Property acquired by ITD u/s 269UE-High Court asks CBDT to consider regularising ownership of bonafide purchaser on payment of difference in FMV
ABCAUS Case Law Citation:
ABCAUS 3083 (2019) (07) HC
The instant Writ Petition was filed by a Cooperative Housing Society claiming to be the owners of land on which a residential complex had been constructed by a Developer from which flats had been purchased by the members of the said Cooperative Society.
The Income Tax Department, against the erstwhile owner of the said land, had claimed the ownership of the said land by virtue of vesting of title in terms of Section 269UE of the Income Tax Act, 1961 (the Act) by an order passed by the Appropriate Authority under Section 269UD of the Act.
However after the Appropriate Authority had passed the said order against the erstwhile owner, the matter travelled to the High Court which granted an interim stay which was eventually revoked and petition was dismissed as withdrawn.
During the pendency of the said petition, the original owner executed an agreement for development ( “development agreement”) with the said Developer without referring to the previous transaction or the proceedings under Chapter XXC of the Act.
Thus, the said development agreement came to be executed, keeping total silence about the order passed by the Authority under Section 269UD of the Act and the pending petition filed by the original owner and the erstwhile purchasers.
The Developer after taking required sanctions from the Municipal Corporation, constructed a building of six floors containing flats and shop which were conveyed to the petitioner society under the provisions of the State Ownership of Flats Act. The members of the petitioner society purchased the flats and started residing there with their families.
At this juncture, the petitioner society received a letter issued by the Appropriate Authority claiming its title in the land. The letter contained the background of the litigation under the act at length.
The Hon’ble High Court opined that at the time when the MoU with the Developers was executed, the erstwhile owner of the land had lost his title to the land since by virtue of the order under Section 269UD of the Act, the land had vested in the Government. The original owner, therefore had no authority to execute the said agreement of development.
The Hon’ble High Court pointed out that since the development agreement did not pass on the title in land in favour of the Developers, the petitioner who claimed the title to the land through Developers, could not step into the shoes of any of the original petitioners to sustain the challenge to the impugned order.
The Hon’ble High Court clarified that the term “person aggrieved” has a particular conotation in legal parlance. Not any or every person who faces adverse consequences of an order or action, can be allowed to question the legality thereof. In order to be able to sustain a legal challenge to an action or an order, the petitioner must have a locus standi which in the present case, we find completely lacking.
However. At the same time, the Hon’ble High Court stated that the Court could not lose sight of the fact that the Income Tax Department had also contributed substantially to the complication. After passing the order under Section 269UG of the Act, the Department took no further steps to safeguard its interest in the land. In the property records, there was no indication of the land having vested in the Government. No claim, no charge, no interest of the Government was recorded in the property records. The least that the Department could have done was to have its name entered in the property records. Had the same been done, the documents of transfer of land by the original owner to the Developers would not have been registered and we are sure, development permission and subsequent permissions would not have been granted by the Municipal Authorities.
Since, as stated, the petitioner society or its members did not have any legal title to the land in question but particularly looking to the inaction on the part of the Income Tax Department in safeguarding its rights in the property, the Hon’ble High Court made request to the CBDT to sympathetically examine these facts and take appropriate decision in terms of its powers under Section 119(2) of the Act.
One of the suggestions advanced by the Hon’ble High Court was the payment of the difference between the fair market value and the agreed price of the land with interest and a lump sum consideration towards cost of litigation by the petitioner society to the Government.
The Hon’ble High Court opined that the Petitioner Society on agreeing to the above terms, the CBDT should consider whether the ownership of the petitioner society and the possession of the residential units by the members of the society can be regularized. For such purpose, the Court directed that proceedings be placed before the CBDT.
It was further directed that if the petitioner society is agreeable to deposit the amounts mentioned above, it may indicate the same to the CBDT within a period of four weeks. Such declaration would be accompanied by a formal request for regularization of the ownership and possession. The CBDT would dispose of such application preferably within four months. If the petitioner do not show such willingness, the petition would automatically be dismissed.
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