1986 (11) TMI 116 - AT - Income Tax

Acquisition Proceedings, Fair Market Value, Natural Justice, Valuation Officer, Valuation Report

Issues Involved:
1. Validity of initiation of acquisition proceedings under Section 269C of the Income-tax Act, 1961.
2. Basis of the Inspector's report and its sufficiency for initiating acquisition proceedings.
3. Applicability of presumptions under Section 269C(2) at the initiation stage.
4. Determination of fair market value.
5. Reliance on affidavits of the transferor and his wife.
6. Authenticity of the alleged agreement dated 6-4-1983.
7. Competent authority's disregard of the transferor's initial statement.
8. Alleged forgery of the signature on the agreement.
9. Non-acting upon the stipulations in the agreement.
10. Burden of proof on the revenue to show fair market value exceeds apparent consideration by more than 15%.
11. Consideration of comparable sale instances.
12. Rejection of the revised valuation report.
13. Non-appreciation of property disadvantages.

Issue-wise Detailed Analysis:

1. Validity of Initiation of Acquisition Proceedings:
The initiation of acquisition proceedings was challenged based on the argument that there was no material prompting the competent authority to believe that the fair market value exceeded the apparent consideration. The tribunal found that the Inspector's report alone, without supporting material, was insufficient to justify the initiation of proceedings. The competent authority's subjective satisfaction must be based on objective facts, which were lacking in this case.

2. Basis of the Inspector's Report:
The Inspector's report, which estimated the property value, was criticized for not being based on any comparable sales or concrete evidence. The tribunal noted that the Inspector was not an expert in property valuation and had not gathered necessary data from comparable properties, rendering his report inadequate for initiating proceedings.

3. Applicability of Presumptions under Section 269C(2):
The tribunal held that presumptions under Section 269C(2) are not available at the initiation stage of proceedings. The competent authority must have independent reason to believe that the fair market value exceeds the apparent consideration without relying on such presumptions.

4. Determination of Fair Market Value:
The competent authority initially relied on the Inspector's report and later on the Valuation Officer's report, which estimated the property value at Rs. 12,34,195. However, the revised valuation report reduced the value to Rs. 5,14,000. The tribunal found the revised valuation report more credible, as it considered objections and was conducted with due process.

5. Reliance on Affidavits:
Affidavits from the transferor and his wife were deemed self-serving and aimed at explaining the cash found during a raid. The tribunal found inconsistencies in their statements and noted that the affidavits were not supported by concrete evidence.

6. Authenticity of the Agreement Dated 6-4-1983:
The alleged agreement was found to be dubious. It was not mentioned in the sale deed, nor was it found during the raid. The tribunal concluded that the agreement was likely concocted after the fact and not acted upon, as stipulated payments were not made as per the agreement.

7. Initial Statement of the Transferor:
The competent authority disregarded the transferor's initial statement during the raid, which affirmed that the sale consideration was correctly stated. The tribunal found no valid reason to dismiss this initial statement, which was given under normal circumstances.

8. Alleged Forgery of Signature:
The tribunal considered the report of a handwriting expert, which suggested that the signature on the agreement was forged. This further discredited the authenticity of the alleged agreement.

9. Non-acting upon Agreement Stipulations:
The tribunal noted that the stipulations in the alleged agreement were not acted upon, indicating that the agreement was not genuine.

10. Burden of Proof:
The tribunal held that the revenue failed to discharge its burden of proving that the fair market value exceeded the apparent consideration by more than 15%. The revised valuation report did not support such a significant difference.

11. Comparable Sale Instances:
The tribunal found that the competent authority did not adequately consider comparable sale instances provided by the appellants. The instances cited by the appellants indicated lower land rates, which were not properly factored into the competent authority's valuation.

12. Rejection of Revised Valuation Report:
The competent authority's rejection of the revised valuation report was found to be without valid grounds. The tribunal considered the revised report more reliable as it addressed objections and followed due process.

13. Non-appreciation of Property Disadvantages:
The tribunal noted that the competent authority failed to properly appreciate the disadvantages associated with the property, such as its location behind a mosque and irregular shape, which would affect its market value.

Conclusion:
The tribunal set aside the impugned orders and canceled the acquisition proceedings, allowing the appeals. The initiation of acquisition proceedings was found to be invalid due to lack of sufficient objective material, improper reliance on presumptions, and failure to consider valid objections and comparable sales.

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