1980 (5) TMI 69 - AT - Income Tax

Issues Involved:
1. Validity of the initiation of acquisition proceedings under Section 269D of the IT Act.
2. Estoppel against the Department from initiating acquisition proceedings.
3. Determination of the fair market value of the property.
4. Service of notices within the prescribed time.
5. Authority of the IAC to give assurance regarding non-initiation of acquisition proceedings.
6. Proper approval from the CIT before initiating acquisition proceedings.
7. The identity of the transferor.

Issue-wise Detailed Analysis:

1. Validity of the initiation of acquisition proceedings under Section 269D of the IT Act:
The Tribunal found that the initiation of acquisition proceedings was invalid as the notices were served on the transferor and transferees after the expiry of the nine-month limitation period prescribed under Section 269D. The publication of the notice in the official Gazette alone was not sufficient; personal service of notices was also required within the limitation period.

2. Estoppel against the Department from initiating acquisition proceedings:
The Tribunal held that the Department was estopped from initiating acquisition proceedings due to the written assurance given by the IAC (Acquisition) that no acquisition proceedings would be initiated if the property was sold for Rs. 1,05,000. The IAC was the Competent Authority to initiate and drop such proceedings, and the assurance was given with the approval of the CIT, Bombay City. The transferor and transferees acted on this representation, altering their position, thus invoking the principle of estoppel.

3. Determination of the fair market value of the property:
The Tribunal agreed with the valuation report of the Asstt. Valuation Officer, which valued the property at Rs. 92,000 using the rent-capitalisation method. The IAC's addition of the reversionary value of the land was deemed erroneous as the land belonged to the Government and was subject to the Cantonment Code and Rent Control Act. The Tribunal cited several Supreme Court and High Court decisions supporting the rent-capitalisation method as the appropriate valuation method for such properties.

4. Service of notices within the prescribed time:
The Tribunal found that the service of notices on the transferor and transferees was not within the nine-month period from the date of sale, rendering the initiation of acquisition proceedings invalid.

5. Authority of the IAC to give assurance regarding non-initiation of acquisition proceedings:
The Tribunal rejected the Department's argument that the IAC (Acquisition) acted beyond his jurisdiction in giving the assurance. It was held that the IAC, as the Competent Authority, had the authority to make such a representation, and it was made with the approval of the CIT, Bombay City.

6. Proper approval from the CIT before initiating acquisition proceedings:
The Tribunal did not find substantial evidence that the approval from the CIT was given without applying his mind. However, this issue became moot due to the invalid initiation of proceedings and the principle of estoppel.

7. The identity of the transferor:
The Tribunal rejected the contention that the transferor was the Tax Recovery Officer, holding that the Government did not become the owner of the building by attachment. The transferor was indeed Shri K.L. Mathuradas, who sold the property with the permission of the Tax Recovery Officer.

Conclusion:
The Tribunal canceled the impugned acquisition orders and allowed the appeals, concluding that the initiation of acquisition proceedings was invalid, the Department was estopped from initiating such proceedings, and the fair market value of the property did not exceed the sale consideration of Rs. 1,05,000.

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