1978 (6) TMI 69 - AT - Income Tax

Issues Involved:

1. Legality of the acquisition order under Section 269C of the Income Tax Act, 1961.
2. Validity of proceedings initiation under Chapter XX-A.
3. Fair market value determination of the property in question.
4. Compliance with procedural requirements under Section 269D.
5. Relevance and admissibility of additional evidence in the appellate proceedings.

Issue-wise Detailed Analysis:

1. Legality of the acquisition order under Section 269C of the Income Tax Act, 1961:

The common grievance in the appeals was that the order of acquisition was illegally and wrongly made, and the case did not attract the provisions of Chapter XX-A. The Tribunal observed that Chapter XX-A provisions were brought to remedy and stop transactions of doubtful and mischievous nature in respect of immovable properties. However, in the present case, the sale did not involve an element of understatement or underhand dealings. The Tribunal noted that the competent authority refused to take notice of the situation and facts in proper perspective, leading to a wrongful acquisition order.

2. Validity of proceedings initiation under Chapter XX-A:

The initiation of proceedings was contested on two grounds: lack of valid reason to believe the consideration stated in the sale agreement was less than the fair market value, and invalid initiation of proceedings. The Tribunal held that the IAC had a valid belief for initiating proceedings based on the Valuation Officer's report, which estimated the market value higher than the stated consideration. However, the Tribunal found that the IAC's approach in assuming the date of issue of notice for publication as the date of publication itself was incorrect, as Section 269D uses the word "publication" and not "issue."

3. Fair market value determination of the property in question:

The Valuation Officer estimated the market value at Rs. 1,40,000 against the sale consideration of Rs. 75,000. The IAC adopted a value on the basis that the fair market value of the property appeared to be Rs. 1,300 per month. However, the Tribunal found that the IAC confused his facts and did not properly appreciate the comparable sale instances and rents of similar properties. The Tribunal concluded that the fair market value could not be said to exceed 15% of the recorded consideration, and the consideration stated in the sale agreement was correct with no understatement intended or made.

4. Compliance with procedural requirements under Section 269D:

The Tribunal noted that the notices under Section 269D(1) were served on the transferor and transferee before the date of publication in the Official Gazette. The IAC assumed that sending the notice for publication within nine months was sufficient compliance, which the Tribunal did not accept. However, the Tribunal decided to deal with the case on merits, as the acquisition order was found to be wrong and unjustified on the facts.

5. Relevance and admissibility of additional evidence in the appellate proceedings:

A preliminary objection was raised by the Revenue regarding the admissibility of certain documents not filed before the IAC. The Tribunal took a liberal view, considering the appeals under Chapter XX-A as the first appeal, and admitted relevant documents that were crucial to the case. The Tribunal found that the additional evidence strengthened the case of the transferor and transferee, showing that the valuation recorded in the sale deed was not lower than the market value.

Conclusion:

The Tribunal concluded that the acquisition order was wrong and unjustified on the merits, and vacated the same. The appeals were allowed, and the Tribunal did not involve itself with the legality of the commencement of the proceedings or the compliance with all formalities before passing the acquisition order. The Tribunal also admitted relevant additional evidence, which supported the case of the transferor and transferee.

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