TMI Blog1996 (2) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... th rule 48-I works out to Rs. 45,97,819. The Departmental Valuation Officer has worked out the depreciated value of the building at Rs. 11,63,400 and the scrap value at Rs. 1,36,900. After deducting the depreciated value from the discounted consideration the land rate of the PUC comes to Rs. 4,983 per sq. mtr. and after deducting scrap value, the same comes to Rs. 6,472 per sq. mtr. The impugned order indicates that members visited the PUC and considering the relevant circumstances, viz., location of the property, size, potential use, general rate of property prevailing in the area, etc., came to the conclusion that the apparent consideration of the PUC was sufficiently undervalued so as to justify its pre-emptive purchase under Chapter XX-C of the Act. Accordingly, a show-cause notice was issued as contemplated under section 269UD of the Act on November 6, 1995, to the interested persons, viz., the transferors and the transferee. Details of sale instances of other properties were also communicated which are indicated in the order and we quote below the relevant part from the order : " There is a comparable sale instance of property (for short, ' SIP-1 ') in the same Satyagrah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 23,60,000, which is below the minimum prescribed limit at Rs. 25 lakhs with effect from August 1, 1995. It was further pointed out that merely because Form No. 37-I is furnished, it would not clothe the appropriate authority with the jurisdiction to exercise the powers under Chapter XX-C. It was also pointed out that the transferee sold the residential property wherein she had 1/3rd share at a consideration of Rs. 1,81,20,000. The appropriate authority issued the NOC in respect of this transaction on September 6, 1995, and the transferee received her share of Rs. 63,33,000. Out of this amount, the PUC is being purchased by the petitioner-transferee. According to the petitioner, she would be required to pay capital gain on the remaining amount and if there was the slightest intention on her part, she would have shown consideration for the PUC at a price higher than Rs. 47,00,000 so as to save tax on capital gain. So far as the transferee is concerned, the contention is that there was no motive on her part to mislead the Department for evasion of tax. With regard to the size and shape of the PUC, vis-a-vis, the size and shape of the SIPs, various contentions were raised. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p and it has held that : " It is true that the PUC is jointly owned by the two transferors, but having entered into one single agreement to transfer and having filed Form No. 37-I, in our view, the transaction comes under the purview of Chapter XX-C of the Income-tax Act, and it cannot be said that merely on that account there cannot be any presumption regarding evasion of taxes. " In the later part of the order, the appropriate authority has considered the judgment delivered by this court. But learned counsel for the appropriate authority fairly stated that the appropriate authority has not correctly appreciated the law laid down by the court, and on assumption a decision is taken that the High Court has held that it had jurisdiction in such a situation. Mr. Thakore, learned counsel for the Revenue, submitted that in the instant case, there is only one agreement. According to him, had it been the case of two agreements for the apparent consideration of the property each having value at less than Rs. 25 lakhs, the question would be different. There may be one agreement for transfer of property where the transferors may be co-owners or joint owners. It may be that the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual owners joined together to enter into one single agreement to transfer their respective shares in favour of one or more persons, that would not make any difference to the main issue that what each transferred is his definite share in the property. " In the instant case, it is clear that what is agreed for transfer is the individual undivided share in the property. It is also not in dispute that the value of each share is less than Rs. 25 lakhs. It is also accepted by the appropriate authority that the transferors are co-owners. Therefore, in view of the decision rendered in the case of K. V. Kishore [1991] 189 ITR 264 (Mad), it cannot be said that merely because there is only one agreement, the provisions of Chapter XX-C can be attracted. Thus, where there are co-owners and each co-owner is getting apparent consideration less than the limit prescribed for his share, i.e., less than Rs. 25 lakhs, the provisions of Chapter XX-C cannot be attracted, even though the amount if calculated of all the co-owners together may exceed Rs. 25 lakhs. The same view is also taken in the case of N. C. Rangesh v. Inspector-General of Registration [1991] 189 ITR 270 (Mad). Mr. Shah, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appropriate authority has no jurisdiction to proceed under Chapter XX-C and that section 269UD was not applicable. The court found that there was a composite agreement. There was nothing in the agreement which would indicate that the petitioners-purchasers agreed to buy individually an undivided one-third share in the property from the vendor. There was nothing on the record to indicate that the consideration for the purchase of each of their interest in the property was Rs. 4,68,667 as alleged. The valuation report dated June 20, 1993, did not support the petitioners' factual contention. From the record it was clear that the petitioners purchased the property in joint ownership and that their shares were undivided. It was also found by the court that in the questionnaire, the petitioners were specifically questioned whether the property is purchased under joint ownership or co-ownership and whether the shares purchased are undivided ? It was categorically declared that the property is purchased in joint ownership and the shares are undivided. This was the factual position. No doubt, in that case the form was submitted before the authority. The court considering the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes to Rs. 10,375 per sq. mtr. (photocopy of the Valuation Officer's report is enclosed herewith). There is another comparable sale instance of property (for short, ' SIP-2 ') in the same Satyagraha Chhavani, S. No. 1127, S. P. No. 48, Sector 1, being plot of land admeasuring 836.12 sq. mtrs. with a bungalow constructed in the year 1975 and having built-up area of 41.7.74 sq. mtr. This SIP (as per this office File No. AHD-1128) was sought to be transferred, vide agreement dated June 26, 1995, for