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Judgment
Abdul Hadi, J.—This writ appeal is against the order dated 10.1.1991 of Kanakaraj, J. in W.P. No. 16225 of 1990. The said writ petition
by the respondent herein, is for a writ of certiorarified mandamus, to quash the impugned order dated 19.9.1990 of the appellant herein, declining
to pass an order u/s 269-UL of the Income Tax Act, 1961 (hereinafter referred to as ''the Act'') in pursuance of the statement filed by the
respondent herein and his transferors, u/s 269-UC of the Act, and to direct the appellant to pass an order granting a certificate of no objection u/s
269-UL of the Act for the sale of No. 94, Poes Garden Street, Cathedral Road, Madras-86 to him. The said writ petition was allowed as prayed
for and hence this writ appeal by the respondent in the writ petition. 2. The respondent initially purchased, by sale deed dated 19.1.1990, an extent
of 2831 sq.ft. with superstructure thereon, (out of the total extent of 8563 sq.ft. with superstructure thereon, bearing the abovesaid Door No. 94,
Poes Garden Street, Cathedral Road, Madras-86, comprised in R.S.No.1567/32 Part, Block No. 31, Mylapore Division, Madras and owned by
his vendor, Pushparani), for a consideration of Rs. 9.5 lakhs. Subsequently on 15.2.1990, he entered into a sale agreement for purchasing the
balance extent of 5732 sq.ft. with the superstructure thereon, from the same owner for a sum of Rs. 32.50 lakhs. (No doubt in the sale agreement,
apart from the abovesaid owner Pushparani, her children were also parties, though they were said to be having no right in the said property, but
added as parties in the said sale agreement, only at the request of the purchaser by way of abundant caution). Since in the above sale agreement,
the sale consideration was above Rs. 10 Lakhs, the respondent, as required u/s 269-UCof the Act (coming under Chapter XX-C) read with Rule
48-L of the Income Tax Rules, reduced the said agreement in the form of statement prescribed under Form No. 37-I and submitted it to the
appellant on 9.3.1990. u/s 269-UD of the Act, the Central Government is given a preemptive power to purchase immovable property covered by
the said Chapter XX-C at an amount equal to the amount of apparent consideration stated in the relevant sale agreement. That is why Section
269-UC of the Act read with Rule 48-L of the Income Tax Rules provided for submission of the abovesaid statement in the above referred to
Form No. 37. In case, the Central Government is not choosing to exercise the said power and purchase the said property accordingly, Section
269-UL (3) of the Act provides that the appellant shall issue a certificate of no objection stating that the Central Government has no objection to
the transfer of such property for an amount equal to the apparent consideration therefore as stated in the agreement for transfer of the immovable
property in question. The proviso to Section 269-UD also states that no order for the purchase by the Central Government, of the property in
question, shall be made after the expiration of a period of two months from the end of the month in which the abovesaid statement (Form No. 37-
1) is received by the appellant.
Now, in the above situation, after the above said Form No. 37-I statement was submitted by the respondent, the appellant, however, by its
letter dated 17.5.1990, stated that the said Form No. 37 I statement was ""not a valid statement"" u/s 269-UC (3) of the Act in view of the alleged
defects and ""rejected"" the statement holding that the appellant ""can neither issue a no objection certificate u/s 269-UL (1) of the Income Tax Act,
1961 nor issue an order for purchase u/s 269-UD (1) of the Income Tax Act, 1961."" In the said letter dated 17.5.1990, the alleged defect pointed
out is mainly that the alleged partition of the abovesaid property of a total extent of 8653 sq.ft. into two parts as stated above, appear to be nothing
but ""an attempt to transfer the property by resorting to unauthorised subdivision.
It is further stated there as follows:
The proposed partition, if effected would result in the building in part (a) being bound on northern and western sides by part (b) in a manner which
is harmful to both parts. The proposed artificial division makes access to both parts extremely difficult and cumbersome.
The said letter also observed as follows:
From a perusal of the physical features of the part (a) stated to have been transferred, as indicated in the statement above, there is reason to
believe that keeping in view the declared consideration of Rs. 32,50 lakhs for the part (b) proposed to be transferred; the value of part (a) already
transferred was significantly more than Rs. 10 lakhs due to which reference should have been made to Appropriate authority. The transfer stated to
have been made without obtaining certificate from Appropriate Authority is to that extent in violation of Section 269-UL(1) of the Income Tax Act,
1961. No clearance from municipal corporation has been produced in support of the extremely odd physical partition stated to have been made.
