Section 269UD — Order by Appropriate Authority for Purchase

CHAPTER XX-C — PURCHASE BY CENTRAL GOVERNMENT OF IMMOVABLE PROPERTIES IN CERTAIN CASES OF TRANSFER

Section 269UD — Order by appropriate authority for purchase by Central Government of immovable property

Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise

Status: Historic / spent. Chapter XX-C was inserted by the Finance Act, 1986 and brought into force area-wise under section 269U; by section 269UP it does not apply to any transfer of immovable property effected on or after 1 July 2002. The pre-emptive-purchase machinery is therefore dormant. The section is reproduced and annotated in full for completeness of the Treatise.

Finance Act, 2026: No amendment. The Finance Act, 2026 does not touch any provision of Chapter XX-C (sections 269U to 269UP).

Mechanism: The operative pre-emption: subject to sub-sections (1A) and (1B), the appropriate authority may, within the prescribed time, order purchase of the property by the Central Government at an amount equal to the apparent consideration; sub-sections (1A)/(1B) require service and recording of the order.

Litigation profile: The most heavily litigated section of the Chapter — natural justice, recording and communication of reasons, the mandatory time-limit, the 15-per-cent undervaluation threshold and the scope of judicial review.

A. COMMENTARY

The heart of the Chapter

Section 269UD is the operative pre-emptive-purchase power. Within the statutory time-limit, the appropriate authority may order that the property be purchased by the Central Government at an amount equal to the apparent consideration — the State stepping into the buyer's shoes at the very price the parties declared. The premise is that an honest declarant has nothing to fear (he receives his stated price), while a party who has understated the price to launder black money loses the bargain.

Natural justice and reasons — C.B. Gautam

The defining decision is C.B. Gautam. Although the section as enacted did not in terms provide for a hearing, the Supreme Court read into it the requirement of a reasonable opportunity to show cause before a purchase order is made, and the requirement that the order record reasons — both to enable challenge and to deter arbitrary action. The Court also held that pre-emption is justified only where there is significant undervaluation, of the order of 15 per cent or more, which raises a rebuttable presumption of an attempt to evade tax. (Sub-sections (1A) and (1B), inserted by the Finance Act, 1993, codified the show-cause and reasoned-order discipline.)

The mandatory time-limit

The first proviso fixes the period within which a purchase order must be made. Moi Engineering treats this limitation as mandatory and jurisdictional: an order not made within the statutory period is a nullity, and the parties become entitled to a no-objection certificate. The discipline is strict because the citizen's title is held in suspense while the clock runs.

Scope of judicial review — Sudha Patil

Because section 269UN makes the order final and no appeal lies, the only remedy is a writ. Appropriate Authority v. Smt. Sudha Patil holds that the absence of an appeal does not enlarge the High Court's supervisory jurisdiction into an appellate one: the court cannot re-value the property or substitute its own opinion, and may interfere only for jurisdictional error, breach of natural justice or perversity. Krishna Kumar Rawat is a modern reaffirmation of the show-cause discipline and valuation methodology, with relief moulded by refund-with-interest.

Limited function — not a title court

Following Tanvi Trading, the authority under section 269UD is not concerned with the validity of the transaction or the transferor's title; defects in title are relevant only to its discretion whether to purchase. Its function is binary — purchase at apparent consideration, or stand aside.

B. STATUTORY TEXT (verbatim)

Reproduced verbatim from the Income-tax Act, 1961, as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no change to Chapter XX-C). Page-header/footer artefacts of the source PDF have been removed; wording, clause-lettering and punctuation are unaltered.

Order by appropriate authority for purchase by Central Government of immovable property.

269UD. (1) Subject to the provisions of sub-sections (1A) and (1B), the appropriate authority, after the receipt of the statement under sub-section (3) of section 269UC in respect of any immovable property, may, notwithstanding anything contained in any other law or any instrument or any agreement for the time being in force, make an order for the purchase by the Central Government of such immovable property at an amount equal to the amount of apparent consideration :

Provided that no such order 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 269UC in respect of such property is received by the appropriate authority :

Provided further that where the statement referred to in section 269UC in respect of any immovable property is received by the appropriate authority on or after the 1st day of June, 1993, the provisions of the first proviso shall have effect as if for the words "two months", the words "three months" had been substituted :

Provided also that the period of limitation referred to in the second proviso shall be reckoned, where any defect as referred to in sub-section (4) of section 269UC has been intimated, with reference to the date of receipt of the rectified statement by the appropriate authority :

Provided also that in a case where the statement referred to in section 269UC in respect of the immovable property concerned is given to an appropriate authority, other than the appropriate authority having jurisdiction in accordance with the provisions of section 269UB to make the order referred to in this sub-section in relation to the immovable property concerned, the period of limitation referred to in the first and second provisos shall be reckoned with reference to the date of receipt of the statement by the appropriate authority having jurisdiction to make the order under this sub-section :

Provided also that the period of limitation referred to in the second proviso shall be reckoned, where any stay has been granted by any court against the passing of an order for the purchase of the immovable property under this Chapter, with reference to the date of vacation of the said stay.

(1A) Before making an order under sub-section (1), the appropriate authority shall give a reasonable opportunity of being heard to the transferor, the person in occupation of the immovable property if the transferor is not in occupation of the property, the transferee and to every other person whom the appropriate authority knows to be interested in the property.