an apparent consideration of Rs. 77,00,000. The discounted consideration was worked out at Rs. 76,65,052. The Departmental Valuation Officer estimated the depreciated value of the bungalow at Rs. 10,30,162 and its scrap value was estimated at Rs. 1,47,166. The land rate of SIP-2 (in June, 1995) after deducting depreciated value from the discounted consideration, comes to Rs. 7,816 per sq. mtr. and the same after deducting scrap value, comes to Rs. 8,872 per sq. mtr." (photocopy of the Valuation Officer's report enclosed herewith). With regard to the property sought to be transferred, the show-cause notice reads as under : " The property sought to be transferred (for short, ' the PU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Valuation Officer of the appropriate authority for consideration and comparison. In three foolscap sheets (handwritten) cost of the PUC is calculated giving all the details of the property. In two foolscap typed pages, cost of SIP-1 is calculated. These details are relevant as on the basis of these details valuation is determined. What is conveyed to the petitioner is value of all the three properties but how and on what basis the value is determined is not communicated by the appropriate authority though the same material is used by the appropriate authority in comparing the value of properties and drawing the presumption against the petitioner. What is not conveyed is structure, i.e., single or double storeyed, load bearing structure, height, availability of a servant room, whether it is with the RCC construction, extra items, i.e., material used for flooring, type of tiles used, either polished kota stone, spartek or glazed tiles, type of grill, type of stair case, roof (whether RCC or RCC covered with Mangalore tiles, whether it has superior specification or architectural features, type of doors, simple or decorative, sloping roof, nature of external plaster, material used i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilding by the Departmental Valuation Officer. There is a reference to the effect that photocopy of the Valuation Officer's report is enclosed but with regard to each property the report supplied is not a full report. Material part, i.e., details of property, with regard to each property, is not forwarded to the petitioner. The petitioner at the time of hearing before the appropriate authority took it for granted that the material supplied is the only material considered by the authority. It is only when reports are produced before the court it has come to light that the full report with regard to each property is not forwarded but only part which is otherwise referred to in the show-cause notice is supplied. Can it be said that sufficient opportunity is afforded even when parties are called upon to contradict the conclusion arrived at for valuation without providing the reports of the Valuation Officer consisting of details of the properties, with detailed measurements and the cost ? Is it sufficient to inform the conclusions based on the report ? As held by a catena of decisions that if the adjudicator is going to rely on any material, evidence or document for basing his decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een but even the risk of prejudice is sufficient, to hold that non-supply of the valuation report vitiates the decision. The apex court in the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 ; AIR 1955 SC 65 considered the question amongst others, whether the Tribunal acted without jurisdiction in relying on the data supplied by the Income-tax Department behind the back of the appellant-company, and without giving it an opportunity to rebut or explain the same ? The court considered the case decided by the Full Bench of the Lahore High Court in the case of Seth Gurmukh Singh v. CIT, AIR 1944 Lah 353 ; [1944] 12 ITR 393, wherein it is held that the Income-tax Officer though not bound to rely on evidence provided by the assessee as he considers to be false ; yet, if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to found that estimate and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilised to such an extent as to put the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the PUC at Rs. 8,000 and held that even if a liberal view is taken and all minor factors are considered fair, the land rate in any case would not be less than Rs. 6,200 per sq. mtr. The question is : on what basis the fair land rate is calculated at the rate of Rs. 6,200 per sq. mtr. ? There is nothing in the order to show as to how and on what basis the fair land rate is reduced to Rs. 6,200. The submission made by the learned advocate for the petitioner is that this is a case where the appropriate authority without giving reasons determined the price so as to attract the provisions. The order passed is without giving reasons and therefore also is not sustainable as submitted by the learned advocate. For valuation of property, our attention is drawn by the learned advocate to several decisions including CIT v. Vimlaben Bhagwandas Patel [1979] 118 ITR 134 (Guj) and Tribeni Devi v. Collector, AIR 1972 SC 1417 which are considered in the case of CIT v. P. I. George [1988] 171 ITR 620 (Ker). It appears that only comparable sales method is adopted for determination of the value. In valuation if a property is owned by more than one, in case of co-owners where there is undivided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 6,200 per sq. mtr. and on this ground also, the order is required to be quashed. Perversity : Surprisingly, we find that so far as the transferee is concerned, in earlier transaction which is referred to in paragraph 3 of the order, a residential property of the transferee situated in Ahmedabad was agreed to be sold at a consideration of Rs. 1,81,21,000. The appropriate authority issued NOC in respect of this transaction on September 5, 1995. The transferee received her share of Rs. 66,33,000. The present PUC is being purchased by the transferee from the said amount. The appropriate authority, at page 91 of this compilation, has observed : "Further, if the transferees have received any unaccounted money from an earlier transaction of sale of property, there would be greater temptation for them to understate the consideration of a subsequent purchase transaction so that the unaccounted money, or part thereof finds a proper and productive outlet. Therefore, in our view, there is no merit in this submission." The appropriate authority, having held that there was no undervaluation of the property of the transferee and was entitled to have a share of Rs. 66,33,000, there c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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