On receipt of the said letter dated 17.5.1990, the abovesaid Pushparani replied by her letter dated 20.6.1990, inter alia stating, ""there is no
question of any unauthorised sub division which arises at the stage of purchase or sale of any property or part thereof. This is also clarified in the
enclosed legal opinion....I have a marketable property with marketable title and have negotiated it for the state consideration, and as required by
Section 269-UC, we have submitted all necessary details of the agreement to you for-necessary NOC....I have been trying to sell the property left
behind by my husband but was unable to do so for a long time. I have to sell it is parts and pieces, which I did since 1982. Now Mr. Naresh
Mehta (petitioner) has come forward to purchase the balance of the property left over.
So saying, the reply concluded stating We have placed all the materials and information available with us before your goodself and once again
request you to issue the certificate of no-objection as per Section 269-UL (3) without further delay.
Then, the appellant wrote to the parties on 12.7.1990, asking them to file another statement in Form No. 37-I. Then, the respondent and his
vendors once again filed another Form 37-1 statement on 25.7.1990, giving the necessary particulars again in the said form. Then finally, the above
referred to impugned order dated 19.9.1990 was passed by the appellant once again rejecting the statement, holding that ""in view of the defects in
the property proposed to be conveyed, we are unable to either purchase the property u/s 269-UD(1) or issues certificate of no objection u/s 269-
UL."" The impugned order also gave almost the very same reasons as already mentioned in their letter dated 17.5.1990. It further stated inter alia
as follows:
The above factors show that when the property was artificially bifurcated and part of it sold in February, 1990, the parties to the transaction had
already decided to sell the entirety of the property to the same person. Even though this was the ultimate object an artificial partition was created
and a part of that sold in February, 1990 for consideration below Rs. 10 lakhs. If the rates obtaining for the proposed transaction are applied to
the transaction which is already completed, the value of the property already sold would amount to not less than Rs. 15 lakhs. The parties to the
transaction resorted to splitting the property in order to avoid interference of the authorities constituted under Chapter XX-.C of the Income Tax
Act.
On the abovesaid rival contentions, the learned Judge, who decided the writ petition, came to the following conclusions:
Therefore it is clear that if an application is made u/s 269-UC and if no order is passed within the prescribed time u/s 269-UD(1), it automatically
follows that a certificate u/s 269-UL(3) must be issued
....Either the appropriate authority should be prepared to exercise the right to purchase with all the defects, short comings and limitations or he
should issue a certificate of no objection. I do not think that the respondent was justified in going to the manner of division of the property and
whether any purchaser from the Income Tax Department can utilise the property at all. I am fortified in this respect by a decision of the Calcutta
High Court reported in Kelvin Jute Co. Ltd. and Another Vs. Appropriate Authority and Others, , No doubt this will give the real estate dealer a
handle to circumvent the provisions of law. It is for the legislature to plug the loop-hole....I am inclined to hold that the law of pre-emption is
bordering on a law of acquisition of property and must be strictly construed. I cannot say that the petitioner is acting against public policy when he
is clearly acting within the four corners of law.
The learned Judge, therefore, allowed the writ petition.
Now before us, the learned Counsel for the appellant very much relied on the decision in McDowell and Co. Ltd. Vs. Commercial Tax Officer,
, where five learned Judges of the Supreme Court observed that tax planning might be legitimate provided it was within the framework of the law
and colourable devices could not be part of tax planning and it was wrong to encourage or entertain the belief that it was honourable to avoid the
payment of tax by dubious methods. But, in the present case, first of all there is no tax evasion as such, nor is there at least any proof or even
allegation in this proceeding that any probable tax has been evaded and if so by what means the respondent has done it No doubt Chapter XX-C
was introduced in the Act to circumvent tax evasion by under-valuation in transfer deals. But, when there is no material showing that any probable
tax has been evaded, we do not think that the said decision would apply to the present proceeding. That apart, in the subsequent decision of the
Supreme Court in Union of India (UOI) and Others Vs. Playworld Electronics Pvt. Ltd. and Another, , two learned Judges of the Supreme Court
have, on the facts of the case before them, has observed as follows:
While it is true, as observed by Chinnappa Reddy, J. in McDowell and Co. Ltd. Vs. Commercial Tax Officer, , too much to expect the legislature
to intervene and take care of every device and scheme to avoid taxation and it is upto the court sometimes to take stock to determine the nature of
the new and sophisticated legal devices to avoid tax and expose the devices for what they really are and to refuse to give judicial beneficiation, it is
necessary to remember as observed by Lord Reid in Greenberg. I.R.C. (1971) 47 T.C. 240 , that one must find out the true nature of the
transaction. It is unsafe to make bad laws out of hard facts and one should avoid subverting the rule of law. Unfortunately, in the instant case, facts
have not been found with such an approach by the lower authorities and the High Court had no alternative on the facts as found but to quash the
show cause and the demand notices.
