1979 (8) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the initiation of acquisition proceedings u/s 269C of the I.T. Act, 1961.
2. Applicability of sub-s. (2) of s. 269C at the stage of initiation of acquisition proceedings.

Summary:

1. Validity of the initiation of acquisition proceedings u/s 269C of the I.T. Act, 1961:
The petitioners challenged the acquisition proceedings initiated by the Competent Authority on the grounds that the conditions precedent for such initiation were absent. The Competent Authority must have reason to believe that the fair market value of the property exceeds Rs. 25,000, the apparent consideration is less than the fair market value, and the consideration has not been truly stated with the object of evading tax or concealing income. The court held that the Competent Authority acts on subjective satisfaction based on objective factors and cannot act arbitrarily. In this case, there was no material to form the belief that the consideration was not truly stated by the LIC, and thus, the initiation of the proceedings was without jurisdiction.

2. Applicability of sub-s. (2) of s. 269C at the stage of initiation of acquisition proceedings:
The court examined whether sub-s. (2) of s. 269C, which involves presumptions about the fair market value and apparent consideration, applies at the initiation stage. The court referred to several judgments, including Smt. Bani Roy Chowdhury v. Competent Authority and Subhkaran Chowdhury v. IAC, which held that the evidentiary value of presumptions in sub-s. (2) of s. 269C is not applicable at the initiation stage. The court agreed with these views, stating that the rules of evidence in sub-s. (2) apply only after the initiation of proceedings. Therefore, the Competent Authority could not rely on sub-s. (2) of s. 269C for forming the belief necessary to initiate acquisition proceedings.

Conclusion:
The court quashed the impugned proceedings, issuing a writ of mandamus to prevent further action under Chap. XX-A of the I.T. Act and a writ of certiorari to quash the proceedings. The operation of this order was stayed for six weeks.