9911796707
TMI Blog1983 (10) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... onsisting of three partners, namely, Smt. Sulochni Devi Tandon and her two sons Sarvshri Badri Vishal Tandon and Girish Tandon (the transferors). The transferee is a co-operative society, the Prayag Upnivesh Evam Avas Nirman Sahkari Samiti Ltd. having its registered office at B-77A, Dariyabad, Allahabad ('the society'). There were two registered agreements dated 11-7-1975 and 15-7-1975 executed by the transferors in favour of the society to sell the property in question for an apparent sale consideration of Rs. 3 lakhs. Thereafter, since the Urban Land (Ceiling and Regulation) Act, 1976 had come on the statute book on 28-1-1976, the permission of the Governor of U.P. under section 20 of that Act was obtained for this transfer on 5-9-1980. Thereafter on 10-10-1980, the sale deed was executed which was registered on 14-10-1980. The said sale deed was executed in pursuance of the agreement to sell and the said permission accorded by the Governor of U.P. under section 20. The society transferred the property in question to its members by subdividing it into various plots and the sale deeds were executed in their favour. The competent authority initiated the acquisition proceedings in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27-10-1980 3-6-1981 ---- 2. Mrs. Chinmoyee Mukerjee Plot No. 23 10-11-1980 3-6-1981 ---- 3. Dr. Gopalji Tandon Plot No. 18 17-10-1980 3-6-1981 ---- 4. Shri Brij Mohan Lal Mehra Plot No. 15 7-4-1982 3-6-1981 ---- 5. Smt. Shukla Dutta Plot No. 16 21-10-1980 3-6-1981 Dropped on 2-6-1982 6. Shri Virendra Saran Plot No. 17 21-10-1980 3-6-1981 Dropped on 2-6-1982 7. Smt. Chandra Kanti Gupta Plot No. 13 28-10-1980 3-6-1981 ----- 8. Shri Keshav Sahai Plot Nos. 3 30-6-1981 3-6-1981 (Sitting tenant) and 4 9. Smt. Madhu Sahai Plot No. 5 30-6-1981 3-6-1981 ----- ----------------------------------------------------------------------------------------- However, the competent authority observed in the impugned order that those acquisition proceedings had been dropped as land was in small fragments to which the provisions of section 269C of the Act were not applicable. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer only on an unexpired period of two years was left. (iii) that the rented property was governed by the Uttar Pradesh Urban Buildings (Regulation of Letting and Eviction) Act, 1972 and on account thereof neither the rents could be increased nor the tenants could be evicted. (iv) that the 'fair market value' of such a rented property on the basis of rental method could be only Rs. 53,170 (calculation chart filed). Reference was also made to the decision of the Hon'ble Allahabad High Court in CIT v. Asharfi Lal Gupta [1983] 142 ITR 765 wherein it was held that where the property sought to be acquired is subject to the rent control law, the rental method can be applied for finding out its fair market value in order to determine whether the difference between the fair market value and the apparent consideration exceeds 15 per cent. (v) that the property was subject to the Urban Land (Ceiling and Regulation) Act and the permission given on 5-9-1980 under section 20 thereof obliged the transferor to transfer the property at a price not exceeding the price of Rs. 3 lakhs stipulated in the agreement to sell. (vi) that even if the mean of the rental method and the land and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety and it could not form the basis for the acquisition proceedings. He also emphasised that a mere reason to suspect could not be sufficient for the initiation of the acquisition proceedings. 7. On behalf of Dr. Gopalji Tandon, Shri Keshav Sahai and Smt. Madhu Sahai, Shri R.K. Gulati, the learned counsel pointed out that the exemption under section 20 had been granted subject to certain conditions. He also pointed out that it is only after the Government was of the view that the consideration was adequate and in the public interest that such a permission was given and, therefore, it could not be said that the transfer had been made at a lower price or in order to avoid taxation. In this connection reference was made by him to the decisions of the Hon'ble Calcutta High Court in Rai Bahadur G. V. Swaika Estate (P.) Ltd. v. M.N. Tewari [1980] 126 ITR 310, Competent Authority, IAC v. Smt. Bani Roy Chowdhury [1981] 131 ITR 578 at page 580 and Lalita Jabbar v. IAC (Acq.) [1980] Tax LR 900. Referring to another decision of the Calcutta High Court in CIT v. Smt. Ashima Sinha [1979] 116 ITR 26, he pointed out that the reversionary value of the land could not be added in the case of ol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he definition of 'transfer' under section 269A(h) of the 1961 Act, he pointed out that the order of the competent authority neither gave the basis for the acquisition proceedings nor the provisions of section 53A of the Transfer of Property Act, 1882 were considered. He next