1986 (12) TMI 73 - AT - Income Tax

Acquisition Of Immovable Property, Acquisition Proceedings, Fair Market Value, Movable Property, Reason To Believe, Reference To Valuation Officer

Issues Involved:

1. Validity of initiation of acquisition proceedings.
2. Consideration of the inspector's report over the Valuation Officer's report.
3. Definition and treatment of "apparent consideration."
4. Determination of the fair market value of the property.
5. Consideration of additional grounds raised by the appellants.

Detailed Analysis:

1. Validity of Initiation of Acquisition Proceedings:

The appellants challenged the initiation of acquisition proceedings, arguing that it was based on the inspector's report rather than the Valuation Officer's report. The competent authority had initially referred the matter to the Valuation Officer, who reported that the consideration of Rs. 37,50,000 was acceptable. However, the competent authority found the Valuation Officer's report incomplete and directed an inspector to report the property's valuation. The inspector valued the property at Rs. 61,22,990. The competent authority found the inspector's report more reliable and initiated proceedings under section 269C of the Income-tax Act, 1961. The Tribunal held that the competent authority was not bound by the Valuation Officer's report and could rely on other material, including the inspector's report, to form a prima facie opinion for initiating proceedings.

2. Consideration of the Inspector's Report Over the Valuation Officer's Report:

The appellants contended that the inspector was not an expert in property valuation and his report should not have been acted upon. The Tribunal noted that while the inspector was not a formal expert, his report could still be considered as he had inspected the property and provided a valuation based on comparable sales. The Tribunal emphasized that the competent authority could rely on the inspector's report for initiating proceedings, as the competent authority is not required to decide the matter finally at the initiation stage but only to form a prima facie opinion.

3. Definition and Treatment of "Apparent Consideration":

The appellants argued that the sum of Rs. 10 lakhs paid to the Government for the unearned increase should be included in the apparent consideration. The Tribunal held that "apparent consideration" is defined in section 269A of the Act as the consideration specified in the instrument of transfer. Since the sale deed mentioned only Rs. 37,50,000 as the consideration, the competent authority was correct in taking this amount as the apparent consideration. However, the Tribunal noted that the payment of Rs. 10 lakhs could not be entirely ignored, as it was a necessary payment for obtaining the Government's approval for the transfer. The Tribunal suggested that the fair market value should be adjusted to account for this payment.

4. Determination of the Fair Market Value of the Property:

The Tribunal found that the competent authority had relied exclusively on the inspector's report, which used a sale instance from Jor Bagh to determine the fair market value. The appellants had cited a sale instance from Golf Links, which was more comparable. The Tribunal noted that the competent authority should have considered multiple methods and exemplars to determine the fair market value, as suggested by judicial precedents. The Tribunal criticized the competent authority for not collecting sufficient evidence and for not considering the Government's letter fixing land rates for various colonies, which could provide some guidance.

5. Consideration of Additional Grounds Raised by the Appellants:

The appellants sought to raise an additional ground that the notice for acquisition was not published in the Official Gazette within the stipulated period. The Tribunal rejected this application, noting that the appellants had not raised this issue before the competent authority or at the earliest opportunity in the appeal. The Tribunal found the delay in raising this ground unexplained and considered it a technical point that would require additional evidence. The Tribunal held that no prejudice was caused to the appellants on this account, as they were aware of the acquisition proceedings.

Conclusion:

The Tribunal allowed the appeals, set aside the acquisition order, and remanded the matter to the competent authority for a fresh decision. The competent authority was directed to collect further evidence, consider the observations made by the Tribunal, and provide the appellants with an opportunity to present relevant evidence.

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