http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: THE APPROPNATE AUTHORITY AND ANOTHER

       Vs.

RESPONDENT: SMT SUDHA PATIT AND ANOTHER

DATE OF JUDGMENT:       10/11/1998

BENCH: SUJATA V., G.B. PATTANAIK.

JUDGMENT:

PATTANAIK, J.

       This appeal is directed  against  the  Judgment  and order dated 6th March, 1907, passed by the Division Bench of Karnataka High Court  in Writ Appeal No.  1233 of 1996.  The said Writ Appeal arises out of a proceeding initiated  under Chapter XX-C  of  the  income  Tax  Act.    The  property in question is situated in Btock  5,  Jayanagar,  Bangatore-560 measuring  85 feet from east to west and 122 feet from north to south bearing no.  483/24.  Respondent no.  2  Shri  A.G. Krishna is  the  owner  of the property.  He entered into an agreement of sale with respondent no.  1 Smt.   Sudha  Patil for  a  consideration  of  63,44,000  under  agreement dated 25.9.1995.  The Appropriate Authority under the  Income  Tax Act  in  exercise  of its powers under Section 269-UD of the Act passed an order for purchase  of  the  property  by  the Central  Government  on  an  amount  equal  to the amount of consideration mentioned in the agreement to sate  after  due notice  to the transferor of the property and after arriving at a conclusion that  the  property  in  question  has  been undervalued by  a  sum  of  Rs.200/-  per  square feet.  The aforesaid order was passed  by  the  Appropriate  Author  on 28.2.1996.   It may be stated that the Appropriate Authority took into consideration tine various sate  instances  relied on  by  the  parties  as  well  as  the gradual trend in the enhancement of the value of the property.  The said order of the Appropriate Authority was assarted by  respondent  no.l, the proposed transferee, by filing a Writ Petition which was registered as Writ  Petition  No.  7586 of 1996.  The teamed Single Judge of the Karnafaka High Court dismissed the  said Writ  Petition  by order dated 22 March, 1906, holding inter alia that the order of the Appropriate  Authority  does  not suffer  from any legal infirmity and the said order has been passed after following  the  prescribed  procedure  and  the conclusion  of the Appropriate Authority has been arrived at on consideration  of  all  relevant  and  germane  materials produced in  the  course  of the proceeding.  Respondent No. 1, however, challenged  the  said  order  by  preferring  an appeal  and  the Division Bench by the impugned judgment and order  dated  6th  March,  1997,  came  to  hold  that   the Appropriate  Authority  has come to the conclusion about the valuation of the tend by taking into consideration the  sale instances  which  are  not  comparable  with the property in question and  thereby  the  conclusion  is  vitiated.    The Division   Bench  also  came  to  the  conclusion  that  the concerned authority had no relevant material  to  arrive  at

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

the correct valuation of the property and further the method adopted by the department was defective and consequently the order made  by  the authorities concerned is Vitiated.  With these  conclusions  the  order  passed  by  the  Appropriate Authority  having  been  quashed  and the Writ Appeal having been allowed the said Appropriate Authority is in appeal  in this Court.

       Mr.   Rawal,  learned  Additional  Solicitor General appearing for the appellant contended that the Dwision Bench of the High Court committed gross error of law and  exceeded its  jurisdiction  in  interfering  with  the finding of the Appropriate Authority with regard to the market value of the tend  in  question,  in  the  absence  of   any   procedural irregularity  and  in  the  absence of a finding by the High Court  that  the  Appropriate   Authority   had   considered irrelevant  materials  or  have  excluded relevant materials from consideration.  A finding of an inferior Tribunal  like the  Appropriate  Authority  under the Income Tax Act can be interfered with by the High Court when the  Court  comes  to the conclusion that the Tribunal has not considered relevant materials  or  it  has  considered  irrelevant or extraneous materials or the conclusion is one which no  reasonable  man can  come to the said conclusion on the materrials on record or the conclusion is one which based on no evidence.   Since in  the  case  in  hand  the  appropriate Authority took the relevant sale instances in  the  locality  to  arrive  at  a conclusion  where  valuation  shown in the agreement to safe was grossly low and on consideration of those  relevant  and germane  materials  the  Appropriate  Authority  came to the conclusion that the valuation shown in the  transaction  was grossly  low,  the  said  conclusion  should  not  have been interfered with  by  the  High  Court  in  exercise  of  its supervisory  jurisdiction under Article 226 even if the High Court could have come  to  the  conclusion  as  an  original authority.   In  other  words  what  the  learned Additional Solicitor General contended is that the power of High  Court being supervisory in nature the said power must be exercised within the parameters already indicated in several decisions of  this  Court  and  the  High  Court  was not justified in embarking  upon  an  enquiry  of   the   evidence   and   on reappreciating  the  same in coming to a conclusion that the valuation arrived at was not proper.

