1988 (11) TMI 128 - AT - Income Tax

Summary

Issues Involved:
1. Validity of initiation of proceedings under Section 269C of the IT Act.
2. Determination of fair market value of the property.
3. Presumption of understatement of consideration and tax avoidance.
4. Right to cross-examine the Departmental Valuation Officer (DVO).
5. Requirement of including tenant's name in the gazette notification under Section 269D(1).

Detailed Analysis:

1. Validity of Initiation of Proceedings under Section 269C of the IT Act:

The appellants challenged the initiation of proceedings under Section 269C, asserting that the Competent Authority had no material basis to believe that the fair market value of the property was Rs. 29,76,000, as presumed. The Competent Authority recorded reasons based on several factors such as the property's location, its commercial nature, the constructed area, and comparable sales data. The Tribunal found that the Competent Authority had relevant material and a live link between the formation of belief and the material, thus upholding the initiation of proceedings. The Tribunal distinguished the present case from the Arun Mehra case, where there was no material whatsoever for initiating proceedings.

2. Determination of Fair Market Value of the Property:

The Competent Authority adopted multiple methods to determine the fair market value, including the land and building method, comparable sales method, and yield method. The Tribunal examined the data and computations provided by the Competent Authority and found them to be based on relevant material. The Tribunal noted that the fair market value estimated by the Competent Authority was justified and exceeded the apparent consideration by more than 25%, thereby upholding the valuation.

3. Presumption of Understatement of Consideration and Tax Avoidance:

The Tribunal discussed the presumptions under Section 269C(2) that if the fair market value exceeds the apparent consideration by more than 25%, it is conclusive proof that the consideration has not been truly stated. Further, it is presumed that the understatement was with the object of tax avoidance. The Tribunal referred to judgments from the Punjab & Haryana High Court and the Delhi High Court, which supported the view that these presumptions are available even at the stage of initiating proceedings. The Tribunal concluded that the Competent Authority correctly invoked these presumptions.

4. Right to Cross-Examine the Departmental Valuation Officer (DVO):

The appellants argued that the Competent Authority erred by not allowing cross-examination of the DVO. The Tribunal held that Section 269L does not provide for cross-examination of the DVO. The Competent Authority had considered the objections raised by the appellants against the valuation report, and thus, the Tribunal found no irregularity in the Competent Authority's approach.

5. Requirement of Including Tenant's Name in the Gazette Notification under Section 269D(1):

M/s Ganga Automobiles contended that their name should have been included in the gazette notification. The Tribunal referred to the Delhi High Court's ruling in Jawahar Lal's case, which held that a tenant is not a "person interested" as defined under Section 269A(g). The Tribunal found that individual notice under Section 269D(2) had been duly served on M/s Ganga Automobiles, and they were heard by the Competent Authority. Therefore, the Tribunal dismissed this contention and upheld the validity of the acquisition proceedings.

Conclusion:

The Tribunal dismissed both appeals, upholding the Competent Authority's initiation of proceedings and the determination of the fair market value. The Tribunal found no merit in the appellants' contentions regarding the initiation of proceedings, the valuation methods adopted, the presumptions of understatement and tax avoidance, the right to cross-examine the DVO, and the requirement of including the tenant's name in the gazette notification.