9911796707
TMI Blog1988 (7) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... peals were heard on 12th May 1988 the Bench had passed an order for inspecting the property in question i.e.6.prithvi Raj Road, on 13th May, 1988 and the Bench accompanied by the learned counsel for the appellants and Departmental representative accompanied by the IAC (Acq) had been to the site. After inspection the Revenue was required to furnish by the bench on the next hearing the following information; (i) Whether Urban Ceiling Act applied to the said property; (ii) restriction under any law for further construction; and (iii) plan submitted to the municipality for repairs etc; and (iv) to enlighten local laws relating to the construction. After that these cases were heard on6th June, 1988to8th June, 1988in continuity, when the same came to be finalised and were marked for orders. After these cases were finalised there came a petition from the side of the Revenue signed by Shri A.K. Manchanda as authorised representative to make a grievance that after the cases were finally heard the Hon'ble President, who was presiding the Bench, sought certain information from the counsel of the appellants and that the same was objected to by the Revenue. It was pointed out that Bench wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was entered into. It was also stipulated in the said agreement that the agreement was being entered by the purchasers for and on behalf of and for the benefit for the persons whose names could be given. It was also stipulated therein that the purchaser would have the right to have the sale deed executed in its own name or in the name of various persons or nominee/nominees for whom the purchaser would Act as contractors to the building to be built on this plot of land. Smt. Urmila Devi has signed the said agreement as vendor whereas on behalf of the vendee M/s Cycle Equipment Pvt. Ltd. Shri Ram Nath Agarwal its Managing Director, had signed the same as purchaser. One of the important stipulations of the said agreement was that in case the registration of the sale deed did not go through, the vendee shall be the tenant of the said property for twenty five years @ Rs. 5,000 as annual rent. Some time in middle of May, 1978 there arose a dispute between Smt. Urmila Devi and M/s Cycle Equipment Pvt. Ltd and on 18th May, 1978, Shri P.S. khan delwal, Advocate, on behalf of Shri R.N. Aggarwal, Managing Director of the purchaser Company served a legal notice on Smt. Urmila Devi making the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seller, both in respect of 6 Prithvi Raj Road and 34 Alipur Road which is at pages 28&29 of assessee's compilation with annexures, the civil litigation went on. On25th March, 1984a memorandum of accord and compromise came to be drawn between Smt Urmila Devi, the defendant M/s Cycle Equipment Pvt. Ltd. and M/s Rohit Tower Building (P)Ltd. And an application under O.6.r.17 r/w s. 151 CPC was also placed before the Honble High Court of Delhi supported by the affidavits and on that very date amended plaint in the said suit for specific performance was placed before their Lordships. One of the important conditions of the compromise was that towards the sale of 6, Prithvi Rahj Road, M/s Rohit Tower Building (P) Ltd. shall be paying Rs. 35 lacs (i) 17.5 laksh on the signing of the memorandum and delivery of actual vacant physical possession of the said building and (ii) balance of Rs. 17.5. lakhs iat the time of registration. Smt. Urmila Devi shall be paid Rs. 5,000 p.m. till balance of Rs. 17.5 lakhs is received by her On9th March, 1984the Hon'ble High Court passed a decree in terms of the compromise placed before the High Court. M/s Rohit Tower Building (P) Ltd. Paid a sum of Rs. 5lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e office of the sub registrar, preliminary notice was issued for filing necessary details These were filed by the transferee and these have been examined. The transferee has claimed that there was an agreement to sale of this property in 1975 hence property should be valued on the date of agreement. I have examined this claim. The agreement to sell is not registered but the existence of such agreement cannot be dernied in view of the materials filed before me so the agreement to sale, though unregistered, cannot be ignored at all so far determination of the issue whether this is or not an object of tax evasion in the transfer of the subject property. Under these circumstances, I am determining the FMV on both the dates as on the date of agreement as on the date of execution of sale deed. The office of the L&DO has fixed the minimum base price for charging an unearned income at Rs. 250 Per sq. yd. In Prithvi Raj Road w.e.f.14th April, 1974vide Ministry of Works & Housing Memo No, K22011/2173-LII dt.7th May 1974for time gap of 15 months I made an addition of Rs. 50 per sq. yd. Thus the land rate has arrived at. Rs. 300 per sq. yd. Total area is 12235 sq. yds. 12245 X 300 Rs. 36,73, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable from14th April 1974to which he made certain adjustments He worked out the valuation of the property in question even on the date of nomination at. Rs. 54 lakhs and assigned his own valuation to the property in question, valuing the said property as on5th Dec., 1984, at Rs. 4.17 crores. He attacked in the said order the valuation of the approved valuer and rejected the rates adopted by him in respect of the instances relied upon by the authorised valuer. It will not be out of place to mention that he relied on the sale of four plots at 46, Rettendon Road which were sold at the rate of Rs. 1792 per sq. Metre and ordered the acquisition of the property in question both dealing with the presumptions 1 & 2 under s. 269(C) (2), holding that element of motive of reduction or evasion of tax is further evidenced, both in respect of transferor and transferee The said order acquiring the property in question was passed by him with the prior approval of CIT Delhi II New Delhi on 30th Oct., 1987. It is the said order which is appealed against by the transferee, the transferor and the three tenants. 