pointed out that on the date of the notification the property was not available and was no longer in the ownership of the society. Referring to the provisions of section 281 of the 1961 Act, he pointed out that bona fide transferee for consideration was protected. He further pointed out that even the sanction accorded by the Commissioner was mechanical and that it was non-speaking order without application of mind. Reference was also made by him to Parke's Principles of Valuation (page 140). He pointed out that there was no basis before the Valuation Officer for bifurcating the appurtenant land and extra land. In this connection he submitted that it was all appurtenant land. In regard to Shri Keshav Sahai who was a sitting tenant, Shri Gulati pointed out that Shri Badri Vishal Tandon had moved an application for eviction in which there was a compromise as a result of which he could not be evicted [Suit No. 80 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to the provisions of the Rent Control Act ; the extent of surplus land ; the fact that a short time was left for the unexpired lease ; that there was no renewal clause in the lease deed ; that the price was fixed by the Government and that the sale had to be in accordance with the conditions subject to which permission had been given under section 20. In this connection he referred to the decision of the Hon'ble Calcutta High Court in the case of Lalita Jabbar at pages 395 to 397 and pointed out that since the competent authority had no material to form his belief as required under section 269C(1) and the conditions precedent for the initiation of the proceedings for the acquisition of property were not satisfied, the proceedings were without jurisdiction. Dr. Misra also pointed out that since one set of proceedings had been dropped, the Government could not indirectly acquire the whole property. In this connection he pointed that the equitable principle of promissory estoppel was operative. He also pointed out that Shri Virendra Saran had made constructions on the faith of the permission granted by the Government and on account of the dropping of the acquisition proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT v. Asharfi Lal Gupta [1983] 142 ITR 765. He referred to the decision of the Hon'ble Delhi High Court in the case of Mahavir Metal Works (P.) Ltd. v. Union of India [1974] 95 ITR 197 for the proposition that for the purposes of Chapter XXA a transfer of immovable property must be taken to be effected only when the instrument of transfer is registered. Regarding the service of the notices he pointed out that service had been made on Smt. Sulochni Devi and Sarvshri Girish Tandon and Badri Vishal Tandon by registered post and that the letter dated 8-7-1981 of Shri Girish Tandon specifically referred to the notice. Shri Roy pointed out that no notices were given to the occupants as there was no information about them. In any case he argued that even if notice to them was necessary, the initiation of the penalty proceedings could not be challenged and that at best the acquisition order could be set aside to be made again after issue of due notices. In this connection reliance was placed by him on the decision of the Hon'ble Gujarat High Court in the case of Smt. Vimlaben Bhagwandas Patel. He pointed out that there was definitely an avoidance of tax in the transfer, though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 269C(1) provides that the proceedings for the acquisition of property under Chapter XX-A can be initiated by the competent authority if he has reason to believe that any immovable property of a fair market value exceeding Rs. 25,000 has been transferred for an apparent consideration which is less than the fair market value of the property and that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with the object of (a) facilitating the reduction or evasion of the liability of the transferor to pay tax under the Act in respect of any income arising from the transfer ; or (b) facilitating the concealment of any income or any monies or other assets which have not been or which ought to be disclosed by the transferee for the purposes of the 1961 Act or the Wealth-tax Act, 1957. As pointed out by the Hon'ble Calcutta High Court in the case of Lalita Jabbar, the satisfaction of the competent authority for the purposes of initiation of the acquisition proceedings has to be based on relevant materials and that if it is not so, the initiation of the proceedings would be without jurisdiction. No doubt, as held by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the transferee, the F.M.V. of the property as per Inspector's report, dated 25-4-1981 is Rs............. The F.M.V. exceeds the apparent consideration by more than 15 per cent thereof. I have reason to believe that the consideration for the transfer of the property agreed between the parties has not been truly stated in the instrument of transfer with the object of reduction or evasion