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TMI Blog1992 (2) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... sferee and therefore, initiation of proceedings under section 269C(1) by relying on the presumption under section 269C(2) is invalid or bad in law and therefore, the order of acquisition is without jurisdiction and should be annulled. The judgment of the Bombay High Court in the case of Unique Associates Co-operative Housing Society Ltd. v. Union of India [1985] 152 ITR 114 is applicable to the case of the transferor and transferee and is binding on the authorities. Without prejudice to the aforesaid ground, another ground has been taken to urge that the service of notice under section 269D having not been effected within time or according to the prescribed manner and copy of notice not being published and served as per section 269D(2), the entire proceedings for acquisition have vitiated and therefore, the acquisition order under section 269F(6) should be annulled. 3. A further ground has been taken on merits of the case to urge that the Dy. CIT (Acquisition) erred in arriving at the market value at Rs. 57,85,000 by relying on certain sale instances which were not quoted by the Departmental Valuation Officer and which were not comparable to the facts of the case. Even the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Valuer Officer has cited two sale instances. The first is of the first and second floors of Aditi Commercial Centre, General Thimayya Road, Pune. The first property was purchased by Life Insurance Corporation of India in December 1983 at a rate of Rs. 475 per sq. ft. of super built-up area which was 9350 sq. ft. The basement of the property was completed in 1985 and the property is about 3 kms from Pune Station with all civic amenities and was also for commercial use. The second property consisting of ground floor of the same building was bought by Corporation Bank in September 1985 at the rate of Rs. 610 per sq. ft. of built-up area of 5,331 sq. ft. including 50 per cent of Mezzanine floor with similar civic amenities and commercial use. On the basis of the factors which have bearing on the valuation of the property, he considered that the plot under consideration was better and therefore, he valued the property transferred at the rate of Rs. 650 per sq. ft. and adding further amount of Rs. 1,00,000 for the facilities of common toilet arrived at the fair market value of the property at Rs. 70.55 lakhs. 6. After making preliminary enquiries regarding comparable transactions in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be equated with office premises but those were certainly comparable cases. According to him, the fair market value of the office premises would not be less than 50 per cent of the fair market value of shops and therefore, he held that the fair market value of the office premises would be Rs. 650 per sq. ft. The Dy. CIT (Acquisition) also referred to the sale instances given by the registered valuer of the parties and held that they are not comparable cases. The first instance was that of a house and for the second instance there were no particulars of area. The two sale instances cited by the parties are located in Clover Centre and Sterling Centre. These instances were not held to be of comparable cases as higher sale instance in the same location were available to him. Consequently, he agreed with the Departmental Valuation Officer that the fair market rate of the property transferred could be estimated at Rs. 650 per sq. ft. vide para 6 of the impugned order. Invoking the provisions of section 269C(2) of the Act containing statutory presumptions he concluded that the consideration for the transfer of the property is agreed to between the parties has not been truly stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntentions against the acquisition order passed by the Dy. CIT (Acquisition). His primary objection was that the initiation of proceedings for acquisition of the property was made beyond time limit. The period of limitation is specified under first proviso to section 269D(1). According to him, a statement in Form No. 37EE was filed before the Competent Authority on 3-12-1985. As per proviso under section 269D(1), the acquisition proceedings shall be initiated within a period of nine months from the end of the month in which the instrument of transfer or agreement of transfer is registered by the publication in Official Gazette. Since the agreement of sale is registered on 16-11-1985 the acquisition proceedings should have been initiated on or before 31-8-1986 whereas admittedly a notice was published in the Official Gazette on 4-10-1986 vide para 5 of order of acquisition. Therefore, he urged that initiation of proceedings were barred by limitation of time and a specific ground has also been raised in the grounds of appeal. In this connection, the learned counsel for the parties submitted that this ground relating to limitation is purely a question of law and does not involve invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the reduction or evasion of the liability of the transferor to pay tax in respect of any income arising from the transfer or concealing of any income or any moneys or other assets not disclosed by the transferee for the purposes of income-tax or wealth-tax. In view of the aforesaid rulings and observations of the Board contained in the circular, the learned counsel urged that the acquisition proceedings were not validly initiated under section 269C(1). Further, he referred to para 6 of the order of acquisition to show that