TMI Blog1992 (2) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... n and should be annulled. The judgment of the Bombay High Court in the case of Unique Associates Co-operative Housing Society Ltd. vs. Union of India Ors. (1985) 152 ITR 114 (Bom) is applicable to the case of the transferor and transferee and is binding on the authorities. Without prejudice to the aforesaid ground, another ground has been taken to urge that the service of notice under s. 269D having not been effected within time or according to the prescribed manner and copy of notice not being published and served as per s. 269D(2), the entire proceedings for acquisition have vitiated and therefore, the acquisition order under s. 269F(6) should be annulled. 3. A further ground has been taken on merits of the case to urge that the Dy. CIT(Acqn.) erred in arriving at the market value at Rs. 57,85,000 by relying on certain sale instances which were not quoted by the Departmental Valuation Officer and which were not comparable to the facts of the case. Even the Departmental Valuation Officer improperly and incorrectly arrived at the market value without appreciating the facts and circumstances existing in this case, and the factors justifying the consideration for the transfer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of Rs. 475 per sq. ft. of super built up area which was 9,350 sq. ft. The basement of the property was completed in 1985 and the property is about 3 kms from Pune Station with all civic amenities and was also for commercial use. The second property consisting of ground floor of the same building was bought by Corporation Bank in September 1985 at the rate of Rs. 610 per sq. ft. of built up area of 5,331 sq. ft. including 50% of Mazanine floor with similar civic amenities and commercial use. On the basis of the factors which have bearing on the valuation of the property, he considered that the plot under consideration was better and therefore, he valued the property transferred at the rate of Rs. 650 per sq. ft. and adding further amount of Rs. 1,00,000 for the facilities of common toilet arrived at the fair market value of the property at Rs. 70.55 lakhs. 6. After making preliminary enquiries regarding comparable transactions in similar types of areas, the Dy. CIT (Acqn.) was of the opinion that the apparent consideration shown by the assessee did not reflect correct fair market value of the property. He was also of the opinion that the fair market value of the said property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Acqn.) also referred to the sale instances given by the registered valuer of the parties and held that they are not comparable cases. The first instance was that of a house and for the second instance there were no particulars of area. The two sale instances cited by the parties are located in Clover Centre and Sterling Centre. These instances were not held to be of comparable cases as higher sale instance in the same location were available to him. Consequently, he agreed with the Departmental Valuation Officer that the fair market rate of the property transferred could be estimated at Rs. 650 per sq. ft. vide para 6 of the impugned order. Invoking the provisions of s. 269C(2) of the Act containing statutory presumptions he concluded that the consideration for the transfer of the property as agreed to between the parties has not been truly stated with the twin objects of facilitating reduction or evasion of the liability of the transferor to pay tax and 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. 8. The Dy. CIT (Acqn.) also reiterated the same conclusion by relying on the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dec., 1985. As per proviso under s. 269D(1) the acquisition proceedings shall be initiated within a period of nine months from the end of the month in which the instrument of transfer or agreement of transfer is registered by the publication in the Official Gazette. Since the agreement of sale is registered on 16th Nov., 1985 the acquisition proceedings should have been initiated on or before 31st Aug., 1986 whereas admittedly a notice was published in the Official Gazette on 4th Oct., 1986 vide para 5 of order of acquisition. Therefore, he urged that initiation of proceedings were barred by limitation of time and a specific ground has also been raised in the gronds of appeal. In this connection, the learned counsel for the parties submitted that this ground relating to limitation is purely a question of law and does not involve investigation of facts. It should be admitted even though this objection was not raised at the time of proceedings before the Dy. CIT (Acqn.). We consider that there is merit and force in the contention of the learned counsel and therefore, he has been allowed to urge the ground. 