1975 (7) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the competent authority to initiate acquisition proceedings.
2. Adequacy of material before the competent authority to form a belief.
3. Alleged discrimination in initiating acquisition proceedings.
4. Validity of the notice under Section 269D(1) of the Income-tax Act.
5. Timeliness and publication of the notice in the Official Gazette.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Competent Authority to Initiate Acquisition Proceedings:
The petitioners challenged the initiation of proceedings under Section 269C of the Income-tax Act, 1961, on the grounds that it was without jurisdiction. The court held that if the initiation of proceedings is without jurisdiction due to being barred by time or lacking the existence of a condition precedent, the court can intervene to prevent harassment and unnecessary expenditure. The court decided to examine the contentions on merits.

2. Adequacy of Material Before the Competent Authority to Form a Belief:
The petitioners argued that there was no material before the competent authority to form a belief that the fair market value of the property exceeded Rs. 25,000 and that the consideration in the sale deed was understated by at least 15%. The competent authority relied on a report by an Income-tax Inspector, which estimated the fair market value at Rs. 10 per sq. yard. The court found that the inspector's report constituted sufficient material for the competent authority to initiate proceedings. The court emphasized that at the stage of initiation, the competent authority only needs a prima facie case, not conclusive evidence.

3. Alleged Discrimination in Initiating Acquisition Proceedings:
The petitioners claimed discrimination, stating that other purchasers of the same property were not subjected to similar proceedings. The court noted that proceedings were initiated against other purchasers whose property value exceeded Rs. 25,000, as required by the Act. The court found no discrimination as the competent authority did not have reason to believe that the fair market value of the properties of other purchasers was in excess of Rs. 25,000 based on the material available.

4. Validity of the Notice Under Section 269D(1) of the Income-tax Act:
The petitioners contended that the notice under Section 269D(1) was issued mechanically without application of mind. The court examined the notice and found that although there was an interpolation in the date, it did not affect the validity of the notice. The court concluded that the competent authority had sufficient material and had applied its mind before issuing the notice.

5. Timeliness and Publication of the Notice in the Official Gazette:
The petitioners argued that the notice was not published in the Official Gazette within the prescribed nine-month period, making the proceedings void ab initio. The court held that the publication of the notice in the Official Gazette is a mandatory requirement and must be completed within the statutory period. The court found that the Gazette containing the notice was not available to the public until after the nine-month period had expired. Consequently, the competent authority did not acquire jurisdiction to continue the proceedings as they were not commenced within the statutory period.

Conclusion:
The court allowed the petitions, quashing the notice dated 19th August 1974, and initiating acquisition proceedings under Section 269 of the Income-tax Act. The petitioners were entitled to costs.