Scope of Sec.269(c). - Income Tax - 1327/CBDT

INSTRUCTION NO. 1327/CBDT Dated: April 2, 1980 The board has examined the question whether it is obligatory on the part of the competent authority to acquire the property in every case in which it is found that the fair market value as on the date of execution of the instrument of transfer exceeds the apparent consideration by more than 25% of the latter. 2. Section 269(C)(2)(a) provides that where the fair market value of the property exceeds the apparent consideration by more than 25% it should be conclusive proof that the consideration for the transfer has not been truly stated in the instrument of transfer. This by itself is however, not sufficient to make the property liable to acquisition. It is further necessary for the competent authority to give a finding that the under-statement of the consideration has been made with one of the objects mentioned in above section. Where it is found that the consideration has been understated section 269(c)(2)(b) raises a rebuttable presumption that the object of the under-statement is one of those mentioned in clauses a and b of sub-section i. Sub clause (a) of the same sub-section as also to cases which do not fall under sub clause a. Even in a case in which the fair market value exceeds the apparent consideration by more than 25% and it is therefore held to be conclusively proved that the consideration has not been truly stated in the instrument of transfer it is further necessary for the competent authority to give a finding that such understatement has been made with one of the objects mentioned in sec.269(c)(1) a and b. If the party concerned is able to prove that such understatement has not been made with the object of facilitating the reduction or evasion of the liability of the transferor to pay tax in respect of any income arising from the transfer or facilitating concealment of any income or any moneys or other assets by the transferee, the competent authority cannot acquire the property. In other words even in a case in which the fair market value on the date of execution of the instrument of transfer exceeds the apparent consideration by more than 25%, the competent authority will have to examine whether any tax evasion is involved and it is only in the event of tax evasion being involved that he can pass an order of acquisition.