Supreme Court of India

HANS RAJ AGARWAL AND ANR.versusCHIEF COMMNR. OF INCOME TAX AND ORS.

Citation: 2002 INSC 573
Decided: 20 December 2002
Disposal: Dismissed
Bench: RUMA PAL

Holding

The appropriate authority's second purchase order is valid as it was issued within the statutory period following a fresh statement under Section 269‑UC, and the appellants' challenges concerning limitation, subject‑matter, oral partition, transfer under Section 2(47), valuation and deposit of consideration are untenable.

Summary

The appellants sought to set aside a second compulsory purchase order issued by the Central Government under Chapter XX‑C of the Income Tax Act, 1961, alleging that the order was beyond the statutory limitation period, concerned an undivided share contrary to the demarcated portions, and that the consideration was not deposited. The High Court had quashed the first purchase order and rejected the challenge to the second. The Supreme Court held that the appropriate authority correctly acted on a fresh statement filed under Section 269‑UC, thereby resetting the limitation period, and that the second purchase order was valid. The Court rejected the appellants' contentions on limitation, oral partition, transfer under Section 2(47), valuation, and deposit of consideration, affirming the High Court’s decision and dismissing the appeal.

Issues considered

Whether the first purchase order was passed beyond the two‑month limitation period under Section 269‑UD(I).
Whether the second purchase order is valid despite the property being demarcated and the share described as undivided in the agreement and statement.
Whether an oral partition is permissible and its effect on the subject‑matter of the compulsory purchase.
Whether the appellants qualify as transferees under Section 2(47) of the Income Tax Act, i.e., whether a transfer occurred before Chapter XX‑C came into force.
Whether the consideration amount reflected the true market value of the property.
Whether the Central Government deposited or tendered the consideration within the time prescribed under Sections 269‑UF and 269‑UG.
Whether the appropriate authority could extend the limitation period or whether the filing order could be challenged.

Legislation cited

Income Tax Act, 1961s. 239-UD, s. 2(47), s. 269-UC, s. 269-UD, s. 269-UF, s. 269-UG, s. 269-UH, s. 269-UL

Subjects

Income TaxCompulsory purchaseSection 269Limitation periodOral partitionValuationSection 2(47)Central Government purchaseProperty transfer

Judgment

A HANS RAJ AGARWAL AND ANR.
v.
CHIEF COMMNR. OF INCOME TAX AND ORS.

DECEMBER 20, 2002

B [RUMA PAL AND B.N. SRIKRISHNA, JJ.]

Income Tax Act, 1961-Chapter XX-C-Section 269-UC, 269-UD and
2(47)-Purchase of immovable property by Central Government in cases of
C transfer involving under valuation -Appropriate Authority passing purchase
orders-High Court quashing the first purchase order-Challenge to the second
purcl;ase order rejected..:_ Validity of-Held, in the circumstances of the case,
High Court was right in rejecting the challenge to the second purchase order.

One Land her sisters- agreed to sell certain property jointly owned
D by them, to the appellants. L died before the conveyance deed was
executed. On the basis of L's will, the executor entered into fresh
agreement with appellants to sell L's one-third undivided share. Other
siste.rs appointed appellants as their power of attorney, who sold
demarcated portions of the property to their nominees. Subsequently,
Chapter XX-C of Income Tax Act came into force which provided for the
E compulsory purchase of immovable properties in certain cases of transfer
by Central Government. Thereafter, appellants and the executor filed a
joint statement under section 269-UC in Form 37-1 in respect of L's share.
The Appropriate Authority did not accept the statement and passed a filing
order refusing to exercise its power under section 269UD(I) or 269UL(3),
F which was accepted hy the parties. The appellants and the executor then
filed a second statement. The Appropriate Authority accepted the same
and passed a purchase order for purchase of the property. Within a month
the Central Government deposited the consideration amount and
possession of property was handed over to it. Aggrieved, the appellants
filed writ petition for setting aside of the purchase order. High Court
G quashed the fir$t purchase order. The Appropriate Authority then passed
a second purchase order. The appellants filed a writ application
challenging the second purchase order. High Court rejected the same.
Hence the present appeal.

The appellants contended that the first purchase order was issued
H 648
HANS RAJ AGARWAL v. CHIEF COMMNR. OF INCOME TAX 649
beyond the prescribed time; that in the second purchase order the A
Appropriate Authority had wrongly purported to purchase a demarcated
share in the premises which was neither the subject matter of agreement
nor the statement filed under section 269-UC; that oral partition was
impermissible in law; that complete transfer had taken place before
Chapter XX-C came into operation in the State, thus the Appropriate
Authority could not initiate proceedings in respect of L's property; that B
the consideration amount reflected the true market value of the property;
and that the Central Government had not deposited the consideration
money nor paid it to the transferor.

