9911796707
TMI Blog1996 (2) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... n, to Export India Corporation (P.) Limited, New Delhi, transferee (hereinafter referred to as "the transferee"), for a sum of Rs. 1,90,000 by a registered instrument of sale dated May 8/9, 1975. On receipt of information regarding the sale transaction, the matter of determination of the fair market value of the property was referred by the Inspecting Assistant Commissioner (Acquisition) (hereinafter referred to as "the Competent Authority") to the Valuation Officer, under section 269L of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The Valuation Officer made his report to the competent authority on November 10, 1975. According to this report, the fair market value of the transferred property was Rs. 3,32,800 against the apparent consideration recorded in the instrument of transfer, namely, Rs. 1,90,000. In view of the difference between the fair market value as returned by the Valuation Officer and the apparent consideration being more than 15 per cent. than the apparent consideration recorded in the instrument of transfer, the competent authority recorded its reasons under section 269C of the Act on November 22, 1975, and initiated proceedings under section 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mencement of the proceedings under section 269C of the Act as the material before the competent authority was not enough to hold that the fair market value of the property exceeded the apparent consideration recorded in the instrument of transfer by more than a margin of statutory percentage. The Tribunal discarded the report submitted by the Valuation Officer and relied upon the reports submitted by the registered valuers employed by the transferee. The Tribunal also relied upon the papers given by way of two additional paper books. The Tribunal further held that the competent authority should have obtained the approval from the Commissioner of the acquisition order passed by it and not merely a proposal sent by the competent authority to the Commissioner for acquisition of the property ; that the competent authority should have sent along with the approval its draft order to the Commissioner. It was also found by the Tribunal that the approval given by the Commissioner was mechanical and without application of mind to the facts and circumstances of the case. We have heard counsel for the parties at length. Under section 269F of the Act, the competent authority has to fix the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air market value of such property exceeds the apparent consideration therefor by more than 15 per cent. of such apparent consideration and the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with such object as is referred to in clause (a) or clause (b) of sub-section (1) of section 269C, may, after obtaining the approval of the Commissioner, make an order of the acquisition under Chapter XX-A of the Act. We have gone through the proposal sent by the competent authority, which is a detailed report highlighting all the aspects of the case. The proposal was accompanied by the report of the Valuation Officer. The Commissioner of Income-tax gave his approval to the proposal after going through the material placed before him. It is not provided in the Act that the approval has to be given to the proposed order of acquisition. The competent authority has to send its proposal to the Commissioner of Income-tax, who has to apply his mind to the proposal along with the material placed before him. If the Commissioner approves the same, then the competent authority can make an order for acquisition of the property. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept the report of the Valuation Officer before the competent authority while forming opinion under section 269C but it does not mean that the opinion could not be formed on the basis of the report of the Valuation Officer alone, that is a piece of evidence, which can be taken into consideration. It would depend in each case on the quality of the report submitted by the Valuation Officer. The prima facie opinion formed under section 269C is in the nature of a preliminary inquiry, which would be subject to the objections filed by the interested persons. So, it is held that there was sufficient material before the competent authority to form a prima facie opinion under section 269C regarding the fair market value. While recording the findings regarding the fair market value, the Tribunal relied upon various aspects, like, the three reports submitted by the registered valuers, the shape of the plot being irregular, the distance from the property to the nearest recognised school, hospital, shopping centre and railway station being 8, km., the construction on the plot being temporary, frontage of the factory building being very small and irregular, losses suffered by the transferor an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has not been stated that the finding recorded by the Tribunal that the Revenue did not raise any objection to the placing on record of the fresh material, was wrong. Once the Revenue chose not to oppose the placing on record of the additional material before the Tribunal, it cannot be permitted to raise that point in the second appeal. Either the Revenue should have insisted on remand of the case or should have placed its material as a counter to the fresh material placed on record by the transferee. In these circumstances, the Revenue cannot be allowed to contest this point at this stage. Accordingly, on the facts, the order of the Tribunal is upheld and it is held that the competent authority did not determine the fair market value properly, keeping in view the facts and circumstances of the case. As regards the conditions provided under clauses (a) and (b) of sub-section (1) of section 269C of the Act, the findings recorded by the Tribunal are correct. It is held that the consideration for transfer as agreed to between the parties has been truly stated and there was no intention on the part of the transferor or the transferee to either reduce or evade the liability to pay t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he immovable property is below Rs. 5 lakhs." To appreciate the contention raised, it is necessary to state that the proceedings under Chapter XX-A of the Act were initiated against the transferor and the transferee by issuing a notice under section 269D. The competent authority after hearing the objections filed by the transferee passed an order dated March 31, 1979, acquiring the property under Chapter XX-A of the Act. The assessee filed an appeal against the order of the competent authority before the Tribunal which was accepted by