1988 (3) TMI 122 - AT - Income Tax

Summary

Issues Involved:
1. Validity of acquisition proceedings under Section 269C of the Income-tax Act, 1961.
2. Determination of fair market value of the property.
3. Application of presumptions under Section 269C(2).
4. Burden of proof and the nature of acquisition proceedings.
5. Relevance of comparable sale instances.

Issue-wise Detailed Analysis:

1. Validity of Acquisition Proceedings under Section 269C of the Income-tax Act, 1961:
The transferee appealed against the acquisition of a free-hold plot under Section 269C of the Income-tax Act, 1961, initiated by the Competent Authority. The Competent Authority's decision was based on the belief that the fair market value exceeded the apparent consideration by more than 15%, and that the consideration was understated to facilitate tax evasion. The Competent Authority relied on the Department Valuation Officer's report and various judicial precedents to justify the initiation of acquisition proceedings.

2. Determination of Fair Market Value of the Property:
The Competent Authority determined the fair market value of the plot at Rs. 12,32,000, which was significantly higher than the apparent consideration of Rs. 9 lakhs. This determination was based on the Valuation Officer's report and comparable sale instances of other plots in the same locality. The Valuation Officer considered the plot's location on a main road and its proximity to the market, among other factors, to justify the higher valuation.

3. Application of Presumptions under Section 269C(2):
The Competent Authority applied the presumptions under Section 269C(2) at the stage of initiating acquisition proceedings, relying on judicial precedents. However, the appellant argued that these presumptions should only be applied after the initiation of proceedings. The Tribunal agreed with the appellant, citing various judicial decisions, including those from the Delhi High Court, which held that presumptions under Section 269C(2) are not applicable at the initiation stage.

4. Burden of Proof and the Nature of Acquisition Proceedings:
The appellant contended that the burden of proof to establish the conditions for acquisition under Chapter XXA was on the revenue, and that the proceedings were quasi-criminal in nature. The Tribunal agreed, emphasizing that the Competent Authority's satisfaction must be based on relevant material and that there must be a direct nexus between the material and the formation of belief. The Tribunal found that the Competent Authority's satisfaction was not justified as it lacked independent findings and relied solely on presumptions.

5. Relevance of Comparable Sale Instances:
The appellant argued that the comparable sale instances relied upon by the Competent Authority were not put to the appellant and were not truly comparable. The Tribunal examined various sale instances, including those where acquisition proceedings were dropped, and found that the Competent Authority had selectively considered instances that favored acquisition. The Tribunal noted that relevant instances, which showed a lower fair market value, were ignored. The Tribunal concluded that the fair market value of the plot did not exceed 15% of the apparent consideration, and thus, the acquisition order was not justified.

Conclusion:
The Tribunal quashed the acquisition order dated 1-4-1987, finding that the Competent Authority's initiation of acquisition proceedings was not justified, the fair market value did not exceed 15% of the apparent consideration, and the presumptions under Section 269C(2) were incorrectly applied at the initiation stage. The appeal was allowed in favor of the transferee.