1980 (9) TMI 164 - AT - Income Tax

Issues Involved:
1. Legality and jurisdiction of acquisition proceedings under Section 269C(1) of the IT Act.
2. Determination of fair market value of the property.
3. Validity of the compromise decree and its impact on the property valuation.
4. Compliance with mandatory provisions of Section 269D(2) of the IT Act.
5. Consideration of additional evidence and the High Court's directive for reconsideration.

Issue-wise Detailed Analysis:

1. Legality and Jurisdiction of Acquisition Proceedings:
The transferors argued that the acquisition proceedings were illegal, void, and without jurisdiction, as the conditions imposed by Section 269C(1) were not met. They contended that the fair market value of the properties did not exceed Rs. 25,000, and there was no basis for assuming that the fair market value exceeded the consideration by more than 15%. The Competent Authority, however, found that the fair market value of the property exceeded the apparent consideration by more than 3 to 5 times, justifying the initiation of proceedings under Section 269C(1). The Tribunal confirmed the Competent Authority's decision, and the High Court later directed the Tribunal to reconsider the fair market value.

2. Determination of Fair Market Value:
The Competent Authority valued the property at Rs. 6,58,000 based on the Department valuer's report, while the transferors and transferees contended that the valuation was unscientific and inaccurate. They cited various factors, such as ongoing litigation, tenant occupation, and potential acquisition by the Patna Development Scheme, which were not considered in the valuation. The High Court observed that the fair market value should be reconsidered, taking into account the actual interest transferred and the imminent likelihood of litigation. The Tribunal, upon reconsideration, found that the interest of Shri Vijay Kumar and others in the property was only 30%, and the fair market value of this interest did not exceed the apparent consideration by more than 15%.

3. Validity of the Compromise Decree:
The compromise decree, which determined the interest of Smt. Champa Devi and others at 70%, was initially not admitted by the Tribunal. The High Court held that the decree should be considered, as it was executed after the Competent Authority's order. The Tribunal, upon remand, accepted the decree and found no evidence to prove it was collusive. The Tribunal concluded that the interest of Shri Vijay Kumar and others was only 30%, and the fair market value of this interest was Rs. 1,64,500, which did not exceed the apparent consideration of Rs. 1,85,000.

4. Compliance with Mandatory Provisions of Section 269D(2):
The transferors argued that the mandatory provisions of Section 269D(2) were not complied with. The Competent Authority, however, stated that the notices were duly published in the Official Gazette and served upon the transferors and transferees. The Tribunal found that the provisions were complied with, and the High Court did not find any fault in this regard.

5. Consideration of Additional Evidence and High Court's Directive:
The High Court directed the Tribunal to reconsider the fair market value, taking into account the compromise decree and the interest actually transferred. The Tribunal, upon reconsideration, found that the fair market value of the interest of Shri Vijay Kumar and others did not exceed the apparent consideration by more than 15%. The Tribunal set aside the order of the Competent Authority, holding that the acquisition proceedings were not justified.

Conclusion:
The Tribunal allowed the appeals, concluding that the fair market value of the property did not exceed the apparent consideration by more than 15%, and the conditions for acquisition under Section 269C were not met. The order of the Competent Authority was set aside, and the acquisition proceedings were held to be illegal.

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