9911796707
TMI Blog1988 (11) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... said property had been sold for Rs. 17,00,000. In receipt of the aforesaid form No. 37G, the Competent Authority issued a preliminary enquiry letter to the transferee on 12th April, 1986 asking for the various details including the lay out plan of the building with floorwise covered area, the state of the property whether it was tenanted or in self possession, whether free-hold or leasehold and whether industrial, commercial or residential etc. In response to the aforesaid letter dt.12th April, 1986, the transferee submitted the following documents for this consideration: 1. Agreement to sell dt.25th June, 1985between Shri P.C. Baweja and M/s Ganga Automobiles Pvt. Ltd. 2. Agreement to sell dt.21st Oct., 1985between Shri P.C. Baweja and M/s Ganga Automobiles Pvt. Ltd. 3. Agreement to sell dt.5th Dec., 1985between Sh. P.C. Baweja and M/s G. Sagar Suri Sons (HUF) 4.Saledeed dt.4th Feb., 1986 5. Stamp Duty Challan for Rs. 1,36,000 6. Brokerage paid Rs. 31,000 and 7. Layout Plan. The aforesaid documents were also submitted by the assessee to Sri P.K. Kohli, District Valuation Officer, IT Department, for the Competent Authority had in the meanwhile asked him i.e. the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the concealment of any income or any moneys or any other assets which have not been or which ought to be disclosed by the transferee for the propose of the Indian IT Act 1922 or the IT Act, 1961 or the WT Act, 1957. Therefore, in accordance with the provisions of s. 269C of the IT Act, 1961, I am initiating acquisition proceedings for the above mentioned property by issue of notice under s. 269D(1) of the IT Act, 1961." The computation of the value at Rs. 29,76,000 as mentioned in the aforesaid reasons has been given on the reverse of the reasons recorded and it may also be reproduced here below for ready reference as follows: "The property S-24, Green Park Extn. measures 200 sq. yds. and is situated in a commercial area as has been reported on page 13 of the Sale Deed. The land is free hold and it has constructed area of over 4,800 sq. ft. A part of the property has been stated to be on rent with M/s Ganga Automobiles Pvt. Ltd., but this again is a family concern of the Vendees. Neither the date of tenancy nor particulars of annual rent etc. has been mentioned. However, the tenancy appears to be of recent creation and that too with a view to sell the property to the tenant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for 15 years. In this manner, the total value came to Rs. 57,37,200. The land and building method was adopted by the Valuation Officer on the ground that, "the vendee got the vacant possession of the property." For arriving at the value of Rs. 29,375 per sq. mtr, for the land the Valuation Officer adopted the exemplar of the following properties : 1. No. 17-Yusaf Sarai,New Delhi. The plot area of which was 225 sq. mtrs. The same was sold on30th July, 1984. It was leasehold property. 2. Another property referred to by the Valuation Officer was 22-Yusaf Sarai,New Delhihaving area of 150 sq. mtrs. It was sold on2nd Jan., 1984. The FAR of both the aforesaid properties was much higher than that of the property under consideration and, therefore, the Valuation Officer adjusted the value of the aforesaid exemplars to arrive at the valuation of the property under consideration. 6. The assessee challenged the aforesaid valuation report of the Valuation Officer and raised many queries about it and it was requested by the assessee that the departmental Valuation Officer may be made available to the assessee for cross examination on the basis of a questionnaire prepared by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, commercial potential, etc., the same also have to be taken into consideration. Even if the FAR of the subject property is assumed at 1.66 (but certainly not admitted) the average rate for the subjected property would work out to over Rs. 19,000 per sq. yd. as below: . B-2/2, Safdaring Enclave M-46, G.K II, M-5, G.K. II, Commercial B-1/16, Hauz khas J-10, Green Park Land rates for the givenFARsas worked out in 11(i). 8350 10,166 18,400 9,7 41 7,267 Adjustments : . . . . . For time gap @ 12 per cent p.a, ( )12% ( )15% ( )11% ( )12% ( )14% For FAR of 1.66 of the property. (+) 12% (+) 22% (+) 4% (+) 11% (+) 90% For free-hold nature of subject property (+) 22% For commercial nature of subject property (+) 100% (+) 100% (+)100% (+)100% Net adjustment: (+) 112% (+)107% ( ) 7% (+) 99% (+)176% . ( )9352 ( )11177 ( )1288 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being taken at 3.54. According to him, the FAR was only 1.66 for that was the authorised figure and not 3.54. The objection was also taken to the presumption raised both by the Valuation Officer and the Competent Authority that vacant possession had been given by the vendor to the vendee at the time of the purchase. It was pointed out that M/s G. Sagar Sur Sons (HUF), the vendee took the property subject to the tenancy of M/s Ganga Automobiles Ltd. and, therefore, the presumption