9911796707
TMI Blog1981 (10) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... ment are Narayana Iyer and Smt. Chellammal. These properties belonged to one late Parameswara Iyer, elder brother of Narayana Iyer and husband of Smt. Chellammal. He died on 14-10-1963. At the time of his death, the building in the first property had been let out to Associated Engineering Corporation (P.) Ltd., while he and his wife used the building in the second property for the purpose of their residence. He died leaving a will which provided a life interest to Smt. Chellammal in the three properties and a reversionary interest to Narayana Iyer. 2. As mentioned earlier only one document was executed by these two persons, namely, Narayana Iyer and Chellammal, transferring their respective interests in the three properties. The following recital in the English translation of the document would appear to be relevant for the purpose of this appeal and, therefore, extracted: "Accordingly for all our rights in the properties, a sum of Rs. 1,85,000 determined as the price of the right of the first of us and of Rs. 60,000 as the price of the right of the second of us was agreed to be paid by you under an agreement dated 15th September, 1977 under which a sum of Rs. 10,001 was receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which ought to be disclosed by the transferee for the purpose of Income-tax Act, 1961, or the Wealth-tax Act, 1957, proceedings under section 269D was initiated." 4. After the initiation a reference was made to the valuation cell which estimated the fair market value of the property at Rs. 7,24,000 as against the stated consideration of Rs. 2,45,000. The competent authority took into account this valuation and then resorted to the presumption under section 269C(2) of the Act and held that the disparity between the market value and the stated consideration is sufficient to establish that there was conclusive proof that consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer. Various contentions were raised on behalf of the transferees before the competent authority regarding the correctness of the determination of the fair market value by the valuation cell and the correctness of the jurisdiction assumed by the competent authority based upon the presumptions contained in section 269C. The competent authority did not accept these contentions and held that the property should be acquired under section 269F(6) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resumptions in section 269C to come to the conclusion that the transferors and the transferees entertained such objects. It is submitted that the jurisdiction thus assumed by the competent authority is not a valid jurisdiction. Reliance in this regard is placed on several decisions of the High Courts and particularly on the following : CIT v. Smt. Vimlaben Bhagwandas Patel and Smt. Kamlaben Kanjibhai Patel [1979] 118 ITR 134 (Guj.) ; Jai Kumar Kankara v. Competent Authority [1981] 130 ITR 595 (Cal.) and Sarabhai M. Chemicals (P.) Ltd. v. P.N. Mittal, Competent Authority [1980] 126 ITR 1 (Guj.). 7. It is pointed out that the valuation by the valuation cell was subsequent to the initiation. Even if it is to be conceded that the valuation by the valuation cell of the fair market value is correct, the report was not available to the competent authority at the time of the initiation of the proceedings under section 269D and, therefore, there was in fact no material that there was an understatement of consideration. In the absence of any such material there was also no material for the belief entertained by the IAC (Aqn.) that there was an object of tax evasion entertained either by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, they should not be given the same meaning as have been given in respect of the interpretation of section 147. Distinguishing the decision of the Calcutta High Court in Smt. Bani Roy Choudhury v. Competent Authority [1978] 112 ITR 111, on the ground that the competent authority in that case did not appreciate the fact that the transferor was the Life Insurance Corporation and, therefore, had misdirected himself, it is submitted that that decision may not be an authority to rule out an action by a competent authority under section 269D read with section 269C on an appreciation of the prima facie position obtaining in any other case. It is submitted that most of the cases did concede that the disparity in paying the apparent consideration and the fair market value could be a prima facie ground for initiating action under section 269C. Reliance is placed in this regard on the decision of the Delhi High Court in Mahavir Metal Works (P.) Ltd. v. Union of India [1974] 95 ITR 197 and of the decisions of the Gujarat High Court and Calcutta High Court in Sarabhai M. Chemicals (P.) Ltd. and Rai Bahadur G.V. Swaika Estate (P.) Ltd. v. M.N. Tewari [1980] 126 ITR 310 (Cal.). It is submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in T.V. Suresh Chandran cannot help the transferees here because in that case what was transferred were identifiable separate plots of land to the different transferees even though the document was only one. Here not merely the document is only one but the property has been transferred jointly without any specific shares to the five persons. We are, therefore, unable to accept this submission made on behalf of the transferees that there would have been 30 separate proceedings initiated under section 269D. 12. We, however, consider that the other ground through which the jurisdiction of the IAC (Aqn.) has been assailed by the transferees should prevail. We have perused the report of the Inspector. In this report the Inspector has given a description of the location of the property, the measurements of the two buildings, the state of repairs of the buildings at the relevant time, the rent that is derived in respect of the property adjoining M.G. Road that was let out and an item of sale on 27-2-1975 at the rate of Rs. 15,000 per cent of a land by the side of M.G. Road. After detailing all these the Inspector worked out a fair market value of the property at Rs. 3,24,000 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are satisfied. The fair market value of the property is higher than the sum of Rs. 25,000 stipulated in the section. It may also be said that the fair market value of the property is more than the apparent consideration. Nevertheless it cannot be said that there was any valid basis for the competent authority to entertain the belief regarding the object of tax evasion either by the transferor or by the transferee or by both of them. It is clear from the report of the Inspector and the order passed by the competent authority on such report that the competent authority has merely, on the basis of the disparity between the fair market value and the stated consideration in the document come to the conclusion that either of the two positions given in clauses (a) and (b) of sub-section (1) of section 269C are satisfied. In this connection we have to take into account the recent decision of the Supreme Court in the case of K.P. Varghese v. ITO [1981] 7 Taxman 13. It has been held in connection with the interpretation of section 52(2) of the Act that understatement of the consideration in respect of the property transferred was one of the necessary conditions and that the onus of proving u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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