upon the decision from Hon’ble Bombay High Court in the case of Lakshmi Narayan Grover Vs. Appropriate Authority 223 ITR 572, and Hon’ble Jurisdictiional High Court in the case of Hindustan Motors Ltd in 240 ITE 424, CIT Vs. R.Jawahr, 217 ITR 59, CIT Vs. R.Damodaran 247 ITR 697 and Hon’ble Rajsasthan High Court in Krishnakumar Rawat VS. UOI in 214 ITR 610(Rajasthan) and the case of Jawajee Naganathan Vs. R.D.O AIR 1994 SC 2852. The crux of the argument is that ld. First Appellate Authority erred in confirming the valuation, as on 01.04.1981, based on guide lines value. On the other hand, the ld.DR Shri B.Sagadevan strongly defended the impugned order by contending that the matter may be sent back to the file of the ld.CIT(A) to consider the arguments of the assessee and the valuation as on 1.4.1981.

Before adverting further, we deem it appropriate to consider decisions, relied upon, before us. One such decisions is from Hon’ble Jurisdictional High Court in the case of Hindustan Motors Ltd.(surpa) wherein the Hon’ble High Court observed/held as under:-

“14. Both the properties in question, namely, at No. 10, First Avenue, Har-rington Road, Chetput and at No. 1, Second Main Road, Gandhi Nagar, Adyar, were valued by a registered valuer, namely, Prashanth Engineers and the petitioner filed a statement in Form No. 37-1 on the basis of the said valuation. The appropriate authority rejected both the valuation reports as well as apparent consideration shown in the statement based on the aforesaid valuation reports. The conclusion of the appropriate authority is that the report of the registered valuer is not based on any evidence of the market value of the land. On the other hand, the appropriate authority relied on two sale instances of the property in which "no objection certificates" were issued and according to the said authority which are authentic documents.

21.

It is also clear that with regard to the first sale instance, "no objection certificate" has been issued for Rs. 1,50,00,000 which is also reflected in page 1 of the sale deed document No. 890 of 1996, the purchaser having paid and the seller having accepted the receipt of the amount. As rightly observed by the appropriate authority, this represents the true market value of the property. As stated earlier, for the purpose of collecting stamp duty, the value is apportioned between land and building, whatever value for land indicated by the vendor and the executant in the document is taken as base and stamp duty worked out. Hence, the value furnished by the petitioner based on the materials supplied by the Sub-Registrar cannot be accepted for valuing the property under Chapter XX-C. Though the second sale instance relating to the property at door No. 8, II Avenue, Harrington Road, is not registered, after considering all the relevant materials, the appropriate authority has issued "no objection certificate" and it reflects the market rate of the land as on the date of that agreement on October 24, 1996. On the other hand, the value furnished by Prashanth Engineers merely on the basis of materials supplied by the Sub-Registrar here again cannot be accepted. As rightly observed by the appropriate authority, there was appreciation in land rate in Chetput locality where the subject property is situated. In fact, Adyar area where the property being exchanged is situated, has also shown appreciation in land rate. Though reliance was placed about the statement in the newspapers regarding slump in the prices of land, as rightly observed, the rise or slump in the prices of land reported in the newspapers cannot be generalised as applicable to all areas. The appropriate authority has also considered the documents in respect of few cases of property transactions in Harrington Road filed by the petitioner, and after giving adequate reasons, rejected those documents. The desire of the fifth respondent to retain the building as her residence and not for development, the appropriate authority has allowed a reduction of 10 per cent, in the land rate for restricted market as suggested by the valuer while evaluating the fair market value. Further, even though the Coovum river has any effect on the property in question, the appropriate authority have given due consideration for locational disadvantage on account of the Coovum and allowed 5 per cent, reduction in the land rate while evaluating the fair market value. Regarding the width of the road, the appropriate authority has obtained necessary details from the Madras Metropolitan Development Authority and considered the claim of the petitioner. In the light of the detailed discussions by the appropriate authority based on acceptable materials, though learned senior counsel for the petitioner has referred to various decisions regarding fixation of market value and other aspects, I am of the view that it is unnecessary to refer the same. Further it is settled law that when the facts are clear, there is no need to refer decisions for those aspects.

