1979 (11) TMI 67 - HC - Income Tax

Summary

Issues Involved:
1. Fair market value exceeding apparent consideration
2. Competent authority's reliance on stale sale instances
3. Tribunal's rejection of comparable sale instances
4. Burden of proof on revenue
5. Procedural fairness and natural justice

Detailed Analysis:

1. Fair market value exceeding apparent consideration
The core issue in these appeals was whether the fair market value of the properties exceeded the apparent consideration by the prescribed margin, thereby justifying acquisition under the Income-tax Act, 1961. The competent authority initiated acquisition proceedings based on the District Valuation Officer's report, which estimated the fair market value significantly higher than the apparent consideration stated in the transfer deeds.

2. Competent authority's reliance on stale sale instances
The competent authority relied on several sale instances, including two from March 1967 involving the Life Insurance Corporation (LIC). The Tribunal found these instances to be stale and rejected them as comparable sale instances. The Tribunal emphasized that the properties sold to LIC were not comparable due to their advantageous location and the time gap between the sales and the current acquisition.

3. Tribunal's rejection of comparable sale instances
The Tribunal rejected the competent authority's reliance on the sale instances involving the Ahmedabad Municipal Corporation and M/s. Hari Om Enterprises, finding them either unproven or irrelevant. The Tribunal concluded that there was no cogent material before the competent authority to justify the acquisition, leading to the setting aside of the acquisition order.

4. Burden of proof on revenue
The Tribunal and the court emphasized that the burden of proof to establish the fair market value lies with the revenue. The revenue must provide cogent and reliable evidence to prove that the apparent consideration is less than the fair market value by the prescribed margin. The Tribunal found that the competent authority failed to meet this burden, leading to the rejection of the acquisition order.

5. Procedural fairness and natural justice
The court criticized the competent authority for not conducting the proceedings fairly and for failing to record necessary evidence. The competent authority did not grant the transferors and transferees' requests to summon witnesses and cross-examine them, which was a procedural lapse. The court held that the competent authority must act as a quasi-judicial authority and follow principles of natural justice, including allowing parties to controvert the material against them.

Conclusion:
The court set aside the orders of both the Tribunal and the competent authority and remanded the matter back to the competent authority. The competent authority was directed to record evidence of necessary witnesses, including those involved in the LIC transactions, and allow cross-examination by the transferors and transferees. The competent authority was also instructed to consider evidence of any rise in property prices between 1967 and 1974. The inquiry was to be completed within three months, and appropriate orders were to be passed based on the newly recorded material and correct legal principles. The appeals were allowed with no order as to costs.