of the proceedings on the ground that no finding had been recorded by the Competent Authority with regard to the motive of the transferor and the transferee to evade taxes as visualised under s. 269C(1) and that there was no material whatsoever before the competent authority to initiate the proceedings in question. Reference was made to the judgment of CIT vs. Arun Mehra (1985) 49 CTR (Del) 119 : (1985) 157 ITR 308 (Del), in this regard to contend that when proceedings were initiated without due material and application of mind the proceedings in question deserve to be quashed. The learned Competent Authority however, brushed aside the above objections as to the initiation of proceedings by observing, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Rent capitalisation method: Rs. 46,66,800 (ii) By Land and Building method: Rs. 75,05,000 (iii) By comparable sale instances: Rs. 63,50,000 The value determined by rent capitalisation method should be even more for the reason stated inPara14. On considering together the value arrived at on the basis of three different methods of valuation adopted, it would thus be a highly conservative estimate to take the FMV at Rs. 50 lakhs." 11. On the basis of the aforesaid findings, the learned Competent Authority passed the order of acquisition, after obtaining the permission of the CIT in the normal course. 12. Against the aforementioned order of the Competent Authority, the appellants have filed the present appeals. The counsel for both the appellants was the same and he argued both the appeals on similar lines. They are, therefore, being disposed of by a combined order, for the sake of convenience. 13. In respect of appeal No. 5, the following objections were, inter alia, taken by the assessee's learned counsel: (1) That the initiation of the proceedings under s. 269C was void ab initio for the following reasons: (a) the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o had valued the property in question at Rs. 57,37,200. In this connection, the learned counsel took us through the various questions which the assessee wanted to ask the Valuation Officer and which were, according to him, all relevant and which were not answered by Competent Authority. The questions numbering in all 32 have been given at pages 324 to 335. Without meeting these objections, according to him, a valid order could not have been passed by the Competent Authority. 15. The following points were also made out by the learned counsel: (1). That it was not correct to proceed on the footing that the property acquired fell Group 3 of the Schedule issued by Land Development Office showing the valuation of lands in various areas of Delhi. (2). That the various sale instances relied upon either by the DVO or by the learned D.R., were distinguishable on facts and did not relate either to the year in which the sale of the present property was made or to the approximate vicinity where the property in question was situated. In this connection, our attention was invited to paragraph 61 appearing at page 258 of the assessee's paper book, para 7 appearing at page 244, paras 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inee. M/s G. Sagar Suri Sons (HUF) was the nominee of Ganga Automobiles and, therefore, it was wrong to say that when possession was handed over by Mr. Baweja the possession was not a vacant the possession. All the tenants other than M/s Ganga Automobiles were asked to vacate the premises and to them, according to the learned Departmental Representative, Rs. 6 lacs were paid by Sh. Baweja for vacation and thereafter the premises were handed over to M/s Ganga Automobiles, who nominated M/s G.Sagar Suri as the vendee. Even the agreement to sell dt.5th Dec., 1985between Sh. Baweja and M/s G. Sagar Suri Sons (HUF), the nominee of M/s Ganga Automobiles Ltd. mentions this fact, vide cl.8 which reads as below: "The Vendor hereby confirms that Vendor had handed over the possession of the whole of the premises to the Vendee at the execution of this agreement," Therefore, according to the learned Department Representative, the presumption of the learned Competent Authority that the property was not a tenanted one, when it was purchased, and that the tenancy in favour of M/s Ganga Automobiles was created lately was not wrong. He also drew our attention to the file of K-114, Hauz Khas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion makes it clear that before the competent authority can initiate proceedings for the acquisition of any immovable property under s. 269D(1) he must have reason to believe that any immovable property of a fair market value exceeding Rs. 25,000 had been transferred by the transferor to the transferee, that the transfer has been effected for an apparent consideration which is less than the fair market value of the property and that the consideration for such a transfer as agreed to between the parties had not been truly stated in the instrument of transfer with the objects mentioned in cls. (a) and (b) of s. 269C(1) of the Act. It is true that s. 269C(1) of the IT Act, 1961, involved the exercise not judicial or quasi-judicial