“Accordingly, the petitioner submitted her reply on 13th Feb., 1993, contending that there was no undervaluation in the sale transaction in question and that the suit property was being purchased at its market value. It was also pointed out that the consideration for the suit property agreed to between the parties was fair and reasonable and that in fact the rate of valuation fixed as per the land rates maintained by the Nagpur Corporation and by the stamp authorities for levy of stamp duty and the registration charges upon documents relating to transfer of title was much lower than the market rate calculated for the suit property on the basis of the consideration agreed to between the parties. It was pointed out that for the area in question the said land rate fixed was Rs. 1,500 per sq. mt., i. e., Rs. 145 per sq. ft., whereas the land rate for the suit transaction worked out to Rs. 225 per sq. ft. Further, it was pointed out by the petitioner in her reply to the show-cause notice that there was encroachment upon some portion of the suit land regarding which a dispute was going on and for which reason its market value would be lower than its real market value. The plea was also raised that since there were two co-owners, i. e., the beneficiaries, the share of each would be less than Rs. 10,00,000 and as such the provisions of compulsory purchase in Chapter XX-C of the Act would not be attracted to the instant sale transaction. Along with the reply to the show-cause notice the petitioner had also submitted documentary evidence in the shape of a valuation report and certain sale deeds to show that the suit transaction was for fair market value. It was also pointed out in her reply to the show-cause notice by the petitioner that before issuing the show-cause notice, the Appropriate Authority must come to the tentative or prima facie view that the property was undervalued and that it should incorporate in its show-cause notice the material or the reasons on the basis of which it comes to such a tentative or prima facie view in the absence of which the noticee does not have an opportunity to meet its case. The petitioner, therefore, demanded the reasons from the Appropriate Authority for its prima facie view that the suit property was undervalued. After receipt of the above reply of the petitioner to the show-cause notice issued by the Appropriate Authority and after hearing the learned advocate for the petitioner who appeared before it, the learned Appropriate Authority by its order dt. 23rd Feb., 1993, passed an order for compulsory purchase of the suit land for a net consideration of Rs. 13,25,343 payable to respondent No. 3 by the Central Government including a sum of Rs. 44,178 ordered to be deposited in the Appropriate Authority's account as per its finding in para 7 of its order relating to the question of vacant possession regarding encroachment of about 200 sq. ft. upon the suit land by the owner of the adjoining plot. The reasons for compulsory acquisition were recorded by the Appropriate Authority separately on the same date, i. e., 23rd Feb., 1993. A perusal of the reasons recorded by the Appropriate Authority would show that the suit land was situated in the Civil Lines area which was purely a residential locality of the people belonging to the upper middle class. The permissible FSI for the suit land was one and its permissible user was for residential purpose. After considering the question of its location, the Appropriate Authority determined the discounted value of the apparent consideration of Rs. 13,50,000 shown in the agreement of sale dt. 24th May, 1992, in accordance with the provisions of s. 269UA(b) r/w r. 48-I of the IT Rules, 1962, which provides for a rate of interest of 8 per cent per annum for determining the discounted value of the apparent consideration given in the agreement of sale. It has calculated the discounted value of the consideration for the sale transaction at Rs. 13,25,343 as shown in para 4 of the reasons. The rate, therefore, worked out was Rs. 221 per sq. ft. The Appropriate Authority then worked out the land rate of land in the same locality of Civil Lines which was treated as a comparable sale instance by it. Its particulars are given by it in para 5 of the reasons. It appears from the particulars that the agreement of sale in the sale instance was dt. 26th Dec., 1990, and the area of the land agreed to be sold was 4,839.5 sq. ft. out of plot No. 2 in Shri Vallabh Co-operative Housing Society, Civil Lines, Nagpur. Its apparent consideration was Rs. 15,00,000 and the discounted rate per sq. ft. worked out was Rs. 304.20 with permissible FSI of 1. Since the property in the sale instance was sold one year two months earlier than the suit property, considering the 12 per cent increase in the land rate per annum, the rate of the land in the sale instance was worked out to Rs. 348 per sq. ft. As the difference was thus more than 15 per cent in the light of the judgment of the Supreme Court in the case of C. B. Gautam (supra), the Appropriate Authority was of the view that the suit land was significantly undervalued and there was thus a case for its pre-emptive purchase. As regards the case of the petitioner based upon the land the land rate maintained by the Nagpur Corporation and the stamp authorities, the Appropriate Authority rejected the said case on the ground that its main object was other than determining the market rate. As regards the two sale instances dt. 23rd Nov., 1989, and 23rd Nov., 1991, pointed out by the petitioner as comparable sale instances, the Appropriate Authority observed that the time gap between the instant sale transaction and the sale transaction in the first sale instance dt. 23rd Nov., 1989, was considerable and as regards the second sale instance dt. 23rd Nov., 1991, it observed that since the property therein was purchased by the tenant in occupation, he would naturally pay the price which is less than the market price in view of his tenancy rights. The Appropriate Authority thus rejected both the sale instances relied upon before it by the petitioner. The Appropriate Authority thus passed an order for compulsory purchase of the suit land for a net consideration of Rs. 13,25,343 payable by the Central Government to respondent No. 3 including the sum of Rs. 44,178 which was directed to be deposited in the account of the Appropriate Authority in view of the dispute about encroachment upon the said land by the owner of the adjoining land in the light of the findings of the Appropriate Authority in para 7 of its order dt. 23rd Feb., 1993. Feeling aggrieved by the order dt. 23rd Feb., 1993, passed by the Appropriate Authority, the petitioner has preferred the instant writ petition in this Court.

The said purchase by him, therefore, according to the petitioner does not reflect the true and fair market value of the said land. The above submission made on behalf of the petitioners is well founded. In assessing the value of the land, its special value to an owner of an adjoining property to whom it may have some very special advantage is a factor which has to be taken into consideration, because such a buyer is likely to pay a higher price for the said land than a prudent buyer would otherwise pay. The above factor is, therefore, recognised as a plus factor in favour of the acquired land under the Land Acquisition Act in determining its market value. (see para 13 of the judgment of the Supreme Court in the case ofChimanlal Hargovinddas vs. Special Land Acquisition Officer ). In the instant case as rightly urged on behalf of the petitioner there is a special advantage to the owner of the land in the sale instance by purchase of the adjoining land in plot No. 2 because it increases its FSI to 1.25. The transaction in the sale instance in which the buyer has paid a higher value for the land purchased by him, because of the above special advantage to him cannot, therefore, furnish a good guide for determining the market value of the suit land. Moreover, there is no material to show that in a period of one year and two months, the market value of the land in the Civil Lines area would appreciate and that too to the extent of 12 per cent per annum. Even the Appropriate Authority has not followed uniformity in giving such appreciation in land rates in the Civil Lines area itself as in other cases in this group of writ petitions, i. e., Writ Petition No. 715 of 1993, Writ Petition No. 1260 of 1993 and 1264 of 1993 with 2088 of 1993, the appreciation given by it without there being any material on record is 10 per cent per annum. In fact, in the order passed by the Appropriate Authority, which is the subject-matter of challenge in Writ Petition No. 1264 of 1993 and the connected Writ Petition No. 2088 of 1993 decided today, the same sale instance which is relied upon by it in the instant case is taken as a comparable sale instance for the suit land in the said case which is also situated in Civil Lines, Nagpur. The rate of appreciation, however, given to the same sale instance is at the rate of 10 per cent per annum and not 12 per cent.

10.

