Mrs Satwant Narang Vs. Appropriate Authority, I T Dept., New Delhi - Court Judgment

M.K. Chawla, J.

1. In this petition, a very short but interesting question of law has arisen. The question posed is whether the jurisdiction of the appropriate authority under Chapter XX-C of the Income-tax Act (hereinafter called 'the Act') is only limited to either pass an order within the specified period for purchase of property by the Central Government for consideration recorded in the agreement, or assigning a no objection certificate for transfer at that consideration; or

2. Whether the appropriate authority is to take the document at its face value, or can also determine its validity and legality by looking into the various other enactments like the Wealth-tax Act, the Urban Land (Ceiling and Regulation) Act, the Delhi Municipal Corporation Act, etc.

3. The case of the petitioner in brief is that she is the owner of a freehold immovable property measuring 2,521.5 sq. ads. being plot No. A of property No. 101, Friends Colony, New Delhi. The said plot has a dwelling house, servants quarters and a garage on it. She purchased the said dwelling house form one Smt. Malti Singh, vide sale deed dated October 11,1972, duly registered in the office of the Sub-Registrar, New Delhi. Plot No. 101, Friends Colony, New Delhi, was a large plot of land which was sub-divided into four portions by the previous owner. Smt. Malti Singh sold the other three plots in the same property, to different persons for different consideration. The petitioner since then has been in occupation of the dwelling house on plot A as absolute owner with full right, title and interest therein as distinct from the right, title or interest of the owners of other plot B, C and D. The petitioner has also been accepted as full owner of her property by the Wealth-tax Department, in her wealth-tax returns. By an order dated October 4, 1980, the Competent Authority under the urban Land (Ceiling and Regulation) Act has recognized her as the absolute owner of the property by declaring that there was no excess vacant land in the said plot.

4. By an agreement dated October 9,1989, the petitioner agreed to sell the said plot A in property No. 101, Friends Colony, New Delhi, to J K Industries Ltd., for a consideration of Rs. 3 crores and seventy-five thousand only. Immediately thereafter, as required by section 269UC of the Income-tax Act, the statement in the prescribed Form No. 37-I was filed with the appropriate authority. On the same day, Shri Pradeep Narang, son of the petitioner, also agreed to sell his adjoining plot 'B' measuring 2,005 sq. yds, to Hidrive Finance Ltd., for a consideration of Rs. 85,00,000. He also filed a statement in the prescribed Form No. 37-I for the purpose of the said transfer. In the said statement, Pradeep Narang specifically mentioned that the Competent Authority under the Urban Land (Ceiling and Regulation) Act had, by order dated September 18,1979, held in his case that there was excess vacant land to the extent of 1,176.44 sq. mtrs. This order of the Competent Authority is stated to be under challenge in this court where an order for stay of acquisition of the excess land has bee passed. Furthermore, the Municipal Corporation of Delhi has refused to sanction the building plans submitted by him (Pradeep Narang) for construction on the said plot.

5. The case set up by the petitioner before the appropriate authority was that the agreement of transfer of plot 'B' between Shri Pradeep Narang and Hidrive Finance Ltd. has nothing whatsoever to do with the petitioner's plot of land 'A' or her agreement with J K Industries Ltd. The petitioner and Shri Pradeep Narang, though being mother and have distinct and independent right over the respective portions owned by them. Furthermore, there is a marked difference between the two plots inasmuch as the Competent Authority under the Urban Land (Ceiling and Regulation) Act had held that there is no excess vacant land in plot 'A'. The said two statements in the prescribed form, in respect of two different agreements for different properties owned by different persons, had to be considered by the appropriate authority separately on their own respective merits and within the limits and parameters of the jurisdiction conferred by the Act.

6. The appropriate authority, however, on consideration of the material placed before it and after bearing the concerned parties passed the impugned order dated December 15, 1989, holding that plot No. A owned by the petitioner and plot No B owned by Sri Pradeep Narang being contiguous to each other, are necessarily to be considered together and not separately. In fact, plots A and B form a composite property and the division as indicated is irregular and illegal and being vocative of the provisions of the Municipal bye-laws. The plots cannot be considered separable in view of the provisions of the Urban Land (Ceiling and Regulation) Act, as applicable to plot B. The statement in Form No. 37-I for plot A thus is invalid and cannot be acted upon. The appropriate authority further came to the conclusion that on account of the refusal of the Municipal Corporation of Delhi to permit construction on plot B owned by Shri Pradeep Narang, the sub-division of land in four plots is illegal and the agreement of the petitioner with J K Industries for plot A is thus unlawful, particularly when the purchasers of the two portions are also inter-connected. The appropriate authority ultimately held that, in this case, unless the Urban Land (Ceiling and Regulation) Act, 1976, has run its course, all actions under the provisions of Chapter XX-C of the Income-tax Act will necessarily have to remain dormant till the proceedings under the other Act run to their logical conclusion. Also in the meantime, as the law stands, transfer of such land being null and void is unlawful. For that matter, the agreement for the unlawful deeds will have to be treated as unlawful and the permission sought could not be granted.