11. The second objection raised was that initiation of proceeding was not v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reduction or evasion of the liability of the transferor to pay tax in respect of any income arising from the transfer or concealing of any income or any moneyes or other assets not disclosed by the transferee for the purposes of income-tax or wealth-tax. In view of the aforesaid rulings and observations of the Board contained in the circular, the learned counsel urged that the acquisition proceedings were not validly initiated under s. 269C(1). Further, he referred to para 6 of the order of acquisition to show that except discussing fair market value of alleged comparable cases of property, there was no material to show that higher amount of consideration was actually paid for transfer of the property or the consideration for the transfer as agreed between the parties has not been truly stated in the instrument of transfer. Referring to para 4 of the acquisition order, he pointed out that only with reference to the subjective valuation of the fair market value of the property stating that it exceeded apparent consideration by more than 25%, the provisions of s. 269C(1) were applied by the Acquisition Officer and relied on the judgment of the Punjab and Haryana High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the property by the Departmental Valuation Officer contained in pages 10 to 16 of the paper compilation. The valuation has been made on the basis of land and building method i.e. physical method. A comparable sale instance considered by the Departmental Valuation Officer is shown in Annexure `X' contained in page 13 of the paper compilation. This annexure shows that the property is on the first and second floor of Aditi Commerce Centre, General Thimayya Road, Pune, which has been completed in the year 1985 for which the date of agreement entered into was 20th Dec., 1983 for Rs. 44,41,250 for a built up area of 9,350 sq. ft. which works out to Rs. 475 per sq. ft. for super built up area. The second instance is the ground floor of Aditi Commercial Centre, for which the date of agreement is 5th Sept., 1985 for a consideration of Rs. 32.50 lakhs for a super built up area of 5,331 sq. ft. including 50% of mezanine floor, which works out to Rs. 610 per super built up area. The property is 3 kms away from Pune railway station together with civic amenities and use for commercial purposes. It has to be pointed out at this juncture that the ground floor of the said property is occupi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to the sale instances of the property situated at a long distance, viz. Aditi Commerce Centre cited by the Departmental Valuation Officer. According to him, the sale rate of Rs. 400 per sq. ft. shown in the agreement of transfer is quite fair and the fair market value in any case, of the property transferred is not above the limit of margin of tolerance i.e. Rs. 460 per sq. ft. Therefore, in the circumstances, he urged that the Competent Authority has not fixed properly the fair market value of the property transferred and consequently, the entire proceedings of acquisition were vitiated and accordingly urged that the proceedings should be cancelled. 15. The learned departmental representative Shri A.K. Khaladkar on the other hand, pointed out that the acquisition proceedings were initiated on 10th Feb., 1986 when notice of acquisition was sent to the Government press for publication and inasmuch as the notice was sent within the prescribed period of limitation, the provisions of s. 269D(1) is satisfied and therefore, the initiation of proceedings were not barred by limitation as contended by the learned counsel for the transferor and transferee. Secondly, relying on the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... azette on 28th Sept., 1974 but it was made available to the public on 4th Oct., 1974. It was held that the Competent Authority did not acquire jurisdiction to continue the proceedings as the proceedings had not been commenced within the statutory period. Similar decision has been rendered by the jurisdictional High Court in the case of Manu Bharati Co-operative Housing Society Ltd. vs. CIT (1987) 59 CTR (Bom) 226 : (1986) 162 ITR 693 (Bom) wherein it has been held that though the notice of acquisition was published in the Official Gazette within the statutory period, it was made available to the public only after the prescribed date and the proceedings for acquisition under s. 269F(6) were vitiated. Further referring to the notice of acquisition issued by the Competent Authority, he stated that he has not scored "and"/"or" in the said notice and therefore, there was ambiguity in the mind of the Competent Authority and therefore, he had not made up his mind as to whether the transfer was with the object of reduction or evasion of the tax liability of the transferor or whether it was for the purpose of concealment of income or assets of the transferee or whether it was both or it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been registered on 16th Nov., 1985 and therefore, the period for initiation of proceedings expire on 31st Aug., 1986 whereas the notice has been published in the Official Gazette on 4th Oct., 1986 as stated in para 5 of the acquisition order. Therefore, we hold that the initiation of acquisition proceedings are barred by limitation of time and consequently the acquisition proceedings have become invalid in law. The order of acquisition passed by the Competent Authority also becomes invalid in law, inasmuch as it is based on invalid notice of acquisition. Therefore, there is force in the ground taken by the appellants and consequently, they are entitled to succeed and the order of acquisition under s. 269F(6) passed by the Competent Authority on 30th Sept., 1991 is annulled. It is needless to emphasize or to point out that even in case where the notice has been published in the Official Gazette within the time or printed within the statutory time but the gazette notification was made available to the public only after the prescribed period, it was held by the jurisdictional High Court in the case of All India Reporter Ltd.; Ashok Madhav Chitaley vs. Competent Authority, IAC Ors. