1985 (10) TMI 118 - AT - Income Tax

Summary

Issues Involved:
1. Preliminary objection regarding the delay in filing the appeal.
2. Validity of the acquisition order under section 269F of the Income-tax Act, 1961.
3. The effect of the appellant's consent to the acquisition on the validity of the acquisition order.
4. The sufficiency of evidence regarding the understatement of consideration.
5. The impact of delay in the acquisition process on the validity of the acquisition order.

Detailed Analysis:

1. Preliminary Objection:
The appeal was filed one day late, on 10-7-1985, beyond the permissible period under section 269G of the Income-tax Act, 1961. The appellant argued that he was abroad and unaware of the order until 7-7-1985. The Tribunal considered the application of section 5 of the Limitation Act, 1963, and found sufficient cause for the delay, noting the appellant's return to India shortly before the expiration of the appeal period. Thus, the delay was condoned, and the appeal was entertained.

2. Validity of the Acquisition Order:
The case involved the transfer of a property for Rs. 1 lakh, which was later valued by the Assistant Valuation Officer at Rs. 1,57,000. The IAC issued a notice under section 269D(1) on the belief that the market value exceeded the apparent consideration by more than 15%, indicating an understatement of consideration. However, the Tribunal found that the valuation was based on properties in well-developed areas, whereas the subject property had significant disadvantages, such as inaccessibility and a dilapidated structure. The Tribunal concluded that the apparent consideration of Rs. 1 lakh was reasonable and not an understatement.

3. Effect of the Appellant's Consent:
The appellant had written a letter on 21-10-1980 requesting the acquisition of the property and outlining compensation. The revenue argued this consent amounted to an admission of understatement. The Tribunal disagreed, noting that the appellant's consent was consistent with the apparent consideration being the true value and was given to avoid further disputes. The Tribunal emphasized that consent to acquisition does not imply admission of understatement.

4. Sufficiency of Evidence:
The Tribunal found no evidence of understatement of consideration beyond the valuation report. The apparent consideration was Rs. 1 lakh, with the market value estimated at Rs. 1,15,000, which did not exceed the 25% threshold for conclusive proof of understatement. The Tribunal noted that the valuation was speculative and based on incomparable properties. The appellant was not given an opportunity to contest the valuation, further weakening the IAC's position. Thus, the Tribunal concluded there was no material evidence to support the acquisition.

5. Impact of Delay:
The order was passed after a five-year delay from the appellant's consent, which the Tribunal found unreasonable and detrimental. The delay contradicted the urgency implied in Chapter XX-A of the Act, causing potential financial loss to the appellant due to inflation and property value changes. The Tribunal held that the inordinate and unexplained delay vitiated the acquisition order, as it failed to meet the procedural urgency required by the Act.

Conclusion:
The Tribunal allowed the appeal, canceling the acquisition order under section 269F(6) of the Income-tax Act, 1961, due to the lack of evidence for understatement of consideration, the appellant's reasonable consent, and the inordinate delay in the acquisition process.