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TMI Blog1986 (11) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... nd delivered possession of the same to him. An amount of Rs. 5,000 was paid as earnest money under the agreement. Subsequently on 21st Aug., 1976 vendors 1 to 4 under the impugned sale deed formed themselves into a partnership, constructed a mill shed, put up machinery and began to run a flour mill under the name and style of M/s Laxmi Dall and Flour Mill. Out of the total extent of 9293 sq.yds., the first of the vendors viz., Shri N.G.K. Gandhi obtained sale deed from Shri Mohd. Galib for an extent of 898 sq.yds., on 9th Feb., 1976 after paying a consideration of Rs. 14,000 and this deed was registered as document No. 648 in Vijaywada Sub-Registry. 3. One of the stipulations of the agreement dt. 25th May., 1974 adverted to supra, in that the 5th among the vendors under the impugned sale deed viz., Shri Mohd. Galib should join in execution of a regular registered sale deed with regarded to the deed site etc., in favour of any person as desired by Shri N.G.K. Gandhi. The 5th party to the impugned sale deed not only agreed to this stipulation but also put his premise into action. Thus, the 5th party came to execute the impugned sale deed along with 1to 4 parties at vendors. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y at Rs. 37,800 for purposes of considering whether the vendors under the sale deed were entitled to a loan of Rs. 1 lakh applied for or not. The competent authority taking into consideration the inclusive definition of the terms immovable property under s. 269 (2) held that immovable property includes machinery, plant, furniture fittings etc., and therefore, he included an amount of Rs. 37,800 to the estimated value of Rs. 2,95,000 and determined the fair market value of the property which is the subject matter of sale dt. 10th Feb., 1978 at Rs. 3,32,800 as against the stated consideration of Rs. 2,64,000 and ultimately concluded that the difference between the fair market value and the stated consideration was Rs. 68,000 which works out to 21.75 per cent of the apparent consideration and in view of the consumption s under s. 269C (1)(a)(b) he felt that it is a case for acquisition under Chapter XXA of the IT Act and therefore, he ordered acquisition of the property covered by the sale deed dt. 10th Feb., 1978. 5. The first contention of the assessee appellants is that the dall mill was leased out to a partnership deed drawn on 21st Oct., 1977 on an annual lease of rent of Rs. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led before us, it was recognised by the ITO and also a assessment was made on the basis that it is registered firm and so the argument that there was no separate lease deed is liable to be rejected. 7. Shri M.J. Swamy, ld. counsel for the appellants relied upon the decision of the Hon'ble Supreme Court in the State of Kerala vs. P.P. Hassan Koya AIR 1968 SC 1201 where the Supreme Court held that when the property acquired is a land with building it is often difficult to secure reliable evidence of instances of sale of similar lands with buildings proximate in time to the date of acquisition and that therefore, the method which generally restored to in such cases in the method of capitalisation of return actually received or which might reasonably be received from the land and the buildings. In this case the net rent derived over the property is only Rs. 9,900 per annum and even if 20 time of annual rental value is taken to a representing the correct market value of the property it would come to Rs. 1,98,000 only whereas the stated consideration is Rs. 2,64,000. A feeble attempt is also made in which it is contended that the property is not fully developed and so the rental method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider them to be comparable sales and therefore, it should be taken that the value of the impugned property was never determined with reference to any comparable sale at all. 10. The appellants filed a Photostat copy of a registered sale deed dt. 9th June, 1981 where under a brother of Shri Md. Galib, the 5th vendor under the impugned sale deed, sold 371 sq. yds. of site at Bhavanipuram in S. No. 34/2 only for Rs. 5,000 on 9th June, 1981 to one Shri D. Parameswara Rao son of D. Ramanathan of Vidyadharapuram. In that case each year works out to Rs. 13 and odd. Vendors 1 to 4 under the impugned sale deed when they were forming a firm and carried on dall mill business they applied for a term loan of Rs. 1 lakh from Andhra Predesh State Finance Corporation which is hereinafter referred to as Corporation. Before granting the said term loan Technical staff of the said Corporation had submitted a report to the Managing Director. In the said report it is stated that the dall mill was being run right from November, 1973. It is represented to the Corporation that an extent on 2500 sq.yds. in S. No. 82/1 in Bhavanipuram village was sought to be purchased for Rs. 36,000 from one Shri Md. Gal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Though the formality of the sale was completed on 10th Feb., 1978 the bargain was struck long back i.e., 25th May, 1977 under an agreement. This agreement was duly cited in the sale deed. 11. The next decision relied upon by the appellants is again a Punjab Harayana High Court decision Mani Singh Avtar Singh vs. IAC of IT (Acquisition Range) (1984) 41 CTR (P H) 243 : (1985) 151 ITR 233 (P H). This decision is cited for two propositions the first being that smaller plots which are used for housing purposes in urban areas fetch more price than the big plots required for industrial