1983 (8) TMI 99 - AT - Income Tax

Acquisition Of Immovable Property Acquisition Proceedings Fair Market Value Movable Property Valuation Report

Issues Involved:
1. Jurisdiction and legality of the competent authority's order.
2. Compliance with mandatory provisions of the Income-tax Act, 1961.
3. Adequacy of reasons and material for initiating acquisition proceedings.
4. Validity of notices and their service on the HUF and its members.
5. Valuation of the property and determination of fair market value.
6. Procedural errors and non-compliance with natural justice principles.

Detailed Analysis:

1. Jurisdiction and Legality of the Competent Authority's Order:
The appeal challenges the order dated 27-3-1982 by the IAC under section 269F(6) of the Income-tax Act, 1961. The property in question was sold for Rs. 1,47,000, but the competent authority considered this an understatement and initiated acquisition proceedings under section 269C of the Act. The competent authority's jurisdiction and the legality of the order were disputed by the assessee, who claimed the order was illegal, ab initio void, and that mandatory provisions of law had not been complied with.

2. Compliance with Mandatory Provisions of the Income-tax Act, 1961:
The Tribunal emphasized that the law relating to the acquisition of immovable properties is contained in Chapter XX-A of the Act. It stated that the conditions laid down under section 269C are mandatory and non-fulfillment of these conditions is fatal to the acquisition proceedings. The Tribunal noted that the competent authority failed to comply with the mandatory provisions of section 269D, which include issuing and serving notices on interested parties and making known the substance of such notices by proclamation.

3. Adequacy of Reasons and Material for Initiating Acquisition Proceedings:
The Tribunal found that the competent authority did not make any independent enquiry to bring on record evidence justifying the acquisition of the property. The competent authority relied solely on the valuation report without conducting further enquiry for judicial satisfaction. The Tribunal held that the onus is on the revenue to prove that the apparent consideration is not the real consideration, which was not discharged in this case.

4. Validity of Notices and Their Service on the HUF and Its Members:
The Tribunal noted that the sale deeds did not explicitly state that the property was sold by the HUF, but it was apparent from the context. The competent authority failed to serve notice on Major Tikka Khushwant Singh as the karta of the HUF within the stipulated time. The notice was served on 30-7-1977, beyond the period of nine months, rendering the proceedings invalid. The Tribunal cited the Supreme Court's ruling in K. Adinarayana Murty's case, emphasizing the necessity of serving notice in the correct capacity.

5. Valuation of the Property and Determination of Fair Market Value:
The Tribunal criticized the valuation process, highlighting inconsistencies and multiple valuations by the official valuer. The competent authority adopted different valuations from various reports, which showed indecisiveness and inconsistency. The Tribunal noted that the revenue should not rely solely on the valuer's reports, especially when the valuer's assessments varied significantly. The Tribunal concluded that the burden of proving that the apparent consideration falls short of the fair market value by more than 15% was not met by the revenue.

6. Procedural Errors and Non-compliance with Natural Justice Principles:
The Tribunal stressed the importance of following the principles of natural justice in quasi-criminal proceedings under Chapter XX-A. It noted that the competent authority failed to provide the transferor and transferee with the material collected, did not afford them an opportunity to state their case, and did not act fairly at all stages. The Tribunal concluded that the competent authority's order was vitiated due to procedural errors and non-compliance with natural justice principles.

Conclusion:
The Tribunal canceled the order of the competent authority under section 269F, citing multiple grounds including non-compliance with mandatory provisions, inadequate reasons for initiating proceedings, invalid service of notices, inconsistent property valuations, and procedural errors. The appeal was allowed, and the acquisition order was declared void.

← Previous Next →