2002 (11) TMI 787 - HC - Income Tax

Summary

Issues Involved:
1. Defect in the notice under Section 269D(1) of the IT Act, 1961.
2. Validity of acquisition proceedings based on multiple valuation reports.
3. Inordinate delay in passing the acquisition order.
4. Basis of valuation done by the Department.
5. Presumption under Section 269C(2) of the IT Act, 1961.

Detailed Analysis:

1. Defect in the Notice under Section 269D(1):
The Tribunal identified a defect in the notice issued under Section 269D(1) of the IT Act, 1961. The notice contained both the words "and" and "or" in sub-para 2(a), which was deemed problematic. The Tribunal relied on the judgment of the Bombay High Court in Ashok Madhav Chitalay's case, which held that such a defect rendered the notice invalid. The Tribunal concluded that the notice was defective based on judicial precedents.

2. Validity of Acquisition Proceedings Based on Multiple Valuation Reports:
The Tribunal scrutinized three different valuation reports provided by the Department. Initially, the fair market value was set at Rs. 20,40,000, which was later reduced to Rs. 19,86,580 and then further to Rs. 18,36,160. The Tribunal referenced the Madras High Court's observations in CIT vs. Apsara Talkies, highlighting the inherent inexactitude in valuations and the invalidity of initiating acquisition proceedings based on such inconsistent valuation reports.

3. Inordinate Delay in Passing the Acquisition Order:
The Tribunal noted that there was a significant delay in finalizing the acquisition proceedings. The process began on 31st March 1981, but the acquisition order was not finalized until 30th July 1986. Citing the Karnataka High Court's observations in Cyril Albert D.I. Souza, the Tribunal held that the inordinate and inexcusable delay vitiated the order.

4. Basis of Valuation Done by the Department:
The Tribunal critically analyzed the valuation methods used by the Department. It observed discrepancies in the valuation of land and buildings. For instance, the fair market value of the land was taken at Rs. 75 per sq. yd., whereas the Estate Officer, Faridabad, certified the rate to be Rs. 30.95 per sq. yd. The Tribunal found the Department's valuation to be casual and unconvincing. It also pointed out that the Department failed to consider comparable sales instances, such as the sale of Plot No. 37 in Sector 6, which had a similar area and covered space but a lower sale consideration.

5. Presumption under Section 269C(2):
The Department contended that the Tribunal failed to draw the presumption under Section 269C(2) that the consideration for the transfer was not truly stated. However, the Tribunal found no material evidence to support that the fair market value exceeded the apparent consideration by more than 25%. The Tribunal concluded that the value of the property as shown in the instrument was not less than the market value of similar properties in the vicinity, thus rejecting the Department's contention.

Conclusion:
The appeal by the CIT, Haryana, Rohtak was dismissed. The Tribunal's findings on the defective notice, inconsistent valuation reports, inordinate delay, and lack of evidence for undervaluation were upheld. The Tribunal's comprehensive analysis led to the conclusion that the acquisition proceedings were invalid, and the appeal was dismissed with no order as to costs.