except discussing fair market value of alleged comparable cases of property, there was no material to show that higher amount of consideration was actually paid for transfer of the property or the consideration for the transfer as agreed between the parties has not been truly stated in the instrument of transfer. Referring to para 4 of the acquisition order, he pointed out that only with reference to the subjective valuation of the fair market value of the property stating that it exceeded apparent consideration by more than 25 per cent, the provisions of section 269C(1) were applied by the Acquisition Officer and relied on the judgment of the Punjab and Haryan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation of the property of the Departmental Valuation Officer contained in pages 10 to 16 of the paper compilation. The valuation has been made on the basis of land and building method i.e., physical method. A comparable sale instance considered by the Departmental Valuation Officer is shown in Annexure 'X' contained in page 13 of the paper compilation. This annexure shows that the property is on the first and second floors of Aditi Commerce Centre, General Thimayya Road, Pune, which has been completed in the year 1985 for which the date of agreement entered into was 20-12-1983 for Rs 44,41,250 for a built-up area of 9350 sq. ft. which works out to Rs. 475 per sq. ft. for super built-up area. The second instance is the ground floor of Aditi Commercial Centre, for which the date of agreement is 5-9-1985 for a consideration of Rs. 32.50 lakhs for a super built-up area of 5331 sq. ft. including 50 per cent of mezzanine floor, which works out to Rs. 610 per super built up area. The property is 3 kms away from Pune Railway station together with civic amenities and use for commercial purposes. It has to be pointed out at this juncture that the ground floor of the said property is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to the sale instances of the property situated at a long distance, viz., Aditi Commerce Centre cited by the Departmental Valuation Officer. According to him, the sale rate of Rs. 400 per sq. ft. shown in the agreement of transfer is quite fair and the fair market value in any case, of the property transferred is not above the limit of margin of tolerance i.e., Rs. 460 per sq. ft. Therefore, in the circumstances, he urged that the Competent Authority has not fixed properly the fair market value of the property transferred and consequently, the entire proceedings of acquisition were vitiated and accordingly urged that the proceedings should be cancelled. 15. The learned departmental representative Shri A.K. Khaladkar on the other hand, pointed out that the acquisition proceedings were initiated on 10-2-1986 when notice of acquisition was sent to the Government press for publication and inasmuch as the notice was sent within the prescribed period of limitation, the provisions of section 269D(1) is satisfied and therefore the initiation of proceedings were not barred by limitation as contended by the learned counsel for the transferor and transferee. Secondly, relying on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-1974. It was held that the Competent Authority did not acquire jurisdiction to continue to the proceedings as the proceedings had not been commenced within the statutory period. Similar decision has been rendered by the jurisdictional High Court in the case of Manu Bharati Co-operative Housing Society Ltd. v. CIT [1986] 162 ITR 693 (Bom.) wherein it has been held that though the notice of acquisition was published in the Official Gazette within the statutory period, it was made available to the public only after the prescribed date and the proceedings for acquisition under section 269F(6) were vitiated. Further, referring to the notice of acquisition issued by the Competent Authority, he stated that he has not scored "and"/"or" in the said notice and therefore, there was ambiguity in the mind of the Competent Authority and therefore, he had not made up his mind as to whether the transfer was with the object of reduction or evasion of the tax liability of the transferor or whether it was for the purpose of concealment of income or assets of the transferee or whether it was both or it was one or the other. The Bombay High Court in the case of Ashok Madhav Chitaley v. Competent Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stated in para 5 of the acquisition order. Therefore, we hold that the initiation of acquisition proceedings are barred by limitation of time and consequently the acquisition proceedings have become invalid in law. The order of acquisition passed by the Competent Authority also becomes invalid in law, inasmuch as it is based on invalid notice of acquisition. Therefore, there is force in the ground taken by the appellants and consequently, they are entitled to succeed and the order of acquisition under section 269F(6) passed by the Competent Authority on 30-9-1991 is annulled. It is needless to emphasize or to point out that even in case where the notice has been published in the Official Gazette within the time or printed within the statutory time but the Gazette Notification was made available to the public only after the prescribed period, it was held by the jurisdictional High Court in the case of Ashok Madhav Chitaley and Manu Bharati Co-operative Housing Society Ltd. that the proceedings for acquisition were not initiated within the specified time and therefore, the proceedings were vitiated. 