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TMI Blog1976 (11) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... iculars given in form No. 37-G which was sent to him by the sub-registrar under s. 269P of the Act, the competent authority addressed letters to the transferor and the transferee calling for the some more particulars to examine the reasonableness of the consideration having regard to the location and nature of the property, The transferee, while answering the queries made by the competent authority submitted an approved valuer's report as per which the value of the property a was estimated at Rs. 1,26,000. The competent authority also deputed his Inspector to visit the property and report regarding its market value. He appears to have submitted a report but the content of the report were not referred to in the order of the competent authority. At the same time, the competent authority referred the matter to the departmental valuation cell in terms of s. 269L of the Act and according to the report submitted by the Valuation Officer, the fair market value of the property was Rs. 1,78,700. The Valuation Officer, it is stated inspected the building on 25th Nov.,1974 before submitting the report. According to the report of the approved valuer submitted by the transferee, the market valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng was in a desolate area in fields, lacking security and that what was paid by him was the proper market value. The competent authority was not prepared to accept the submissions of the transferor and the transferee. He observed that even as per the report of the approved valuer submitted by the transferee, the market value was about Rs. 1,53,000. He found that in the said report it was mentioned that the total plinth area of the ground floor was 3,317 sq. ft. which included drawing hall measuring 203 sq. ft. While arriving at the cost of construction of the main portion of the ground floor excluding the drawing hall, the valuer deducted 203 sq. ft. relatable to the drawing hall from the total plinth area of 3,317 sq. ft., and put the balance at 2,114sq.ft. instead of 3,114 sq. ft. This mistake was admitted by the valuer himself when examined later. Taking the cost of construction at Rs. 30 per sq. ft., the value estimated by the approved valuer had, therefore, to be enhanced by Rs. 30,000 i.e from Rs. 1,26,000 to Rs. 1,56,000. The competent authority further observed that the approved valuer initially put the value of site at Rs. 20 per sq. yd. But corrected it later to Rs., 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the transferor. (7) The property was not in a busy commercial locality, but some what removed from the main road and was vulnerable from the security point of view which fact ought to have been taken into account in assessing the fair market value. (8) The onus is in the department to establish that the market value was more than the apparent consideration shown in the document and the consideration was understand with a view to evade tax. The competent authority has not discharged that onus and his conclusions are based entirely on surmises and suspicion. 4. For the revenue, Sri Swaminathan, the Departmental Representative, has submitted that the reasons recorded by the competent authority were sufficient to vest him with the jurisdiction to start acquisition proceedings and his order cannot be challenged for lack of jurisdiction on the at ground. he has further submitted that in form No. 37-G received by the competent authority from the Sub-Registrar, it was not shown that the property was tenanted at the material time and that was the reason why no notice was issued by the competent authority to the tenants. In any case, it is submitted, the failure on the part of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO to at is not a justiciable issue. it is the existence of the belief that can be challenged by the assessee but not the sufficiency of the reason for the belief. At the same time, it is open to the Court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are extraneous or irrelevant to the purpose of the section. 6. The question that has to be examined in the light of the above observations is whether there were adequate grounds before the competent authority to entertain the belief that the fair market value of the property in question was more than the apparent consideration shown in the sale document. The competent authority had before him the report of the approved valuer submitted by the transferee according to which, the value after making the necessary corrections referred to earlier, was around Rs. 1,60,000. Then again, there was the report of the departmental valuer according to which, the value was Rs. 1,78,000 The competent authority himself made a personal inspection of the property and had before him sales of lands in the vicinity which showed the market value of the land to be around Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings for acquisition may be taken (1) Where the competent authority has reason to believe that any immovable property of a firm market value exceeding twenty-five thousand rupees has been transferred by a person (hereinafter in this Chapter referred to as the transferor) to another person (hereinafter referred to as the transferee) 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 this Act in respect of any income arising from the transfer; or (b) 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 Indian IT Act, 1922 (11 of 1922), or this Act or that WT Act, 1957 (27 of 1957), the competent authority may, subject to the provisions of this Chapter, initiate proceedings for the acquisition of such property under this Chapter:" In other words, the presumption is a rebuttable one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lure of the competent authority to issue a notice to the tenant of the property is a serious irregularity and his order of requisition is, therefore, liable to be set aside on that ground alone. This irregularity is, of course, a curable one and the competent authority can pass a fresh order of acquisition after complying with the requirements of s. 269(2). We, therefore, do not propose to set aside his order on that ground alone without examining the case for acquisition on merits with reference to the firm market value. 8. The question that has to be decided ultimately therefore is what was the fair market value of the property, and whether the revenue has established that the fair market value exceeded the apparent consideration by more than 15 per cent or 25 per cent as the case may be. Courts have held that in the case of a residential property, the capital value should be estimated with reference to the rent realised. More so when the tenancy is subject to the provisions of the Rent Control Act. Reference is invited to the decisions in CWT vs. V.C. Ramachandran, Controller of Estate Duty, West Bengal vs. Radha Devi Jalan and C. Krishna Prasad vs. CWT, Gangalore. It has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Co. on a monthly rent of Rs. 750 including furniture and fittings. It was a fairly higher rent for a property in a town like Guntur and only a concern like the I.L.T.D. Co. could pay such a higher rent and could overcome the drawbacks attached to the house, viz., problem of security and lack of market and other facilities in the vicinity. The transferor, we are told, was not prepared to retain the property as an absentee landlord and was on the look out for a purchaser. The property was in the market for sale for four months and ultimately the transferee offered Rs. 1,25,000 which was, it is said, the highest offer received. The revenue has not been able to show any comparable sales of properties in the locality which would indicate that the price received by the transferor was understated. There was a lot of discussion in the other of the competent authority regarding the market value of the land, but that, in our opinion, does not indicate the market value of the property as a whole. The site on which the property was constructed was less than 1000 sq. yrds., and according to the report of the Valuation officer attached to the Department, the value of land at that time in the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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