Court dismisses petition challenging property acquisition by Income Tax Department

Get the full picture - access the original judgement of the court order here.

Case Name:

New White Rose Chs Ltd. Vs Appropriate Authority (High Court of Bombay)

Writ Petition No. 1994 of 2018

Key Takeaways

- The court upheld the Income Tax Department's acquisition of the property under Section 269UD of the Income Tax Act.

- The original owner and prospective purchasers' petition was dismissed as they did not pursue it further.

- The court ruled that the original owner had no authority to execute a development agreement after the property vested in the government.

- The petitioner society and its members do not have any legal title to the land in question.

- The court suggested that the Central Board of Direct Taxes (CBDT) consider regularizing the ownership and possession of the residential units if the petitioner society agrees to certain financial conditions.

Issue

Did the original owner and prospective purchasers have the right to challenge the Income Tax Department's acquisition of the property under Section 269UD of the Income Tax Act?

Facts

- The original owner, Bhimsen Bhikaji, agreed to sell the property to three prospective purchasers for Rs. 1.40 Crore on July 18, 1994.

- The Income Tax Department found that the declared sale consideration was substantially lower than the fair market value and exercised its powers under Section 269UD to acquire the property.

- The original owner and prospective purchasers challenged this order in Writ Petition No. 2475 of 1994, but the petition was dismissed in 2016 as they did not pursue it further.

- The property vested in the government, and the original owner had no authority to execute a development agreement in 2004.

- The petitioner society, which claims title through the developer, cannot challenge the order as they do not have any legal title to the land.

Arguments

- Original Owner and Prospective Purchasers:

Argued that the sale consideration was fair and challenged the acquisition order.

- Income Tax Department:

Argued that the sale consideration was undervalued and exercised its powers under Section 269UD to acquire the property.

Key Legal Precedents

- Section 269UD of the Income Tax Act:

Allows the government to acquire property if the declared sale consideration is substantially lower than the fair market value.

- Section 269UE of the Income Tax Act:

States that the property vests in the government upon passing an order under Section 269UD.

- Section 269UG of the Income Tax Act:

Pertains to the payment of consideration to the persons entitled thereto.

Judgement

The court dismissed the petition challenging the acquisition order under Section 269UD. It ruled that the original owner had no authority to transfer the property after it vested in the government. The court suggested that the CBDT consider regularizing the ownership and possession of the residential units if the petitioner society agrees to pay Rs. 49 Lakhs along with interest and litigation costs.

FAQs

Q1: What was the main issue in this case?

A1: The main issue was whether the original owner and prospective purchasers had the right to challenge the Income Tax Department's acquisition of the property under Section 269UD of the Income Tax Act.

Q2: What was the court's decision?

A2: The court dismissed the petition challenging the acquisition order and ruled that the original owner had no authority to transfer the property after it vested in the government.

Q3: What are the implications of this case?

A3: The case reinforces the government's authority to acquire property under Section 269UD if the declared sale consideration is substantially lower than the fair market value. It also highlights the importance of ensuring that property records reflect government acquisitions to prevent unauthorized transactions.

Q4: What did the court suggest for the petitioner society?

A4: The court suggested that the CBDT consider regularizing the ownership and possession of the residential units if the petitioner society agrees to pay Rs.49 Lakhs along with interest and litigation costs.

Q5: What is Section 269UD of the Income Tax Act?

A5: Section 269UD allows the government to acquire property if the declared sale consideration is substantially lower than the fair market value.

1. Through the note of speaking to minutes, it is pointed out that in our judgment dated 23rd July, 2019, in paragraph 19 figure of Rs.34,36,000/- or Rs.34.36 Lakhs has been wrongly typed as Rs.24,36,000/- or Rs.24.36 Lakhs (as the case may be). Similarly, the figure of Rs.39 Lakhs refereed once in the said paragraph, will be substituted by Rs.49 Lakhs and Rs.25 Lakhs mentioned once in the same paragraph will be read as Rs.35 Lakhs. Such typographical errors in paragraph 19 shall be corrected.

2. Necessary corrections be carried out in order dated 23rd July, 2019, and corrected order be uploaded accordingly.

( S.J.KATHAWALLA, J. ) ( AKIL KURESHI, J.)