7. By this petition, the petitioner has challenged the impugned order of the appropriate authority passed under section 269UB of the Act by contending that it is based on wholly irrelevant and extraneous considerations. It is also contended that the appropriate authority has acted without jurisdiction and or in excess of jurisdiction conferred on it by the Act in discharging it statutory obligations.

8. The case of the respondent as disclosed in the affidavit of Shri I N Sahu, Member, Appropriate Authority, in brief is that the appropriate authority has applied its mind to the peculiar facts of the case and had come to a definite conclusion that the plot of Shri Pradeep Narang is such that one is contiguous to the other and, in fact, no clear demarcation exists between the two. plot B is lawn for the plot A. Both these plots cannot be independently enjoyed by unconnected owners. The appropriate authority acted bona fide holding that the sub-division of such a plot is neither permissible nor recoginsed by the Municipal Corporation of Delhi and further a construction on this sub-divided plot was not allowed as per the Master Plan of Delhi and the Zonal Plan drawn up by the Delhi Development Authority. The question of acting upon an invalid agreement, thereforee, does not arise.

9. The further case of the respondent is that, where a pre-emptive right of the Government is not exercised to purchase the property under section 269UD, the appropriate authority is not bound to issue a no objection certificate under section 269UL of the Act. The deponent denied the suggestion that the jurisdiction of the appropriate authority is only limited to either pass an order of purchase within the prescribed period under section 269UD or to issue a no objection certificate under section 269UL of the Act. thereforee, before acting upon the statement for transfer of property, the appropriate authority is required to apply its mind from all angles which include, inter alia, examination of the property as it is, the scrutiny of documents from its legal angles and various other factors. Keeping in view the provisions of section 269UL read with section 131 of the Income-tax Act, the appropriate authority is entitled to go into the question that the proposed sale does not suffer from any impediment in law and is not offending any provision of law prohibiting such a transfer.

10. It is not disputed that the appropriate authority has not found the consideration mentioned by the petitioner in the agreement of the petitioner with J K Industries to be inadequate. The appropriate authority has also not disputed the ownership of the petitioner of plot No. A. Her case has also been cleared by the Competent Authority under the Urban Land (Ceiling and Regulation) Act, declaring that there is no excess vacant land in the said plot. She says that she has nothing to do with plot B, owned by her son, Shri Pradeep Narang, which is a separate entity. At this stage, we may note that by order dated April 16,1990, the Income-tax Appellate Tribunal has held the value of Plot 'B' at the time of its purchase at Rs. 4,25,000 as a fair valuation. Merely because Plot No. A of the petitioner is contiguous to plot No. B of Shri Pradeep Narang, it cannot make them a single unit to warrant their being considered together.

11. It is a known fact that proliferation of black money is in evidence in the transfer of immovable properties. One way of tackling the problem of tax evasion is to confer on the Government the pre-emptive right to acquire any immovable property undergoing a transfer for consideration For this, the Finance Act has inserted a new Chapter XX-C in the Income-tax Act. The registering officer under the Registration Act has been barred form registering any document purporting to transfer any immovable property exceeding the value prescribed unless the appropriate authority certifies that it has no objection to such a transfer.

12. The appropriate authority is a creature of the statute and function within the four corners of Chapter XX-C of the Income-tax Act. Under this Chapter, the appropriate authority has been constituted by the Central Government under section 269UB of the Act. Section 269UC places restrictions on the transfer of any immovable property of the value exceeding Rs. 10 Lakhs, unless and until an agreement for transfer is entered into between the person who intends transferring the immovable property and the person to whom it is proposed to be transferred in accordance with the provisions of sub-section (2) at least three months before the intended date of transfer, and every statement shall be furnished to the appropriate authority. Under section 269UD, the appropriate authority has been empowered to pass an order for the purchase of the said immovable property covered by the agreement at an amount equal to the amount of apparent consideration by the Central Government. the said order for purchase has to be passed within two months form the end of the month in which the statement if From No. 37-I is received by the appropriate authority. When such an order is made by the appropriate authority, the said property shall, on the date of the order, vest in the Central government free from all encumbrances by virtue of section 269UE. Under section 269UG, the Central Government is obliged to tender to the person or persons entitled thereto the amount of consideration within a period of one month in which case the immovable property concerned becomes vested in the Central Government. If the Central Government fails to tender or deposit the whole or any part of the mount of consideration required to be tendered there under within the specified period, the order of purchase shall stand abrogated and the immovable property shall stand revested in the transferor by virtue of the provisions of section 269UH. It comes to this that in case the appropriate authority does not make an order for the purchase of the property by the Central Government or where the order stands abrogated, the appropriate authority is obliged under section 269UL to issue a certificate that it has no objection to the transfer of the immovable property for the consideration stated in the agreement.

13. A bare perusal of the above said provisions of the Act indicates that the jurisdiction of the appropriate authority is only limited to either passing an order within the specified period for purchase of property by the Central Government for consideration recorded in the agreement or issue of a no objection certificate for transfer at that consideration. While considering the statement in From No. 37-I, the appropriate authority is only to examine the adequacy of the consideration and to decide whether to order purchase or to grant a no objection certificate. It certainly has no jurisdiction to go into the object or the purpose of the transaction or its legality and validity. Furthermore, the appropriate authority has no jurisdiction to club one property with another with a view to find faults in the validity of the transaction which, otherwise, has been cleared by the Competent Authority under the Urban Land (Ceiling and Regulation) Act.