Turning next to the sale instances cited by the petitioner, i. e., by her valuer in his valuation report enclosed with her reply to the show-cause notice show that the land rate of the suit land represents its true and fair market value, it is necessary to see that although the Appropriate Authority has rejected the sale instance dt. 23rd Nov., 1989, of the Civil Lines area itself relied upon by the petitioner on the ground that there is considerable time gap, the sale instance dt. 26th Dec., 1990, relied upon by it is also much prior to the sale transaction in question in the instant case which is dt. 24th Feb., 1992. Although, as we have held above, there is no material to show how the appreciation at the rate of 12 per cent per annum is given to the transaction in the sale instance for the time gap between it and the sale transaction of the suit land, there is no reason why similar or at any rate some appropriate increases should not have been given by the Appropriate Authority to the land rate in the transaction in the above sale instance dt. 23rd Nov., 1989, for its comparison with the suit transaction as it had done in the case of the sale instance relied upon by it. The finding of the Appropriate Authority that there is a considerable time gap between the aforesaid sale instance dt. 23rd Nov., 1989, and the suit transaction and, therefore, the said sale transaction dt. 23rd Nov., 1989, cannot be taken as a comparable sale transaction is clearly arbitrary and perverse. Since the sale instance dt. 23rd Nov., 1989, was from the Civil Lines area of Nagpur itself, the Appropriate Authority should have considered the same by giving appropriate appreciation for value of the land for the time gap between the transaction in the said sale instance dt. 23rd Nov., 1989, and the suit transaction for comparing their land rates. As regards the aforesaid sale instance in which the sale deed is dt. 23rd Nov., 1989, it is material to see that the valuer in his valuation report has observed that the plot therein has a prime location, i. e., it is on the main road whereas the suit plot is in an inner lane. The plot rate, according to him, is Rs. 175 per sq. ft. For the time factor, he added 25 per cent (i. e., more than 12 per cent increase granted by the Appropriate Authority to sale instance relied upon by it) to the above value of Rs. 175 per sq. ft. of the plot and the rate thus worked out by him for the land in the said sale instance dt. 23rd Nov., 1989, is Rs. 219 per sq. ft. on the date of the agreement of sale of the suit plot, i. e. 24th Jan., 1992. In fact if 12 per cent increase per year which is made applicable by the Appropriate Authority to the sale instance relied upon by it is given, the rate of the above sale instance relied upon by the petitioner would work out to a rate lower than the rate of Rs. 219 per sq. ft. It may then be seen that if the allowance is made for the prime location of the land in the said sale instance dt. 23rd Nov., 1989, the market rate for the suit land should be still less than the rate for the land in the said sale instance dt. 23rd Nov., 1989. However, the discounted rate which is worked out by the Appropriate Authority for the suit land is Rs. 221 per sq. ft. which is more than the above rate of the land in the sale instance dt. 23rd Nov., 1989. It is, therefore, difficult to see how the land rate of the suit land is grossly understated.

11.

As regards the second sale instance upon which reliance is placed in the valuation report of the valuer submitted by the petitioner along with her reply to the show-cause notice, the said sale instance is rejected by the Appropriate Authority on the ground that it is a sale to the tenant in occupation. It is true that a tenant in occupation of the land is most likely to pay the price of the land in his occupation, which is lower than its market price. But then in rendering such a finding the Appropriate Authority has acted in an arbitrary manner because in the sale instance relied upon by it, the purchaser of the land was the owner of an adjoining land who was to benefit by the purchase of the said land by getting a higher FSI for the land, in which case, he was most likely to pay a price which was more than the market value of the land purchased by him. The Appropriate Authority should have in all fairness rejected the said transaction as not being a comparable sale transaction as it has done in regard to the above sale transaction in relation to the tenant in occupation relied upon by the petitioners. It is, however, pertinent to see that the sale agreement in the second sale instance is dt. 23rd Nov., 1991, which is very proximate in point of time to the suit transaction which is dt. 24th Feb., 1992, i. e., just after about three months. The said sale instance is about the plot in Civil Lines, Nagpur, itself which is close to the suit land. Its area is 7,500 sq. ft. and the consideration for its sale is Rs. 14,00,000. The land rate worked out by the valuer for the above second sale instance is Rs. 186.66 per sq. ft. It is pertinent to see that the valuer has actually given the rate of Rs. 210 per sq. ft. to the suit land on the date of the agreement, i. e., 24th Feb., 1992, i. e., just after three months of the transaction in the above sale instance dt. 23rd Nov., 1991, which should, therefore, normally take care of the lower value offered by the tenant in occupation of the land in the above sale instance. What is material to be seen is that although the valuer has taken into consideration the disadvantageous factor of the tenant in occupation offering a lower rate for the land in the above sale instance dt. 23rd Nov., 1991, which is close to the suit transaction time-wise and vicinity-wise, the Appropriate Authority did not at all take into consideration the advantageous factor of the land purchased by the owner of the adjoining land in the sale instance relied upon by it by giving to the transaction therein, the appropriate discount in comparing its rate with the rate of the suit land.

13.

There is another angle to the question of the alleged undervaluation of the suit property which should have been looked into properly by the Appropriate Authority. The petitioner who was the purchaser of the suit land was aware of the fact that there was encroachment of the owner of the adjoining plot to the extent of 200 sq. ft. upon the suit land which fact she had brought to the notice of the Appropriate Authority in her reply to the show-cause notice. There was thus a dispute about possession and ownership of the encroached land. Therefore, although respondent No. 3 transferor had agreed to put the petitioner in vacant possession of the suit land, she could not have done so about the encroached land unless her dispute about the same with the owner of the adjoining land was resolved. In view of the above factor, about the encroachment upon the suit land, which would cause delay in giving possession of the said land to the petitioner, if not total loss of the same, if the owner of the adjoining land were to succeed, the consideration agreed to between the parties may not reflect the true market value of the suit land. But then this factor has to be borne in mind while considering the question whether the suit land is grossly undervalued because it would give a good reason why the suit land has not fetched its proper market value, if at all, as held by the Appropriate Authority, its value is understated. A perusal of the finding of the Appropriate Authority in para 7 of the order shows that it has not considered the question from this angle but has considered it only for the purpose of withholding the payment of the value of the encroached land to respondent No. 3 till the said dispute was resolved and the Central Government through its appropriate department was put in possession of the said land since respondent No. 3 in her agreement of sale dt. 24th Feb., 1992, with the petitioner had agreed to give vacant possession of the suit land free from encumbrances on the date of execution and registration of the sale deed. This is yet another infirmity in the order of compulsory purchase passed by the Appropriate Authority in the instant case. It is thus necessary to see that the IT Department must make genuine efforts to find proper material or proper sale instances which are comparable time-wise and location-wise with the sale transaction of the property in question under the agreement of sale before proposing its pre-emptive purchase, so that the bona fide purchasers are not harassed and the bona fide transactions are not hampered as in the instant case where because of the reliance placed by the Appropriate Authority upon the sale instance which does not compare with the suit transaction, the parties to the transaction are required to suffer because of the delay in completion of that transaction caused by the Court proceedings. The Appropriate Authority must keep in mind the instructions issued by the CBDT referred to above in which the object of compulsory purchase of the immovable properties, which is pointed out, is to prevent proliferation of black money in real estate transactions and evasion of taxes by gross undervaluation of the immovable property in question. It is, therefore, necessary that recourse to compulsory purchase of the immovable property in question under Chapter XX-C of the Act should be taken only in clear cases of gross undervaluation from which the inference must clearly flow that it is done for evasion of taxes.