       Mr.  G.    Sarangan, teamed senior counsel appearing for the transferee and Mr.  Hegde, learned counsel appearing for the transferor on the other  hand  contended,  that  for ’invoking  the  powers  of  property purchased under Chapter XX-C of the Act the burden being on the department  to  show that  the  apparent  consideration of tine property shown in the transaction is less than it fair market value by 15% and the said burden, not having been discharged in the  case  in hand  by  the  department by adducing a reliable and germane materials the Division Bench of the High Court was fully  in interfering  with  the  conclusion  and  order passed by the Appropriate Authority.

       According to Mr.  Sarangan, teamed counsel appearing for the respondent, the  order  passed  by  the  Appropriate Authority  under  Chapter  XX-C  having not provided for any remedy of appeal the standard of scrutiny by the High  Court should  be  some way different from the standard of scrutiny as against orders of any other inferior Tribunals  and  tine High  Court  is  duty  bound to take note of all submissions made by an.  aggrieved person.  Judged from this stand point

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

the Division Bench having recorded a finding that  the  sate instances reared upon by the Appropriate Authority cannot be held  to  be  comparable,  the  ultimate  conclusion  of the Appropriate Authority that  the  vacation  of  the  property shown in the transaction is grossly tow becomes a conclusion without  any  evidence  and such conclusion has rightly been interfered with by the High  Court.    In  support  of  such contention learned counsel, places reliance on a decision of Delhi  High  Court in the case of Mahesh Chandra Agarwal and anr.  vs.  Union of India and others  reported  in  231  ITR 319.   According to the learned counsel for the respondents, a reading of the order of the  Appropriate  Authority  would indicate  that  the said Authority has acted more or less in an arbitrary manner in arriving at the fair market value  of the  property in question and, therefore, in the interest of justice the Division Bench rightly quashed the said  of  the Appropriate Authority.

       in  view of the rival contentions of the parties two questions really arise for our consideration.

1.   Merely  because  no  appear  is  provided for under the statute against an order passed by the Appropriate Authority under Chapter XX-C of the Act does the supervisory power  of the High Court under Article 226 get enlarged in any way and can the High Court a such a case exercise an appellate power and re-appreciate findings to come to its own conclusion?

2.  Whether in the case in.  hand the conclusion arrived  at by  the  Appropriate  Authority  with  regard to fair market value of  the  property  in  question  was  by  taking  into consideration all relevant and germane materials and whether the  deportment  discharged  the  burden  that  lay on it in establishing  that  the  apparent  consideration,   of   the property as indicated in the agreement of sale was tess than its fair market value by 15%?

       So  far  as  the  first  question  is concerned, the parameters for exercise of supervisory jurisdiction  of  the High  Court  under  Article  226  of the Constitution, white examining the decision  of  an  inferior  tribunal,  has  no connection  with  the question whether an appeal is provided for against the sard order of the tribunal under the statute in question.  As has been held in several decisions of  this Court,  the power being supervisory in nature in exercise of such power, a finding/conclusion of an inferior tribunal can be interfered with if the High Court comes to the conclusion that in arriving at the conclusion the tribunal  has  failed to  consider  some relevant materials or has considered some extraneous and irrelevant materials or that the  finding  is based  on  no  evidence  or  the  finding  is  such  that no reasonable man can come to such a conclusion on the basis of which the finding has been  arrived  at.    This  being  the settled  position,  it  is  difficult to sustain a plea that when the order of the  tribunal  does  not  provide  for  an appeal, the High Court can get its Jurisdiction enlarged and exercise  an appellate power while examining the correctness of the conclusion arrived at by such tribunal.  In the  case of C.B.Gautam vs.    Union of India and Ors.  1993 (199) ITR 530 where the provisions of Chapter XX-C had  been  assailed as  being  ultra  vires the Constitution Bench of this Court negatived the contention  raised  that  the  provisions  are arbitrary  since  no  appeal  or  revision has been provided against the order made  by  the  Appropriate  Authority  for compulsory purchase of immovable property on the ground that