The respondents contended that it was not open to the appellants to C
co'.!_tend that the first purchase order had been issued beyond the period
of limitation since they had never raised this issue in the writ petition;
that the appellants had accepted the 'filing order' of the Appropriate
Authority and submitted a second statement without protest; that in terms
of the direction issued in C.B. Gautam 's case the date of disposal of the
appellants' first writ petition was to be taken as the date of filing of the D
statement and, therefore, the Appropriate Authority had issued the second
purchase order within the statutory period; that the appellants had
admitted that the property had been orally partitioned between the three
owners and also the sale deeds of the other two owners stated so; that the
appellants had given up the argument that complete transfer had taken E
place under Section 2(47) of the Act prior to coming into force of Chapter
XX-C which had been recorded by High Court; that the documents on
record and finding of the Appropriate Authority shows that appellants
had not taken possession of L's share pursuant to the agreement of sale;
that they had «=11tered into possession of demarcated portions of L's sisters'
property after the execution of sale deeds by the appellants; that F
Appropriate Authority had considered the material on record which
showed that the stated consideration amount did not represent the true
market \•alue of the property; and that the Central Government had
deposited the purchase money with the Appropriate Authority which had
been subsequently withdrawn by the transferor against a bank guarantee G
executed by the appellants and this issue was not raised by the appellants
in the writ petition.

Dismissing the appeal, the Court

HELD: I.I. The respondents' subm.issions are entirely acceptable and H

..
650 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A the High Court had correctly rejected the appellants' writ application. The
Appropriate Authority had passed the 'filing order' refusing to exercise
its power under section 269UD(l) pr 269UL(3). The appellants could have
challenged such refusal. They chose not to do so till date. lpstead they
voluntarily filed a fresh statement in Form 37-1. The necessary implication
B according to the parties was that the first statement was not a proper one.
The fact remains that parties had filed a second statement in Form 37-1
and they requested Appropriate Authority to act on it. The transferor who
was a party to the second statement has never contended that the second
statement was not valid nor have the appellants either before the High
Court or before this Court contended otherwise. There is no question of
C the Anpropriate Authority having extended the time under the first proviso
to Section 269-UD nor did it do so. Whatever the reason for their doing·
so, it was appellants and transferor's act of filing a fresh statement under
Section 269-UC which gave rise to a fresh period of limitation. Under the
first proviso to Section 269UD(I) time is to be computed from the receipt
of"the statement" under Form 37-1. In the instant case the statement was
D the second one. It was open to the Appropriate Authority, in such
circumstances, to act on the second statement and pass a compulsory
purchase order within a period of two months from the receipt of that
statement. Thus the first purchase order could not be said to be invalid
on this ground. Besides, the appellants' challenge to the first purchase
E 'order does not really survive after the disposal of the first writ petition.
There is no appeal from this order. As the first purchase order has been
set aside without protest, the appellants' present grievance that the first
purchase order is otherwise invalid is ill founded. 1660-F-H; 661-A-EI

1.2. Having quashed the purchase order, the High Court had directed
F that Form 37-1 filed by the appellants would be deemed to have been filed
as on that date. No doubt, the High Court records that the deeming fiction
as to the date of filing of the statement was without prejudice to the
appellant's contention that the first purchase order was passed beyond
the period of limitation. However, in preserving the appellants' right, the
G High Court directed the Appropriate Authority to determine the
contention in keeping with the decision in C.B. Gal/lam's case. In the light
of the decision in C.B. Gautam's case, the appellants' challenge to the first
purchase order was misconceived. 1661-H; 662-AI

1.3. The appellant's submission that the second purchase order
H directed the purchase of something which was not the subject matter of
HANS RAJ AGARWAL v. CHIEFCOMMNR. OF INCOME TAX 65J
the agreement for s,ale or Form 37-1 stateinent is unacceptable. The A
appellants cannot dispute that the shares of the three owners of premises
had been demarcated prior to the second purchase order, if not even prior
to the filing of the first statement. The 'nature of interest or right proposed
to be transferred' was described as 'Absolute' and 'Ownership' property.
There was no reference to the undivided interest of the sisters. The recital B
portion of each deed referred to an oral partition and also that the
property sold consisted of a specified area "as detailed in the schedule and
the annexed plan". Boundaries were given and demarcated on the plan in
respect of each of the sisters' share which was indicated on the plans
forming part of the sale deeds. The Executor had filed an affidavit
affirming the fact of oral partition giving in detail the demarcated portion C
of the premises owned by L. The Appropriate Authority had also inspected
the premises prior to issuing the purchase order and had found that
property was in fact demarcated as recorded in the order. The reason why
the share of L has been mentioned as undivided in the agreement of sale
has been explained by the appellants themselv'es in the eight sale deeds
executed by them. 1662-A-GI D
1.4. Oral partition had taken place before the agreement of sale. For
the Appropriate Authority to have issued the purchase order in respect
of the undivided share, in these circumstances, would mean not only the
disruption of the established state of fact but also a reopening of the
appellants' title to the undivided portions of premises. Jn any event, the E
appellant cannot contend in the face of these facts that L's share was at
any material time in fact undivided. Further the submission of the
appellants that an oral partition was impermissible in law is erroneous.
1663-B-CI
F
1.5. The second purchase order directed the purchase of '1/3 share/
interest in the property. Although the purchase order goes on to describe
the 1/3 share/interest with reference to its boundaries, this would not serve
to invalidate the first portion of the order. 1663-H; 664-AI

