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TMI Blog1979 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... nt consideration of Rs. 92,000 the competent authority required the valuation officer concerned to determine the fair market value of the property in question and he submitted his valuation report on October 23, 1973, determining the fair market value at Rs. 1,99,200 as against the apparent consideration of Rs. 92,000. It appears further that the competent authority had directed his inspector to make inquiry and submit his report in connection with the fair market value of the property which he did. The competent authority, therefore, initiated acquisition proceedings by publishing a notice in the Official Gazette on 10th November, 1973, and served individual notices to the transferors and the transferee on November 7 and November 9, 1973, respectively, and the locality notice was proclaimed on 21st March, 1974. Pursuant to these individual notices, the transferors as well as the transferee filed their objections. However, the occupants of the different business premises did not file their objections, though they were served with notices on different dates. The competent authority, on consideration of the material on record before him, concluded that the property in question was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 on this account. As regards vacancies, collection charges, etc., the deduction of 7% of the gross rental income allowed by the Valuation Officer is reasonable and the transferee's counsel has inflated the figures of deduction on this score. The other deductions claimed by the counsel have not been considered fit enough by the transferee's own registered valuer. For the reasons mentioned in the Valuation Officer's comments, reproduced hereinabove, the rate of 7 1/2% applied by the Valuation Officer is considered fair and reasonable in contrast to the rates of 15% and 12%, respectively, by the transferee's representatives. Thus, I hold that the fair market value of the property in question as on the date of transfer was Rs. 1,99,200 as against the apparent consideration of Rs. 92,000. Thus, there is a difference of (Rs. 1,99,200 minus Rs. 92,000) Rs. 1,07,200 between the fair market value and the apparent consideration. " The competent authority, therefore, by his order of February 17, 1977, decided to acquire the property in question. Being aggrieved by this order of acquisition, the transferee went in appeal before the Income-tax Appellate Tribunal, Ahmedabad. A number of conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than the apparent consideration (that is the amount mentioned in the deed), nothing more can be held to be business income of the transferor; if it is the transfer of capital asset, sec. 52(2) gives power to the Income-tax Officer to take fair market value as the full value of the consideration. There is no such provision in any of the sections dealing with business income, i.e., sections 28 to 44. 46. We would also like to note that the transferee is also a dealer in building. It is not clear whether the building under consideration, i.e., Moti Sagar, is a business asset of the transferee. Neither the assessment nor copies of statements relating to the transferee clarify this position. If it is a business asset, under-statement of the value would be adverse to the transferee's interest in the long run though no doubt in one assessment year she may be faced with, higher taxation in case she is not able to explain the source of funds paid in addition to the apparent consideration." In that view of the matter, the Tribunal allowed the transferee's appeal and set aside the acquisition by its order of October 27, 1977. It is this order of the Tribunal which is the subject-matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, there is no question of taxing the alleged difference between the consideration and the fair market value of a property and, therefore, there is no scope for raising any presumption in law and/or fact for reaching the conclusion that there was an ulterior object of tax evasion. It is in the context of these rival contentions that we have to determine, whether the Tribunal was right in reaching the conclusion that the presumption permitted to be raised under s. 269C(2)(a) and (b), and in fact raised in the present case, was rebutted by any action not being taken in the individual assessment of the transferors and the transferee. It should be noted that so far as the transferors are concerned, they may be exposed to the consequences of s. 52(2) as a result of these acquisition proceedings. What has really weighed with the Tribunal in the present case is that since the transferee was a dealer in immovable properties and since there is no provision which brought to tax the alleged difference between the consideration for transfer and the fair market value of the property concerned, there was no scope for raising the presumption about the ulterior motive, as prescribed under s. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f account. In CIT v. Calcutta Discount Co. Ltd. [1973] 91 ITR 8 (SC), the facts were that there was a transfer by a company of shares to its subsidiary company at a rate below market price. A question arose, whether the profit can be computed by taking the market price. In that set up of facts, the Supreme Court ruled that where a trader transfers his goods to another trader at a price less than the market price, and the transaction is a bonafide one the taxing authority cannot take into account the market price of those goods, ignoring the real price fetched to ascertain the profit from the transaction. It, therefore, cannot be urged successfully that in no case profit cannot be computed at a price other than the agreed price, because in the case of a transaction which is a sham or not genuine, the revenue authorities have always a power to compute the profit at the real price at which the bargain is struck between the parties. It is only when the transaction is a bona fide one, the taxing authorities cannot take into account the market price of those goods ignoring the real price fetched to ascertain the profits from the transaction. In other words, the jurisdiction of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence prescribed by the legislature for the exercise of powers in the course of acquisition proceedings initiated under Chap. XX-A of the 1961 Act. In our view, therefore, the Tribunal clearly committed an error of law, inasmuch as it held that the inaction on the part of the assessing authorities in case of individual assessment the transferee or the transferor has rebutted the presumption raised under s. 269C(2)(b). We would like to add that the competent authority can always consider the fact that no action has been taken against the transferors or transferee for bringing the alleged difference to tax though it will not by itself, as stated above, rebut the presumption which has been raised. The competent authority may, with the above fact of inaction coupled with other sufficient circumstances, reach the conclusion that the presumption about the ulterior motive is or is not rebutted. To that extent the fact of the inaction may be relevant, but, in our opinion, it cannot by itself alone, rebut the presumption which is permitted to be raised under s. 269C(2)(b). In that view of the matter, therefore, these appeals should be allowed and the orders of the Tribunal should be set asid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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