Devichand Pannaji and Co. vs Commissioner of Income Tax

M.P. Chandrakantarai Urs, J.—This writ petition is disposed of by following the order at the stage of preliminary hearing after notice to respondents. The petitioner is a tenant in premises bearing No. 32, S.D. Lane, Chickpet, Bangalore. In this writ petition, he has prayed for the quashing of the order made by the IAC, the second respondent, dropping further proceedings under Chapter XXA of the income tax Act, 1961 (hereinafter referred to as "the Act"), in respect of the premises which is in his occupation.

It is averred that the petitioner had offered to his original landlord a sum of Rs. 4,41,000 as consideration for the premises and expressed his intention to purchase the same and entered into an agreement in that behalf. But the landlord instead of selling the same to the petitioner, sold it to the fourth respondent by a deed of sale in which the consideration has been shown at Rs. 2,49,000 only. The petitioner, therefore, brought this to the notice of the concerned authorities under the Act as a consequence of which proceedings were initiated under Chapter XXA. The petitioner was notified of the acquisition proceedings commenced against respondent No. 4, as he was the tenant of the premises in respect of which the proceedings had been commenced u/s 269D(1) of the Act. The petitioner was asked to appear before the IAC, second respondent herein, by a letter dated 3-2-1979 in which he was asked to appear in person or through his representative on 21-2-1979. The petitioner appeared before the second respondent, IAC, Acquisition Range, Bangalore. But his representative was informed that he would be informed later of further proceedings and nothing transpired on that day. Thereafter, nothing happened. The petitioner made a representation to the Commissioner, first respondent. Even then, nothing happened. Therefore, he made a representation to the Central Board of Direct Taxes, New Delhi. Even then the acquisition proceedings did not proceed further. The petitioner was surprised to receive the order impugned in spite of the assurances given by the Commissioner, first respondent, that the matter was being looked into. The petitioner contends that he is aggrieved by the order in as much as the acquisition, which should have been gone through, has not been completed.

Sri S. Vasantha Kumar, learned counsel appearing for the petitioner, has contended:

(i) that he is aggrieved because he has not been heard before the impugned order at Ex-P was passed by the second respondent;

(ii) that the second respondent is bound to give reasons for dropping the proceedings which he had commenced u/s 269B of the Act; and

(iii) that he has a statutory right to be heard before any order is passed in terms of section 269 of the Act.

I am of the view that the contentions advanced by the petitioner are not well founded. The purpose of Chapter XXA is to penalise transactions in immovable properties which have been grossly undervalued with the object of evading payment of tax on income by way of capital gains. The nexus in the proceedings exists only between the State on the one hand and the transferor and/or the transferee on the other. If this fact is borne in mind, it is easy to eliminate the interests of third persons, even though such third person may have some kind of interest in the property, either by way of filing objection, which are specifically provided for u/s 269E(1) of the Act, or by way of having furnished the information regarding undervaluation to the concerned authorities for appropriate action. It is significant to notice that in terms of sub-section (1) of section 269F, the competent authorities should fix a date and a place for the hearing of the objections made u/s 269E against the proposed acquisition. Section 269E, in terms, provides for objections against the acquisition of the immovable property, in respect of which a notice has been published in the official gazette under sub-section (1) of section 269D, by the transferor or transferee or any other persons referred to under clause (a) of sub-section (2) of that section. Clause (a) of sub-section (2) of section 269D contemplates notice to the transferor, the transferee, the person in occupation of the property, if the transferee is not in occupation thereof, and on every person whom the competent authority knows to be interested in the property. In other words, it is a mandatory requirement before the revenue can successfully conclude the proceedings initiated u/s 269D that notice must go to the four classes of persons mentioned in clause (a) of sub-section (2) of section 269D.

It is not in dispute that the petitioner was served with a notice because he was the occupant of the premises which was sought to be acquired. It is pertinent to point out here that under the sub-clauses of section 269D notice is not contemplated to persons who are mere informants or informers who have passed on the information of undervaluation of the property to the department. Interested persons to whom the reference is made in the afore mentioned sub-clause has reference only to persons who have interest in title to the property or in respect of the right to receive the compensation, if the acquisition is completed, culminating in the taking over of the property in accordance with an order passed under subsection (6) of section 269F. If there is not going to be an acquisition, then the occupant need not be heard. The occupant is evidently required to be notified in order to put him on guard, that as a consequence of the acquisition his lease hold right will stand extinguished. Beyond that there is no other obligation on the part of the competent authority to hear the tenant or a person in occupation of the premises which is sought to be acquired.

For whatever reasons, the competent authority decides not to proceed with the acquisition, it is not necessary to hear the tenant whose rights as a tenant vis-a-vis his landlord at a given point of time does not get in any way altered by the dropping of the proceedings.

The second contention that Ex-P suffers from the infirmity of not being a speaking order inasmuch as no reasons have been given for dropping the proceedings against respondent 4 is concerned, it should only be stated to be rejected.

The proceedings are administrative in character, though they appear to be quasi-judicial. The decision taken to acquire is an administrative decision. If the decision is going to result in the deprivation or loss of property as in the case of compulsory acquisition of any kind, then the occupants, the persons having right, title and interest in the property are bound to be heard before they are deprived of the property. But nobody need to be heard if the Government in its wisdom abandons the acquisition proceedings. But not hearing before dropping the proceedings;, no civil consequence is visited upon an occupant or a owner thereof. In that view of the matter, the second respondent was not bound to give any reasons, much less furnish those reasons to the petitioner, who is a stranger, as pointed out earlier. I do not see any infirmity in Ex-P.

It is true as contended for the petitioner that the tenant has a right to be heard in terms of section 369F only if the department pursues the acquisition proceedings. If it abandons for whatever reasons, then it cannot be said that the right to be heard in question by the occupant by virtue of sub-clause (a) of sub-section (2) of section 269D subsists. Therefore, it is of no consequence ever if a right is conferred, as that right is only a contingent right and not an absolute and unqualified right.

For the reasons I have given above and in the light of the discussion as above, I am of the view that there is no lis between the petitioner herein and the respondents 1 and 2. If the department has erred in dropping the proceedings, it is not for this Court to interfere at the instance of the petitioner, who is really unconcerned with the acquisition proceedings except to the extent already indicated. He has an agreement of sale and it is admitted that he has a suit pending for specific performance under that agreement. Therefore, he is in no way affected by the dropping of the proceedings. That is a matter which the Court will adjudicate on the merits of the suit. I therefore, see no reason why rule should be issued in this case.

Any loss to the public revenue, is a matter for the CBDT to be concerned with and not the petitioner. It is, accordingly, dismissed without rule being issued.