9911796707
TMI Blog1989 (10) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ter published in the Gazette of India on 31st October, 1983. By his order dt. 1st Dec., 1984 passed under s. 269F (6) the Competent Authority directed that the property in question stood acquired. The assessee in Acquisition No. 1 is the transferor the assessee in Acquisition NO. 2 is the transferee. Both of them have challenged the order of the competent authority. 2. The learned counsel for the assessee has pointed out that there have been several defects and beficiencies both in the procedure as well as the final order. The order is defective even from the point of merit and deserves to be cancelled the copy of the Valuation Report sent by the Competent Authority on 27th July, 1983, was received by the assessee on 21st August, 1983, thus giving them absolutely no time to deal with the issues raised No adjournment was also given for preparing a case and meeting the points. The conclusion by the Competent Authority that the transfer amount has been understated and there is evasion of tax liability is absolutely baseless. Both the transferor and the transferee have clean records in all the past years. There is nothing in Notice dated 9th Sept., 1983, issued by the IAC, Acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le instances referred to by the Competent Authority were given only for the first time in his order and were never seen by the assessee earlier. The law is clear that each of the conditions laid down in the section of the Act, should be separately satisfied and fully satisfied. The presumption about understatement of consideration is rebuttable. This can be done only if on opportunity is given. In fact there is no mention of any evidence known or collect indicating an understatement of consideration. 4. Referring to 'Annexure A' where certain instances of transfer are referred to, it is pointed out that these speak of a rate of Rs. 890 per sq. ft. Much reliance is placed on the cost of construction or the value of the building "Shanudeep. As a matter of fact his building was only under construction at that time and is one of the most prestigious and palatial building with almost no comparison. In fact the irrelevance of the departments allegation of under statements could be clear by comparising the instances I and 2 in Annexure A with the instance of 5 even in the same statement An analysis of the comparable instance taken out from 'Annexure A' clearly shows the position to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty under acquisition was subject to a large number of other disadvantages as pointed out in the report of the Registered Valuer, dt. 20th Dec., 1983, which had to be taken into account while determining the fair market value of the property There is no question of the assessee being a party to tax evasion, since the entire proceeds have been invested in Rural Bonds, thus leaving the assessee with no liability. Referring to the Acquisition Order itself, it is pointed out that when the transfer form was filed in December 1982 nothing was done for a long time. The Acquisition Officer did not even register the transaction within a reasonable time which pointed out to a definite case of prejudice against the assessee. The valuation itself has been made on the basis of unsatisfactory principles. Reference is made in this connection to certain Expert Articles regarding offering (sic) in journals. In fact the District Valuation Officer has also ignored the fact that the Twin Towers was in the industrial area and could not be taken into consideration against the background of the other details for the computation. Reference is made to the decision in SARABHAI M. CHEMICALS PVT LTD. vs. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Dist. Valuation Officer thus based on sales illustrations are more accurate and must be accepted. 7A. The learned counsels has referred to several reasons why the valuation given by the assesses valuer should not be accepted. M/s Ganjwala has valued the property on the basis of the land and building method. This method can be resorted to only where comparable cases of sales are not available. Reference is made in this connection to the decision in AIR 1984 SC 774 In fact the report of M/s Ganjawala itself indicates that free land in the are a could be valued at Rs. 3,000 per sq. ft. The learned counsel has dealt at length on the detailed averments made by the Competent Authority in connection with the valuation of this property and also the instance cited in Annexure 'A'. These clearly indicate that the valuation put by the assessee and recorded in the document of transfer are low are unrealistic. The learned counsel also referred to the real question to be asked in this connection, whether the competent authority had reasons to believe that these proceedings were needed. According to the learned counsel, s. 269C does not require any material at the time the belief as to un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to between the parties has not been truly stated in the instrument of transfer. The comparative case shown that the price of the Flat transferred should be very much more. The