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Issues: Challenge to the legality of notice under s. 269D(1) of the Income-tax Act, 1961 served by the Competent Authority. Jurisdiction of the Competent Authority under s. 269C of the Act in a property transfer case.
Analysis: The petitioners challenged the legality of the notice under s. 269D(1) of the Income-tax Act, 1961, served by the Competent Authority, the Inspecting Assistant Commissioner of Income-tax, Acquisition Range I, Bombay. The petitioners contended that the initiation of proceedings by the Competent Authority was erroneous. The notice alleged that the property transfer from the trustees to the petitioners was undervalued. The petitioners argued that the provisions of s. 269C would apply only if the consideration for the transfer was agreed upon between the parties, which was not the case in an auction scenario where the property was purchased. The Competent Authority's assumption of jurisdiction under s. 269C was deemed baseless due to the lack of agreement on consideration in an auction transaction. The Competent Authority, represented by the department, suggested that the petitioners should raise their contentions during the inquiry under section 269D and avail the appeal process if aggrieved. However, the court found no merit in the department's submissions. It held that the petitioners' grievance was related to the Competent Authority's assumption of jurisdiction, which required satisfaction of the basic requirements of section 269C before issuing any notice. Directing the petitioners to appear before the Competent Authority would only result in unnecessary multiple proceedings. Consequently, the court ruled in favor of the petitioners, granting the relief sought in the petition and making the rule absolute without any order as to costs.
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