TMI Blog1996 (6) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that the fair market value of the property sold in favour of the respondent herein was in excess of the stated consideration by more than 15 per cent. After giving notice to the parties and after hearing them, he determined the fair market value of the property as Rs. 2,54,000, and as the stated consideration of Rs. 1,40,000 was much below the fair market value, attracting the provisions of the Chapter referred to above, he proceeded to acquire the property as contemplated by the Act. It is against this order of the said Inspecting Assistant Commissioner, the owner of the property, who is the transferee, preferred an appeal before the Income-tax Appellate Tribunal. The Tribunal, by an order, dated July 31, 1975, allowed the appeal and set aside the acquisition proceedings. As against the said order passed by the Tribunal, the Department went in appeal before this court in T. C. No. 88 of 1976. While disposing of this tax case, this court, by its judgment, dated November 27, 1978, set aside the order of the Tribunal and remanded back the matter to the file of the Appellate Tribunal with a direction to dispose of the same in accordance with law and after taking into con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration has not been truly stated in the instrument of transfer. The object with which the consideration has not been so stated was also not established. Even if the fair market value exceeds the stated consideration by 25 per cent., the presumption indicated under section 269C(2)(b) is only a rebuttable presumption. In this case the Tribunal found that the contrary has been proved. The Department has no case that there is, in fact, any extra consideration. There is also no case of any other form of tax evasion by the transferor or the transferee. Under such circumstances, on a guess work and by some exercise in estimating the value of the property, the Department cannot resort to proceedings under section 269C of the Act." In view of the abovesaid findings recorded by the Tribunal, it ultimately came to the conclusion that the acquisition proceedings under section 269F(6) are liable to be cancelled. It is against that order, the Department is now in second appeal before this court. Learned standing counsel appearing for the Department submitted that the assessee failed to rebut the presumption as contemplated under section 269C(2)(a) of the Act. According to learned standing co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was additional construction from 1969 to 1972. The Tribunal was not correct in stating that the Department failed to prove that extra consideration passed between the parties. The circular issued by the Central Board of Direct Taxes would not apply in the present case when the matter is pending before the High Court by way of second appeal. The circular would be applicable only when the matter is pending before the Inspecting Assistant Commissioner before passing the order of acquisition. "Proceedings pending", occurring in the circular issued by the Central Board of Direct Taxes, would not mean the proceedings pending in the High Court by way of second appeal. It would mean the proceedings pending before the Inspecting Assistant Commissioner before passing the order of acquisition by him. Reliance was placed upon the decision of the Kerala High Court in CIT v. Mathew M. Thomas [1993] 201 ITR 494 [FB]. In determining the fair market value of the property, the Tribunal was not correct in adopting the lowest value as provided in the valuation report filed by the assessee and the valuation report filed by the Income-tax Inspector, ignoring the valuation report filed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to learned counsel, the values mentioned in the Inspector's report and the values mentioned in the executive engineer's report should be taken into consideration in determining the fair market value of the building. The Department has also not established that extra consideration passed in the transaction. According to learned counsel appearing for the assessee the circular issued by the Central Board of Direct Taxes would apply to the facts of this case. The proceedings pending would mean proceedings pending even before the High Court. Therefore, when the value of the transaction is less than rupees five lakhs, the competent authority ought to have withdrawn the acquisition proceedings, in view of the abovesaid Board's circular. Reliance was placed upon the decision in CIT v. Rattan Chand Sood [1987] 166 ITR 497 (Delhi) at page 502 and CIT v. Export India Corporation (P.) Ltd. [1996] 219 ITR 461 (P H). In order to show that the burden is not on the transferee to prove that the consideration recorded in the sale deed is the correct consideration and no extra consideration passed, learned counsel was relying upon a passage occurring at page 1587 in the Commentary of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Commissioner was satisfied that the understatement definitely exceeded the apparent consideration by 25 per cent. and section 269C(2)(a) would apply. In the light of the same, he got the proceedings approved by the Commissioner of Income-tax to acquire the property. There are four valuation reports filed in this case, which are as under: " Valuation as per the Income-tax Inspector's Report (Pages 191-192 of the typed set) (Rs.) Site 26,985 sq. ft., at Rs. 8 per sq. ft. 2,15,880 Building 8,400 sq. ft. at Rs. 6 per sq, ft. 50,400 Compound wall 6,000 ------------------- Total value 2,72,280 ------------------- Valuation as per Departmental Valuer's report (Pages 133-137 of the typed set) (Rs.) Value of the building (gross) 1,27,804 Depreciation at 10 per cent. 12,780 