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Issues Involved:
1. Whether the initiation of the proceedings under s. 269C (i) was proper. 2. Whether non-service of the notices on the transferor-company and on the person in occupation of the property was enough to vitiate the entire proceedings. 3. Whether the estimate of the competent authority of the fair market value of the property was correct. Detailed Analysis: Issue 1: Whether the initiation of the proceedings under s. 269C (i) was proper The initiation of proceedings under s. 269C(1) can only be justified if the competent authority has a reasonable belief that: 1. The property has a fair market value exceeding Rs. 25,000. 2. The property was transferred for an apparent consideration less than the fair market value by 15% or more. 3. The consideration was understated with the object of reducing or evading tax liabilities. The competent authority relied solely on the valuation report dated 5th June 1974 by the Valuation Cell, which estimated the property value at Rs. 2,34,000 against the sale consideration of Rs. 1,65,000. The Tribunal found that the competent authority had no other material evidence to support the belief that the sale consideration was understated with an ulterior motive of tax evasion. The Tribunal cited the Supreme Court's decision in ITO vs. Lakshmani Mewaldass, which mandates that the reasons for the formation of belief must have a rational connection and relevant bearing to the formation of belief, and must be based on objective facts. The Tribunal also considered the applicability of s. 269C(2) presumptions at the initiation stage and concluded, following the Gujarat and Calcutta High Courts' decisions, that these presumptions come into play only after the proceedings have been properly initiated. Therefore, the Tribunal held that the initiation of the proceedings was not proper as it was based solely on the valuation report without any other corroborative material. Issue 2: Whether non-service of the notices on the transferor-company and on the person in occupation of the property was enough to vitiate the entire proceedings Section 269D(2)(a) mandates that notices must be served on the transferor, the transferee, the person in occupation of the property, and every person known to be interested in the property. In this case, notices were not served on the person in occupation of the property, M/s. Jaipur Spinning and Weaving Mills Ltd., and the transferor, M/s. Shah Engineering Pvt. Ltd. The notice was served on the Director, Shri Jeetmal Shah, instead of the company. The Tribunal referred to the Andhra Pradesh High Court decision in Mohammad Mahoob Ali Sahib vs. IAC and the Gujarat High Court decision in Vimlaben's case, which held that failure to serve mandatory notices vitiates the entire proceedings. However, the Tribunal noted that the Director, Shri Jeetmal Shah, had negotiated the sale and signed the sale deed on behalf of the company and had responded to the notice, indicating that the company had proper representation. The Tribunal also noted that the person in occupation had vacated the premises before the acquisition order was passed. Therefore, the Tribunal concluded that the non-service of notices did not vitiate the proceedings. Issue 3: Whether the estimate of the competent authority of the fair market value of the property was correct The valuation of the property was contested between the registered valuer of the transferor and the Valuation Cell. The registered valuer estimated the value at Rs. 1,56,340 (rent capitalisation method) and Rs. 1,68,396 (land and building method), while the Valuation Cell estimated it at Rs. 2,34,000 and Rs. 2,60,000, respectively. The Tribunal emphasized the need for a fair and comprehensive approach to valuation, considering multiple methods and the condition of the property. The Tribunal found that the Valuation Cell's reliance on outdated methods and failure to consider the property's condition and other relevant factors rendered its valuation excessive. The Tribunal preferred the registered valuer's more scientific and updated approach, which considered the property's age, state of repairs, and other relevant factors. The Tribunal concluded that the sale consideration of Rs. 1,65,000 represented the fair market value and that there was no justification for the initiation of acquisition proceedings. Therefore, the Tribunal canceled the order of the competent authority. Conclusion: The Tribunal allowed the appeals, holding that the initiation of proceedings was not proper, the non-service of notices did not vitiate the proceedings, and the estimate of the competent authority was incorrect. The sale consideration was found to represent the fair market value, and the acquisition order was canceled.
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