1985 (2) TMI 37 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the IAC under s. 269D(2)(a) of the Income Tax Act.
2. Determination of the fair market value of the property.

Summary:

Re: Point No. 1 - Jurisdiction of the IAC
The primary issue was whether the issuance of notices u/s 269D(2)(a) before the publication of the notice u/s 269D(1) in the Official Gazette vitiates the jurisdiction of the IAC. The Tribunal had allowed an additional ground that the proceedings initiated by the IAC were void as the notices were served before the publication in the Gazette. The High Court held that the Tribunal committed an error in allowing this ground, as the defect was merely an irregularity in the proceedings and not a case of inherent want of jurisdiction. The court clarified that jurisdiction is conferred by Chapter XX-A of the Act and the Government's order, not by the sequence of notice issuance. The High Court concluded that the IAC had jurisdiction, and the Tribunal's decision to invalidate the proceedings was erroneous.

Re: Point No. 2 - Determination of Fair Market Value
The second issue was whether the determination of the fair market value by the Tribunal and the IAC was legal and valid. The property was sold for Rs. 2,00,000, but the IAC determined the fair market value to be Rs. 3,32,000 using the rental method. The Tribunal adjusted this to Rs. 2,70,300. The High Court noted that the correct principles of valuation had not been applied, and the comparable sales method was not considered. The court emphasized that the fair market value should be determined as on the date of the instrument of transfer and that the rental method should only be used when comparable sales data is unavailable. The High Court remanded the case to the IAC for a fresh determination of the fair market value, allowing both parties to present further evidence.

Conclusion:
The High Court allowed the appeals, set aside the orders of the Tribunal and the IAC, and remanded the case to the IAC for redetermination in accordance with the law and the observations made in the judgment. The IAC was directed not to permit the appellants to challenge the validity of Chapter XX-A or the proceedings initiated by him on the grounds already decided against them. The appeals were disposed of, and the parties were directed to bear their own costs.