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TMI Blog1983 (3) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in an area mentioned as an exception in section 2(14)(iii) of the Income-tax Act, 1961 ('the Act'). In other words, the land is situated in a village, which is not comprised within the jurisdiction of a municipality, etc., as described in item (a) or any area described in item (b) of the aforementioned provision. The action for acquisition under Chapter XXA of the Act started on the basis of a complaint dated 7-7-1980 received by the IAC. The IAC asked the Inspector to make enquiries and after getting his report dated 1-9-1980 initiated the acquisition proceedings by order-sheet entry dated 3-9-1980, quoted below : " 3-9-1980 Inspector's report received and placed on file. The immovable property as described in Registered Deed No. 123 of 14-4-1980 registered in the office of the Registering Officer, Phillaur, was sold at an apparent consideration of Rs. 40,000. Enquiries reveal that the fair market value of this property at the time of sale was Rs. 61,612.50 which exceeded the apparent consideration by more than 25 per cent of such apparent, consideration have thus (sic) reason to believe that : (i) the fair market value of this property in question exceeded Rs. 25,000 ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have the reason to believe that any immovable property had been sold for an apparent consideration, which was less than the fair market value of the property with the object/objects specified in section 269C(1) of the Act in the facts and the circumstances of the case. It was very emphatically argued that initiation of acquisition proceedings was invalid as the conditions precedent for taking such an action were not fulfilled and, consequently, the order passed was to be quashed. It was pointed out that there was no material available to the competent authority to show that the consideration of sale had been understated with the object of 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 for the purposes of the Income-tax Act or the Wealth-tax Act or for 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. The counsel of the transferee, who made submissions at great length, pointed out that the land sold was agricultural land situated in a village where it could not be treated even as a cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eror to pay income-tax in respect of any income arising from the transfer. He prayed that the finding of the competent authority about transferor avoiding tax was unsupportable and should be deleted and in any case the acquisition proceedings were not properly initiated and this being so, the order of the competent authority be vacated. 4. It was urged by both the counsels that at the time of initiating of acquisition proceedings the competent authority must have material to entertain the reason to believe that an immovable property has been sold for an apparent consideration, which is less than the fair market value and with the object/objects specified relating to the reduction or evasion of tax either by the transferor or the transferee or both and that, the presumptions in section 269C(2) would not be available to the competent authority at that stage. A number of authorities mostly from the Calcutta High Court were cited and relied upon,. These were Smt. Bani Roy Chowdhury v. Competent Authority, IAC [1978] 112 ITR 111 (Cal.), Subhkaran Chowdhury v. IAC [1979] 118 ITR 777 (Cal.), Tube Mill (India) (P.) Ltd. v. IAC [1980] 122 ITR 72 (Cal.), Competent Authority, IAC v. Smt. Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he necessary reason to believe. However, we have even looked into the Inspector's report which too is quoted above. This too lacks any such material. The Inspector merely noted that there was understatement of consideration and recommended the proceedings for acquisition. It is further clear from a sentence towards the end in the report that about the source of investment also there was nothing known to him and he merely passed on the information to ITO, Phagwara. There is nothing either in the report of the Inspector or in the reasons recorded to show as to whether the transferor or transferee were at all liable to in tax or wealth-tax or both, as the case may be. A copy of the complaint dated 7-7-1980 was also placed on record by the departmental representative. This complaint was made to point out that less court fee, meaning thereby registration stamp duty, was paid and that the complainant wanted to purchase the land at the price of Rs. 61,612 given in the agreement to sell dated 8-3-1980. 7. It is further clear from reading pages 6 to 10 of the order of the competent authority that while finalising the acquisition proceedings the competent authority was alive to the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are stronger than the words 'is satisfied' and has reiterated the principles laid down in the earlier decision of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). It was reiterated that the belief entertained must not be arbitrary or irrational and it must be based on reasons, which are relevant and material. In the instant case, the question of liability to income-tax or wealth-tax of the transferor and the transferee is obviously a very important one for initiating action for acquisition and to meet the requirements of section 269C(1) and when it is found that there is no material available to show that either of them was liable to income-tax or wealth-tax, it cannot be said that the competent authority had rationally speaking any reason to believe. The Calcutta High Court has clearly held that presumptions cannot be invoked for initiating proceedings for acquisition and in Competent Authority, IAC v. Smt. Bani Roy Chowdhury's case, the High Court has distinguished the ruling in Mahavir Metal Works' case, cited by the departmental representative. 9. In view of the above discussion, we must hold that the proceedings for acquisition have not been validly initiated by the compe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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