(1B) Every order made by the appropriate authority under sub-section (1) shall specify the grounds on which it is made.

(2) The appropriate authority shall cause a copy of its order under sub-section (1) in respect of any immovable property to be served on the transferor, the person in occupation of the immovable property if the transferor is not in occupation thereof, the transferee, and on every other person whom the appropriate authority knows to be interested in the property.

C. AUTHORITIES

Natural justice, recorded reasons, the mandatory time-limit, the 15-per-cent threshold and the limited scope of judicial review are the controversies — addressed by the authorities below. The Tribunal dimension. No appeal lies to the Income-tax Appellate Tribunal against an order of the appropriate authority: by section 269UN such an order is final and conclusive, and the only remedy is a writ petition to the High Court (and thence to the Supreme Court). The merits jurisprudence of the Chapter is therefore entirely of the High Courts and the Supreme Court. The Tribunal's contact with the Chapter is collateral — in the transferor's own assessment, where the apparent consideration is the 'full value of consideration' for capital gains and the Tribunal applies George Henderson, Gillanders Arbuthnot and K.P. Varghese to resist substitution of market value.

Natural justice, recorded reasons and the undervaluation threshold

C.B. Gautam v. Union of India (1993) 199 ITR 530 / 110 CTR 179 / 65 Taxman 440 / (1993) 1 SCC 78 (SC)

Court / Bench Supreme Court of India; decided 17 November 1992 (test case transferred from the Delhi High Court).

Issue Constitutional validity of Chapter XX-C, and whether a pre-emptive purchase order under section 269UD can be made without affording the parties a hearing and without recording reasons.

Held The Chapter was upheld in substance, but the Court read into it the principles of natural justice: a reasonable opportunity to show cause must be given to the intending purchaser and seller before an order under section 269UD is made, and the order must record reasons. Pre-emptive purchase can be resorted to only where there is significant undervaluation of about 15 per cent or more, raising a rebuttable presumption of an attempt to evade tax. The words 'free from all encumbrances' in section 269UE(1) were read down so as not to defeat bona fide tenants and encumbrancers in possession.

Relevance The foundational decision for the entire Chapter. It governs sections 269UA, 269UC, 269UD, 269UE and 269UF and is the source of the hearing-and-reasons discipline applied throughout. (Followed Kraipak v. UOI AIR 1970 SC 150 and Olga Tellis v. Bombay Municipal Corpn. (1985) Suppl. 2 SCR 51.)

Vijay Kumar Sharma v. Appropriate Authority (Allahabad High Court)

Court Allahabad High Court.

Held Reiterated, following C.B. Gautam, that a section 269UD purchase order requires a prior show-cause opportunity and recorded reasons, and that significant undervaluation (of the order of 15 per cent) raises only a rebuttable presumption of tax avoidance.

Relevance High Court application of the C.B. Gautam natural-justice and 15-per-cent-undervaluation discipline to section 269UD.

The mandatory time-limit for the purchase order

Moi Engineering Ltd. v. Appropriate Authority (1992) 198 ITR 270 (Calcutta)

Court Calcutta High Court.

Held The time-limit in the first proviso to section 269UD(1) is mandatory; an order of pre-emptive purchase not made within the statutory period is without jurisdiction, and the parties become entitled to a no-objection certificate.

Relevance Leading authority on the strict statutory time-frame governing section 269UD(1); the limitation is jurisdictional, not directory.

Scope of judicial review; valuation; finality

Appropriate Authority v. Smt. Sudha Patil (1999) 235 ITR 118 (SC)

Court Supreme Court of India.

Held Merely because no statutory appeal is provided against a pre-emptive purchase order, the supervisory writ jurisdiction of the High Court is not enlarged into an appellate power. The High Court cannot substitute its own valuation for that of the appropriate authority; it may interfere only on established grounds of judicial review (jurisdictional error, breach of natural justice, perversity).

Relevance The leading decision on the scope of judicial review of section 269UD orders; read with section 269UN (finality). Limits the citizen's writ remedy to legality, not merits, of valuation.

Krishna Kumar Rawat v. Union of India (Supreme Court, decided 29 July 2019; affirming Rajasthan High Court, 31 May 2007)

Court Supreme Court of India (on appeal from the Rajasthan High Court, Jaipur Bench).

Held Where the appropriate authority, after a show-cause notice under section 269UD(1A), found the fair market value materially higher than the apparent consideration, the pre-emptive purchase order was sustainable; on the facts, relief was moulded by directing refund of amounts to the affected purchasers with interest.

Relevance A modern Supreme Court reaffirmation of the valuation methodology and the show-cause discipline under section 269UD(1)/(1A), and of the courts' power to mould consequential monetary relief.

Limited function of the authority — not a title court

Tanvi Trading & Credits (P) Ltd. v. Appropriate Authority (1991) 188 ITR 623 (Delhi)

Court Delhi High Court; decided 28 November 1990.

Held Section 269UD confers only a pre-emptive right to purchase at the apparent consideration (or to issue a no-objection certificate). The appropriate authority has no jurisdiction to adjudicate upon the legality or validity of the proposed transaction or the transferor's title; such matters are relevant only to the discretion whether to exercise the right of purchase.

Relevance Defines the narrow scope of the appropriate authority's function under sections 269UC, 269UD and 269UL; repeatedly followed, including in DLF Universal.