1.6. The appellants' submission that they were transferees within the G
meaning of section 2(47) of the Income Tax Act is unsustainable. Whether
there was a transfer or not would depend on whether the appellants had,
in part performance of the agreement for sale taken possession of L's
property. In each of the eight such sale deeds executed by the appellants
of the share of the two sisters of L, it is recorded that the vendor was 'full
and absolute owner and possessor of the property conveyed' and that the H
652 SUPREME COU!lT REPORTS (2002] SUPP. 5 S.C.R.

A 'vendor has handed over vacant possession to the vendee'. In other words,
the appellants or their nominees who were the purchasers of the property
conveyed took possession of demarcated portions of the premises pursuant
to the eight deeds of sale and not prior thereto. There is no such document
which would show that the appellants had ever taken possession of L's
share. Besides the question is essentially one of fact and having given up
B the case before the High Court, the appellants cannot be permitted to
reopen the issue at this stage. 1664-B-EI
1.7. With regard to valuation, the Appropriate Authority had
considered sale instances which had taken place at or about the time the
agreement of sale was executed, location of property, its frontage and
C accessibility and after physical inspection and concluded that the
consideration for which L's property had been sold was under-stated. High
Court affirmed the valuation. There is no reason to disturb the finding of
fact on the basis of the material and also this Court cannot be oblivious
to the fact that the property which the appellants had agreed to purchase
D at Rs. 15,33,333 in 1988 was agreed to be purchased by the intervenor in
2000 at Rs. Four crores and five lakhs. 1664-F-G I

1.8. The submission that the Central Government had not deposited
or tendered the amount within the time required under Section 269-UF
read with S.269-UG(I) is an issue of fact. Since it is for the first time raised
E by the appellants before this Court it is liable to be rejected. The deposit
had been made by the Central Government within one month from the
first purchase order and in any case prior to second purchase order.
Admittedly the transferor has received the payment without any protest
whatsoever. 1664-H; 665-A-BI

F C.B. Gautam v. Union of India, 119931 I SCC 78; Nanni Bai and Ors.,
v. Gila Bai, 119591 SCR 479; Appropriate Authority v. Tanvi Trading & Credit
(P) lid., (1991) 191 ITR 307; Shankarrao v. Vithalrao, AIR (1988) SC 879
and Roshan Singh and Ors. v. Zile Singh and Ors., AIR (1988) SC 881,
referred to.

CIVIL APPELLATE JURISDICTION Civil Appeal No. 2121 of
G
2001.

From the Judgment and Order dated 27.4.2000 of the Andhra Pradesh
High Court in 10386/94.
Joseph Vellapally and L. Nageshwara, G. Ramakrishna Prasad, K.V.
H Ramakrishna, Jayanth Muthuraj, K.C. Sundarshan and Mohd. Wasay Khan,
HANS RAJ AGARWALv. CHIEFCOMMNR. OF INCOME TAX [RUMA PAL,!.] 653
for the Appellant. A
T.L.V. Iyer, Rajiv Tyagi and B.V. Balramdass, for the Respondents.

Avadh Behari Rohtagi, S.S. Rana, Bimal Bhaskar, Mrs. B. Rana and
Ms. Manu Lall for the intervenor.
B
The Judgment of the Court was delivered by

RUMA PAL, J. The appellants' challenge under Article 226 to the
order passed by the Appropriate Authorities under Section 239 UD (I) of the
Income Tax Act, 1961 (referred to hereafter as 'the Act') was turned down
by the Andhra Pradesh High Court. They have therefore assailed the decision C
of the High Court before us.

The property which ~as the subject matter of the order under Section
269 UD (I) was part of premises situated at Road No. 3, Banjara Hills,
Hyderabad. The entire premises covered an area of about 7100 sq. mts and
was jointly owned by one Leila D. Lean and her two sisters. On 13th March D
1988, the three owners agreed to sel! the entire premises to the appellants.
Before the conveyance could be executed, Leila Lean died. The executor
named in her will, through a general Power of Attorney Holder, one Sri
Armugham, entered into a fresh agreement with the appellants on 27th April
1989 agreeing to sell Leila Lean's 1/3 undivided share in the property. The E
two other sisters appointed the appellants as their power of attorney holders.
In their capacity as the power of attorney holders the appellants sold
demarcated portions of the property to nominees of the appellants by eight
separate agreements executed and registered between 28th April 1989 and
31st May 1989.
F
On I st June 1989, Chapter XX-C of the Act which statutorily provides
for the compulsory purchase by the Central Government of immovable
properties in certain cases of transfer came into force in the State of Andhra
Pradesh. The Chapter was introduced in an effort to curb tax evasion by
under valuation of the property sold. The substance of the provisions of G
Chapter XX-C which are relevant for the detem1ination of the issues raised
in this appeal are briefly considered.