by the Central Government under Chapter XX-C of the Act must disclose how the tentative or prima facie conclusion is arrived at by the Appropriate Authority that the property sought to be compulsorily purchased is significantly undervalued, which means that if any particular sale instance (s) is/are relied upon to show how the property in question is significantly under-valued, it is necessary for the Appropriate Authority to refer to the said details in the show-cause notice so that the transferor and/or the transferee have real and proper opportunity to meet the case of the Department. It is necessary to see that issuing a show-cause notice is not merely an empty formality which is incorporated in s. 269UD(1) of the Act to save it from its invalidity but the opportunity to show cause has to be real and substantial which means that the transferor and the transferee concerned must know as to why the Appropriate Authority is holding that their immovable property under the agreement of sale is significantly undervalued. When an obligation is cast upon an authority to give a notice to show cause before reaching any final conclusion against the person affected by its action, the purpose and the requirement of such a show-cause notice is two-fold (i) the noticee must get an opportunity to meet the case against him and (ii) he must have an opportunity to set forth his own case to show why an order adverse to him should not be passed. In this regard, de Smith in his Judicial Review of Administrative Action (Fourth Edn.) has observed at page 196 as follows : "Natural justice generally requires that persons liable to be directly affected by proposed administrative acts, decisions or proceedings be given adequate noticee of what is proposed, so that they may be in a position - (a) to make representations on their own behalf; or (b) to appear at a hearing or inquiry (if one is to be held); and (c) effectively to prepare their own case and to answer the case (if any) they have to meet".

“The petitioners have entered into an agreement to purchase a plot of 9,500 sq. yards (7,945 sq. metre) with two godowns having an area of 2,920 sq. metres with respondent No. 3 for a consideration of Rs. 99,84,500 out of which a sum of Rs. 40,00,000 was paid by cheque and the possession of the two godowns, guard-room, office premises along with 1/4th Undivided share of the remaining open land was delivered. From No. 37-I along with a copy of the agreement was submitted under section 269UC on December 31, 1993. The Valuation Officer of the appropriate authority of the Income-tax Department, vide his letter dated January 18, 1994, informed the petitioner and the seller for inspection of the property on January 21, 1994. The appropriate authority, after receiving the report from the Valuation Officer, issued a show-cause notice on March 8, 1994, under section 269UD(1A) of the Act on the ground that the apparent consideration was lower for various reasons mentioned therein and the value of the land is much higher than the agreed rate. An example of a plot of land at A-90, Triveni Nagar, near Durgapura Station, sold by the Jaipur Development Authority on November, 7, 1992, at Rs. 1,781 per. sq. metre was taken. Adjustment of five per cent. on account of less development of the plot and ten per cent. on account of general condition of the plot was given and 12 per cent. was added on account of the time gap. On the basis of the rate of Rs. 1,692 per sq. metres, the value of the land of 7,943 sq. metres was calculated at Rs. 1,34,39,556. The petitioner was asked as to why the order for per-emptive purchase under section 269UD be not made and the case was fixed for March 21, 1994. Objections were submitted by the vendor as well as the petitioner that 40 per cent. of the land would be required to be left for amenities like parks and roads besides the cost of development of roads, electricity, water supply, etc. The sub-division has not been effected. It was also stated that the market price of the land in Durgapura notified by the sub-Registrar as on April 1, 1991, for the first category has been fixed at Rs. 550 an the second category at Rs. 450; and if 12 per cent. is added, it would come to Rs. 690 per sq. metre. This is besides the various objections mentioned above and also the fact that the cost of demolition and removal of debris would be substantial and the cost of investment for six months has to be taken into consideration. An example in the representation dated March 24, 1994, was given of a plot of 116.13 sq. metres sold at Rs. 861.10 per sq. meter situated in Triveni Nagar Scheme. The market rate fixed by the Sub-Registrar for registration purposes was stated to be Rs. 1,043.05 per sq. metre. A copy of the office order dated November 4, 1992, of the Jaipur Development Authority fixing the reserve price at Rs. 600 per sq. metre was pointed out. The appropriate authority passed the order under section 269UD(1) and exercising the powers vested in it ordered purchase of the property by the Central Government at an amount equal to the apparent consideration shown in the agreement. The appropriate authority directed delivery of possession of the said property to the Departmental Valuation Officer of the Income-tax Department whereupon the petitioner applied for time.

