1979 (7) TMI 120 - AT - Income Tax

Summary

Issues Involved:

1. Validity of the IAC's assumption of jurisdiction for acquisition proceedings.
2. Accuracy and acceptance of valuation reports.
3. Determination of fair market value and apparent consideration.
4. Justification for acquisition under Section 269F(6) of the IT Act, 1961.

Detailed Analysis:

1. Validity of the IAC's Assumption of Jurisdiction for Acquisition Proceedings:

The IAC, Acquisition initiated acquisition proceedings based on the valuation report of the Asstt. Valuation Officer, which indicated that the apparent consideration was lower by 15%. The IAC recorded his reasons to believe that the fair market value of the property was higher than the apparent consideration, thus fulfilling the conditions laid down in Section 269C(1) read with Section 269C(2) of the IT Act, 1961. The IAC issued notices under Section 269D(1) and served them to the transferee and transferor, and also posted the notice on the property.

The transferee and transferor challenged the assumption of jurisdiction by the IAC, arguing that the reasons to believe were based on incorrect particulars, specifically the number of sheds reported. However, it was held that the IAC had prima facie reasons to believe as understood in law, and the assumption of jurisdiction was in accordance with the provisions of Section 269C. The order of the IAC for assuming jurisdiction to initiate acquisition proceedings was upheld.

2. Accuracy and Acceptance of Valuation Reports:

Multiple valuation reports were submitted by the Asstt. Valuation Officers and the transferee's valuers. The IAC, Acquisition obtained three separate valuation reports from different Asstt. Valuation Officers, which varied significantly in their assessments. The transferee also submitted valuation reports from their valuers, which provided lower valuations based on different methods.

The IAC, Acquisition did not accept the valuation reports of the transferee's valuers or the government valuers, and instead, determined the value of the property at Rs. 2,09,600 based on his own assessment. This raised the question of whether the competent authority could disregard the expert valuation reports without sufficient rebuttal evidence.

3. Determination of Fair Market Value and Apparent Consideration:

The IAC, Acquisition determined that the fair market value of the property exceeded the apparent consideration by more than 15%, which justified the acquisition under Section 269F(6). However, the transferee's valuer, Shri Bhojraja, provided a valuation based on comparable sales in the same locality, which was not adequately rebutted by the IAC.

The tribunal found that the IAC, Acquisition did not place on record any comparable sales in the same locality to counter the valuation provided by the transferee's valuer. The IAC's subjective assessment of the property value was not supported by sufficient material evidence. Consequently, the tribunal held that the consideration shown in the instrument of transfer constituted the fair market value.

4. Justification for Acquisition under Section 269F(6) of the IT Act, 1961:

The IAC, Acquisition's order to acquire the property was based on the belief that the fair market value exceeded the apparent consideration by more than 15%. However, the tribunal found that the IAC's order suffered from inherent infirmity due to the lack of sufficient rebuttal evidence against the expert valuation reports.

The tribunal quashed the IAC, Acquisition's order on the grounds that the reports of the transferee's valuer, which were based on comparable sales, provided proper guidelines for determining the fair market value. The tribunal held that while the assumption of jurisdiction by the IAC was in accordance with law, the order acquiring the property under Section 269F(6) could not be sustained on merits.

Conclusion:

The appeals by the transferor and transferee were partly allowed. The tribunal upheld the assumption of jurisdiction by the IAC, Acquisition but quashed the order for acquisition of the property on the grounds of inadequate rebuttal of the expert valuation reports. The fair market value was determined to be in line with the apparent consideration shown in the instrument of transfer.