but administrative powers as held in Rai Bahadur G.V. Swaika Estate P. Ltd. vs. M.N. Tewari (1980) 16 CTR (Cal) 75 : (1980) 126 ITR 310 (Cal). Although the Court exercising its writ jurisdiction cannot question the sufficiency or adequacy of the reasons for formation of the belief by the competent authority it is certainly entitled to know whether or not all the conditions precedent for the formation of such a belief existed an whether the competent authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio of the aforesaid judgment of Arun Mehra could not, therefore, be taken advantage of by the learned counsel for. 21. Coming to the merits of the case, the learned Deptt. Representative wanted us to have much greater regard to the actual facts of the case rather than to the theoretical overtone in the argument of the learned counsel for the assessee. According to him the constructed area as worked out by the Valuation Officer was the correct one as he had physically measured the area and any different version from his should be rejected by us because the assessee had not taken the stand that the learned Valuation Officer have not undertaken the physical measurements and that those measurements were demonstrably wrong. The location of the area was in the heart of the commercial centre of Uphar market and, therefore, the learned competent authority was entirely justified in going by the impression that the property in question was commercial. It was being used for commercial purposes by the transferee itself and even prior to that since its construction, the property was being used for commercial purposes. The commercial use of the property had been recognised by the Municipal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only the land and building method but also comparable sale method, as well as yield method. His final estimate of the fair market value was based on such a broad conspectus of facts and events and, therefore, to say that the estimate of fair market value arrived at by him was not correct, would not be justified. The learned Deptt. Representative illustrated the absurdity of the apparent consideration being Rs. 17 lacs by pointing out that the transferee had got much more from the tenant, M/s Ganga Automobiles than was the apparent consideration of the property in so far as he had been given not only the security of Rs. 10 lacs but the advance rent to the extent of Rs. 10,80,000 vide cls. 4 and 12 of the lease-agreement dt.19th Dec., 1985placed at pages 72 and 73 of the assessee's paper book. M/s Ganga Automobiles, May it be remembered, were the original party to the agreement to sell with M/s P. C Baweja, and it is they who had nominated Sagar Suri Sons for purchasing the said property for Rs. 17 lacs, when the property in question was, according to the estimate of Ganga Automobiles itself, worth Rs. 30,000 p.m by way of rent and in respect of which they agreed to pay Rs. 20,80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer's report was, of course, open to objections which the assessee could raise under s. 269E of the IT Act, 1961, but the learned counsel could not insist that the Valuation Officer be produced for cross-examination. The assessee had raised objections against the valuation report and the learned Competent Authority had met them in his own way. No irregularity on this account could, therefore, be read into the order of the learned Competent Authority. 24. The learned Deptl. Res. referred to the valuation report of the assessee's approved valuer and pointed out that it was based not on physical measurement of the property but on the basis of the papers, which were supplied to him by the assessee. Therefore, according to the learned Deptt. Representative, the area which was taken by him for working out the value of the structure could not be relied upon. Besides it is pointed out that the structure was insured by the transferee for Rs. 15 lacs soon after its purchase. Its valuation at about Rs. 4 lacs by the approved valuer was prima facide ridiculously low. It is also stressed by the learned Deptt. Representative that the assessee's approved valuer had taken up instances of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as he had called for report of the Valuation Officer for the purpose of enabling him to make up his mind as to whether or not he should initiate action under s. 269C(1) in the present case but instead of waiting for the report of the Valuation Officer he initiated the proceedings on the basis of his own working. It was clearly wrong and, according to him, the action of the learned IAC was in fact based on no material and, therefore, it was Arun Mehra's case which applied to the facts of the present case and therefore, he requested that we should quash the proceedings. He drew our attention to the judgment of the Hon'ble Bombay High Court in the case of Unique Coop. House Building Society Ltd. vs. Union of India Ors. (1985) 152 ITR 114 (Bom) and to the judgment of the Hon'ble Supreme Court in the case of K.P. Verghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC) and submitted that on