The submission of learned counsel for the petitioner is that the total land is 17 bighas 12 biswas having Khasra No. 126 owned by the partnership firm, Messrs. Rajasthan Industrial Company, which submitted a plain for development of an amusement park, commercial complex and residential colony. The Jaipur Development Authority approved the plain for the commercial complex and amusement park. The partnership was dissolved and, as such, the single integrated complex for which the plans were approved could not be acted upon. According to the submission of learned counsel for the petitioner, out of the total area of 7,943.48 sq. metres only 1,087.74 sq. metres is capable of being developed commercially and the saleable are comes to 13.693 per cent; and the rest of the area would form part of the roads, parking and other open spaces. If the rate of Rs. 1,800 per sq. metre is applied, the total value of the land would come to Rs. 19.58 lakhs. The godowns are being used for storage purposes and if the industrial use of the land is taken into consideration, then it should be on the basis of the rate charged by the RIICO for industrial land which is Rs. 100 per sq. metre for fully developed land. Even if the valuation is to be taken on the basis of the residential plot, the cost of development and reduction of area on account of the facilities have to be taken into consideration besides the fact that it would take around 12 months to develop the property over which at least Rs. 18 lakhs would have to be deducted on account interest alone. Possession has been taken only of land covered under godowns and the open area is said to be under the co- ownership of Smt. Krishna Kumari. The final agreement with the co-owner has not been arrived as yet, and there can be a change of site also. No notice was issued for treating the property as a commercial property. The value of the godown was also not mentioned in the notice issued. The grievance of the petitioner is also that they were given only ten days time for filing the reply and thus the principles of natural justice have been violated. A reasonable opportunity as directed by the apex court has also not been given. The notice was received on March 11, 1994, and there was a strike by Government staff from March 16, 1994, to April 3 1994, and therefore, the copies of similar sale transactions could not be obtained. The action of the appropriate authority has been challenged on the ground that there was no material available with the Department to the effect that there was any evasion of tax in the transaction. Notice to the co-owners who are interested persons was not issued. The goods were shifted to the godown in several months and it will take a few months now to vacate it. The apparent consideration shown is not less than apparent consideration if 15 per cent. is added thereon. The orders have been passed on grounds different than those for which the notice was issued. The copy of the valuation report was not supplied. The comparison with the land situated at Triveni Nagar which is fully developed has wrongly been made. The value of the structure should have been taken as nil. While valuing the godown incorrect facts with regard to the tubular trusses, A. C. sheet roofing having CC floor, electric installations, iron etc., have been taken and it has wrongly been mentioned that commercial use of the property has been allowed by the District Magistrate and the Jaipur Development Authority. The proper norms for valuation of the property have been not been adopted. A single instance cannot be the basis for valuation of the property. The property is near the vegetable factory which is emitting a foul smell and incapable of developing into a residential colony. The instance of sale of plot given by the petitioner has wrongly been ignored. The salable area is only 66 per cent. of the total area and the calculation should have been made on that basis. It is submitted that the market rate notified by the Sub-Registrar under the provisions of the Rajasthan Stamps Act as on April 1, 1991, was Rs. 777 per sq. metre and if 12 per cent. is added for the time-gap, it would come to only Rs. 963 per sq. meter. The rate notified by the Jaipur Development Authority on November 4, 1992, was Rs. 600 per sq. metre and if 12 per cent. is added thereon it would come to Rs. 672 per sq. metre. The average of the two plots in Triveni Nagar which have been sold at Rs. 1,043

per sq. metre and Rs. 1,781 per sq., metre comes to Rs. 1,411 per sq. metre and on that basis also the total cost of 5,242 sq. metres comes to Rs. 74.02 lakhs. The cost of laying roads and other amenities should be deducted therefrom. On the basis of the land approved by the Jaipur development Authority, for commercial use to the extent of 1,087 sq. yards, it is submitted that the cost should be calculated at Rs. 1,800 per sq. metre as fixed by the Jaipur Development Authority November 4, 1992, and if 12 per cent. is added for the time-gap, it comes to Rs. 2,016 per sq. metre and the total cost of this land comes to Rs. 21.93 lakhs from which deduction for demolition an interest charges should be given. I have considered the arguments of both learned counsel for the petitioner. The objection which has been taken by learned counsel for the respondents is that the writ petition is not maintainable as the petitioner and the vendor have contravened the provision of the Act by transferring the property before any permission could have been given by the appropriate authority and for which reliance has been placed on the decision given by a Division Bench of this court in the case of Rajasthan Patrika Ltd. v. Union of India [1995] 213 ITR 443 (D.B. Civil Writ Petition NO. 3426 of 1991) decided on April 22, 1994. It is observed that so far as the preliminary objection is concerned, the respondents are to blame themselves. By none of the orders of the court, were the respondents restrained from taking any action if they were legally entitled. The decision relied on by learned counsel is not on the proposition that in such a situation, the writ petition is not maintainable. In that case, the order passed by the appropriate authority was not under challenge, by it was the prosecution of the petitioner in which the court refused to interfere. The writ petition against the order passed by the appropriate authority is maintainable and, therefore, the preliminary objection having no force is rejected. In the agreement dated December 31, 1993, the sale price of the land has been mentioned as Rs. 1,051 per sq. yard. Possession of

The appropriate authority has also taken into consideration the fact that the transferor has assured the purchaser that the property sold is free from all encumbrances and the responsibility to get the land partitioned was also undertaken; the fact of conversion was also stated. There are residential colonies adjoining the present land. As per cost of construction on the basis of norms applicable in the case of CPWD structures the value of godown was estimated at Rs. 42 lakhs. The submission of learned counsel for the petitioner is that the fact that the future of Rs. 42 lakhs was not mentioned in the notice does not vitiate the order because, even the cost of land itself was considered as more than the apparent consideration shown in the agreement and the fact that the cost of the godown has to be separately considered was also mentioned in the notice. The contention of learned counsel for the petitioner that the cost of removal of the debris will be more than the cost of the structure was rejected. This conclusion of the appropriate authority is also correct as the petitioner has himself stated in the petition that the godowns are being used for storing goods and is used for business purposes, and, therefore, there is no necessity for demolishing them. The value of the godown was taken at Rs. 42 lakhs and the value of the land was estimated at Rs. 1,37,21,532, at 1,727 per sq. metre. The total value has been taken at Rs. 1,79,21,532 as against Rs. 99,84,500. The contention of the petitioner with regard to the deduction of 40 per cent. for roads and park, etc., was not accepted and for the sake of the argument, it was considered that if the salable area as per rule 11 of the Rajasthan Urban Areas (sub-division) Rules, 1975, is taken to be 66 per cent., then it will come to 5,242.38 sq. meters to which if the sale instance was taken into consideration of Rs. 1,718 per sq. metre on which 12 per cent. for the time-gap is added, it will come to Rs. 1,994.72 per sq. metre. Even on that basis, the value comes to Rs. 1,04,58,548 and Rs. 42 lakhs for the building which is much more then the declared apparent consideration. It was also found that the area of Triveni Nagar is on the interior side of the main Tankroad, whereas the present land is having a better situation. The property being commercial has about 50 per cent. more value, which was not added for computation purpose. The decision of the Allahabad High Court in the case of Daya Engg. Works (P.) Ltd. v. Union of India (C.W.P. No. 4240 of 1993) decided on July 15, 1993, was also relied on for the point that the rate determined under the Stamp Rules cannot be determinative of the actual value of the property. The claim of Rs. 10 lakhs as registration charges and Rs. 15 lakhs of roads, water supply and electricity and for interest were also held untenable.

