Full Judgment
A.M. Farooq, J.
1. The petitioner is an agreement holder and he negotiated to purchase a property with the fourth respondent who was the owner of site No. 48 situated at 1st A Cross, R.M.V. Extension, Bangalore, which measured 45' x 60' for a consideration of Rs. 16,20,000. Under the provisions of Chapter XX-C of the Income-tax Act, Form No. 37-I was filed on April 9, 1991, by the parties before the appropriate authority and the appropriate authority on considering the application and finding that the value of the property was below the market value by 15 per cent. proceeded to pass an order of preemptive purchase which is now challenged by the petitioner.
2. In the writ petition, the petitioner has questioned the constitutional validity of the provisions of Chapter XX-C of the Act and sought for quashing of the impugned order issued by the authorities dated June 13, 1991, as per annexure C. It is pertinent to state here itself that the constitutional validity of the provisions questioned by the petitioner has been upheld and it was held constitutionally valid by the Supreme Court in the case of C.B. Gautam v. Union of India : [1993]199ITR530(SC) . Learned counsel for the petitioner also does not dispute the said fact, but contended that the other merits of the case have to be considered by this court in the writ petition.
3. Sri Sarangan, learned counsel appearing for the petitioner, contended that no opportunity was given to the petitioner before the impugned order was passed by the respondent-authorities under the provisions of the Income-tax Act and hence the writ petition has to be allowed and the matter has to be remitted back to the concerned authority to reconsider the matter. On the other hand, Sri M.V. Seshachala, learned counsel appearing for the respondent-authorities, has contended that all the contentions now raised by the petitioner in this writ petition are concluded by the above cited judgment of the Supreme Court and he has also cited certain other judgments passed by this court and the Supreme Court on similar aspects.
4. In view of the rival contentions raised by learned counsel, the only point for consideration in this case is as to whether the writ petition is to be allowed and the matter is to be remanded to the competent authority to reconsider the matter after giving opportunity to the petitioner before passing a fresh order.
5. It is not disputed by Sri Sarangan, learned counsel appearing for the petitioner, that in C.B. Gautam v. Union of India : [1993]199ITR530(SC) , a Constitution Bench of the Supreme Court has held that Chapter XX-C under which Sections 269UD and 269UE fall are not arbitrary provisions and upheld the constitutional validity of the said provisions and in view of the said decision, learned counsel appearing for the petitioner submitted that he did not press the first prayer in the writ petition and he contended that the only question to be considered is as to whether the petitioner has been given reasonable opportunity of being heard before the impugned orders are passed and as to whether the writ petition deserves to be allowed and remitted to the authorities for reconsideration.
6. Sri Sarangan submitted that in the abovementioned judgment, the Supreme Court has specifically laid down the principle that under the above-mentioned provisions, the question of granting reasonable opportunity of being heard to the parties must be read into the provision. The Supreme Court in the said judgment further held that the requirement of a reasonable opportunity being given to the concerned parties, particularly, the intending purchaser and the intending seller must be read into the provisions of Chapter XX-C. It was held that the time-frame within which the order for compulsory purchase has to be made is a fairly tight one, but it is not such as would preclude reasonable opportunity of being heard or to show cause being given. That the provisions of the Chapter can be resorted to only where there is a significant under valuation of the property to the extent of 15 per cent. or more in the agreement of sale as evidenced by the apparent consideration being lower than the fair market value by 15 per cent. or more. That although a presumption of an attempt to evade tax may be raised by the appropriate authority concerned in the case where the aforesaid circumstances are established, such a presumption is rebuttable and this would necessarily imply that the concerned parties must have an opportunity to show cause as to why such a presumption should not be drawn.
7. On the facts of that case before the Supreme Court, the Supreme Court observed that the order for compulsory purchase under Section 269UD(1) of the Income-tax Act which was served on the petitioner has been made without any show cause notice being served on the petitioner and without the petitioner or other affected parties having been given any opportunity to show cause against an order for compulsory purchase nor were the reasons for the said order set out in the order or communicated to the petitioner or the other concerned parties with the order. And in view of the same it was held that the order was clearly bad in law and the order was accordingly set aside. However, the Supreme Court next considered as to the consequences to be followed in view of the said finding. It was clarified as follows (page 562) :
'We may clarify that, as far as completed transactions are concerned, namely, where, after the order for compulsory purchase under Section 269UD of the Income-tax Act was made and possession has been taken over, compensation was paid to the owner of the property and accepted without protest, we see no reason to upset those transactions and hence, nothing we have said in the judgment will invalidate such purchases. The same will be the position where the public auctions have been held of the properties concerned and they are purchased by third parties. In those cases also, nothing which we have stated in this judgment, will invalidate the purchases.'