18. The second objection of the appellants that there was no material or evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin sub-section (2), it must show not only that the fair market value of the capital asset as on the date of the transfer exceeds the full value of the consideration declared by the assessee by not less than 15 per cent of the value so declared, but also that the consideration has been understated and the assessee has actually received more than what is declared by him. There are two distinct conditions which have to be satisfied before sub- section (2) can be invoked by the revenue and the burden of showing that these two conditions are satisfied rests on the revenue. It is for the revenue to show that each of these two conditions is satisfied and the revenue cannot claim to have discharged this burden which lies upon it, by merely establishing that the fair market value of the capital asset as on the date of the transfer exceeds by 15 per cent or more. The full value of the consideration declared in respect of the transfer and the first condition is, therefore, satisfied. The revenue must go further and prove that the second condition is also satisfied. Merely by showing that the first condition is satisfied, the revenue cannot ask the court to presume that the second condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant portion of order of the Division Bench of the Gujarat High Court contained at page 135 is extracted hereunder: "Having regard to the purpose underlying the power invested in the competent authority under section 269C(1) and particularly the condition precedent for the exercise of such power and the presumptions to be raised in connection therewith under section 269C(2) and more particularly having regard to the deeming fiction provided in section 269J(4) with the clarification that the transferee will not be exposed to further penalty under the Income-tax Act or the Wealth-tax Act, it is clear that the nature of the power is a penal power and the proceedings in respect thereto are quasi-criminal. It is not merely the untrue statement of consideration in the instrument of transfer but, coupled with that, the ulterior motive of tax evasion or concealment of income is the gist of the offence and till that ulterior motive is established and found, the power in question cannot be exercised. Since for purposes of effectuating the said objective, immovable properties are transferred, Parliament has, in its legislative wisdom, thought it fit to provide for the acquisition thereof a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for acquisition of property both of which require a record of any evidence to belief of escapement of income or untrue statement of consideration for transfer of property in the document of transfer, it was observed that the Competent Authority must have reason to believe about the ulterior motive, of the transferor of tax evasion or tax reduction of the transferee about the concealment of income which he should disclose for tax purpose. This is an objective fact about which the Competent Authority must be satisfied besides common objective fact that the fair market value in question exceeds by the prescribed margin the apparent consideration shown in the document. This is necessary requirement for acquisition of property because before initiation of acquisition proceedings the Competent Authority shall record his reasons for doing so and as observed by their Lordships of the Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 that the ground or reason for the formation of belief must have material validity on the question of escapement of income because of his failure or omission to disclose fully and truly all material facts and such belief must be held in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 461 dated 9-7-1986 published. It has been stated that this circular was issued by the Board to explain the reasons for introducing Chapter XXC in the Act in place of Chapter XXA. The Board has categorically stated in the circular that, under the provisions of Chapter XXA, before the provisions, meaning thereby sections 269C and 269D could be invoked, it had to be proved that the consideration for transfer of an immovable property as agreed to between the parties had not been truly stated in the instrument of transfer with the object of facilitating reduction or evasion of tax liability of the transferor or concealing the income or assets of the transferee. Since that was an impossible task and the provisions proved ineffective Chapter XXC was introduced. Taking a clue from the Board's circular it was observed that one can easily say that the conditions requisite mentioned in section 269C without the help of the presumptive clauses are required to be satisfied before the Competent Authority can assume valid jurisdiction to initiate the proceedings for acquisition under section 269D/269C. 20. Now, in the impugned acquisition order passed by the Competent Authority apart from discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 269C(1)(a) and (b) was significant inasmuch the Competent Authority had not scored out the relevant portion and therefore, the initiation of acquisition proceeding is not valid. After hearing the submissions of both the parties and following the judgment of the Bombay High Court in the case of Udharam Aildas Thadani and also in the earlier case of Ashok Madhav Chitaley, we uphold the contention of the learned counsel for the appellants that the requisite formation of belief or opinion was a jurisdictional fact and unless a fair prima facie opinion was formed in regard to the category of infringement or any one of them, the authority had no right to initiate the proceedings for acquisition. It was held that by use of conjuncture "and/or" for the two clauses of section 269C(1)(a) and (b) of the Act. the pre-condition and requirement for assuming jurisdiction and exercise of the power was defective. 