the basis thereof, the departmental case should be rejected because on evidence whatsoever has been brought on record to show that there was in fact understatement of the fair market value in the sale deed. 26. Coming to the facts of the case, he stressed that Varandha on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs but according to him that would not given an estimate of the value of the structure and both the competent authority and the Deptt. Representative had been wrong in referring to this fact 27. In the case of ACC. Appeal No. 6 of 1988, filed by M/s Ganga Automobiles, the only extra point added was that notice under s. 269D(2) had not been served on Gana Automobiles within nine months and its name was not found mentioned in the notice printed in the Gazette under s. 269D(1) and that, therefore, the proceedings in question were void ab initio. Reference in this connection was made to the following authorities: 1. CIT vs. Amirt Sports Industries (1983) 36 CTR (P H) 121 (FB) : (1983) 144 ITR 113 (P H) (FB) 2. CIT vs. Smt. Phoolmati Devi (1983) 35 CTR (All) 331 : (1983) 144 ITR 954 (All). 28. On behalf the Revenue, the learned Deptt. Representative pointed out that notice under sub-s. (2) of s. 269D had been duly served on M/s Ganga Automobiles Pvt. Ltd and there was no time limit of nine months for the service of the notice under s. 269D(2). Under s. 269D(1), there was no mandate regarding the name of the tenant being included. He drew our attention to the decision of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea of over 4,800 sq. ft (5) That though the property was on rent with M/s Ganga Automobiles Pvt. Ltd., it was a family concern of the vendees and that the tenancy appeared to be of recent creation and that too with a view to sell the property to the tenant as was clear from the perusal of agreements to sell and the sale deed. (6) That the land and building method was the correct method for valuing the aforesaid property. (7) The cost of construction of 4,800 sq. ft. @ Rs. 150 would be Rs. 7,20,000 and that after allowing depreciation of 20 per cent approximately out of the aforesaid value of the super structure, the adjusted value would be Rs. 5,76,000. (8) That land rates in the area where the property was situated for residential plots varied at the relevant time between Rs. 5,000 to Rs. 6,000 per sq. yd. and that the rates for commercial plots were 2 to 3 times the rates of residential plots (9) That property No. K-114, Hauz Khas Enclave, a residential one measuring 500 sq. yds. was sold for Rs. 35 lacs and that the vendor had himself estimated the value of the land @ Rs. 5,500 per sq. yd. in Nov., 1985. (10) That in comparison, the property under consideration was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leasehold lands is also common knowledge and the correctness of this proposition has not been disputed. To what extent, there would be difference in the price of the leasehold land and the price of the freehold land would again be a matter of opinion. At the stage of forming of the belief, as has been rightly stressed by the learned Deptt. Representative, the Court has merely to look at the evidence which was on record and see whether there is any live link between the formation of the belief by the competent authority and the said evidence. The Court cannot go into the adequacy or sufficiency of the evidence at this stage. The evidence on record must, of course, be relevant evidence. If any authority for the above view is needed, one may refer to the judgment of the Hon'ble Supreme Court in the case of S. Narayanappa vs. CIT (1967) 63 ITR 219 (SC). We have, therefore, to see the facts of the present case in the light of the law as laid down by their Lordships in the aforementioned case and which has also been by their Lordships of Hon'ble Delhi High Court in the case of Jawahar Lal. vs. Competent Authority Ors.. When we view the facts stated as above and the reasons recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on this basis would, in our opinion, be against the law as laid down by their Lordships of the Hon'ble Supreme Court in the case of S. Narayanappa for that would amount to going into the adequacy or sufficiency of evidence which consists of not only one item but numerous other items as enumerated above. We are, therefore, unable to accept the assessee's submission that there was no material before the competent authority to come to the tentative conclusion that the value of the said property would be Rs. 29,76,000 as against the apparent consideration of Rs. 17 lacs stated in the sale deed. 34. That brings us to the question of motive of the sale for the purpose of avoiding tax payments by the transferor and the transferee. In this connection, both the competent authority and the learned Deptt. Representative have based themselves on the presumptions raised in this regard by cls. (a) and (b) of sub-s(2) of s. 269C which read as below: "(2) In any proceedings under this Chapter in respect of any immovable property (a) where the fair market value of such property exceeds the apparent consideration therefor