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, even if the condition of 15% difference between the fair market value of the capital asset as on the date of the transfer and the full value of the consideration declared by the assessee is satisfied. If, therefore, the Revenue seeks to bring a case within sub-s. (2), it must show not only that the fair market value of the capital asset as on the date of the transfer exceeds the full value of the consideration declared by the assessee by not less than 15% of the value so declared, but also that the consideration has been understated and the assessee has actually received more than what is declared by him. There are two distinct conditions which have to be satisfied before sub-s. (2) can be invoked by the Revenue and the burden of showing that these two conditions are satisfied rests on the Revenue. It is for the Revenue to show that each of these two conditions is satisfied and the Revenue cannot claim to have discharged this burden which lies upon it, by merely establishing that the fair market value of the capital asset as on the date of the transfer exceeds by 15% or more the full value of the consideration declared in respect of the transfer and the first condition is, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x and in the absence of such material the Competent Authority had no jurisdiction to initiate the proceedings. Reliance was placed on the decision of the Gujarat High Court in the case of CIT vs. Smt. Vimalaben Bhagwandas Patel. The relevant portion of order of the Division Bench of the Gujarat High Court contained at page 135 is extracted hereunder: "Having regard to the purpose underlying the power invested in the Competent Authority under s. 269C(1) and particularly the condition precedent for the exercise of such power and the presumptions to be raised in connection therewith under s. 269C(2) and more particularly having regard to the deeming fiction provided in s. 269J(4) with the clarification that the transferee will not be exposed to further penalty under the IT Act or the WT Act, it is clear that the nature of the power is a penal power and the proceedings in respect thereto are quasi-criminal. It is not merely the untrue statement of consideration in the instrument of transfer but, coupled with that, the ulterior motive of tax evasion or concealment of income is the gist of the offence and till that ulterior motive is established and found, the power in question cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower under s. 269C is penal in nature and the proceedings are quasi-criminal. Comparing the provisions of s. 147 relating to reopening of assessment and the provisions under s. 269C for acquisition of property both of which require a record of any evidence to belief of escapement of income or untrue statement of consideration for transfer of property in the document of transfer, it was observed that the Competent Authority must have reason to believe about the ulterior motive, of the transferor of tax evasion or tax reduction of the transferee about the concealment of income which he should disclose for tax purpose. This is an objective fact about which the Competent Authority must be satisfied besides common objective fact that the fair market value in question exceeds by the prescribed margin the apparent consideration shown in the document. This is necessary requirement for acquisition of property because before initiation of acquisition proceedings the Competent Authority shall record his reasons for doing so and as observed by their Lordships of the Supreme Court in the case of ITO Ors. vs. Lakhmani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC) that the ground or rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Bombay High Court. Similar view has been expressed by the Bombay High Court in the case of Udharam Aildas Thadani Ors. vs. IAC Ors. At page 445 their Lordships of the Bombay High Court have referred to Circular No. 461 dt. 9th July, 1986 published in (1986) 56 CTR (St) 1 : (1986) 161 ITR (St) 42. It has been stated that this circular was issued by the Board to explain the reasons for introducing Chapter XX-C in the Act in place of Chapter XX-A. The Board has categorically stated in the circular that, under the provisions of Chapter XX-A, before the provisions, meaning thereby ss. 269C and 269D could be invoked, it had to be proved that the consideration for transfer of an immovable property as agreed to between the parties had not been truly stated in the instrument of transfer with the object of facilitating reduction or evasion of tax liability of the transferor or concealing the income or assets of the transferee. Since that was an impossible task and the provisions proved ineffective Chapter XX-C was introduced. Taking a clue from the Board's circular it was observed that one can easily say that the conditions requisite mentioned in s. 269C without the help of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence the order of acquisition is bad in law. 21. The third objection taken by the learned counsel for the appellants related to the validity of the individual notices issued to the appellants. According to him, the use of conjucture "and/or" in the notice for the two clauses of s. 269C(1)(a) and (b) was significant inasmuch the Competent Authority had not scored out the relevant portion and therefore, the initiation of acquisition proceeding is not valid. After hearing the submissions of both the parties and following the judgment of the Bombay High Court in the case of Udharam Aildas Thadani and also in the earlier case of All India Reporter, we uphold the contention of the learned counsel for the appellants that the requisite formation of belief or opinion was a jurisdictional fact and unless a fair prima facie opinion was formed in regard to the category of infringement or any one of them, the authority had no right to initiate the proceedings for acquisition. It was held that by use of conjucture "and/or" for the two clauses of s. 269C(1)(a) and (b) of the Act, the pre-condition and requirement for assuming jurisdiction and exercise of the power was defective. 