22. The fourth issue to be decided relates to the fair market value of the property transferred. The Departmental Valuation Officer has valued the fair market value of the property at Rs. 70.55 lakhs which works out to Rs. 650 per sq. ft. of built-up area. The comparative sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the shops could not be compared with the office premises the Competent Authority agreed that the shops could not be equated with the office premises but they are certainly comparable and he could fix the fair market value of the office premises on that basis shall not be less than Rs. 650 per sq. ft. Thus, it is seen the Competent Authority has cited the sale instances of two shops and another property for which description and details of area etc. were not available. Therefore, these sale instances cited by the Competent Authority could not be taken as comparable case with the property under consideration. 23. Coming to the property under consideration, it is seen that the office premises are situated at the back side of the building on lease hold land for a period of 40 years only. It is situated in the first floor at a height of 28 feet because the ground floor is on a height of 18 feet and service floor above it of 10 feet. Therefore, there is considerable disadvantage of entrance to the premises compared to the direct entrance to the Aditi Commerce Centre taken into account by the DVO. The market value of the property under consideration would be less than the marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in ignoring the sale instances of office premises cited by the appellants in the very same Aurora Towers building and in the adjacent building of Clover Centre and the sale instance in Sterling Centre which is located in front of Aurora Tower building simply on the ground that they are not comparable and simply because some higher sale instances are available. In our opinion, the action of the Competent Authority is arbitrary and unjustified. It is pertinent to point out that in the very same Aurora Tower building sales were effected to Super Energey and Recovery Engg. P. Ltd. at a rate of Rs. 375 per sq. ft. covering an area of 651 sq. ft., M/s C.G. Narang Co. at the same rate covering an area of 679 sq. ft. and Shri S. B. Navandhar at the same rate covering an area of 651 sq. ft. and the acquisition proceedings initiated by the Competent Authority were dropped in respect of those transactions. It is pertinent to point out that compared to these sale instances with small area the appellants' property consists of an area of 10700 sq. ft. and that too consisting of eight shops premises taken together and the assessee has paid the entire amount of sale consideration before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e M.G. Road. Even, with reference to this property, the first floor office premises would be 50 per cent of its rate which works out to Rs. 244 per sq. ft. In respect of Punjab National Bank and M/s Blaze Enterprises (P.) Ltd. premises the Competent Authority has dropped acquisition proceedings which contain in the paper compilation filed by the appellants at pages 36 and 37 respectively. 27. The sale instances given by the D.V.O. in the Aditi Commerce Centre situated in General Thimayya Road are not comparable cases for the simple reason that it is not situated in the same location but away at the distance of 1 to 1 1/2 kms. We have already pointed out that the facilities available to this property and even from the point of the rate paid by the Corporation Bank for ground floor the rate per sq. ft. for the property under consideration cannot be said to be unreasonable or understated, because it is more than 50 per cent of the rate paid by Corporation Bank which is at Rs. 610 per sq. ft. Out of five instances given by the Competent Authority, four pertain to the ground floor shops which are not situated in the same location in which the property transferred under consideration i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the assessment for the assessment year 1987-88 the income returned by the transferor was accepted under section 143(1) as per order dated 10-3-1989. Similarly, the assessment order for the assessment year 1986-87 shows that though the assessment has been made under section 143(3) the returned income was accepted by the department. 28. After considering all the facts and circumstances of the case, we are of the opinion that the Competent Authority has not established that the fair market value of the property exceeded the apparent consideration shown in the deed of transfer by more than 15 per cent as required in terms of second proviso to section 269C(1). On the contrary, the appellants proved the contrary and rebutted the statutory presumptions under section 269C(2). Therefore, we hold that the Competent Authority has not validly initiated the acquisition proceedings under section 269C(1) of the Act. In view of the aforesaid circumstances, we are satisfied that the Competent Authority has not validly acquired the jurisdiction in view of the facts that the notice of acquisition was not published within the statutory time nor was it properly served and as conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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