1986 (5) TMI 41 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction to initiate acquisition proceedings.
2. Validity of treating multiple sale transactions as a single transaction.
3. Application of fair market value and the limit prescribed under Section 269C(1) of the Income-tax Act.
4. Proper initiation of acquisition proceedings and application of mind by the Competent Authority (CA).
5. Validity of joint sale transactions and the requirement for separate acquisition proceedings.

Detailed Analysis:

Jurisdiction to Initiate Acquisition Proceedings:
The first common legal objection raised by the transferees' counsel was regarding the jurisdiction of the IAC to initiate acquisition proceedings for the three sale deeds of 19 sq. yds. each from March 1981. It was argued that these were separate pieces of property, each with a fair market value below Rs. 25,000, thus not warranting acquisition proceedings under Section 269C(1) of the Income-tax Act. The counsel cited the Kerala High Court decision in CIT v. T. V. Suresh Chandran, which held that separate sale transactions to different transferees cannot be clubbed for acquisition proceedings.

Validity of Treating Multiple Sale Transactions as a Single Transaction:
The Competent Authority treated the six sale transactions as a single deal, reasoning that the transferor was the same and the property transferred was part of one Ahata. However, the Tribunal found no legal or commonsensical basis to ignore separate sales to different buyers at different times. The Kerala High Court's decision reinforced that each sale deed should be judged separately for acquisition proceedings.

Application of Fair Market Value and the Limit Prescribed Under Section 269C(1):
The Tribunal noted that none of the three sale deeds from March 1981 had a fair market value exceeding Rs. 25,000, even as per the departmental valuer's assessment. Consequently, the acquisition proceedings for these transactions were deemed improper and quashed.

Proper Initiation of Acquisition Proceedings and Application of Mind by the Competent Authority (CA):
For the sale deeds from May 1982, the transferees' counsel argued that the CA initiated acquisition proceedings mechanically, using a stereotyped form without applying independent judgment. The CA relied on an earlier AVO report for March 1981 sales, applying the same land rate without considering differences in plot size, location, and other relevant factors. The Tribunal found this approach flawed, as the CA failed to form a reason to believe based on proper material and independent consideration.

Validity of Joint Sale Transactions and the Requirement for Separate Acquisition Proceedings:
In the case of the joint purchase by Kala Ram and Chuni Lal, the Tribunal noted that the CA should have initiated separate acquisition proceedings for each share, as per the Kerala High Court's ruling. The single proceeding for the joint sale was not in accordance with Section 269C(1) of the Income-tax Act, leading to the cancellation of the acquisition order.

Conclusion:
The Tribunal concluded that the CA's approach of treating all six transactions as a single deal was incorrect. Each transaction was considered separately, leading to the quashing of acquisition proceedings for all six sale deeds. The appeals were allowed, emphasizing the need for proper jurisdiction, independent application of mind, and adherence to legal precedents in acquisition proceedings.