fact that the assessee has invested the proceedings in Rural Bonds also does not support its case. On the question of proof it is pointed out that the while the presumption regarding the valuation is rebuttable no such rebuttal is available in present case. Referring to s. 269 C (1) and s. 260C (2) (a), it is pointed out that the latter section comes into play only after the initiation of proceedings. In the present case there is no procedural or other defect in the initiation of proceedings. Automatically the other provisions of the Act are attracted and a clear obligation to acquire the property on the part of the Competent Authority arises. Reference is made in this connection to the decision in (1980) 16 CTR (Guj) 315 : (1980) 126 ITR 1 (Guj) The final order passed under s. 269F is natural conclusion from the factual position to which the provisions of law are applied the decision in the case of PUSHPALATA vs. IAC (1984) 38 CTR (All) 120 : (1984) 150 ITR 42 (All) also is referred to in this connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion stood acquired Both the transfer or and the transferee have challenged this acquisition. 11. The challenge arises from two angles; one, relating to the legal and technical deficiencies rendering the acquisition invalid and two stating that on merits there was no under valuation of the consideration justifying an acquisition. We have heard the parties. 12. The principles to be followed in an acquisition under Chapter XX-A of the IT Act, have been judicially well settled in CIT vs. SMT VIMLABEN BHAGWANAS PATEL SMT KAMLABEN KANJIBHAI PATEL and SARABHAI PATEL SMT KAMLABEN KANJIBHAIPATEL and SARABHAI M. CHEMICALS PVT LTD. vs. COMPETENT AUTHORITY the Gujarat High Court has elaborately explained the principles relating to such acquisition. The Calcutta High Court in SMT. BANI ROY CHOWDHRY TUBE MILL (INDIA) P. LTD. ANR vs. IAC JAI KUMAAR KANKARIA vs. COMPETENT AUTHORITY and CIT vs. MADHO PROPERTIES LTD. considered the problem at. Length. These provisions were the subject matter of consideration also by the Allahabad High Court in U.S. AWASTHI ANR vs. IAC and the Delhi High court in JAWAHAR LAL vs. COMPETENT AUTHORITY. The principles settled by these decisions may broadl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of allegations against them including the material collect so far by the competent authority, and be furnished with copies of the statements recorded and those of the documents collected by the competent authority on which he intends to rely so as to give the person interested or affected an opportunity to state his case and to correct or controvert the material sought to be relied upon. (8) In the prospective of acquisition proceedings under Chapter XX-A of the IT Act, which are penal provisions having far reaching repercussions, the competent authority must be satisfied and assured by cogent, reliable and relevant evidence that the fair market value of the property in question exceeds the apparent consideration by a prescribed margin. (9) It would be too hazardous to prefer one of the recognised methods of valuation which may be advantageous to the cause of the revenue. And arrive at an estimation of fair market value of a property on that basis. Such a lopsided approach on the part of the competent authority would not be in consonance with the burden of proof required to be discharged in such quasi criminal proceedings. (10) It is incumbent on the competent au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elieve doe no mean a pure subjective satisfaction on the part of the competent authority the reason must be held in good faith the reason must have a rational connection with or relevant bearing to the formation of the belief Rationale postulates that there must be a direct nexus between the material coming to the notice of the competent authority and the formation of his belief. (16) At the time of the initiation of proceedings the competent authority is required only to record his reasons for his belief that the fair market value of the property exceeds the apparent consideration by the prescribed percentage He is neither called upon nor empowered to come to any final conclusion regarding the valuation of the property and as such as the question of drawing the presumption under s. 269(C)(2) can never arise, at that stage. Where the competent authority has only to record his reasons for his belief as a state of facts he cannot proceed on the basis of the rules of Evidence. (17) The legislation has prescribed that the competent authority must also have reason to believe that the consideration has been under stated with the object of reduction, evasion or concealment of taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. At the face of it this looks an attractive argument. On deeper consideration, however, we have to hold that the competent authority had sufficient reasons to justify his reference of the matter to the departmental valuer. The property in question was situated in a prominent and posh locality in Bombay where the land as well as building a values were very high and increasing This objection also cannot be accepted. A point came up before us that