5. The learned counsel for the assessee originally had placed a voluminous paper book, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage of sale agreement a portion of the property was permitted to be occupied by the purchaser but only after a little while the locks of the said portion were broken open and Smt. Urmila Devi had taken back the possession. He submitted that the learned Acquisition Authority has ignored the initial agreement, the pending litigation the subsequent compromise of final Court decree, On the basis of these facts, he submitted that Rettendon Road property for which the price was taken at the rate of Rs. 1792 sq per yrd could not be termed as a comparable case. He went at length through page 20 onwards of the assessee's compilation. He drew our attention to the fact that the Acquisition Authority has taken into consideration the total area whereas copy of order of competent Authority under Urban land (Ceiling & Regualtion) Act, 1976, through which he had gone at length, as observed above indicates that entire land was not free from encumbrances, such as there were restrictions of construction and fear of acquisition. He pointed out to page 33 as well which is a copy of notification under s. 10(1) ofUrbanLand(Ceiling & Regulation) Act, 1976 dt.25th March, 1987for acquisition of excess vac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. CIT (1987) 59 CTR (Bom) 226 : (1986) 162 ITR 693 (Bom) and CIT vs. Ramkumar Agarwallo and Bros. (1985) 153 ITR 568 (Cal). He attacked the valuation assigned by the Revenue as well and vehemently attacked the rates of land taken by the Acquisition Authority at fabulous amount of Rs. 4,000 per sq. Metre and ultimately summarised that the litigation in form of suit for specific performance, compromise decree on the basis of original agreement promised decree on the basis of original agreement to sell and subsequent high Court decision culminating in the decree, have been ignored by the Acquisition officer while working out the valuation of the property in question. He submitted that as per different papers submitted site, building and restrictions imposed on construction have totally been ignored by the Acquisition Authority. He submitted that the fact that land in question was under Land & Ceiling Act was very much in the knowledge of the Revenue as is clear from the letter produced by the Acquisition Authority at the time of hearing which was never dealt with and conveniently ignored by him while dealing with the issue He also submitted by summarising that there was a litigatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut he submitted that property in question is a huge bungalow belonging to an Explanation Maharani and its area is about 12 thousand and odd sq. yds. He submitted that undoubtedly the agreement dt.17th Nov., 1975was unregistered and therefore in light of s. 269F. (9) the same could not be taken into consideration. He submitted that the original price agreed to in the said agreement was Rs. 18.25 lakhs whereas price on the said date, even of land, as per Land & Development Office worked out to over Rs. 36 lakhs According to him (1980) 15 CTR (Guj) 150: (1980) 125 ITR 301 (Guj) could not come to the rescure of the assessee. He submitted that the consideration given in the said agreement came to be enhanced to Rs. 40 Lakhs. He submitted that Urban land (Ceiling and Regulation) Act, 1976 applies w.e.f.17th Feb., 1976. but it does not apply to the present transaction. According to him, the Urban Land Ceiling Act was not applicable to the instant transaction. Moreover, he submitted that the said plea was never taken by the assessee in the course of acquisition proceedings before the Acquisition Authority. He submitted that the letter dt.12th Aug., 1978was never placed before the competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us grievance of the fact that valuer was never produced in spite of several opportunities were granted to the assessee. He submitted that building was said to be not in existence as per approved valuers valuation and only malba was sold for over a lac of rupees. He drew our attention to page 134 of the assessee's compilation, According to him thus the owner of the property in question was in advantageous position as it was neither to pay rent nor anything on account of earned increase. In support of the above submission he mainly relied on his own order and submitted that every aspect of the matter has been rightly fulfilled factually and he has arrived at the correct legal decision of acquisition in the said property. 