The valuation has no doubt to be made objectively and not on the subjective satisfaction of the appropriate authority. The figure which is arrived at has to be based on the material on record. There may be a certain element of arbitrariness while estimating the market value and it is for that reason alone, that without there being any mandate of the Act, the respondents have issued a circular that the acquisition of the property under Chapter XX-C would be if the difference of the market value and agreed value shown in the instrument is more than 15 per cent. Thus, the 15 per cent. margin covers the estimation part of the valuation, so that no injustice is done while acquiring any property. The right of pre-emptive purchase by the Central Government of immovable property is at an amount equal to the amount of apparent consideration so as to relieve the transferor of any grievance. The order undersection 269UD has to be passed in a time-bound programme. The appropriate authority consists of three persons; two of whom are to be members of the Indian Income-tax Services Group A holding the post of the Commissioner of Income- tax or, any equivalent or higher post and, one has to be a member of the Central Engineering Services Group A holding the post of the Chief Engineer or, any equivalent or higher post. The transferor and transferee are to be given the opportunity and a reasoned order has to be passed. The respondents have to make the valuation of the property by taking into consideration all relevant facts and thereafter a decision has to be taken by the appropriate authority. Viscount Simon J., in Gold Coast Selection Trust Ltd. v. Humphrey [1949] 17 ITR (Suppl) 19 (HL) observed that, "valuation is an art, not an exact science, mathematical certainty is not demanded, nor is it possible ?" A certain element of guess has to be there based on objective factors having reasonable nexus with the evidence on record. The various factors are there on the basis of which out of the various methods by which the valuation of the immovable property can be made, appropriate method is to be adopted. It depends on the location of the property, the purpose for which the property is used, the nature of the property, the time when the agreement is entered into and similar other objection factors. The valuation, therefore, has to be done by a method which is more objective and could furnish reliable data to arrive at a just conclusion.

