1986 (1) TMI 179 - AT - Income Tax

Issues Involved:

1. Service of notice under section 269D(2)(a).
2. Publication of notice under section 269C(1) in the Official Gazette.
3. Validity of initiation of proceedings under section 269C(1).
4. Determination of fair market value of the property.

Issue-wise Detailed Analysis:

1. Service of Notice under Section 269D(2)(a):

The main contention by the transferors was that no notice was served on them as required under section 269D(2)(a). The competent authority must serve notice on the transferor, transferee, and any person interested in the property. The learned counsel for the transferors argued that the notice was received by an unauthorized person, O.P. Arora, and not the transferors. The departmental representative could not provide evidence that O.P. Arora was authorized to accept the notice. Therefore, the Tribunal held that no notice was served on the transferors, rendering the proceedings invalid. However, the Tribunal also noted that the non-service of notice invalidated the enquiry and findings but did not nullify the initiation of proceedings. The competent authority could continue the proceedings after duly serving the transferors with notices.

2. Publication of Notice under Section 269C(1) in the Official Gazette:

The appellants contended that the notice was not published in the Official Gazette within the prescribed time. The sale deed was registered on 15-12-1978, and the notice had to be published by 30-9-1979. The Gazette was dated 10-9-1979, leaving 30 days for it to be made available for sale. The Tribunal held that the presumption favored the revenue, and the appellants did not provide evidence to prove that the Gazette was not published within the required time. Therefore, this plea failed.

3. Validity of Initiation of Proceedings under Section 269C(1):

The appellants argued that there was no material for the competent authority to believe that the fair market value exceeded the apparent consideration by more than 15% and that the consideration was understated to evade taxes. The Tribunal noted that the competent authority had the inspector's and Valuation Officer's reports, which estimated the fair market value significantly higher than the apparent consideration. However, the Tribunal found that there was no material to show that the consideration was understated with the intent to evade taxes. The competent authority did not direct the inspector to investigate the real consideration or tax evasion. The Tribunal concluded that the initiation of proceedings was invalid due to the lack of material to support the belief that the consideration was understated to evade taxes.

4. Determination of Fair Market Value of the Property:

The Tribunal examined the fair market value of the property as on the date of execution of the sale deed, 1-11-1975. The competent authority had determined the value in February 1975 and December 1978 but not specifically for November 1975. The Tribunal noted that the Valuation Officer's reliance on government circulars for land rates was not a sound basis for determining the fair market value. The Tribunal also considered that the transaction was genuine, involving a large plot sold for a high price, and the vendors had obtained tax clearance certificates. The Tribunal held that the fair market value was not proven to exceed the apparent consideration by more than 15%, and therefore, the property could not be acquired under section 269F.

Conclusion:

The Tribunal allowed the appeals and quashed the order under appeal, concluding that the acquisition proceedings were invalid due to improper service of notice and lack of material to support the initiation of proceedings under section 269C(1).

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