1983 (5) TMI 11 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the initiation of acquisition proceedings.
2. Fair market value determination.
3. Validity of the notice issued under Section 269D(1) of the Income Tax Act, 1961.
4. Right to appeal under Section 269H of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of the initiation of acquisition proceedings:

The Competent Authority initiated acquisition proceedings based on the information received in Form No. 37G, which indicated an apparent consideration significantly lower than the fair market value. The Competent Authority's inspector reported the fair market value to be Rs. 8,70,000, much higher than the sale consideration of Rs. 2,75,000. The Competent Authority, therefore, initiated proceedings under Chapter XX-A of the Income Tax Act, 1961. The Appellate Tribunal upheld that the Competent Authority had "good reasons to believe" the difference between the apparent consideration and the fair market value justified the initiation of proceedings.

2. Fair market value determination:

The transferees objected to the valuation, arguing that the fair market value was accurately reflected in the sale price and provided a private valuation report estimating the property value at Rs. 2,96,000. The Competent Authority, however, overruled these objections, determining the average rate of Rs. 40,000 per katha as fair. The Appellate Tribunal also rejected the transferees' objections regarding valuation.

3. Validity of the notice issued under Section 269D(1) of the Income Tax Act, 1961:

The Appellate Tribunal quashed the acquisition proceedings on the ground that the notice under Section 269D(1) mentioned only one of the five transferors, thus vitiating the proceedings. The Tribunal held that non-mention of all transferors' names in the notice was a legal infirmity. However, the High Court disagreed, stating that the non-mention of all transferors was an irregularity, not an illegality. The Court noted that the Competent Authority acted on the information provided in Form No. 37G, which listed only Kumar Tara Nand Sinha as the transferor. The High Court directed the Competent Authority to issue notices to the remaining transferors and provide them an opportunity to be heard, thereby correcting the irregularity.

4. Right to appeal under Section 269H of the Income Tax Act, 1961:

The respondents argued that the appeal was not maintainable as it was filed by the IAC, the Competent Authority, and not the Commissioner. The High Court examined Section 269H, which allows "the Commissioner or any person aggrieved" to appeal. The Court concluded that the IAC, as the Competent Authority, was a "person aggrieved" because he initiated the proceedings, was the sole respondent in the appeal before the Appellate Tribunal, and defended his order. Consequently, the High Court overruled the preliminary objection, holding that the appeal was maintainable.

Conclusion:

The High Court allowed the appeal, set aside the Appellate Tribunal's judgment, and remanded the case to the Competent Authority. The Competent Authority was directed to issue notices to the remaining transferors, provide them an opportunity to be heard, and pass a fresh order. The Court emphasized that the transferees could not raise further objections, and the proceedings should be disposed of expeditiously.