2004 (9) TMI 81 - HC - Income Tax

Acquisition proceedings for property - Since the valuation of the property determined by the Valuation Officer on the basis of the rental yield method and also on the land and building method, exceeded the apparent consideration by more than 15 per cent, proceedings for acquisition were initiated by issue of a notice u/s 269D In Circular No. 455 on May 16, 1986, it has been stated that where the acquisition proceedings had been initiated by issue of notice under section 269D, the proceedings would be dropped if the apparent consideration of the immovable property was below Rs. 5 lakhs - In the present case, it is clear that the apparent consideration, as per the sale deed of the property in question, is Rs. 1,25,000 and, therefore, as per the Board s circular No. 455 on May 16, 1986, itself, the proceedings are liable to be dropped. In this view of the matter, notice u/s 269D(1) is liable to be quashed on this ground alone.

Summary

Issues involved:
- Challenge to the vires of the provisions of Chapter XX-A of the Income-tax Act under which proceedings were initiated.
- Validity of the acquisition proceedings initiated under section 269D of the Act.
- Applicability of Circular No. 455 issued by the Central Board of Direct Taxes.

Analysis:

1. Challenge to the vires of the provisions of Chapter XX-A:
The petitioner purchased a property, and the competent authority initiated acquisition proceedings under section 269D of the Income-tax Act due to the valuation exceeding the apparent consideration by more than 15%. The petitioner challenged the vires of Chapter XX-A of the Act. The Tribunal initially set aside the acquisition order for non-compliance with mandatory provisions. Subsequently, the matter was remitted back to the Tribunal by the High Court, and the Revenue's appeal to the Supreme Court was dismissed. The petitioner filed a writ petition challenging the vires of the Act at this stage.

2. Validity of the acquisition proceedings:
The Tribunal re-decided the matter and quashed the proceedings under section 269C of the Act. However, the Revenue appealed this decision in the High Court. The Central Board of Direct Taxes issued Circular No. 455, stating that if the apparent consideration of the property was below Rs. 5 lakhs, acquisition proceedings initiated under section 269D would be dropped. Referring to previous court judgments, it was established that proceedings must be dropped even if appeals were pending in the High Court if the apparent consideration was below the specified amount. In the present case, the apparent consideration was Rs. 1,25,000, falling below the threshold, leading to the quashing of the notice under section 269D(1) of the Act.

3. Applicability of Circular No. 455:
The judgment relied on Circular No. 455 issued by the Central Board of Direct Taxes, which mandated dropping proceedings if the apparent consideration was below a specified amount. The court held that in this case, the apparent consideration being Rs. 1,25,000, the proceedings were liable to be dropped as per the circular. Consequently, the notice under section 269D(1) was quashed, and the writ petition was allowed without delving into other issues raised.

Overall, the judgment focused on the legality of the acquisition proceedings, the applicability of relevant circulars, and the threshold for dropping proceedings based on the apparent consideration of the property in question.