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

the  provisions  of  said  Chapter could be resorted to only when there is an  attempt  at  tax  evasion  by  significant under-valuation  of immovable property agreed to be sold and further reasons are required to be recorded and disclosed to the affected parties and opportunity to be heard is required to be given before making an order for purchase.  This Court ultimately came to the conclusion  that  The  power  of  the Appropriate    Authority    is   not   arbitrary   and   the pre-conditions engrafted in the provisions must be satisfied for invoking the power  to  make  an  order  for  compulsory acquisition.   This being the position, we fad to understand how the supervisory power of the High Court white  examining the  correctness  of  the  conclusion  arrived  at  by  such Appropriate Authority  could  get  enlarged  merely  because there  is  no  appeal  or  revision against the order of the Appropriate Authority.  In the case of  Kailash  Suneja  vs. Appropriate Authority 1998 (231) ITR 318 the decision of the Delhi High Court on which the learned Senior Counsel for the respondent   strongly   relied   upon,   the  teamed  Judges themselves have  indicated  that  the  satisfaction  of  the Competent    Authority   for   initiation   of   acquisition proceedings is a subjective satisfaction  on  the  objective facts  and  the  reasons for the determination of the belief must have a national and direct connection with the material coming to the notice of the Competent Authority  though  the question  of  sufficiency or adequacy of the material is not open to judicial review.  The teamed  Judges  of  the  Delhi High  Court  in the aforesaid case have themselves indicated that  white  exercising  powers  of  judicial  review  under Article 226 of the Constitution though the case is not to be examined  as  an  appellate  court, it is to be kept in view that  a  citizen  has  no  alternative  remedy  and  it   is permissible  to examine whether extraneous matters have been considered by the authority and relevant materials have  not been taken  into consideration.  This statement of the Delhi High Court on which the learned counsel for  the  respondent strongly  relied upon, in our considered opinion does not in any way enlarge the power of judicial review in  the  matter of  exercise  of  supervisory  power of the High Court under Article 226 against an order of an inferior  tribunal.    It may  be  stated  here that on the materials if two views are possible, one which has been given by the inferior  tribunal and  tine  other  which tine High Court may on examining the materials itself came to a conclusion, then  also  it  would not  be  possible  for  the  High  Court  to  substitute its conclusion for that of  the  tribunal.    In  the  aforesaid premises,  we  are  of  the  considered  opinion that merely because no appeal is provided for against the order  of  the Appropriate  Authority,  directing compulsory acquisition by the Government, the supervisory power of the High Court does not get  enlarged  nor,  the  High  Court  can  exercise  an appellate power.

       Coming  to  the  second  question,  on examining the order passed by the Appropriate Authority for arriving at  a conclusion  as to what would be the fair market value of the property in question agreed to be sold,  we  find  that  the said  Appropriate Authority did consider all the germane and relevant materials produced  before  it  in  course  of  the proceedings   and   formed   ’its   opinion  that  there  is under-statement of  consideration  in  the  agreement  dated 25.9.96 by an amount more than ^5% of the fair market value. On  the  basis  of  several  sale transactions which are all contemporaneously made and which have the same  potentiality and situated in the same locality, the Appropriate Authority