Section 269 UC places conditions on the transfer of immovable property
valued at over Rs.5 lakhs. The conditions include (a) that an agreement for
transfer must be entered into between the intended transferor and the intended H
654 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.

A transferee at least four months prior to the intended date of transfer, (b) the
reduction in writing of the agreement in the form of a statement by each of
the parties or by any of them acting for the other, (c) the statement being
furnished to the Appropriate Authority within a prescribed period and in the
prescribed form.

B After the receipt of the statement under Section 269 UC then
notwithstanding anything contained in any other law or instrument or
agreement, the Central Government or the Appropriate Authority can make
an order under Section 269 UD for the purchase by the Central Government
of such immovable property at an amount equal to the amount of apparent
C consideration. Under the proviso to Section 269 UD(I), no order of purchase,
"shall be made in respect of any immovable property after the expiration of
a period of two months from the end of the month in which the statement
referred to in section 269-UC in respect of such property is received by the
Appropriate Authority".

D Where an order for the purchase of any immovable property is made
under sub-section (I) of section 269-UD the property vests in the Central
Government and under Section 269-UF, the Central Government "shall pay,
by way of consideration for such purchase, an amount equal to the amount
of the apparent consideration". The amount of consideration payable under
E Section 269-UF is required to be tendered to the person or persons entitled
thereto within a period of one month. If there is any dispute as to who is
entitled to the amount of consideration or if the person entitled to receive the
amount of consideration does not consent to receive it, the Central Government
is required to deposit the amount of consideration with the Appropriate
Authority within the same period. (Section 269-UG) If the Central Government
F fails to either tender or deposit the amount then under Section 269-UH the
order under Section 269-UD would stand -abrogated and the immovable
property shall stand re-vested in the transferor after the expiry of the aforesaid
period. If the 'Appropriate Authority' decides not to make an order under
sub-section (I) of Section 269-UD or if the order stands abrogated under
Section 269-UH, "the Appropriate Authority shall issue a certificate of no
G objection referred to in sub-section (I) or, as the case may be, sub-section (2)
and deliver copies thereof to the transferor and the transferee". [Section
269UL(3)]

On 15th June 1989 the appellants and Sri Armugham, representing the
H estate of Leila Lean, filed a joint statement under Section 269-UC in Form
HANS RAJ AGARWAL v. CHIEF COMMNR. OF INCOME TAX [RUMA PAL; J.) 655
37-1 which is the prescribed form under the Act in respect of Leila Lean's A
share in the premises. The consideration for the sale was stated to be Rs.
15,33,333/33. The date of agreement <if transfer was given as 13th March
1988.

The Appropriate Authority did not accept the statement. By its order
dated 23rd August 1989 it refused to act on its basis stating that the statement B
was premature an'd invalid because the property belonged to a non-resident
and the approval of the Reserve Bank of India was required for alienating the
same. According to the A.J>propriate Authority, no such approval having been
taken the transferor was not empowered to dispose of the property. It was
said in the order:
c
"Therefore we are unable to issue either a purchase order u/s 269
UD(I) or issue a No Objection Certificate U/s 269 UL( I). The
statement furnished in Form 37-1 is filed. The transferor/transferees
are however free to co1~1e up before the Appropriate Authority after
the above defect is cured, if they are so advised." D
This order dated 23rd August 1989 (hereafter referred to as the 'filing
order') was accepted both by the transferor and transferees. On 8th September
1989, the appellants and the said Armugham representing the estate of Leila
Lean submitted a second statement in Form 37-1 with the Appropriate
Authority after getting the permission of the Reserve Bank of India. This E
statement was accepted by the Appropriate Authority and on 28th November
1989, an order was passed by the Appropriate Authority under Section 269-
UD(I) for the purchase of property. ( hereinafter referred to as the 'first
purchase order') Within a month i.e. on 22nd December 1989, the Central
Government deposited an amount equivalent to the apparent consideration
with the Appropriate Authority. The purchase was, therefore complete· and F
the said Arumugham handed over possession of the property to the Central
Government.