8. The authorised representative for the assessee in their rejoinder went through s. 269F,(9) and submitted that even if the agreement was unregistered it did not lose its evidentiary value He drew our attention back to the gazette notification and letter confirming the publication which was available to the public only on 1st Nov., 1985. He reiterated his reliance on the cases cited above He submitted that the report was secured on4th Sept 1985. And reasons were re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1975or5th Dec., 1984were relevant for the purpose of finding out of the fair market value? (8) Whether in view of the litigation and suit for specific performance the agreement of17th Nov., 1975can be acted upon and if so whether rates fixed by the Land & Development office are available as fair market value or they should be scaled down? (9) Whether the comparative sale instances given from both the sides could be relied upon? (10) Whether the excess land declared by the assessee to the urban land Ceiling Act Authorities has any impact on the price fixed between the parties and so the hazard of litigation. 10. We are hereunder giving our reasons for finding's both on the basis of facts and law on the above issues and shall be recording our finding on each issue in the end of this order. There is no controversy about the fact that there was an agreement of sale entered into between the owner Smt. Urmila Devi on the one hand and M/s Cycle Equipment Pvt. Ltd. on the other Photstat copy is placed on assessees compilation and original of which was also shown to us and the learned counsel for the assessee. The only attack made on the said agreement by the Acquisition Authority is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the course of hearing of objections against the proposed acquisition, which necessarily postulates the untruth fulness of the consideration and the ulterior motive of tax evasion, an objector would not be entitled to explain the difference between the apparent consideration and the fair market value by relying on an agreement to sell unless that agreement is registered. It is a part of the entire procedure of hearing objections that the legislature has provided about the quality of evidence, by shutting out any evidence of an unregistered agreement to sell. It does not interfere with vested rights and cannot be construed as a substantive law creating for the first time new disabilities or remedies. It does not in any way curtail or prejudicially affect the rights under an agreement to sell property. Nor does it invalidate the contract or make the agreement ineffective. It is merely a rule of evidence and, therefore, a part of the procedure. It will operate retrospectively. Sec. 269F, (9) only excludes evidence of unregistered agreement for purposes of rebutting the presumption permitted to be raised about the untrue statement of consideration under s. 269C(2)(a). Such agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon by the learned Departmental Representative is on Mahavir Metal Works vs.UnionofIndia(1974) 95 ITR 197(Del). The Hon'ble Delhi High Court observed that on the basis of the valuation report the Competent Authority had the reason to believe that the fair market value of the property transferred was more than the stated consideration. This ruling too does not help the Revenue because in the present case while initiating the proceedings there was no valuation report before the learned Competent Authoritty. On the other hand in CIT vs. Arun Mehra (1986) 49 CTR (Del) 119 : (1986)157 ITR 308 (Del) the Hon'ble Delhi High Court held that at the time of the initiation of the proceedings, no presumption was available to the Competent Authority and it must have material before it to show that the fair market value was more than 15 per cent of the apparent consideration. Further, apart from the mere difference in valuation, the Competent Authority was to have the further reason to believe that the consideration has not been truly stated in the instrument of transfer with the object to facilitating the reduction or revision of tax liability of the transfer of facilitating the concealm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case was regarding agreement with Government, had observed that the presumption under cl. (b) of s 269C(2) is not applicable to the stage when the competent authority forms his belief under sub-s(1) of s. 269C, because there is no "proceeding" at that stage. In this case, single Judge decision reported in Smt. Boni Roy Chowdhry vs. Competent Authority, IAC & Ors. (1976) CTR (Cal) 438: (1978) 112 ITR 111 (Cal) was confirmed. 12.2. This is also supported by Bombay High Court's decision in the case of Unique Associates Co-Operative Housing Society Ltd. vs. Union of India And Others (1985) 152 ITR 114 (Bom). In this case also it was held that presumption that the consideration stated in the document has not been truly stated with the object of evading the tax is available only at the later stage when an inquiry is to be concluded and not at the stage of initiation of proceedings. 13. Regarding the publication of the notice in the gazette, the uncontroverted facts are that the sale-deed was executed on 5th Decision., 1984. It was registered on30th Jan., 1985and in the gazette it was published on26th Oct., 1985, as is evident from copy of notification in the gazette of26th Oct., 1985a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired by s. 269D was made available to the public only after the prescribed period of 9 Months though it had been printed within the said statutory period. It was contended on behalf of the appellants that on the basis of the judgment of the Bombay High Court in All India reporter Ltd. vs. Competent Authority (1986) 162 ITR 697 (Bom), the proceedings for acquisition were not initiated within nine months from the date of sale, and therefore, the proceedings were vitiated. Held, that applying the ratio of that judgment to the present case, the proceedings for acquisition under s. 269F (6) of the Act were invalid." 