8 In this context, the learned Counsel for the respondent herein points out that nowhere the appellant has stated that the property agreed to be sold
has been undervalued. The said learned Counsel points out that the impugned order or the appellant''s letter dated 17.5.1990 only states that the
abovesaid property already sold for Rs. 9.5 lakhs has been under-valued, but that nowhere it is stated that the property that is agreed to be sold
now is undervalued. We have also gone through the impugned order as well as the earlier letter dated 17.5.1990 and find that what is stated by the
learned Counsel for the respondent is correct. The learned Counsel also points out that since the appellant speaks about the valuation of the
property already sold, as stated above, it shows that the appellant has applied its mind to the question of valuation and that if really, the appellant
felt that even the property agreed to be sold now has been undervalued, it would have stated so in the impugned order of in its abovesaid earlier
latter. We think there is force in this argument. Further, on a question put forward by us, the learned Counsel for the appellant also represents that
there is no law to reopen the sale already held for Rs. 9.50 lakhs.
The learned Counsel for the appellant also relied on the decision in Income Tax Officer Vs. M.K. Mohammed Kunhi, , to contend that when
there is a power to either purchase the property agreed to be sold or to issue no objection certificate, impliedly there is an incidental power to say
that the appellant could not exercise either of the said powers. This contention has no merit, because, what is contended by the learned Counsel
cannot be considered as an incidental power at all.
On the other hand, the learned Counsel for the respondent relies on the decision in Appropriate Authority and Another Vs. Tanvi Trading and
Credits P. Ltd. and Others, ; Tanvi Trading and Credits P. Ltd. and Others Vs. Appropriate Authority and Others, . He also relied on the
decisions in Mrs.Satwant Narang v. Appropriate Authority 188 L.T.R. 656, of Kelvin Jute Co. Ltd. and Another Vs. Appropriate Authority and
Others, , of Calcutta High Court. In the above referred to Tanvi Trading and Credits P. Ltd. and Others Vs. Appropriate Authority and Others, ,
the Delhi High Court observed as follows:
As we read Section 269-UD, it is clear that the only right which it confers on the appropriate authority is to enable it to make an order for
purchase of the immovable property at an amount equal to the amount of the apparent consideration....The said provision does not give jurisdiction
to the appropriate authority to adjudicate upon the legality of the transaction which is proposed to be entered into by the applicant. It is to be
remembered that Chapter XX-C was incorporated in an effort to curb sales of immovable properties for apparent consideration which would be
less than the actual consideration. In other words, the effort was to see that immovable property is not transferred by taking sale consideration in
black. Section 269-UD was not concerned with the validity of the sale."" If there was any impediment or defect in the title of the transferor or if
there was any other law which was vitiated by such a sale, the same was to be of no consideration to the appropriate authority except that it could
take all such factors into consideration while making up its mind whether to exercise the pre-emptive right of purchase or not. The appropriate
authority cannot, on grounds of alleged infringement of law, exercise its right of purchase and, at the same time, refuse to grant the certificate sought
by the seller.
When the same matter was taken up to the Supreme Court, in the above referred to Appropriate Authority and Another Vs. Tanvi Trading
and Credits P. Ltd. and Others, , the Supreme Court dismissed the SLP with the following observation:
We agree that two alternatives are open under the scheme of the legislation:- (1) the Union of India through the appropriate authority could buy the
property, or (ii) in the event of its decision not to buy, it has to issue a ""No Objection Certificate"" leaving it open to the parties to deal with the
property. In that view of the matter, the High Court was-right in its conclusion.
(emphasis supplied)
In this connection, no doubt, the learned Counsel for the appellant brought to our notice the decision in Late Nawab Sir Mir Osman Ali Khan
Vs. Commissioner of Wealth Tax, Hyderabad, , to contend that the dismissal of special leave petition, does not mean affirmation of the High
Court''s decision. The relevant observation in the above referred to Late Nawab Sir Mir Osman Ali Khan Vs. Commissioner of Wealth Tax,
Hyderabad, is as follows:
It is, however, well-settled that dismissal of a SLP in limine does not clothe the decision under appeal in the SLP with the authority of the decision
of this Court. See, in this connection, the observations in Daryao and Others Vs. The State of U.P. and Others, . It may be mentioned, as was
rightly observed by a Full Bench of Allahabad High Court in Sahu Govind Prasad Vs. Commissioner of Income Tax, , that special leave is a
discretionary jurisdiction and the dismissal of a SLP cannot be construed as affirmation by this Court of the decision from which special leave was
sought for.
