1988 (7) TMI 99 - AT - Income Tax

Issues Involved:
1. Whether the initiation is proper.
2. Whether at the time of initiation, the impact of Urban Land & Ceiling Act was available.
3. Whether presumptions under s. 269(C)(2) were available at the time of initiation.
4. Whether the gazette notification made available to the public after nine months was valid or invalid.
5. Whether the document of 17th Nov., 1975 i.e. sale agreement is of any evidentiary value.
6. Whether that document was binding upon the parties or violated so as to free the parties from its obligations.
7. Whether the date of 17th Nov., 1975 or 5th Dec., 1984 were relevant for the purpose of finding out the fair market value.
8. Whether in view of the litigation and suit for specific performance the agreement of 17th Nov., 1975 can be acted upon and if so whether rates fixed by the Land & Development office are available as fair market value or they should be scaled down.
9. Whether the comparative sale instances given from both the sides could be relied upon.
10. Whether the excess land declared by the assessee to the urban land Ceiling Act Authorities has any impact on the price fixed between the parties and so the hazard of litigation.

Detailed Analysis:

1. Whether the initiation is proper:
The initiation of proceedings by the IAC (Acq) was deemed improper. The learned Acquisition Authority relied on the Delhi High Court's decision in the case of Mahavir Metal Works P. Ltd. vs. Union of India, which stipulates that the presumption under s. 269-C is available if there is a report of the approved valuer. However, the report was only as of 30th Jan., 1985, not for 17th Nov., 1975. The Tribunal found that since there was no valuation report for 17th Nov., 1975, the initiation was not legal, and the presumptions under s. 269-C were not available. The Tribunal also noted that the income-tax records of the vendee and vendor were not perused by the Acquisition Authority.

2. Whether at the time of initiation, the impact of Urban Land & Ceiling Act was available:
The property was subject to the Urban Land (Ceiling & Regulation) Act, 1976, as evidenced by several documents, including a letter from the Delhi Administration and a notification indicating excess land declared. The IAC (Acq) did not consider the impact of this Act, which was crucial since it imposed restrictions on the property.

3. Whether presumptions under s. 269(C)(2) were available at the time of initiation:
The Tribunal found that the presumptions under s. 269(C)(2) were not available at the time of initiation. This was supported by various High Court decisions, including the Delhi High Court's decision in CIT vs. Arun Mehra, which stated that at the time of initiation of proceedings, no presumption was available to the Competent Authority without material evidence showing that the fair market value was more than 15% of the apparent consideration.

4. Whether the gazette notification made available to the public after nine months was valid or invalid:
The gazette notification was published on 26th Oct., 1985, but made available to the public on 1st Nov., 1985, exceeding the nine-month period. The Tribunal referenced several High Court decisions, including the Allahabad High Court's decision in U.S. Awasthi and Another vs. IAC (Acq), which held that the proceedings were invalid if the notification was not available to the public within the statutory period.

5. Whether the document of 17th Nov., 1975 i.e. sale agreement is of any evidentiary value:
The Tribunal held that the sale agreement dated 17th Nov., 1975, had evidentiary value despite being unregistered. This was supported by the Gujarat High Court's decision in CIT vs. Ochhaylal Laljibhai Dharia, which stated that such agreements are admissible for rebutting the presumption about the object underlying the untrue statement of consideration.

6. Whether that document was binding upon the parties or violated so as to free the parties from its obligations:
The sale agreement of 17th Nov., 1975, was found to be binding upon the parties. The Tribunal noted that the agreement led to a High Court decree, indicating its binding nature.

7. Whether the date of 17th Nov., 1975 or 5th Dec., 1984 were relevant for the purpose of finding out the fair market value:
The Tribunal concluded that the relevant date for determining the fair market value was 17th Nov., 1975, not 5th Dec., 1984. This was because the original agreement to sell was dated 17th Nov., 1975.

8. Whether in view of the litigation and suit for specific performance the agreement of 17th Nov., 1975 can be acted upon and if so whether rates fixed by the Land & Development office are available as fair market value or they should be scaled down:
The Tribunal held that the agreement of 17th Nov., 1975, was the basis for the transaction, but the rates fixed by the Land & Development Office could not be considered the fair market value due to the litigation and the applicability of the Urban Land Ceiling Act. The rates should have been scaled down accordingly.

9. Whether the comparative sale instances given from both the sides could be relied upon:
The Tribunal found that the comparable sales relied upon by the Acquisition Authority and Valuation Officer could not be relied upon. Instead, sales of adjacent and similar properties close to 17th Nov., 1975, should have been considered.

10. Whether the excess land declared by the assessee to the urban land Ceiling Act Authorities has any impact on the price fixed between the parties and so the hazard of litigation:
The Tribunal acknowledged that the excess land declared under the Urban Land Ceiling Act and the hazard of litigation had a significant impact on the property's value. These factors were not adequately considered by the Acquisition Authority.

Conclusion:
The Tribunal vacated the acquisition proceedings for multiple reasons, both factual and legal, and allowed all the appeals filed by M/s Rohit Tower Building Ltd., M/s Saw Pipes Ltd., M/s Jindal Strips Ltd., M/s Nalwa Steels Ltd., and Smt. Urmila Devi.

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