1992 (2) TMI 188 - AT - Income Tax

Summary

Issues Involved:
1. Time limit for initiation of acquisition proceedings under Section 269D.
2. Availability of material or evidence to establish understatement of consideration.
3. Validity of individual notices issued to the appellants.
4. Determination of fair market value of the property.

Detailed Analysis:

1. Time Limit for Initiation of Acquisition Proceedings:
The appellants contended that the acquisition proceedings under Section 269C were initiated beyond the prescribed time limit under Section 269D. The agreement of sale was registered on 16th November 1985, and the notice was published in the Official Gazette on 4th October 1986, exceeding the nine-month period ending on 31st August 1986. The Tribunal held that the initiation of proceedings was barred by limitation, rendering the acquisition order invalid.

2. Availability of Material or Evidence:
The appellants argued that the Deputy Commissioner of Income Tax (Dy. CIT) did not have material or evidence to establish that the consideration for the transfer was understated with the object of tax evasion. The Tribunal referenced the Supreme Court's ruling in K.P. Varghese vs. ITO, which requires proof that the consideration was understated and that the assessee received more than what was declared. The Tribunal found no such material or evidence in the impugned order, thus invalidating the acquisition proceedings.

3. Validity of Individual Notices:
The appellants contended that the use of the conjunction "and/or" in the notice created ambiguity, indicating that the Dy. CIT had not formed a clear opinion on whether the transfer was for tax evasion or concealment of income. The Tribunal upheld this contention, citing the Bombay High Court's rulings in Udharam Aildas Thadani and All India Reporter Ltd., which emphasize the necessity of a clear and specific belief for initiating proceedings.

4. Determination of Fair Market Value:
The Dy. CIT relied on the Departmental Valuation Officer's report, which valued the property at Rs. 70.55 lakhs, significantly higher than the apparent consideration of Rs. 44 lakhs. The Tribunal found that the sale instances cited by the Dy. CIT were not comparable to the property in question. The Tribunal noted several discrepancies, including the lack of independent sanitary facilities and the property's location on leasehold land for 40 years. The Tribunal also criticized the Dy. CIT for ignoring comparable sale instances provided by the appellants, such as transactions in the same building and adjacent properties. Consequently, the Tribunal held that the fair market value was not properly determined, and the acquisition order was invalid.

Conclusion:
The Tribunal annulled the acquisition order under Section 269F(6) based on the following grounds:
- The acquisition proceedings were initiated beyond the statutory time limit.
- There was no material or evidence to establish that the consideration was understated with the object of tax evasion.
- The individual notices were ambiguous and did not meet the jurisdictional requirements.
- The fair market value was not properly determined, and comparable sale instances were ignored.

Result:
The appeals were allowed, and the acquisition order was annulled.