We find that in the above referred to Daryao and Others Vs. The State of U.P. and Others, , the Supreme Court dealing with the question of
bar of res judicata to a petition before the Supreme Court under Article 32, on the ground of earlier dismissal of a writ petition by the High Court
under Article 226 of the Constitution of India, the Supreme Court observes thus:
If the petition is dismissed in limine without passing a speaking order then such dismissal cannot be treated as creating a bar of res judicata. It is
true that prima facie dismissal in limine even without passing a speaking order in that behalf may strongly suggest that the court took the view that
there was no substance in the petition at all; but in the absence of a speaking order it would not be easy to decide that factors weighed in the mind
of the Court and that makes it difficult and unsafe to hold that such a summary dismissal is a dismissal on merits and as such constitutes a bar of res
judicata against a similar petition filed under Article 32.
Further in the above referred to Sahu Govind Prasad Vs. Commissioner of Income Tax, , - the Allahabad High Court observed as follows: ""The
Supreme Court dismissed the Special leave petition. No reasons are mentioned. Maybe, the case was dismissed for lack of a copy of judgment.
Special leave is a discretionary jurisdiction of the Supreme Court. It cannot be predicted that by dismissing the SLP the Supreme Court affirmed
the decision of the Andhra Pradesh High Court on its merits.
From the abovesaid observations, it is clear that when the Supreme Court dismisses the special .Leave Petition without assigning any reason,
there may be scope for saying that the Supreme Court has not, by such non-speaking order, affirmed the decision by accepting all the reasons
given by the High Court. But, where the Supreme Court gives its opinion that the conclusion reached by the High Court is correct and dismisses
the special leave petition, then it cannot be said at all that the Supreme Court has not affirmed the decision of the High Court. In the present case,
as already noted, the Supreme Court in the above referred to Appropriate Authority and Another Vs. Tanvi Trading and Credits P. Ltd. and
Others, , specifically held that ""the High Court was right in its conclusion"". Therefore, there can be no doubt that the above referred to Tanvi
Trading and Credits P. Ltd. and Others Vs. Appropriate Authority and Others, , has been affirmed by the Supreme Court in the abovesaid
decision reported in Appropriate Authority and Another Vs. Tanvi Trading and Credits P. Ltd. and Others, .
We also find that in Satwant Nakang Vs. Appropriate Authority, Income Tax Department, New Delhi, , referred to above also, it was held
that the jurisdiction of the Appropriate Authority was only limited to either pass an order, within the specified period, for purchase of the property
by the Central Government for the consideration recorded in the agreement or to issue a no objection certificate for transfer at that consideration,
and that while considering the statement in Form No. 37-I, the appropriate authority had only to examine the adequacy of the consideration and to
decide whether to order purchase or to grant a no objection certificate and that the appropriate authority had nc jurisdiction to go into the object
or the purpose of the transaction or its legality or validity.
Further in Kelvin Jute Co. Ltd. and Another Vs. Appropriate Authority and Others, , referred to above, the Calcutta High Court has also
expressed the same view as follows:
When there is a proposal for sale, the appropriate authority has either to purchase the property by exercising the right u/s 269-UD of the Income
Tax Act and if it is not inclined to purchase, to issue a ""no objection"" certificate. The third alternative is not left open as the stage is premature and
that the transferor has to better his title.
In the present case, it cannot also be said that there was any defect in the form in which the statement was given under the above referred to
Form No. 37-1. So, the rejection of the said statement by the appellant was also not justified.
The last argument that was addressed by learned Counsel for the appellant is, even if the impugned order had to be quashed, the learned Judge
should have given an opportunity to the appellant to consider once again and pass a fresh order regarding the pre-emptive power given to the
Central Government under Chapter-XX-C. But, we do not think that this contention can be accepted on the facts of the present case. First of all,
even in the impugned order, it is specifically concluded as follows:
It is regretted that we are unable to either make an order of purchase u/s 269-UD(1) or issue a certificate of no objection as contemplated u/s
269-UL....
So, when the appellant has already concluded that it is unable to make the purchase, it cannot be given a fresh opportunity to consider and pass
fresh order regarding purchase. That apart, as already pointed out, the first proviso to Sec,269 UD(1) of the Act specifically states that no order
for the purchase by the Central Government shall be made after the expiration of a period of two months from the end of the month, in which the
abovesaid statement was received by the Appropriate Authority. Even taking into account the statement in Form No. 37-I that was submitted for
the second time on 23.7.1990, the said period of two months expired by 22.9.1990 itself. The writ petition was filed only subsequently in
October, 1990. If at least the writ petition was filed prior to the expiry of the said period and this Court had granted stay of further proceedings
within the said two months'' period, it can be argued that a further time should be granted by the court when it disposes of the writ petition. But,
that is not the case here. Therefore, this last argument also cannot be entertained.
In the result, the writ appeal is dismissed. However, the circumstances of the case, there will be no order as to costs.