On 18th December 1989 an affidavit was filed by the said Armugham
representing the estate of Leila Lean before the Appropriate Authority giving G
the exact description of the demarcated portion of the share of Leila Lean in
the prope11y. On 28th December 1989 the Appropriate Authority sought to
amend the first purchase order in purported exercise of power for rectification
of mistakes granted under Section 269-UJ, by including the description of
Leila Lean's property.
H
656 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A A writ petition (referred to as the first writ petition ) was thereafter
filed by the appellants before the High Court at Andhra Pradesh (W.P.
No.1731/89) impugning the constitutional validity of Chapter XX-C and
seeking the setting aside of the order passed under Section 269-UD( I) basically
on the ground that it was passed in violation of natural justice and was
otherwise unconstitutional.
B
While the appellants' first writ petition was pending, this Court in C.B.
Gautam v. Union of India and Ors., [ 1993) I SCC 78 held that even though
Section 269-UD did not provide for an opportunity of hearing being afforded
to the intending purchaser and the seller of the property, a reasonable
C opportunity of showing cause against an order for compulsory purchase was
to be given under Section 269 UD( 1) to the interested parties. Reasons were
also to be recorded by the Appropriate Authority to support its order. Otherwise
the order issued under Section 269 UD(l) was bad_in law. However, taking
into consideration the laudable object with which Chapter XX-C had been
introduced in the Act, this Court inter a/ia directed that in all cases where the
D orders under Section 269 UD were invalid consequent upon this Court's
decision, and were the subject matter of challenge in writ proceedings, the
statement in Form 37-1 submitted would be treated as if it were submitted on
the date of the disposal of those proceedings and the Appropriate Authority
could if it so thought fit issue a show cause notice within a period of two
E months calculating the commencement of the period under the proviso to
Section 269-D( I) from that date. It was also made clear that as far as completed
transactions were concerned i.e. where after the order of compulsory purchase
under Section 269-UD( I), possession had been taken and compensation paid
and accepted by the owner without protest, nothing said in the judgment
would invalidate such purchases.
F
The appellants' first writ petition was disposed of by the High Court on
16th February 1994. In view of this Court's decision in C. B. Gautam 's case
the first purchase order under section 269 UD( I) dated 31st August 1989 was
quashed. The Appropriate Authority was directed to give an opportunity to
the appellants of being heard before passing any order "in the light of the
G observations made by the Supreme Court in Gautam' s case and in accordance
with law". It was said:

"That having regard to the directions given by the Supreme Court in
the case referred above Forms 37-1 filed by the petitioners in these
cases would be deemed to have been filed as on today and this is
H
HANS RAJ AGARWAL v. CHIEFCOMMNR. OF INCOME TAX [RUMA PAL, J] 657
without prejudice to the contentions that filing of the Form for the A
second or the third time a.. the case may be, was only pursuant to the
directions of the Appropriate Authority and that no valid order of
pre-emptive purchase under chapter XX-C can be •made by the
Appropriate Authority beyond the statutory period from the date of
filing of the first Form 37-1 in each case.
B
That the first respondent shall consider these and other contentions
that might be raised by ihe petitioners in reply to the show cause
notice and pass reasoned orders in accordance with law in the Iight
of the observations of the Supreme Court in the above case".

Within a period of two months from the date of the order of the High C
Court, namely on 20th May 1994, the Appropriate Authority passed a fresh
order (referred to as the second purchase order) under Section 269-UD(I)
after issuing notice to the parties and considering their replies. Elaborate
reasons were given by the Appropriate Authority for directing the compulsory
purchase of Leila Lean's property by the Central Government. The appellants' D
challenged the second purchase order under Section 269-UD by way of an
application under Article 226. The petition was rejected by the High Court
on 27th April 2000.

The appellants' filed a special leave pe.ition challenging the High Court's
decision. An interim order was passed by this Court on 19th June 2000 E
allowing the auction sale of Leila Lean's property to be held subject to the
result of the special leave petition. On 22nd June 2000, the Central Government
advertised the property for sale. The sale was duly held and M/s Vansh
Builders of Hyderabad was declared the highest bidder of Leila Lean's property
at a sum of Rs. Four crores and five lakhs. M/s Vansh Builders made an
application for intervention before this Court which was allowed on 28th F
September 2000.

The appellants' have challenged the first order of purchase on the ground
that although the issue of limitation had been left open by the earlier order
of this Court disposing of the first writ petition, ·the Appropriate Authority G
·had failed to consider the issue. According to the appellants, it was settled by
this Court in Appropriate Authori(l' v. Tanvi Trading & Credit (f') ltd:,
(1991) 191 ITR 307 that the Appropriate Authority was bound to either pass
an order for purchase under Section 269-UD or issue a No Objection Certificate
under Section 269-UL. It could not question the title of the vendor. Since it
was not in dispute that the Appropriate Authority had done neither within the
658 SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.

A prescribed period, it is contended by the appellants that the Appropriate
Authority could not extend the period of limitation for issuing a compulsory
purchase order on such basis. It is contended that merely because a second
statement in Form 37-1 has been filed by the parties beyond that period, it
would not operate as a waiver either in law or in the facts. It was emphasized
that the first statement in Form 37-1 was a valid statement and had been filed
B on 15th June 1989. The period for exercising the power under Section 269
UD( I) had expired on 31st August 1989. Since no decision was taken to
purchase the property then, the Appropriate Authority was bound to issue a
'No objection' certificate under S.269 UL(3 ). The first purchase order had
been made on 28th November 1989 beyond the prescribed time and was,
C therefore, invalid.

The second submission of the appellants was that the power to purchase
the property under Section 269-UD was limited to the purchase of the property
which was the subject matter of the agreement for transfer dated 27th April
1989 and the statement in Form 37-1. The property in both the agreement and
D statement had been described as the undivided share of Leila Lean . In the
second purchase order, the Appropriate Authority had wrongly purported to
purchase a demarcated share in the premises which was neither the subject
matter of the agreement nor the statement filed under Section 269 UC. The
second purchase order was incompetent and could not be given effect to. The
E appellants also contended that the Appropriate Authority's determination that
the stated consideration did not reflect the true market value of the property
when the agreement for sale was entered into was based on immaterial and
irrelevant considerations.