22. The fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the built up rate was taken at Rs. 650 per sq. ft. by the Competent Authority. He referred to another shop at No. 3 H, 848, D.M. Road, sold at Rs. 700 per sq. ft. more in 1983-84. He also referred to another shop No. 5, Taj House, M.G. Road, sold at Rs. 1,330 per sq. ft. When it was objected that the shops could not be compared with the office premises the Competent Authority agreed that the shops could not be equated with the office premises but they are certainly comparable and he could fix the fair market value of the office premises on that basis shall not be less than Rs. 650 per sq. ft. Thus, it is seen that the Competent Authority has cited the sale instances of two shops and another property for which description and details of area, etc., were not available. Therefore, these sale instances cited by the Competent Authority could not be taken as comparable case with the property under consideration. 23. Coming to the property under consideration, it is seen that the office premises are situated at the back side of the building on lease hold land for a period of 40 years only. It is situated in the first floor at a height of 28 feet because the ground floor is on a height ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocation are available and it is preferable to adopt higher sale instances. Even though he admitted that the sale instances taken by the Departmental Valuation Officer are situated about 1 to 2 kms away from the property acquired, he did not agree that the distance would make any difference in the fair market value. 25. In this connection, we have to make a pertinent observation that the Competent Authority was not justified in ignoring the sale instances of office premises cited by the appellants in the very same Arora Towers building and in the adjacent building of Clover Centre and the sale instance in Sterling Centre which is located in front of Arora Tower building simply on the ground that they are not comparable and simply because some higher sale instances are available. In our opinion, the action of the Competent Authority is arbitrary and unjustified. It is pertinent to point out that in the very same Arora Tower building sales were effected to Super Energy and Recovery Engg. P. Ltd. at a rate of Rs. 375 per sq. ft. covering an area of 651 sq. ft., M/s C.G. Narang Co. at the same rate covering an area of 679 sq. ft. and Shri S.B. Navandhar at the same rate covering an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from this sale instance point of view the rate of office premises on the first floor would be Rs. 200 sq. ft. subject to adjustment on the date of agreement for the property under consideration. There is another instance in the Arora Tower building itself. M/s Blaze Enterprises (P) Ltd. purchased the ground floor premises of 3,522 sq. ft. on 6th Jan., 1985 at a rate of Rs. 488 per sq. ft. This shop also got a direct approach from the M.G. Road. Even, with reference to this property, the first floor office premises would be 50% of its rate which works out to Rs. 244 per sq. ft. In respect of Punjab National Bank and M/s Blaze Enterprises (P) Ltd. premises the Competent Authority has dropped acquisition proceedings which contain in the paper compilation filed by the appellants at page 36 and 37 respectively. 27. The sale instances given by the Departmental Valuation Officer in the Aditi Commerce Centre situated in General Thimayya Road are not comparable cases for the simple reason that it is not situated in the same location but away at the distance of 1 to 1-1/2 kms. We have already pointed out that the facilities available to this property and even from the point of the rate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of agreement, viz., 16th Nov., 1985 the prospects of construction of revolving restaurent was very much there and because of litigations it has been abandoned only thereafter. Various paper cuttings enclosed by the appellants in the paper compilation has therefore, relevance and this would affect the market rate of the property in the minds of the would be buyers. It is also seen from the paper compilation that no adverse inference has been drawn in the case of the transferor as seen from the fact that the assessment for the asst. yr. 1987-88 the income returned by the transferor was accepted under s. 143(1) as per order dt. 10th March, 1989. Similarly, the assessment order for the asst. yr. 1986-87 shows that though the assessment has been made under s. 143(3) the returned income was accepted by the Department. 28. After considering all the facts and circumstances of the case, we are of the opinion that the Competent Authority has not established that the fair market value of the property exceeded the apparent consideration shown in the deed of transfer by more than 15% required in terms of second proviso to s. 269C(1). On the contrary, the appellants proved the contrary and re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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