Where the comparison of one with another is different since each property is susceptible to different factors which may have a dramatic effect on the figure of sale achieved. Even in the same market, the value of shops may differ on account of location. The profit which is derived on account of situation, location or special circumstances of the property is taken as basis for valuing the property. It is considered appropriate in respect of hotels, cinemas, shops, petrol pumps and other commercial properties. (v) Cost of replacement : This method is applicable in respect of property which is to be designed or used for a special purpose to meet specific requirement and the valuation of such property is derived from the value of alternative sites plus cost of building. The property in such cases have no sale instances in the market and thus no comparable cases could be found. The price of an alternative site and cost of erection of the building is taken into consideration. This cost of replacement is also referred as contractors method. (vi) Break-up method : The break-up method or asset breaking method is adopted for loss incurring concerns which have no chance of revival. (vii) Municipal valuation : Under this system taxes which are calculated by municipal authorities as a percentage of rent realised or realisable are taken into consideration and on that basis the annual value of the property is determined. (viii) Land and building method : Under this method, the valuation of the land is done separately on the basis of comparable instances of sale of other plots and the cost of construction as prevailing is taken from which the depreciation looking to the year of construction is reduced. This method is normally applied in cases of compulsory acquisition. The objection that solitary instance rate cannot be adopted for the purpose of comparison cannot be considered to be an absolute proposition of law. It depends on the facts and circumstances of the case and even where there is no other comparable case available a single solitary instance can be taken into consideration. The objection that the land should be considered to be agricultural land or that the rate of industrial land should be made applicable or that since the value of the building has been taken then the cost of land should be taken as nil cannot be accepted, as factually it could neither be considered as agricultural land nor a industrial land and the potentiality of the land has to be taken into consideration as observed by the apex court in the case of Raghubans Narain Singhs case, AIR 1967 SC 465. The various propositions with regard to the costing of land or restricting the saleable area on the basis of the already approved map can also not be taken into consideration as in accordance with the approved map the seller has not taken any action and learned counsel for the Jaipur Development Authority who was issued notice in this matter has admitted that the map could be revised by the Jaipur Development Authority. So far as the valuation of constructions is concerned, it is not proved by any evidence on record that the valuation has incorrectly been arrived at. The only thing which has been said is that the valuation was not depicted in the notice so that the petitioners could have submitted their reply. Even if for the sake of argument, the contention is accepted, nothing is stated by the petitioner in the petition itself as to how the valuation has not correctly been arrived at or there is any mistake apparent, so that the order of valuing the cost of built-up area at Rs. 42 lakhs would be considered to be illegal or a mistake apparent from record or an arbitrary figure. The contention of the petitioner that the said godown is to be demolished is contrary to his own averment in the petition that the godowns are used for storing the goods and it will take a number of months in transporting the goods and that the petitioner is carrying on his business there, which is near to the airport as well. In an area which is already constructed long-back and the business is being carried on neither there is any possibility of any authority demolishing the structure or restraining the purchaser from carrying on the activities. The contention that the building is to be demolished cannot be taken into consideration at this stage, even if the construction is finally demolished after a number of years. The valuation which has been arrived at by the appropriate authority of the constructed area, therefore, cannot be said to be unreasonable or requiring any interference by this court as there is no evidence on record by which it could be concluded that the petitioner has no intention to carry on the business in the said premises where it is being carried on by him under the agreement. The method of valuation of the godown has rightly been taken on the basis of land and building method. In CWT v. Mrs. Sara Varghese [1991] 187 ITR 450, the Kerala High Court has observed that for valuation a hypothetical market is contemplated. Imponderables are involved in the matter of valuation. The market value of the property is the price which a willing buyer will pay to a willing seller. It will vary from case to case. Valuation is not an exact science. Mathematical calculation is not possible. The money value attributable to the asset should be decided and estimated by the concerned statutory authority in a reasonable and judicial manner on the basis of the facts and circumstances available. The valuation should be made objectively and should be based on some material. The qualitative and quantitative analysis in the matter of valuation will differ from asset to asset, from place to place, and also considering the particular statute for which the valuation and price of the property have to be determined. It could be a wooden rule. Different methods and approaches, necessary in the context of different statutes under which the market value of an asset has got to be determined, pose difficult problems. The market value has got to be fixed with reference to the particular statute. The approach will differ, according to the nature of the statute, between fiscal statutes or non-fiscal statutes. Among the non-fiscal statutes, the Land Acquisition Act is an important legislation. Among the fiscal statutes, the Income-tax Act, the Wealth-tax Act, the Gift-tax Act, the Municipalities Act, etc., are important. In fixing the market value of a particular asset or property, the approach and analysis are likely to vary according to the subject-matter of legislation. The principles that are ordinarily applied in the case of non-fiscal statutes like the Land Acquisition Act cannot be applied mechanically to cases arising under the fiscal statutes. In Mani Singh Avtar Singh v. I.A.C. of I.T. [1985] 151 ITR 233 (P&H), it was observed that a plot built upon cannot be compared with an unbuilt not on which the purchaser has the opportunity of exercising a wide choice of building. In Debi Prosad Poddar v. CWT [1977] 109 ITR 760 (Cal), the following principles were laid down for the valuation of immovable property under the Wealth-tax Act (at page 773) : "(i) Attempt must be made to find out the price which the immovable property would fetch on the valuation date imagining a willing buyer to purchase the property from a willing seller in respect of the property; (ii) In respect of the immovable property, there is no fixed market such as market for shares or for other commodities, like sugar, cloth, etc. In order to arrive at a valuation in respect of the property, there must necessarily be certain element of guess. But the guess must be based on certain facts and according to certain principles which would be, in the facts and circumstances of each case, as fair as possible to the Revenue as well as to the assessee in trying to imagine reasonably and intelligently the price which was expected to be fetched if it was possible to sell the property in question on the relevant valuation date. (iii) Such a determination, therefore, involves adopting certain methods in determining the valuation and there are different kinds of methods, as mentioned in the circulars of the Board and the principles enunciated in the several decisions of the court as noticed before. (iv) Which one of the various methods would be suitable for a particular case must depend upon the nature of the property, the location of the property, the purpose for which the property is used and several other objective factors, viz., the time when the valuation is made, the prospect of buying and selling in respect of the property at the relevant time and also special features in respect of the property, if there be any. Taking all these factors into consideration it is, therefore, necessary to determine which one of the various methods will be most suitable to reach as accurate as possible a guess as to the valuation on the valuation date. (v) Another factor that has to be borne in mind is that such a method should be preferred which has more objective and reliable data to rely upon than mere subjective opinions. For instance, if there are more objective data to work out in respect of one method more reliable than another, then that method for a particular land should be preferred. If, however, there is any objective and reliable evidence of any transaction of sale of the land or property similar in quality or of the same type and in approximately same time then that would, however, provide more reliable method to follow." In Tribeni Devi v. Collector of Ranchi, AIR 1972 SC 1417; [1972] 3 SCR 208, it was observed by the apex court that (at page 1419) : "the general principles for determining compensation have been set out in sections 23 and 24 of the Act. The compensation payable to the owner of the land is the market value which is determined by reference to the price which a seller might reasonably expect to obtain from a willing purchaser, but as this may not be possible to ascertain with any amount of precision, the authority charged with the duty to ward compensation is bound to make an estimate judged by an objective standard. The land acquired has, therefore, to be valued not only with reference to its condition at the time of the declaration under section 4 of the Act, but its potential value also must be taken into account. The sale deeds of the lands situated in the vicinity and the comparable benefits and advantages which they have, furnish a rough and ready method of computing the market value. This, however, is not the only method. The rent which an owner was actually receiving at the relevant point of time or the rent which the neighbouring lands of similar nature are