the property had not been transferred in so far as the Society has not registered the proposed transfer and in effect the original owners continues to be the owner of the property. This argument gives rise to a peculiar situation. The provisions of Chapter XX-A of the IT Act, are attracted only in the case of transfer, this expression being also defined in the same Chapter. In a case where there is no effective transfer and the original owner retains the ownership of the property, neither in law nor as a matter of fact can it be held that there was a transfer within the meaning of s. 269A The provisions of Chapter XX-A cannot apply when there is no transfer. If that be so the entire exercise gone through in the present case by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the properties in at Sagar Terang in Bhulabhai Desai Road is rated at Rs. 1,120 per sq. ft. A property at Podar Road Flat No. 909 shows a rate of Rs. 1,228, per sq. ft. Whereas another property in Sofia College Lane shows a rate of Rs. 1,013 per sq. ft. The departmental valuer has, even though he has referred two properties concentrated only on Shanudeep Even here as pointed out above the rates of transfer differ from Rs. 1,300 per sq. ft. To Rs. 16.00 per sq. ft. For the Flats. We had the occasion to visit in the presence of both the parties the Flat alleged to be transferred by the assessee and both properties referred to by the departmental valuer. The building Shanudeep was in the course of construction at the relevant date of transfer It had not been completed It is an extremely posh property using mostly marble and high cost material. It has got only eight storeys the flats are mostly of duplex type The Flats have been constructed by the Surat Cutton Spinning Mils and sold to big parties like Chartered Bank, British Deputy High Commissioner and Bank of America The lowest sale price of the properties here is a Rs. 34 lakhs per Flat, and some of these purchasers have taken mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned by the District valuation Officer perhaps the 'Twin Tower' would be nearer to the assessee's property. The departmental valuer however has not relied on this. It is true that the property in question is facing the sea. We find that there are several peculiarities not all of which are favourable to the building relative to this property. The facts that there are 44 flats occupied by persons of different types, the maintenance of the property as well as the corridors, etc the almost unsatisfactory use to which the swimming pool could be put not merely by the occupants of one or other flat but the occupants of all the 44 Flats, etc cannot be ignored. The owner of the flats in this case are merely members of the co-operative housing society which owns the flats. Shareholding with the resultant ownership of a flat in a coop society is certainly on interior right and a less costly one that ownership of a full flat by one self. The more the number of flats, the greater would be the disadvantage on this score. In a multi-storeyed building, there would be the other disadvantages peculiar to the large number of flats, the larger number of occupants and risk connected with high rise bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith such meagre material and tools of comparison at one's command it would be rash to come to the conclusion that the price at which the assessee's property is transferred has been understated. There are also no other evidence pointing out to an intention to evade tax as laid down by the judicial decisions. We have already referred to the dispute in this regard about the transfer itself of the property. On the facts, therefore, it is not possible to say that there has been any understatement of consideration. 20. We, therefore, set aside the order of Acquisition. The appeals are allowed. 27th Sep., 1985. Y. R. MEENA, J.M.: I have gone through the order of my learned brother. After careful consideration, I am unable to persuade myself to agree with the final view taken by my learned brother. Therefore, I am writing a separate order. 21.2. The relevant facts of this case are that the assessee No. 1 Shri Uttamlal Chimanlal Kapasi has transferred his flat No. 5B along with a garage and car parking space in "Vaibhav" Building at 80, Bhulabhai Desai Road, Bombay under an agreement dated 6th Nov., 1982, to assessee no. 2, M/s Chemicals Auxiliaries Services Ptv. Ltd. For a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no intention of evasion of tax; "Vaibhav" is just an ordinary building, therefore there is no comparison between "Vaibhav" and "Shanudeep". He relied up on CIT vs. LONDON MACHINERY CO (1979) 10 CTR (All) 301 : (1979) 117 ITR 111 (All); CIT vs. SMT VIMLABEN BHAGWANDAS PATEL SUBHKARAN CHOUDHARY ORS. vs. IAC, JAI KUMAR KANKARIA vs. COMPETENT AUTHORITY ORS, SARABHAI M. CHEMICALS PVT LTD vs. P. N. MITTAL, COMPETENT AUTHORITY AND COMPETENT AUTHORITY vs. SMT BANI ROYCHOUDHARY (1981) 131 ITR 578 (Cal). He also disputed the area of the flat. Shri Ganjawala has deducted 10 per cent of balcony area and thereafter he draw our attention to the report of the Dist. Valuation Officer, report of the Shri Ganjawala