1998 (10) TMI 14 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the acquisition proceedings under Section 269D of the Income-tax Act.
2. Basis for the competent authority's reasonable belief regarding undervaluation.
3. Timeliness of the initiation of acquisition proceedings.
4. Consideration of objections regarding property valuation.
5. Exhaustion of alternative remedies.

Detailed Analysis:

1. Validity of the Acquisition Proceedings under Section 269D:
The petitioner challenged the acquisition proceedings on the grounds that the competent authority did not have material to form an opinion that the property was undervalued at the time of issuing the notice under Section 269D(1). The court noted that the notice dated August 6, 1986, was the initiation of the proceedings, but there was no evidence of its publication in the Official Gazette, which is a statutory requirement. Thus, the acquisition proceedings were deemed void.

2. Basis for the Competent Authority's Reasonable Belief:
The court found that the competent authority's reasonable belief was based on the valuation report of the District Valuation Officer, which was dated December 11, 1986. However, the notice under Section 269D(1) was issued on August 6, 1986, before the valuation report was available. This indicated that the competent authority did not have a valid basis for its belief at the time of issuing the notice, rendering the proceedings invalid.

3. Timeliness of the Initiation of Acquisition Proceedings:
The document was registered in December 1985, and the notice under Section 269D(1) was issued on August 6, 1986. Although this was within the nine-month period specified in Section 269D(1), the lack of publication in the Official Gazette and the absence of a valid basis for the reasonable belief rendered the initiation of the proceedings untimely and void.

4. Consideration of Objections Regarding Property Valuation:
The petitioner argued that the competent authority did not consider the objections regarding the valuation of the property. The court agreed, noting that the objections about the reliance on the property on College Road as a data sale and the land ceiling proceedings were not addressed. Additionally, the court emphasized the necessity of examining parties connected to the sale deeds relied upon for valuation, which was not done in this case.

5. Exhaustion of Alternative Remedies:
The respondents argued that the writ petition was not maintainable as the petitioner had not exhausted alternative remedies. However, the court held that since the appeal was dismissed as time-barred and not on merits, the petitioner had not effectively exhausted the alternative remedy. The court cited precedents to support that judicial review is permissible even when alternative remedies have not been exhausted, especially when the order is patently illegal.

Conclusion:
The court concluded that the acquisition proceedings were invalid due to the lack of a valid basis for the competent authority's reasonable belief and the failure to comply with statutory requirements. The writ petition was allowed, and the acquisition order was quashed. The petitioner was directed to withdraw the pending appeal before the High Court.