purposes and the second being if comparable sales were not taken into consideration while determining the market value of the impugned land it vitiates the acquisition proceedings. In that case also the land in question belongs to Gurdevnagar no sale instance of land at Gurdevnagar was considered. Further the sales which are compared were all smaller plots. Under those circumstances the Punjab and Harayana High Court held as follows : "The sales were of smaller plots and it is well accepted fact that in urban housing smaller plots fetch more price. The Departmental valuer had not taken into account an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the portion sold to P did not exceed the apparent consideration by 15 per cent and so the acquisition of the portion sold to P was set aside. As regards the portion sold to 'A' the Tribunal took into the condition of the building and the reasons for the sale and set aside the acquisition of the property sold to 'A'. In that connection the Allahabad High Court held as per the head note as follows : "Held that the fair market value in relation to any immovable property transferred by way of sale or exchange means, the price that the immovable property would ordinarily fetch. Therefore, the rental income was relevant in valuing the house. In the case of P, the Tribunal had applied the multiplier of 11.635 which had been adopted by the Government Valuer himself. Hence the Tribunal was justified in setting aside the acquisition of P's property." Thus the first contention argued on behalf of the appellants is that even though the Department fully knew that the dall mill was let out to another person (firm) and it is still running the mill, inserted of valuing the dall mill as well as the site and machinery on the yield method the valuer had erroneously adopted the land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut. Under those circumstances the Court held that the satisfaction of the competent authority is vitiated by irrelevant and extraneous consideration. There is a clear provision under s. 269 to deputy the Valuation Officer to estimate the fair market value of the property even before initiation and for purpose of initiation of proceedings also. When the competent authority knows about the said provision there is no reason why he preferred to send only an Inspector who has no technical knowledge to estimate the value of the property in preference to the valuation officer who is quite competent to value of the property. In those circumstances, we have to hold that the estimation of the IT Inspector about the value of the property was quite conjectural and cannot serve as basis for initiation of proceedings under s. 269 (c). Further in the said decisions the Gujarat High Court held about the methods of valuation to be adopted as follows at pages 194-195. "It would be too hazardous to prefer one of the recognised methods of valuation which may be advantageous to the cause of the Revenue and arrive at an estimation of fair market value of property on the basis thereof." At page 195 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 per cent of such apparent consideration : (iii) that the consideration for transfer as agreed to between the parties has not been truly stated in the instrument of transfer, and (iv) that such untrue statement of consideration is with the object of facilitating the reduction or evasion of the liability of the transferor or the transferee to pay tax under the provisions of the IT Act and the WT Act. While constructing taxing legislation strict interpretation is necessary and the mere fact that a true interpretation would cause difficulty for the Department in actual practice to implement the provisions is no answer. The legislature in its wisdom has provided that the competent authority can initiate proceedings under s. 269C of the IT Act only on fulfilment of certain basic conditions, and the mere fact that the Department finds some difficulty in gathering the material is no consideration to conclude that initiation of proceedings is permissible even without complying with the requirement of the section. The competent authority cannot proceed to reach a conclusion that the object was to evade tax from the mere fact that there is some material to indicate that the apparent consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ips of Andhra Predesh High Court held in the said case as follows : "Before initiating proceedings for acquisition of any immovable property under s. 269 of the IT Act, the competent authority should cause service of notice under s. 269D (2) (A) on all the transferors, transferees, the person in occupation of the property if the transferee is not in possession and all other persons whom the competent authority knows to be interested in the property. S. 269D(2)(a) is a mandatory provision and any proceeding in violation of the same is void." 17. Another decision cited for the same purpose is that of Allahabad High Court in Shantimoy Rao vs. Competent Authority, IAC of IT, Acquisition (1984) 145 ITR 365 (All) and also Bangalore Bench decision in Cyril Albert D' Souza vs. IAC (1986) 15 ITD 685 (Bang) Mr. Swamy also submitted that the impugned order gives the impression that the property in question is situated just at the beginning of the road branching off towards Bhavanipuram which is not correct. The property was in fact situated by the side of the kuccha road which was termed as a cross-road from Vijayawada Hyderabad High Way. There are only three dall mills and the dall mill ..... X X X X Extracts X X X X X X X X Extracts X X X X
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