fetching can be taken into account by capitalising the rent which, according to the present prevailing rate of interest, is 20 times the annual rent. But this also is not a conclusive method. This court had in Special Land Acquisition Officer v. T. Adinarayan Setty [1959] Supp. 1 SCR 404; AIR 1959 SC 429, indicated at page 412, the methods of valuation to be adopted in ascertaining the market value of the land on the date of the notification under section 4(1) which are : (i) opinion of experts; (ii) the price paid within a reasonable time in bona fide transactions of purchase of the lands acquired or the lands adjacent to the lands acquired and possessing similar advantages; and (iii) a number of years purchase of the actual or immediately prospective profits of the lands acquired. These methods, however, do not preclude the court from taking any other special circumstances into consideration, the requirement being always to arrive as near as possible at an estimate of the market value. In arriving at a reasonably correct market value, it may be necessary to take even two or all of those methods into account inasmuch as the exact valuation is not always possible as no two lands may be the same either in respect of the situation or the extent or the potentiality nor is it possible in all cases to have reliable material from which that valuation can be accurately determined." So far as the question of valuation of land is concerned; reliance has been placed on the decision of Mathura Prosad Rajgharia v. State of West Bengal, AIR 1971 SC 465, wherein it was observed that (at page 469) : "the market value according to the disposition of the land apparently means the value of the land in a hypothetical market which willing purchaser may in the prevailing conditions pay for the land to a willing vendor, taking into consideration its situation and advantages. In determining the disposition the hypothetical purchaser would normally take into consideration the advantages of the situation and the potentialities of the land, for the market value of land, especially in urban areas, depends upon its situation, special adaptability, advantages and inherent potentiality in the light of the demand for land. Where a large area of land in an urban locality is sought to be acquired in determining the market value the method of belting is appropriate. It is common knowledge that lands having frontage on the main roads in urban areas are always more attractive than the lands which have no such frontage." In Sahib Singh Kalha v. Amritsar Improvement Trust [1992] Supp. AILACC 593, it was held by the apex court that where there is a large area of undeveloped land under acquisition, provision has to be made for providing the minimum amenities of town life such as water connections, well laid-out roads, drainage facility, electric connections, etc. The process necessarily involves deduction of the cost of factors required to bring the undeveloped lands on par with the developed lands. An extent of 20 per cent. of the total land acquired was taken as a reasonable deduction for the space required for road. Apart from it, the cost of laying roads and other amenities like electricity, water, underground drainage, etc., was taken at 33 per cent." A distinction was also drawn between a tiny plot and a large area. In the case of Mirza Nausherwan Khan v. Collector, Land Acquisition, AIR 1974 SC 2247, the apex court observed that : "there is no doubt that the value of an extensive plot of land in a city, the strip that adjoins an important road will have a higher value than what is in the rear, for obvious reasons of potential user or commercial exploitation." In State of Kerala v. P. P. Hassan Koya, AIR 1968 SC 1201, it has been observed : "in determining compensation payable in respect of land with buildings, compensation cannot be determined by ascertaining the value of the land and the break-up value of the buildings separately. The land and the building constitute one unit and the value of the entire unit must be determined with all its advantages and its potentialities." The method of capitalisation of return actually received or which might reasonably be received from the land and the buildings in respect of a property which is used for business purposes was approved. In CWT v. Raghubar Narain Singh [1984] 146 ITR 228, it was held by the apex court that the market value of an asset would be a question of fact, but if the Tribunal has arrived at its conclusion by taking wrong principles into consideration, then such a finding would not be binding on the High Court. The contention that the area is in the vicinity of a factory which is emitting a foul smell and chemicals cannot be considered because it is mentioned in the order that a number of other colonies have also been developed and had it been the position the residents of the colonies would have approached the environmental authorities of the State of Rajasthan for taking necessary action. The contention that the entire land cannot be used for residential purposes as part of it is to be left out for facilities and roads are to be developed may affect the market value. The question whether the instance of sale should be relied upon is also a question of fact. It may be the correct depiction of the market value (rate) or may not be so and, therefore, the market value is to be adopted looking to the rates prevailing in the locality, situation of the plot, the potentiality and use of it. The valuation of the land could be on the basis of comparable cases of which one example has been given by the respondent while the other has been given by the petitioner. The total value for which the agreement was entered into was of Rs. 99,84,500. If the value of the godown of Rs. 42 lakhs is reduced therefrom, the value of the land remains only at Rs. 57,84,500 in respect of 9,500 sq. yards. The value comes approximately to Rs. 600 per sq. yard. It may be observed that in the case of Rajendra Giriraj Prasad Tiwari v. Union of India [1995] 212 ITR 158-S. B. Civil Writ Petition No. 3492 of 1993 decided on April 18, 1994, it was observed that judicial review is limited only to the extent of examining as to whether any finding is perverse or there is non-application of mind or the order is contrary to the established principles of law. It was further observed that this court is not sitting in appeal over the order passed by the appropriate authority and the satisfaction has to be arrived at by the appropriate authority on the basis of the valuation report and the relevant documents which have been taken into consideration. It is not the calculation or the manner which could be examined under article 226. The calculation is always a question of fact. Principles of valuation alone have to be considered. The respondents have taken into consideration the sale of the plot by the Jaipur Development Authority, at Rs. 1,781 on December 7, 1992. The said colony is situated in the inferior than the present land and necessary deductions have already been given to the petitioner. The land is said to be in the vicinity of the main road. The various arguments which have been raised by learned counsel for the petitioner to arrive at the value of the land are only hypothetical. The deduction as contemplated in the case of Sahib Singh [1992] Supp. AILACC 593 (SC) referred to above is given, still the value exceeds more than 15 per cent of the apparent consideration. In these circumstances, I am of the view that the action of the appropriate authority in making the order of the pre-emptive purchase is not contrary to law. The reliance on the letter dated November 4, 1992, with regard to the reserve rice is of no avail because it is not the market value but is only the reserve price below which the Jaipur Development Authority cannot sell or allot a plot to any person even of a reserved category and such price cannot be taken into consideration while determining the market value for pre-emptive purchase under Chapter XX-C. The market rates for the purpose of registration of an immovable property as notified by the Sub-Registrar can also have no application for determining the market value under Chapter XX-C of the Act. It is limited only for payment of the stamp duty. The said notification also does not take into consideration the difference of value, even of the plots in the same locality having different situation. As such the value notified for the purpose of registration cannot be a proper guide for valuation in respect of pre- emptive purchase. An objection was also taken that the land is not an identifiable separate piece of land as the other co-owners may object or give another land in lieu of the land shown in the map. This argument is also of no avail to the petitioner, because the other co-owners have not raised any objection when the possession was taken over by the petitioner from the vendor and a number of vehicles must have come to unload his goods and, therefore, it could be a case of implied consent. Even if it is not a case of implied consent, the responsibility has been taken by the seller that the conversion charges of the land have been deposited and the land as shown in the map is to be sold by the vendor. The agreement reciting the obligation of the seller is the complete answer to the argument raised by learned counsel for the petitioner. Shri B. L. Sharma, appearing on behalf of the vendor, has submitted that on account of the stay order the seller could not get the remaining sale consideration and thus in view of the decision in C. Dass v. Appropriate Authority [1993] 199 ITR 9 (SC), at least direction for interest should be given. This matter has also been considered by me. The seller has already received a sum of Rs. 40,00,000 as an advance under the contract itself, and even after the clearance by the appropriate authority certain obligations are to be fulfilled by the seller. Directions for payment of interest could be given in an appropriate case but I do not consider that the present one is an appropriate case for giving directions to the Central Government for making payment of interest in addition to the consideration and hence this plea is accordingly rejected. In view of the observations made above, there is no mistake apparent from the record nor could the order be said to be without application of mind or perverse nor could the order be said to be contrary to the established principles of law. The writ petition having no substance is hereby rejected. The respondent-Central Government shall make the payment to the seller within a period of 15 days on fulfilling the various obligations as contemplated in the agreement and under law.”