14. Learned counsel for the respondent has also not been able to place any document on record to show that there exists any prohibition under the Delhi Municipal Corporation Act or in any other law on the sub-=division and sale of sub-divided freehold plots in Delhi. Moreover, in this case, even the Municipal Corporation of Delhi has never disputed or questioned the ownership right or title of the petitioner to plot A, or the building standing thereon as she had purchased the property after the plans had been duly sanctioned. Merely because the Municipal Corporation of Delhi has not allowed construction on plot B owned by Shri Pradeep narang, it can not make the sub-division of plots illegal or vocative of any provisions of the Delhi Municipal Corporation Act. At best, it may mean that the value of Mr. Pradeep Narang's plot will go down. In any event, the petitioner has nothing whatever to do with plot B, and any decision of the Corporation in respect of plot B cannot have any relevance or bearing on the plot of the petitioner or make the transaction illegal or unlawful. Prima facie, the agreement of the petitioner with M/s J K Industries is in no way unlawful nor does it defeat any provisions of law more particularly section 23 of the Indian Contract Act.

15. As already referred to above, the Competent authority under the Urban Land (Ceiling and Regulation) Act has recognised and accepted the individual ownership of the petitioner of plot A and has further held that there is no excess vacant land in the said plot. This finding has become conclusive, final and binding on all concerned. the appropriate authority under the Income-tax Act cannot question or reopen the same. It may be that the appropriate authority, on examination of the statement in Form No. 37-I in the case of Shri Pradeep Narang, has concluded that it is invalid on account of the orders of the Competent Authority, but the same plea will not hold good in the case of the petitioner. Prima facie, the appropriate authority acted in excess of its jurisdiction in this behalf.

16. In view of these facts we are constrained to hold that the appropriate authority which was required to function within the four corners of Chapter XX-C has travelled beyond these limits while holding the petitioner's transaction of sale as illegal.

17. In a similar situation, the Division Bench of this court, in C. W. No. 2576 of 1990, Tanvi Trading and Credits (P) Ltd. V. Appropriate Authority : [1991]188ITR623(Delhi) , decided on November 28, 1990, held, 'we do not find any provision in this Chapter which can enable the appropriate authority to create a situation whereby neither the Government decides to purchase nor does it issue a certificate under section 269UL(3) '.

18. This conclusion finds support from the judgment in Barium Chemicals Ltd. v. Company Law Board : [1967]1SCR898 , wherein it was held (headnote of AIR) :

'Though an order passed in exercise of power under a statute cannot be challenged on the ground of propriety or sufficiency, it is liable to be quashed on the ground of mala fides, dishonesty or corrupt purpose. Even if it is passed in good faith and with the best of intentions to further the purpose of the legislation which confers the power, since the authority has to act in accordance with and within the limits of that legislation, its order can also be challenged if it is beyond those limits or is passed on grounds extraneous to the legislation or if there are no grounds at all for passing it or if the ground s are such that no one can reasonably arrive at the opinion of satisfaction requisite under the legislation. In any one of these situations it can well be said that the authority did not honestly form its opinion or that in forming it, it did not apply its mind to the relevant facts.'

19. Now the question that further requires going into is as to what relief the petitioner is entitled to. The submission of learned counsel for the respondent is that in case it is held that the impugned order of the appropriate authority is not on sound footing, then the respondent be given an opportunity to reconsider the statement of the petitioner filed in Form No. 37-I of the Act and to make up its mind, if the Central Government would like to purchase the property on the apparent consideration mentioned in the agreement or not. According to learned counsel, the petitioner will not suffer any injury inasmuch as she has agreed to sell the property on the consideration mentioned in the agreement; whether it goes to the purchaser or the Central Government, that will not make any difference to the petitioner.

20. We are not impressed by this submission. the agreement under reference is dated October 9, 1989. The petitioner moved the appropriate authority by filing the statement if Form No. 37-I on October 20,1989. Thereafter, the Act lays down a very tight schedule for the appropriate authority to make up its mind to purchase or not to purchase the property. There is no provision for extension of time. The respondents have missed the bus and have passed the impugned order on December 15, 1989, Rejecting the permission on quite irrelevant considerations. This court would not like to extend the period and frame a fresh time schedule for the Department specially when the statute does not give not give any such power to the court. There is no worthwhile Explanationn as to why, at this point of time, the Department wants to purchase the property except the only consideration that the prices have gone up. This will then be as case of unjust enrichment. In our opinion, there is no equity in their favor for allowing them another opportunity to make up their mind.

21. Under these circumstances, we accept the petition and set aside the impugned order of the appropriate authority dated December 15, 1989, and direct the respondents to issue a no objection certificate under section 269UL of the Act for the registration of the sale deed of the property bearing plot No. A 101, Friends Colony, New Delhi.

22. The petition stands disposed of. There will be no order as to costs.