of tax liability of the transferor under the IT Act or facilitating concealment of income or assets of the transferee. This is a fit case for initiating proceedings under section 269C. Issue notice under section 269D(1). Dated Sd/-- 2-6-1981 Inspecting Assistant Commissioner of Income-tax Acquisition Range, Lucknow 25-4-1981" A perusal thereof shows that reference is made therein to the 'fair market value' of the property as per the Inspector's report dated 25-4-1981 but neither the copy of the Inspector's report was placed on the record for our perusal nor it detailed as to what was the amount of the fair market value. In the reasons recorded there is a blank and the fair mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were no materials before the competent authority for the formation of the belief that the consideration for the disputed transfer had not been truly stated in the instrument of transfer. To the same effect were the observations of the Hon'ble Calcutta High Court in the case of Tube Mill (India) (P.) Ltd. and, therefore, we are clearly of the view that the initiation of the proceedings was bad, unauthorised, without jurisdiction and, therefore, void ab initio. 14. So far as the question of valuation is concerned, it is by now well settled by a number of pronouncements that in the case of buildings which are in the possession of the tenants and the tenants cannot either be evicted or the rent payable by them enhanced, the only proper method of valuation would be to capitalise the annual rent by a certain number of years' purchase. It is equally well settled that even if the valuation of a property is capable from four different methods, the method which leads to the least valuation will have to be taken for the present purposes. Again, as rightly pointed out on behalf of the appellants, even if the mean of the two methods, i.e., rent yield method and land and buildings method is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the sale deeds was similar and this is also a relevant factor. In the light of the above, the question of valuation of the property in question may now be examined. The four bungalows are occupied by the following tenants at rents noted against each: Sl. No. Name of tenant Rent per month Rs. 1. Mr. Justice K.N. Seth 110.00 2. Shri Daya Prakash Mittal (Half Residence) 55.00 3. Shri Kailash Chandra Mittal (Half Residence) 55.00 4. Shri Satya Pal Prabhakar 88.75 5. Shri Keshav Sahai, Advocate 95.00 6. 19 out-houses in occupation of different persons 190.00 -------- 593.75 -------- The valuation was made by the valuation cell by land and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Valuation Officer at Rs. 2,60,354 and the tin shed structures were valued at Rs. 65,148. The depreciated value of these two items was taken by the Valuation Officer at Rs. 1,25,819. The Valuation Officer had taken the expenses relating to the litigation/probable settlement with the tenants to get the house evicted at Rs. 20,000. As against this, the details of the actual expenditure already incurred on litigation/settlement according to the appellants is as follows: Rs. 1. Depreciated cost of four bungalows not charged from, the tenants of the bungalows as per Valuation Officer's report 1,25,819.00 2. Further rebate allowed to the five occupants of the bungalows for the improvements effected by them in the residences: (i) Shri Keshav Sahai 10,000.00 (ii) Shri Satya Pal Prabhakar Rs. 28,273.75 (iii) Mr. Justice K.N. Seth: (a) Improvement rebate 24,109.00 (b) Cost of boundary wall made by the vendees 30,943.73 (c) Garage and servant quarters made by the vendees 18,620 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d need to be substituted by Rs. 2,97,077,60 (Rs. 10,000+Rs. 28,273.75+ Rs. 73,673.10+Rs. 35,130.75+Rs. 1,50,000). This means that the fair market value taken by the competent authority at Rs. 6,78,340 will get reduced to Rs. 4,01,262.40 (Rs. 6,78,340---Rs.2,97,077.60+Rs.20,000). It has to be further reduced by Rs. 67,000 being the reversionary value taken into consideration by the valuer. If this is also deducted, the value would be further reduced to Rs. 3,34,262.40 which does not exceed by more than 15 per cent of the apparent consideration of Rs. 3 lakhs. Thus, even if the other points including development charges (whatever be the date with reference to which such development charges were to be reckoned) were not looked into, even according to the valuation report of the departmental valuer the fair market value of the property, in question could not be said to exceed more than 15 per cent of the apparent consideration. Thus, in whatever way the matter is looked at, the order of acquisition could not be made in terms of section 269F(6). The acquisition order has, therefore, to be quashed. Having regard to the above, we are, therefore, clearly of the view that the impugned acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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