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TMI Blog1992 (2) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... s without jurisdiction and should be annulled. The judgment of the Bombay High Court in the case of Unique Associates Co-operative Housing Society Ltd. vs. Union of India Ors. (1985) 152 ITR 114 (Bom) 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 s. 269D having not been effected within time or according to the prescribed manner and copy of notice not being published and served as per s. 269D(2), the entire proceedings for acquisition have vitiated and, therefore, the acquisition order under s. 269F(6) should be annulled. 3. A further ground has been taken no merits of the case to urge that the Dy. CIT (Acq) 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 Departmental Valuation Officer improperly and incorrectly arrived at the market value without appreciating the facts and circumstances existing in the case, and the factors justifying the consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1983 at a rate of 4.75 per 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 5,331 sq. ft. including 50 per cent of mezzanine floor with similar civic amenities and commercial use. On the basis of the factor 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 similar types of areas, the Dy. CIT (Acq) was of the opinion that the apparent consideration shown by the assessee did not reflect correct fair market value of the property. He was also of the opinion that the fair market value of the said property exceeded by more than 25 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the registered valuer of the parties and held that they are not comparable cases. The first instances was that of a house and for the second instances 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 s. 269C(2) of the Act containing statutory presumptions he concluded that the consideration for the transfer of the property as agreed to between the parties has not been truly stated with the twin object of facilitating reduction or evasion of the liability of the transferor to pay tax and facilitating the concealment of any income or any moneys or other assets which have not been or which ought to be disclosed by the transferee. 8. The Dy. CIT (Acq) also reiterated the same conclusion by relying on the statutory presumptions only with reference to the fair market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 16th Nov., 1985 the acquisition proceedings should have been initiated on or before 31st Aug., 1986 whereas admittedly a notice was published in the Official Gazette on 4th Oct., 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 investigation of facts. It should be admitted even though this objection was not raised at the time of proceedings before the Dy. CIT (Acq). We consider that there is merit and force in the contention of the learned counsel and, therefore, he has been allowed to urge the ground. 11. The second objection raised was that initiation of proceedings was not valid, because, the statutory presumptions contained in s. 269C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 purpose 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 s. 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 property stating that it exceeded apparent consideration by more than 25 per cent the provisions of s. 269C(1) were applied by the Acquisition Officer and relied on the judgment of the Punjab and Haryana High Court in the case of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty 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 shares that the property is on the first and second floor 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 20th Dec., 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 5th Sept., 1985 for a consideration of Rs. 32.50 lakhs for a super built up area of 5,331 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 occupied by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 pr sq. ft. shown in the agreement of transfer is quite fair and the 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 property the fair market value of the property transferred and consequently, the entire proceedings of acquisition were vitiated and according 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 10th Feb., 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 s. 269D(1) is satisfied and therefore the initiation of proceedings were not barred by limitation as contended by the leaned counsel for the transferor and transferee. Secondly, relying on the Departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he jurisdictional High Court in case of Manu Bharati Co-op. Housing Society Ltd. vs. CIT (1987) 59 CTR (Bom) 226 : (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 s. 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 (1) All Indian Reporter Ltd.: 2. Ashok Madhaw Chitaley vs. Competent Authority, IAC Ors. (1986) 162 ITR 697 (Bom) has held that this requisite formation of belief or opinion was a jurisdictional fact and unless a fair prima facie opinion was for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation of time and consequently the acquisition proceedings have become invalid in law. The order of acquisition passed 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 s. 269F(6) passed by the Competent Authority on 30th Sept., 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 (1) All India Reporter Ltd. (2) Ashok Madhaw Chitaley vs. Competent Authority, IAC Ors. and Manu Bharati Co-op. Housing Society Ltd. vs. CIT 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 to show that the competent authority had reason to beli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket 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 understand 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-s. (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 too is fulfilled, because even in a case where the first condition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court contained at page 135 is extracted hereunder: "Having regard to the purpose underlying the power invested in the competent authority under s. 269C(1) and particularly the condition precedent for the exercise of such power and the presumption to be raised in connection therewith under s. 269C(2) and more particularly having regard to the deeming fiction provided in s. 269J(4) with the clarification that the transferee will not be exposed to further penalty under the IT Act or the WT 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 at something more than the grossly understated consideration, and consequently, provided, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Ors. vs. Lakhmani Mewal das 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC) that the ground or reason for the formation of belief must have material validity on the question of escarpment of income, because of his failure or omission to disclose fully and truly all material facts and such belief must be held in good faith and not by mere pretext. The Gujarat High Court also held that the statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42. 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 ss. 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 s. 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 s. 269D/269C. 20. Now, in the impugned acquisition order passed by the Competent Authority apart from discussing the fair market value, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 All India Reporter, 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 not right to initiate the proceedings for acquisition. It was held that by use of conjecture "and/or" for the clause of s. 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 property at Rs. 70.55 lakhs which works out to Rs. 650 per sq. ft. of built up area. The comparative sale instances taken by him consist of ground fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 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 market value of the property considered by the DVO because of the fact that it is bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y same Aurora Towers building and in the adjacent building of Clover Centre and the sale instance in Sterling Centre which is located from 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 Arora Tower building sales were effected to Supre Energy and Recovery Engg. (P) Ltd. at a rate of Rs. 375 per sq. ft. covering an area of 651 sq. ft., 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 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 10,700 sq. ft. and that too consisting of eight shops premises taken together and the assessee has paid the entire amount of sale consideration before the date of registration of agreement. The appellants have also obtained the individual valuation reports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rate which works out to Rs. 244 per sq. ft. In respect of Punjab National Bank and Blaze Enterprises (P) Ltd. premises the Competent Authority has dropped acquisition proceedings which contain in the paper compilation filed by the appellants at page 36 and 37 respectively. 27. The sale instances given by the DVO 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 pr 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 is located. The competent authority has not given any reasons as to why the sale instances given by the appellants in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er order dt. 10th March, 1989. Similarly, the assessment order for the asst. yr. 1986-87 shows that though the assessment has been made under s. 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 required in terms of second proviso to s. 269C(1). On the contrary, the appellants proved the contrary and rebutted the statutory presumptions under s. 269C(2). Therefore, we hold that the competent authority has not validly initiated the acquisition proceedings under s. 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 precedent under ss. 269C(1) and 269D were not satisfied, the order of the acquisition is ab initio, void and, therefore, it is annulled. 29. In the result, the ..... 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