The next submission of the appellants was that they had taken possession
F of the entire premises pursuant to the agreement of sale dated 13th March
1988. There was, therefore, a complete transfer of the property to the appellant •
for the purposes of the Income Tax Act as Section 2(47) defines transfer, in
relation to a capilal asset as including, "any transaction involving the allowing
o_f the possession of any immovable property to be taken or retained in part
performance of a contract of the nature referred to in section 53A of the
G Transfer of Property Act, 1882". According to the appellants' the transfer
having taken place before Chapter XX-C came into operation in the State of
Andhra Prad~sh, it was not open to the Appropriate Authority to initiate any
proceeding under that Chapter in respect of Leila Lean's property.

It was finally submitted that the Central Government had not deposited
H
HANS RAJ AGARWAL v. CHIEF COMMNR. OF INCOME TAX [RUMA PAL, l) 659

the consideration money nor paid it to the transferor as required under the A
provisions of Section 269-UG and, therefore, in terms of Section 269-UH the
premises stood re-vested in the transferor. In the light of all these
circumstances, it is submitted by the appellants, that the Appropriate Authority
should now be directed to issue a 'No Objection' under Section 269UL(3).

The respondents have submitted that it was not open to the appellants B
to impugn the second purchase order on the ground that the first purchase
order had been issued beyond the period of limitation. The respondents say
that in their writ petition in challenge to the first order, the appellants had
never raised this issue. The issue was raised for the first time in answer to
the show cause notice issued prior to the second purchase order. It was also C
submitted that the Appropriate Authority had considered the issue and had
negatived it. According to the respondents, the appellants had accepted the
order of the Appropriate Authority which had "filed" the first statement in
Form 37-1 holding that it was premature and invalid. They had acted on that
order and submitted the second statement without protest. The respondents
contend that even if the order refusing to either pass an order under Section D
269-UD or release under Section 269UL(3) were held to be void, since the
appellants had not challenged it till today, they could not do so collaterally.
According to the respondents the order was at the most wrongly passed but
it could not be said that it was void. According to the respondents, in any
event the decision of this Court in C.B. Gautam (supra) had effectively wiped E
out the earlier order passed under Section 269-UD. In terms of the. Supreme
Court directions, the date of the disposal of the appellants' first writ petition
was to be taken as the date of the filing of the statement under Section 37-
1 and the Appropriate Authority had issued the second purchase order within
the statutory period thereafter. It is contended that the challenge to the first
purchase order did not in the circumstances, survive. F
On the submission of the appellants that the second purchase order was
not in terms of the agreement for sale nor the statement in Form 37-1, the
respondents submitted that the appellants themselves had on divers dates
admitted that the property had been orally partitioned between the three
owners. The eight sale deeds of the other two owners which had been executed G
by the appellants representing the owners had expressly stated that there was
an oral pa11ition. It is pointed out that there is no claim by the appellants that
what had been sold pursuant to the second purchase order was larger than the
share of Leila Lean's share. It is pointed out that an oral partition between
members of a non-coparcenery family was also legally permissible as has H
660 SUPREME COURT REPORTS (2002) SUPP. 5 S.C.R.

A been held. by this Court in Nanni Bai and Olhers v. Gila Bai, (1959) SCR
479 and Shankarrao v. Vilhalrao AIR (1988) SC 879.

According to the respondents, the appellants' submission that the Central
Government had defaulted in tendering or depositing the purchase money
was factually wrong. The deposit had been made with the Appropriate
B Authority and had been subsequently withdrawn by the transferor against a
bank guarantee executed by the appellants. It is contended that this was not
an issue which had been raised by the appellants in their writ petition before
the High Court.

It is further submitted by the respondents that the appellants had
C expressly given up the argument that the property had been "transferred" to
them within the meaning of Section 2 (47) of the Income Tax Act prior to
coming into force of Chapter XX-C. This had been recorded by the High
Court. Documents on record as well as the finding of the Appropriate Authority
were referred to show that the appellants' had not in fact taken possession of
D Leila Lean's share pursuant to the agreement of sale dated 13th March 1988.
They had entered into the possession of demarcated portions of Leila Lean's
sisters' property after the eight sale deeds had been executed by the appellants
on behalf of the sisters and had never taken possession of Leila Lean's share.

; Finally on the question of valuation, it is stated that the Appropriate
E Authority had considered the material on record which clearly showed that
the consideration which the appellants had agreed to pay to Leila Lean or her
representative did not represent the true market value of the property either
in 1988 or in 1989 when the fresh agreement for sale was entered into
between the executor of Leila Lean's estate and the appellants.