8. In Union of India v. Shatabadi Trading and Investment (P.) Ltd. : [2001]251ITR93(SC) , a Division Bench of the Supreme Court has held considering the facts of the case that the court having allowed auction of the property in question ending in confirmation of the same after that order having become final, now to allow the order made by the appropriate authority to be set aside and to permit the parties to work out in appropriate proceedings for restitution of the property would lead to a serious anomalous position. The Supreme Court observed that when the transferor without demur allowed the property to be sold pursuant to the orders of this court and that sale having taken place and this court having affirmed the same and the proceedings by way of special leave petition filed under Article 136 of the Constitution coming to an end as having become infructuous, the High Court could not have brushed aside that sale in the manner it has been done. That the impact of such decision ought to have been taken note of by the High Court. It further observed that in K. Basavarajappa v. TRO : [1997]223ITR297(SC) , the Supreme Court had held that an agreement to sell creates no interest in the property and in the absence of a decree of specific performance of an agreement, even though authorised by the general power of attorney holder of the original owner of the property had no locus standi to move an application for setting aside the auction sale on offer to deposit full tax dues.
9. In Writ Petition No. 17705 of 1991 disposed of on December 17, 1992, his Lordship Justice S. Rajendra Babu, as he then was; has held in similar circumstances, that there is no reason at all to upset the transactions which have already taken place and nothing in the judgment shall invalidate the purchases made by the auction purchasers and other third parties.
10. Further, a Division Bench of this court in W. A. No. 792 of 1993 disposed of on April 17, 1998, following the judgment of the Supreme Court in C.B. Gautam's case : [1993]199ITR530(SC) held that as far as completed transactions are concerned and where compensation was paid to the owner of the property and accepted without protest by the owner of the property, the completed transactions cannot be upset.
11. This writ petition was pending when the Supreme Court delivered the judgment in C.B. Gautam's case : [1993]199ITR530(SC) and this court even though granted an interim order on June 28, 1991, subsequently modified the said order by an order dated July 24, 1991, and permitted the Department to proceed to auction the property in question subject to the result of the writ petition and in the event of such auction being held, it shall be prominently notified the pendency of these proceedings. Thereafter the property was auctioned and the fifth respondent has purchased the property.
12. Sri Sarangan, learned counsel appearing for the petitioner, relying upon the interim order submitted that this is not a case like the one considered by the Supreme Court in C.B. Gautam's case : [1993]199ITR530(SC) but in this case according to learned counsel, this court itself has permitted the auction of the property subject to the result of this writ petition and hence the direction of the Supreme Court in C.B. Gautam's case : [1993]199ITR530(SC) cannot be applied to the facts of this case. I am not at all inclined to accept the said submission made on behalf of the petitioner.
13. Admittedly, this writ petition was pending when the Supreme Court decided in C.B. Gautam's case : [1993]199ITR530(SC) and in C.B. Gautam's case : [1993]199ITR530(SC) , the Supreme Court clarified that as far as completed transactions are concerned and where after the order of compulsory purchase under Section 269UD of the Income-tax Act was made and possession taken and compensation paid to the owner of the property and accepted without protest, then such transactions should not be upset and it should not be invalidated. Admittedly, in this case, the property has been sold under public auction and the fifth respondent who is subsequently impleaded in this writ petition purchased the property in public auction and hence as directed by the Supreme Court and as held in the other judgments cited, it will not be proper to upset the completed transactions even though no proper opportunity had been given to the petitioner before issuing the orders under Section 269UD. It is an admitted fact that after the public auction, compensation was paid to the owner of the property in question and the same was accepted without protest by the owner and hence it is not necessary to give any further opportunity to the petitioner who is the intending purchaser.
14. In the result, I do not find any merit in this writ petition and it is accordingly dismissed.