by more than twenty-five per cent of such apparent consideration, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated in the instrument of transfer with such object as is referred to in clause (a) or cl. (b) of sub-s. (1). The Hon'ble Punjab Haryana High Court has held in the case of Sutlej Chit Fund and Financiers Pvt. Ltd vs. CIT that the aforesaid two presumptions are available to the ITO even at the stage of initiation of proceedings under s. 269C(1) for acquisition of property. The following observations of their Lordships of the Hon'ble Punjab Haryana High Court may be noted with advantage that this stage: ":The words used in the opening part of sub-s(2) are "in any proceedings under this Chapter". The reason given is that the proceedings are initiated under s. 269D (1) only when the notice is published in the Official Gazette, because the word "proceedings", according to the learned judge, has to be interpreted carrying the same meaning throughout the whole Chapter. With due respect to the learned judge, we are unable to subscribe to this view. The word "proceedings" has to be interpreted in the context in which it has been used in the various sections. The word "for the acquisition of such property". Similarly, this word has been qualified in sub-s. (1) of s. 269D. The word " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Authority may not initiate proceedings if he is of the opinion that the presumption stands rebutted from the other circumstances narrated in the instrument of transfer itself. So, the discretion conferred on the Competent Authority in no way would be fettered by the presumption available under sub-s. (2)(b). However, if there are no such circumstances available rebutting the presumption, the word "may" shall operate like "shall" the Competent Authority has to initiate proceedings, in discharge of the obligation imposed upon him by virtue of the provisions of s. 269C." The following observations appearing at pages 186 and 187 also deserve to be noted: "Now, we may notice our reasons for taking the view that the presumption contained in sub-s.(2) of s. 169C would be available even during the proceedings prior to the publication of the notice under s. 269D initiating proceeding for the acquisition of the property. Firstly, if the material is already available on the record for the Competent Authority in form a belief that the consideration has been understated with the objects contained in cl. (a) or cl. (b) of sub-s. (1), there would be no necessity to make a provision for rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78 (Cal). 3. Unique Associates Cooperative Housing Society Ltd. vs.UnionofIndia. The observations made by their Lordships of Punjab Haryana High Court for the aforesaid case are in consonance with the observations made by their Lordships of the Hon'ble Delhi High Court in the case of Mahavir Metal Works Pvt. Ltd. vs. Union of India at page 217,218 and 219 of 95 ITR. We would, therefore, hold that the initiation of the proceedings in the present case by the learned competent authority was in accordance with the law as laid down in s. 269C. 37. That brings us to the merits of the case namely whether the valuation as finally arrived by the learned competent authority is justified. The contention of the learned Deptt. Representative was that the provisions of s. 269C and the subsequent provisions contained in s. 269F did not require of the competent authority to determine the exact price of the property which was acquired by him. The law merely required that he should be able to show that the property which had been acquired by him had fair market value more than 15 per cent of the apparent consideration mentioned in the sale deed. Sub-s. (6) of s. 269F was read in this connect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appear to us to be erroneous. Atleast the assessee did not place on record anything to show that the above working of the net A.L.V. was not correct. The above value namely Rs. 26,38,970 does exceed the apparent consideration of Rs. 17 lacs by more than 25 per cent of the above, namely Rs. 4,25,000. That being so, the order of acquisition by the competent authority would stand justified. 38. The land and building method adopted by the competent authority and the assessee's own Valuation Officer would, in our opinion, yield a much higher fair market value even if the assessee's contention be taken at its face value and we so take it that the FAR of the property in question was only 1.66 and not 3.54. The figure of Rs. 19,120 per sq. mt. worked out by the competent authority in paragraph 28 taking FAR of 1.66 appears to us to be correct. Rounding it upto Rs. 13,000 per sq. mt., the value of the assessee's plot area (167 sq. mt.) would be Rs. 31,73,000 approx. To this if the value of the super structure as worked out by the assessee's own valuer be added namely Rs. 4,04,790, the fair market value of the aforesaid property would work out to Rs. 35,77,790. The aforesaid valuation el ..... X X X X Extracts X X X X X X X X Extracts X X X X
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