F We are of the opinion that the respondents' submissions are entirely
acceptable and th_e High Court had correctly rejected the appellants' writ
application. It is really unnecessary, in this case, to consider whether the
'filing order' dated 23rd August 1989 was void or merely irregular. We will
assume for the purpose of argument that the 'filing order' of the Appropriate
G Authority refusing to exercise its power under Section 269UD( I) or 269UL(3)
was illegal being in contravention of the law as laid down in Tanvi 's case
(supra). The appellants could have challenged such refusal. They chose not
to do so till today. Instead they voluntarily filed a fresh statement in Form
37-1. The necessary implication was according to the parties, to the first
statement, that it was not a proper one. The fact remains that a second statement !
H in form 37-1 had been filed by parties and they requested the Appropriate
HANS RAJ AGARWAL v. CHIEF COMMNR. OF INCOME TAX [RUMA PAL, J.) 66 J
Authority to act on the second statement. The transferor who was a party to A
the second statement has never contended that the second statement was not
valid nor have the appellants either before the High Court or before us
contended otherwise. There is no questfon of the Appropriate Authority having
extended the time under the first proviso to Section 269-UD nor did it do so.
Whatever the reason for their doing so, it was the appellants and transferor's B
act of filing a fresh statement under Section 269-UC which gave rise to a
fresh period of limitation. Under the first proviso to Section 269UD(I) time
is to be computed from the receipt of"the statement" under form 37-1. In this
case, "the statement" was the second one. It was open to the Appropriate
Authority, in such circumstances, to act on the second statement and pass the
compulsory purchase order within a period of two months from the receipt C
of that statement. The first compulsory purchase order could not, in the
circumstances, be said to be invalid on this ground. Besides, the appellants'
challenge to first purchase order dated 28th November 1989 does not really
survive after the disposal of the first writ petition, When the first writ
application was disposed of on 16th February 1994, the High Court had
quashed the first order issued under Section 269-UD( I) on the basis of the D
Supreme Court's decision in C.B. Gautam (supra). The language is unequivocal
and unqualified. It said:

"The impugned order in F.N.AA/Hyd/9/68111189-90 dated 23.8.1989
on the filing of the 1st respondent herein be and hereby quashed".
E
There is no appeal from this order. If the first purchase order has been
set aside without protest, the appellants present grievance that the first purchase
order is otherwise invalid is ill founded. C.B. Ga111a111 's directive that the
statements in Fonn 37-1 were to be deemed to have been filed on the date
of the disposal of pending writ petitions did not make a distinction between F
the orders under Section 269UD(1) which were invalid because of non-
compliance with natural justice alone and those which were also otherwise
assailable.

Having quashed the purchase order, the High Court had also directed.
·as has been quoted above, that the form 37-1 tiled by the appellants would G
be deemed to have· been tiled as on that date. No doubt, the High Court
records that the deeming fiction as to the date of the filing of the statement
was without prejudice to the appellant's contention that the first purchase
order was passed beyond the period of limitation. However, in preserving the
appellants' right, the High Court directed the Appropriate Authority to
H
662 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.

A determine the contention in keeping with the decision in C.B. Gautam 's case.
And as we have already held that in the light of the decision in C.B. Gautam's
case, the appellants' challenge to the first purchase order was misconceived.

The appellants challenge to the second purchase order on the ground
that it directed the purchase of something which was not the subject matter
B of the agreement for sale or the Form 37-1 statement is also unacceptable.

The appellants cannot dispute that the shares of the three owners of the
premises had been demarcated prior to the second purchase order in November
1989, if not even prior to the filing of the first statement under Section
C 269UC. In that statement in describing the property of Leila Lean, under the
heading 'Persons in occupation of the property sought to be transferred and
details thereof, it was said 'Vacant'. Under the heading 'Persons interest in
the property and in consideration specifying their shares and basis thereof,
it was said 'Self-full'. The 'nature of interest or right proposed to be
transferred' was described as 'Absolute' and ·ownership' property. There
D was no reference to the undivided interest of the sisters therein. Secondly, in
the several sale deeds executed by the appellants themselves, as the general
power of attorney holders of the two sisters of Leila Lean between April and
May 1989 they had said in the recital portion in each of the sale deeds:

"And whereas, the said land and building have fallen to the share of
E Mrs. Kripa Devi in oral partition effected amongst the three sisters."

Apart from the repeated references to an oral partition in the recital
portion of the each deed, the deeds also recite that the property sold under
each deed consisted of a specified area "as detailed in the schedule and the
plan annexed". The boundaries were given and demarcated on the plan in
F respect of each of the sisters' share which was indicated on the plans forming
part of the sale deeds. Apart from this, the vendor represented by the general
power of attorney holder, namely the said Armugham. had filed an affidavit
affirming the fact of the oral partition giving in detail the demarcated portion
of the premises which was owned by Leila Lean. The Appropriate Authority
G had also inspected the premises prior to issuing tl{e purchase order and had
found that the property was in fact demarcated as recorded in the order under
Section 269UD( I). The reason why the share of Leila Lean has been mentioned
as undivided in the agreement of sale dated 13th March 1988 has been
explained by the appellants themselves in the eight sale deeds executed by
them between April and May 1989 as:
H
HANS RAJ AGARWAL v. CHIEF COMMNR. OF INCOME TAX [RUMA PAL, J.] 663

"Though the property had already been divided equally among the A
three sisters through an oral partition and share of each sister was
delineated in the plan, as the agreement holders wanted to buy the
entire said property for redevelopment, all the three sisters executed
a single agreement of sale."

