C.B. GAUTAM versus UNION OF INDIA AND ORS.

Citation: [1992] SUPP. 3 S.C.R. 12 · Decided: 17-11-1992 · Supreme Court of India · Bench: M.H. KANIA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
B 
C.B. GAUTAM 
v . 
. UNION OF INDIA AND ORS. 
NOVEMBER 17, 1992/NOVEMBER 27, 1992 
(M.H. KANIA, CJ. J.S. VERMA, s:c. AGRAWAL, YOGESHWAR 
DAYAL AND DR. A.S. ANAND, JJ.] 
Income Tax Act, 1961: Chapter XX-C-Sections 269-UD, 269 
UE-Compulsory pre-emptive purchase of property by Government to check 
C tax evasiori-Constitutional validity of-Reasons for such purchase 
recorded-Whether a substitiite for opportunity of hean"ng-Such reasons to 
be inc01porated in the order or recorded separately and communicated--Op-
portunity to show cause+-Need for-Vesting of property in Central Govern-
ment-'Free from all encumbrances' -Whether violative of Article 14 of the 
D 
Constitution-Whether could be read down-Monthly tenancies in such 
properties-Whether terminated on" acquisition by Government-Section 269 
UD(l)-To clan"fy that encumbrance or lease created to defeat provisions of 
Chapter XX~C would be void-Amendment-Suggested. 
Constitution of India, 1950: Article 14--Chapter XX-C of Income Tax 
E Act-Check on. Tax evasion-compulsory purchase of property by Govem-
ment-,-Free from all encumbrances-Whether .violative of 
Administrative Law: Pn"nciples of Natural Justice-Provisions for 
recording reasons-Whether a substitute for opportunity of hean"ng-Com-
F 
municating reasons-Ne.cessity of-Show cause notice-Affording of-Need 
for even though not provided in the statute. 
The petitioner proposed to purchase a plot of land from its owner 
· who held it under a lease executed by the Delhi Development Authority 
(DDA). Initially the owner entered into an agreement to transfer the 
G leasehold rights in the said property to the petitioner and paid an advance. 
On the sa~e day an agreement for the construction of a structure on the 
· said plot was entered into between the owner and the petitioner. Thereafter 
a fresh agreement to sell the said plot along with the leasehold rights in 
the said land was executed, wherein the owner agreed to transfer to the 
H 
petitioner his leasehold rights in the said land along with the ownership 
12 
C.B. GAUTAM. v. U.0.I. 
13 
of the building put up thereon for Rs.16 lakhs. The petitioner was also A 
liable under the agreement to pay Ks.3.4 lakhs to DDA on account of 
unearned increase. As per the requirements of Section 269 UC of the 
Income Tax Act, 1961 the said agreement to sell the property along with 
Form 37-1 giving the required particulars, was furnished to the ap-
propriate authority. After getting the report of the registered valuer, the B 
appropriate authority passed an order for purchase of the property by the 
Central Government under Section 269 UD (1) of the Income Tax Act and 
served the same on the petitioner. No specific reason was given for the 
compulsory purcha~e of the property. The order of the appropriate 
authority was challenged by the petitioner before the High Court by 
way of a Writ Petition. This Court transferred to itself the said Writ C 
Petition. 
On behalf of the petitioner, it was col)tended that no guidelines were 
-prescribed in Chapter XX-C of the Income Tax Act for the exercise of the 
drastic power of pre-emptive purchase wherein the Government was not D 
even required to comply with the provisions of the Transfer of Property 
Act in regard to title of the property, and so the provisions of Chapter 
XX-C confer unfettered discretion on the appropriate authority, which is 
arbitrary; that the provisions of Chapter XX-C were bad in law as they did 
not comply with principles of Natural Justice as no opportunity was to be E 
given to the intending purchaser; that the requirement of recording 
reasons was not sufficient in the absence of recording them in the order 
of purchase or communicating the reasons to the transferor or the trans-
feree along with the Order; that there has been failure to provide the mode 
of valuation of property where the title was disputed or the sale was part 
of a resolution of some dispute between the transferor and the transferee F 
or where there was an adjustment in the price on account of tenancy rights 
vested in the transferee or on account of encumbrance etc.; and that a law 
providing for the acquisition or compulsory purchase of immovable 
property, even in the absence of any proof of tax evasion, would violate the 
provisions of Articles 14 and 19(1) (g) of the Constitution of India as being 0 
excessive and unreasonable. It was also contended that the provisions of 
Chapter XX-C were bad in law as there was no ap

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