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

came  to  the  conclusion  that  the fairer market land rate could not be less than Rs.850 per square feet.  Further,  in the  absence  of any irrebutable materials adduced on behalf of transferor or  transferee  as  to  why  in  the  impugned transaction the property has been agreed to be sold @ Rs.650 per  square feet, the natural presumption arises that it was with a view to attempt to evade tax.  in  fact  in  Gautam’s case  referred  to  supra [1993(199) lTR 530] this Court had held that the provisions of Chapter XX-C can be resorted  to Only  where  there  is  a significant under-valuation of the property to the extent of 15% or more in  the  agreement  of sale, as evidenced by the apparent consideration being lower than  the fair market value by 15% or more and a presumption of an attempt to evade tax may be raised by the  Appropriate Authority  concerned  where  the aforesaid circumstances are established  but  such  a  presumption  is   undoubtedly   a rebutable one.    in  the  case  in  hand, the plea of  the transferor that he agreed to sell the land at a tower  price as  he  was  in  urgent  need of money to defray the medica) expenses on  account  of  kidney  transplantation  was  duty considered but negatived inasmuch as the transplantation was done  in  June,  1994  and the agreement to sale was made in September, 1995.  The Authority also took into consideration the fact that the transferor was highly qualified doctor and had various various offices with distinction  in  a  carrier spanning over  four  decades  in India and abroad.  No other reason having been  advanced  and  the  only  plea  advanced having been considered and rejected and in our view rightly, it  is  difficult for us to sustain the argument advanced by tine learned counsel for the respondent that the  transferor has  been  able  to  rebut  the presumption arising out of a grossly low valuation on the ground of force sate.    Having examined  the  order of the appropriate Authority we have no hesitation to come to the conclusion  that  the  Appropriate Authority  passed  the  order  for compulsory purchase under Section 269 UD of the Act after giving  due  opportunity  to the  parties  concerned  of  hearing and after recording the reasons as to the fair market value of the land and  further after  recording a finding that there has been a significant under-valuation of the property to the extent of  more  than 15% in  the  agreement  of  sale.    Such conclusions of the Appropriate  Authority  were  based  on   consideration   of relevant materials produced in course of the proceedings and the authority was fully justified in drawing the presumption that  the under-valuation had been done with a view to evade the  tax  and  the  transferor  could  not  rebut  the  said presumption by  adducing  any  positive  ground.    The High Court, therefore, exceeded its jurisdiction  in  interfering with  such  conclusions  of  the  Appropriate  Authority  by embarking upon an inquiry as an Appellate Authority and,  by recording   its   own  conclusion  in  substitution  of  the conclusion  of  tine  tribunal  and,  therefore,  the   said decision of  the High Court gets vitiated.  In the aforesaid premises,  we  set  aside  the  impugned  judgment  of   the Karnataka High  Court  in  Writ Appeal No.  1233 of 1996 and affirm the decision of the Appropriate Authority.  The  writ petition filed before the High Court stands dismissed.

       It was contended on behalf of the  respondents  that even if the order of the Appropriate Authority under Section 269-UD  of  the  Act is ultimately upheld by this Court, the respondents should be entitled to the interest on the amount of consideration money  indicated  in  the  agreement  dated 25.9.96, particularly when the intended transferee under the deed   has   deposited   a   sizeable  amount  of  the  said

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

consideration amounting to  Rs.     43   lakhs.      Learned additional  Solicitor  General appearing for the Appropriate Authority resisted the prayer of the transferee for grant of interest on the ground that the transferee having  attempted to  delay and defeat the compulsory purchase of the property and the amount in question having been deposited  after  the transferor  refused to take the money it would not be in the interest of justice to award interest in tine case in  hand. In  support  of  his  contention reliance has been placed on Rajalakshmi Narayanan (Mrs.) vs.  Margaret  Kathleen  Gandhi (Mrs.) & Ors.   1993 Supp.  (3) Supreme Court Cases 296.  In the aforesaid case this Court  held  that  whether  interest should  be  paid  to the owner of immovable property who has entered into an agreement of sale but the sale could not  be completed  by  reason  of an order of purchase under Section 269-UD of the income Tax Act, and if so, at what  rate  will have  to  be  decided in the facts and circumstances of each case.  As a general rule the Court had  observed  that  when such setter has raised no objection or obstruction either to the  purchase of a property by an order under Section 269-UD or to the completion to agreement of sale entered  ’into  by him  but  is  unable  to get purchase price by reason of the said order and the stay order 16  passed  by  a  Court  then interest  appropriate  rate can be pard to him, if equity so requires.  In the aforesaid case this Court had ordered that the Government should pay to the appellant the amount stated as the consideration for the safe of the  said  property  in the   agreement  entered  into  between  the  appellant  and respondent no.1 with interest  thereon  at  15%  per  annum. This Court has issued the aforesaid direction to be followed in  the  event  the  order  of compulsory purchase passed is ultimately upheld.  The Court while  issuing  the  aforesaid direction  took  judicial notice of the fact that the prices of the immovable properties have shot  up  continuously  for the last  few  years.  Learned Additional Solicitor General, however, stated that the amount in question which  has  been deposited  by  the  Government  is  carrying  interest being deposited in a fixed deposit.

       Having considered the facts and circumstances of the case  we  think  it  appropriate  to  direct that the entire amount lying in deposit together with tine ’interest accrued thereon should be paid to the respondents.  This  appeal  is accordingly   allowed   with  the  aforesaid  direction  and observation.

       But in the circumstances there will no order  as  to costs.