1996 (2) TMI 128 - HC - Income Tax

Acquisition Of Immovable Property, Acquisition Proceedings, Appeal To High Court, Law Applicable To Assessment, Movable Property, Transfer Of Property

Issues Involved:
1. Validity of the initiation of acquisition proceedings under Section 269C of the Income-tax Act, 1961.
2. Adequacy of the material before the competent authority to form a prima facie opinion under Section 269C.
3. Legality of the approval granted by the Commissioner of Income-tax under Section 269F(6).
4. Tribunal's reliance on additional evidence and fresh material.
5. Applicability of Circular No. 455, dated May 16, 1986, to the proceedings pending in appeal.

Detailed Analysis:

1. Validity of the Initiation of Acquisition Proceedings under Section 269C:

The Commissioner of Income-tax, Haryana, Rohtak, appealed against the order of the Income-tax Appellate Tribunal (the Tribunal) which set aside the acquisition order passed by the Competent Authority, Rohtak. The Tribunal held that there was no proper commencement of the proceedings under Section 269C of the Act as the material before the competent authority was insufficient to hold that the fair market value of the property exceeded the apparent consideration by more than the statutory percentage. The Tribunal discarded the Valuation Officer's report and relied on the reports submitted by the registered valuers employed by the transferee.

2. Adequacy of the Material Before the Competent Authority to Form a Prima Facie Opinion under Section 269C:

The Tribunal found that the competent authority should have obtained the approval from the Commissioner for the acquisition order and not merely a proposal. The Tribunal concluded that the approval given by the Commissioner was mechanical and without application of mind, as he did not consider the three valuation reports of the registered valuers. The High Court disagreed, stating that the competent authority had sufficient material to form a prima facie opinion under Section 269C based on the Valuation Officer's report, which was detailed and dealt with the land area and superstructures.

3. Legality of the Approval Granted by the Commissioner of Income-tax under Section 269F(6):

The High Court held that the Tribunal erred in finding that the absence of a proposed order of acquisition vitiated the approval granted by the Commissioner. Under Section 269F(6), the competent authority must send a proposal to the Commissioner, who must apply his mind to the proposal and the material placed before him. The approval is not to be given mechanically but does not require the Commissioner to record reasons or hear the parties. The High Court found that the Commissioner had given his approval in accordance with law and in terms of Section 269F(6).

4. Tribunal's Reliance on Additional Evidence and Fresh Material:

The Tribunal considered various aspects, including three reports submitted by registered valuers, the shape of the plot, distance from amenities, the temporary nature of the construction, and other factors. The Tribunal's findings on the fair market value were based on these considerations and were deemed findings of fact, not subject to interference in a second appeal. The High Court noted that the Revenue did not object to the additional material placed on record by the transferee and thus could not contest this point in the second appeal.

5. Applicability of Circular No. 455, Dated May 16, 1986, to the Proceedings Pending in Appeal:

The High Court addressed whether Circular No. 455, which stated that acquisition proceedings would be dropped if the apparent consideration was below Rs. 5 lakhs, applied to proceedings pending in appeal. The High Court found that the circular did not limit its applicability to proceedings pending before the competent authority only. The word "proceedings" in the circular included those pending at the appeal stage. Therefore, the acquisition proceedings were liable to be dropped as the apparent consideration was below Rs. 5 lakhs.

Conclusion:

The High Court upheld the Tribunal's order on the facts, finding that the competent authority did not determine the fair market value properly. The findings regarding the conditions under Section 269C were affirmed. The High Court set aside the Tribunal's interpretation of Section 269F(6) concerning the approval by the Commissioner, holding that the approval was given in accordance with law. The High Court also held that Circular No. 455 applied to proceedings pending at the appeal stage, leading to the dismissal of the appeal with no order as to costs.

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