the Tribunal on October 30, 1979, against which the present appeal has been filed by the Commissioner of Income-tax, Haryana. During the pendency of the appeal, Chapter XX-C was introduced in the Act by the Finance Act, 1986, with effect from October 1, 1986. The President of India gave his assent to the Finance Act, 1986, on May 13, 1986, and the Central Board of Direct Taxes issued Circular No. 455 on May 16, 1986, reproduced above. It was decided by the Central Board of Direct Taxes that where the acquisition proceedings have been initiated by issue of notice under section 269D, the proceedings will be dropped if the apparent consideration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case [1987] 166 ITR 497 was not cited before their Lordships to hold that the circular was applicable to the proceedings at the initial stage only. It was held that the circular would be applicable to the proceedings pending at the appeal stage as well. There is not much of detailed discussion on the point in issue either in the view taken by the Kerala High Court in Mathew M. Thomas' case [1993] 201 ITR 494 [FB] ; by the Calcutta High Court in Asha Devi Agarwal's case [1988] 169 ITR 400 and by the Delhi High Court in Rattan Chand Sood's case [1987] 166 ITR 497. It would be useful to refer to the legislative background leading to the introduction of Chapter XX-A and thereafter of Chapter XX-C in the Act. By a legislation dated March 2, 1970, a committee of experts was constituted by the Government of India to suggest means for tackling the problems of black money, tax evasion and tax arrears. The committee was Direct Taxes Enquiry Committee, popularly known as Wanchoo Committee. The Committee submitted its interim report in the end of 1970 to the Government, recommending certain immediate measures for unearthing black money and countering tax evasion. The Government introduced th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to take possession of the immovable property. Evidently, the provisions of Chapter XX-A of the Act did not prove to be effective. In the Finance Bill of 1986, which ultimately resulted in the deletion of Chapter XX-A and the introduction of Chapter XX-C in the Act, it was proposed that no proceedings under section 269C of the Act shall be initiated in respect of the property transferred after September 30, 1986. New Chapter XX-C was introduced. This Chapter contains sections 269U to 269UO. The provisions of the new Chapter XX-C were to come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different areas. The basic difference between Chapters XX-A and XX-C is that under Chapter XX-A, the Central Government had the power to acquire and possess any property whereas under the new Chapter XX-C, transfer of any immovable property of a value exceeding Rs. 5 lakhs, or as may be prescribed, was prohibited except after entering into an agreement for transfer between the transferor and the transferee at least three months before the intended date of transfer. The agreement shall be reduced into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also properties worth more than Rs. 10 lakhs. To be fair the selection will have to be based on a system of random sampling. Furthermore, the Government will be required to make full payment for any property it notifies for acquisition within 30 days of such notification. To reduce undue uncertainty in property transactions the Government's pre-emptive right of purchase will automatically lapse after 60 days of the seller's applying for the clearance certificate from the Income-tax Department for any particular property sale." Chapter XX-A was applicable to the whole of the country and to properties exceeding Rs. 25,000 in value, whereas Chapter XX-C was initially made applicable to the metropolitan towns of Bombay, Delhi, Madras and Calcutta. Selection of properties to be acquired was to be made on the basis of random sampling. Section 269UC of Chapter XX-C provides that the properties the value of which exceeded Rs. 5 lakhs were to be covered under Chapter XX-C. The value of the properties which could be acquired was to be prescribed under the Rules. Rule 48K of the Income-tax Rules, 1962, provided that the properties with an apparent consideration exceeding Rs. 10 lakhs cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it would not apply to the cases pending at the appeal stage. Under Chapter XX-A, proceedings could only be initiated by issue of notice under section 269D. Simply by using the words "by issue of notice under section 269D", the Board did not mean to limit the applicability of the circular to the proceedings pending at the initial stage only. Notice under section 269D has to precede the proceedings whether pending at the initial stage before the competent authority or before the Tribunal/High Court. Counsel for the Revenue raised another argument that if the Board meant that the circular would be applicable it the appeal stage also, then the Board would have used the word "withdrawn" and not "dropped" in the circular because the proceedings can be dropped by the competent authority at the initial stage and the same can be withdrawn and not dropped in appeal. The dictionary meaning of the word "dropped" in the English Chambers' Dictionary is "to lapse". So, the intention of the Board was in consonance and in terms of the speech made by the Finance Minister on the floor of the House while introducing the Finance Act of 1986 that the experiment under Chapter XX-A having failed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs once initiated will continue to have the same character until and unless they acquire finality as provided under section 269-I of the Act. In the present case as well, the proceedings which had been initiated by issue of notice under section 269D by publication in the Official Gazette in which the competent authority had passed the order under section 269F(6) were continuing as the second appeal was pending in the High Court under section 269H of the Act. The proceedings had not come to an end. The proceedings in appeal would be in continuation of the proceedings which bid been initiated by the competent authority by issuing notice under section 269D of the Act. Section 119 of the Act empowers the Board to issue such orders, instructions and directions to other income-tax authorities as it may deem fit for proper administration of this Act and all authorities employed in the execution of this Act are duty-bound to observe and follow such orders, instructions and directions of the Board. Provided that no such orders, instructions or directions shall be issued : (a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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