and reports that the report of Sykes Divecha was not available to the competent authority as nothing has been said about it in his order. On the other had the submission of the learned counsel for the Revenue Sri Jetly was that the area of the flats is 2011 sq. ft. The prevailing market rate is very high as the building is considered to be the best in the area as also it is in posh locality of Bombay, i.e., Bhulabhai Desai road (Warden Road). The area of 2011 sq.ft. has been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s building values are very high and increasing. The objection also cannot be accepted. Accordingly, the claim of the assessee was rejected that the competent authority has wrongly initiated the proceedings. So far as the above findings and conclusions reached by learned brother. I fully agree with his views. Now, the only issue remains is whether the fair market value of the flat in a question is higher by 15% than the apparent consideration indicated in the instrument and the competent authority was justified in acquiring the flat along with the garage and place for car parking space. For that, it would be proper to bring on record some relevant essential facts. First we will take the area of the flat. The competent authority has taken the area of the flat at 2011 sq. ft. Similar area has been taken by the assessee's valuer Sykes Divecha. That is placed at pg. 40 of the assessees paper book, wherein in, it has been said: "I am, therefore, of the opinion that the value of this Flat No. 5-B having an area of 2011 sq. ft...." Sri Ganjawala has also taken the area at 2011 sq. ft. But he has excluded 10% on account of the balcony area. In my view, the area should be taken at 2011 sq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esumption does not arise at that stage. The assessee concerned has no voice at that stage either to rebut any presumption or fact any conclusive proof. The expression 'presumption' and 'conclusive proof' in sub-s. (2) of s. 269C make it clear that such conclusive proof or presumption is not applicable prior to the initiation of the proceedings. In JAWAHARLAL vs. COMPETENT AUTHORITY (1983) 32 CTR (Del) 1982 137 ITR 605 (Del), the issue before their Lordship was that when the competent authority has dropped the proceedings, whether fresh notice can be issued at the instance of the Commissioner. Their lordship has taken the view that the notice issued under s. 269D(1) at the instance of the Commissioner, the proceedings initiated were void ab inito. In AVASTI ANR vs. IAC (1977) 107 ITR 796 (All), the issue before their lordship of the Allahabad High Court was, when the notice was not published within the prescribed period as required by the provisions of the Second Chapter XX-A, though, individual notices were issued to the parties within the prescribed period. Their Lordship has taken the view that the fact that the individual notice were issued to the parties within the prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings were valid. On the issue regarding transfer of the interest of a member in the proper belonging to the society, Sri Jetly referred to the decision of the Supreme Court in RAMESH M. SHAH vs. HARSHA JADHAV JOSHI AIR 1985 SC 1470. Their Lordship of the Supreme Court has considered the interest of the member in a flat in a building of the co-operative housing society. Their Lordship held that there is no absolute prohibition in the Act or in rules or in the bye law against transfer of interest of a member in the property belonging to the society. The only transfer which is void under the Act is one made in contravention of sub-s. (2) of s. 47. If the society turns down in the purchaser's application for membership which of course, cannot be done except for valid reasons, it is upon him to take such course of action as available under the law. In SPL. LAND ACQUISITION OFFICER vs. P. VEERABHADRAPPA AIR 1984 SC 774. Their Lordship has considered the issues regarding determination of value of land by applying the method of capitalising return. At page 777 in para 8, their Lordship has observed in para 8, it is axiomatic that the best evidence to prove what a willing purchaser would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire flat. Now the question remains, what should be the rate and what should be the proper method for valuing the property for the purpose of ascertaining the fair market value of the flat for acquisition of the flat in question. Before I proceed further, I would like to clarify the facts that are on record. It has been stated that Sri Uttamal Kapasi agreed to transfer the flat to M/s Chemicals Auxiliaries. They are strangers. Sri Kapasi has nowhere claimed that he has intentionally charged lesser value from the purchaser. On the contrary, both Sri Kapasi and M/s Chemical Auxilaries claiming that the fair market value of the property is Rs.16 Lakhs or even less, therefore, there is no question of acquisition of the property. Interesting question does arise that when the property in question was sold at a fair market value and the Department is willing to pay 15 per cent more on Rs. 16 lacs to acquire the property, how the assessee are sufferers