In other words, the oral partition had taken place before the agreement B
of sale. For the Appropriate Authority to have issued the purchase order in
respect of the undivided share, in these circumstances, would mean not only
the disruption of the established state of fact but also a reopening of the
appellants' title to the divided portions of the premises which had been
purchased by them or by their nominees. In any event, it does not lie in the C
appellants' mouths to contend in the face of these facts that Leila Lean's
share was at any material time in fact undivided.

The further submission of the appellants that an oral partition was
impermissible in law is erroneous. As far back as in 1958 in Nanni Bai and
Ors. v. Gita Bai, [1959] SCR 479, it was held: D
"Partition in the Mitakshara sense may be only a severance of the
joint status of the members of the coparcenary, that is to say, what
was once a joint title, has become a divided title though there has
been no division of any properties by metes and bounds. Partition
may also mean what ordinarily is understood by partition amongst E
co-sharers who may not be members ofa Hindu coparcenary ......... For
partition in the latter sense of allotting specific properties or parcels
to individuals coparceners. agreement amongst all the coparceners is
absolutely necessary. Such a partition may be effected orally, but if
the parties reduce the transaction to a formal document which is
intended to be the evidence of the partition, it has the effect of declaring F
the exclusive title of the coparcener to whom a particular property is
allotted by partition and is, thus, within the mischief of s. 17(1 )(b) .. ''

This view has been affirmed in Roshan Singh and Ors. v. life Singh
and Ors .. AIR (1988) SC 881 at p. 885:
G
"A partition may be effected orally; but if it is subsequently reduced
into a fonn of a document and that document purports by itself to
effect a division and embodies all the tenns of bargain, it will be
necessary to register it."

Apart from all this, the second purchase order directed the purchase H
664 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.
A of, '1/3 share/interest in the property known as Lilazar bearing No. 8-2-349,
Road No. 3, Banjara Hills, Hyderabad'. Although the purchase order goes on
to describe the 1/3 share/interest with reference to its bou"daries, this would
not serve to invalidate the first portion of the order.

The appellants' submission that they were transferees within the meaning 1

B of S.2(47) of the Income Tax Act is equally unsustainable. Whether there
was a transfer or not would depend on whether the appellants had, in part
performance of the agreement for sale dated 13th March 1988, taken possession
of Leila Lean's property. In each of the eight such sale deeds executed by the
appellants of the share of the two sisters of Leila Lean in April/May, 1989,
C it is recorded that the vendor was ' full and absolute owner and possessor of
the property conveyed' and that the 'vendor has handed over vacant possession
to the vendee'. In other words, the appellants or their nominees who were the
purchasers of the property conveyed took possession of demarcated portions
of the .premises pursuant to the eight deeds of sale and not prior thereto.
There is no such document which would show that the appellants had ever
D taken possession of Leila Lean's share. Besides the question is essentially
one of fact and the High Court expressly records that:

"Although a contention has been raised in the writ petition that the
agreement was·given effect to and transferees, were put in possession
even before the date Chapter XX-C was made applicable to the State
E of Andhra Pradesh, the same has not been pursued before us."

Having given up the case before the High Court, the appellants cannot
be permitted to reopen the. issue at this stage.

F On the question of valuation, the Appropriate Authority has in great
detail considered the several instances of the sale which had taken place on
or about the time that the agreement of sale was executed on 31st March
1988. Apart from the sale instances, the location of the property, its frontage
and accessibility were considered by the Appropriate Authority which after
physical i.nspection came to the conclusion that the consideration for which
G Leila Lean's property had been sold was under-stated. The High Court has
affirmed this valuation. We see no reason to disturb the finding of fact on the
basis of material before us. We cannot also be oblivious to the fact that the
property which the appellants had agreed to purchase at Rs.15,33,333 in
1988 was agreed to be purchased by the intervenor in 2000 at Rs. four crores
H and five lakhs.
HANS RAJ AGARWAL"· CHIEF COMMNR. OF INCOME TAX [RUMA PAL, J.] 665

The final submission of the appellants that the Central Government had not A
deposited or tendered the amount within the time required under Section 269-
UF read with S.269-UG( I) is an issue of fact which has been raised for the
first time by the appellants before this Court and is liable to be rejected on
this ground alone. Nevertheless, we may note that the deposit had been made
by the Central Government on 22nd December 1989 within one month from
the first purchase order and in any case prior to the second purchase order. B
Admittedly the payment has been received by the transferor without any
protest whatsoever.

We, therefore, dismiss the appeal with costs.

N.J. Appeal dismissed.

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