13.2. The Hon'ble Madras High Court, as well, in the case of Asia Tobacco Company Ltd. vs. Union of India and Others (1985) 45 CTR (Mad) 306 : (1985) 155 ITR 568 (Mad) have held that the date of release to the public is the decisive date and not the date of print or the date of notification, in the following words: "Neither the date of the notification nor the date of printing, nor the date of the Gazette counts for "notification" within the meaning of the rule, but only the date when the public gets notified in the sense, the concerned Gazette is made available to the pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Our attention was also drawn by IAC (Acq) on Hon'ble Gujaraj High Court decision, as per which date of publication is given importance and not the date of availability of gazette to the public. On this issue since again there are two views as per earlier High Court decision cited above, it has been held that date of availability to the public is an important date and not the date of publication. This judgement also could not be fatal to assessee's claim. Similar observation can be made regarding Karnataka High Court decision in the case of Giranar Builders (P) Ltd. vs. IAC of Income-tax (1985 156 ITR 403 (Kar) 17. Once there is no controversy about the fact that notice under s. 269D(1) was served on the transferor and transferee on 12th Sept., 1985 and the same came to be published in the gazette on 26th Oct., 1985, which was made available to the public on 1st Nov., 1985 in light of Delhi High Court decision referred to above, the proceedings were not rightly initiated. 18. Once we have held that the IAC (Acq)had no jurisdiction, all other issues become academic but since both the sides argued at length each and every issue, both regarding legal and factual aspects, we consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e admission of which was objected to by the learned Acquisition Authority, copies were demanded and given subsequently. 19. After we have already held that agreement to sell dt.17th Nov., 1975had evidentiary value, we have to find out whether due to compromise decree granted by the High Court, the said agreement became non est. The reply is clearly in negative because the perusal of bundle of papers, starting from the sale agreement dt.17th Nov., 1975followed by nomination agreement dt. 26th May, 1978 and proceeded by the legal notice by Shri Khandelwal advocate of 18th May, 1978 to Smt. Urmila Devi, objecting the eviction of the portion of the part of the building, which was said to have been taken per force by Smt. Urmila Devi and correspondence between the two advocates with a copy of suit filed by Cycle Equipment Pvt. Ltd., originally and thereafter, introduction of M/s Rohit Tower Building (P) Ltd. as nominee in the said plaint as co-plaintiff with detailed copy of memorandum of accord and compromise dt. 25th March, 1984, which is available on pages 34 to 40 of assessee's compilation, all go to show that everything originated from the sale agreement dt.17th Nov., 1975. Many q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he approved valuer and the official valuers, but we are not concerned nor we are required to make any observations on the types of valuations which are coming from either sides from time to time. Cases are not wanting where Valuation Cell in respect of the very same building on four references has given four different valuations. Similar is the situation on the part of approved valuer. Even a common man knows that inDelhione could not hold more than 500 sq. yds. of land since the inception of Urban Land & Ceiling Act, but unfortunately this aspect was ignored, not by both the valuers that of the assessee and the Revenue, but even by the Acquisition Authority. The IAC (Acqn) went on to assign the valuation of Rs. 4,07,92,000 against that of Rs. 3,05,42,000 by the valuation officer. The most important aspect of the matter that the hazard of litigation and Damocles sword of Urban Land (Ceiling & Regulation) Act, 1976 on the property with several other restrictions and specially when Smt. Urmila Devi had entered into an agreement, would there be a buyer for the said property, even for the sum for which it has been sold. In these days of rising prices of land, apparently it looks that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an owner of an adjoining property to whom it may have some very special advantage (15) The evaluation of these factors, of course, depends on the facts of each case. There cannot be any hard and fast or rigid rule. Common sense is the best and most reliable guide. For instance, take the factor regarding the size. A building plot of land say 500 to 1000 sq. yds. cannot be compared with a large trade or block of land of say 10000sq. yds. or more. Firstly while a smaller plot is within the reach of many, a large block of land will have to be developed by preparing a lay out, carving out roads, leaving open space, plotting out smaller plots, waiting for purchasers (meanwhile the invested money will be blocked up) and the hazards of an entrepreneur. The factor can be discounted by making a deduction by way of an allowance at an appropriate rate ranging approx between 20% to 50% to account for land required to be set apart for carving out lands and plotting out small plots. The discounting will to some extent also depend on whether it is a rural area or urban area, whether building activity is picking up, and whether waiting period during which the capital of the entrepreneur would be l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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