or penalised. No arguments were adduced before us regarding the fact that if the property is acquired they will be penalised. In fact, it is for the department to think know better before paying 15 per cent more on the apparent consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority. No mention of this report is mentioned in the order of the Competent Authority. But once the assessee has brought to our notice, we want to take some relevant aspects of this report which can be considered for valuing the said property. Skyes Divecha has taken the area of the flat at 2011 st. ft. along with garage and car parking space and the rate of the flat at Vaibhav is taken at Rs. 1300 per sq. ft. Further, he has allowed 20 per cent depreciation on the rate and further allowed 20% discount as the flat is in the co-operative housing society. Even then he has taken the value of the flat at Rs. 17,09,350, though Skyes Divehca agreed for the rate prevailing in the locality at Rs. 1300 per sq. ft. But because they have given 40% discount, the value taken by the Competent Authority was reduced substantially, by Skyes Divecha. I agree that some deduction in value can be allowed in the case of old building, and the flat is in a society. A flat in a new building can fetch more if it is identical to the old building. Similarly, a flat which is independently owned, on a fetch a little bit more than the flat in a housing society. But the discount of 20-20% as has been gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... big green lawns which is very rare in any other neighbouring building in this post locality of Bombay. At the back of the building, there is complete sea view and the facts sow that the residents of Vaibhav building will enjoy the sea view for a very long time in future also. On the right side of the building there is a park along these coast. On the lest side, the Vankhana Palace which is now American consulate. Though it is located on Bhulabhai Desai Rd., the building is constructed at a distance from the Main Road, therefore it, enjoys the benefit of the main Road as also the residents can avoid the nuisance of the road having sufficient distance from the main road. So far location of Shanudeep is concerned this building is located on the Cumballa Hill, which is surrounded by other buildings; there is no open atmosphere as in Vaibhav and sea view is not available so far land attached to Vaibhav and Shanudeep is concerned, Vaibhav has far more attached land with the building than Shanudeep. Shanudeep has no swimming pool and park, while Vaibhav has a swimming pool and good park. We visited Vaibhav and saw the swimming pool. It is in good condition though at that time there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act, 1961. The appeals are dismissed. 11th October, 1985 REFERENCE UNDER S. 255(4) OF THE IT Act 1961. The above appeals were heard by Dr. V. Balasubramanian (Sr. Vice president) and myself (Y. R. Meena), Since there is a difference of opinion between the Members on the conclusion in the appeals under consideration, the following questions are referred to the Hon'ble President ITAT for appointing a Third Member to hear the above appeals so that the same may be decided in accordance with the majority view: (1) Whether, on the facts and in the circumstances of the case, the fair market value of the flat in question exceeds 15 percent from the apparent consideration as indicated in the Sale Deed? (2) Whether the Competent Authority was justified in acquiring the flat in question under s.269(F) under the provisions of Chapter XX-A? U.T. SHAH, VICE-PRESIDENT (AS A THIRD MEMBER) These appeals arise out of the acquisition proceedings initiated under the provisions of Chapter XX-A of the Act. The learned Members who originally heard these appeals, differed on the issue as to whether the fair market value of the property in question exceeds by more than 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cality. The reports of the three valuers have been discussed by the learned Members in their respective orders and, therefore, the same need not be discussed at length here. It is pertinent to note that the valuers of the parties have valued the flat in question on the basis of the sale instances in the vicinity of "Vaibhav", while the departmental valuer has mainly based his valuation keeping in mind instance of a building known as "Shanudeep" located on Altamount Road. 3. Both the parties invited my attention to the orders of the learned Members and urged that I should adopt the conclusion arrived by the learned Members which was in their favour. They also invited my attention to the valuation report of the valuer to support their respective stands. The learned Counsel for the assessee submitted that the conclusion arrived at by the learned Accountant Member is a quite sound and reasonable and, therefore, should be adopted by me. In this connection, he also pointed out that incoming to the conclusion as arrived at by him, the learned Accountant Member had also kept in mind certain legal principles enumerated in para 12 of his order. The learned representative for the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