Depreciated value of the building 1,15,024 Value of the land 24,000 sq. ft. at Rs. 4 per sq. ft. 96,000 ------------------- Total value 2,11,024 ------------------- Rounded off 2,11,000 Transferee's approved valuer's report (Pages 139-141 of the typed set) Value of the land 24,766 sq. ft. at Rs. 1,000 per cent 56,810 Value of the building 1,71,920 ----------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her hand, the transferee submitted that there was no additional construction except repairing and raising a compound wall. The property in question is not a rented property. Therefore, the only method that can be adopted for determining the value of the property would be the land and building method. The competent authority describes the building as first class. Till 1968, the building was only an open shed, with no side wall and no flooring and with a compound wall and the building was used till then for foundry purposes. Its depreciated value in 1968 was stated to be Rs. 30,000 or near about. During December, 1969, to 1972, it was repaired or renovated by the transferor. It is not any new construction that was done in those years. According to the Departmental Valuation Officer, the construction was like providing steel doors and windows, providing cement concrete flooring, steel trusses and roofing with asbestos sheets, etc. According to the Tribunal, these are only works on repairs or renovations. However, the Tribunal considered that in the matter of granting depreciation, one should not be confused between the extensive repair made and the additional constructions. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opt one value for wealth-tax purposes and another value for acquisition purposes with regard to the same property, This line of argument advanced by learned counsel appearing for the assessee appears to be acceptable. Thus, from any point of view, the value adopted by the Inspecting Assistant Commissioner for the land and building in order to initiate proceedings under section 269D of the Act appears to be not supported by any material on record. As already pointed out, the Inspecting Assistant Commissioner also intended to take the highest value for both the land and building as furnished by the executive engineer. In view of all these findings, we hold that the Tribunal was correct in coming to the conclusion that acquisition proceedings cannot be initiated under section 269D of the Act. Learned standing counsel appearing for the Department submitted that under section 269C(2)(a) of the Act, if the Department established that the fair market value is over and above 25 per cent. of the apparent consideration, it need not establish that extra consideration passed in the transaction. While considering this aspect in Kanga and Palkhivala's The Law and Practice of Income-tax, 8th ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no understatement of consideration in the present case so as to evade the tax. The Tribunal was also of the view that the assessee rebutted the presumption on the facts arising in this case. Accordingly, it ultimately came to the conclusion that initiation of acquisition proceedings under section 269D of the Act is unwarranted. Our attention was drawn to a circular issued by the Central Board of Direct Taxes to the effect that after April 1, 1986, proceedings earlier initiated should be dropped unless the apparent consideration exceeded rupees five lakhs. Learned standing counsel appearing for the Department submitted that proceedings earlier initiated would mean the proceedings initiated by the Inspecting Assistant Commissioner till its disposal. It cannot extend beyond the order passed by the Inspecting Assistant Commissioner. In the present case, inasmuch the second appeal is pending before the High Court, on the basis of the circular cited supra, the assessee cannot ask to drop the proceedings. In order to support this contention, learned standing counsel appearing for the Department relied upon the Full Bench decision of the Kerala High Court in CIT v. Mathew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the Punjab and Haryana High Court also considered the Full Bench decision of the Kerala High Court in CIT v. Mathew M. Thomas [1993] 201 ITR 494 and the decision of the Delhi High Court in CIT v. Rattan Chand Sood [1987] 166 ITR 497. Considering the reasons given by the Delhi and Punjab and Haryana High Courts, we are in entire agreement with those decisions than placing reliance upon the decision of the Kerala High Court in CIT v. Mathew M. Thomas [1993] 201 ITR 494 [FB] or this aspect. The sale deed was executed on September 11, 1972. The sale deed was registered on December 11, 1972. Chapter XX-A came into effect from November 15, 1972. According to learned counsel appearing for the assessee, the sale deed registered on December 11, 1972, would relate back to the date of execution of the sale deed, viz., September 11, 1972. In such a case, Chapter XX-A, which came into effect from November 15, 1972, would not be applicable to the facts of this case. Reliance was also placed upon the decision of the Supreme Court in Hamda Ammal v. Avadiappa Pathar [1991] 1 SCC 715. In that decision the Supreme Court held that the document after its registration relates back to the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the transferee dates back to the date of execution. In Divvi Suryanarayana Murthy v. Competent Authority [1979] 117 ITR 278, the Andhra Pradesh High Court held on this aspect that the fact that Parliament has provided in section 269C of the Income-tax Act that the proceedings thereunder can be initiated only on registration of the transfer and only within nine months from the end of the month in which the transfer by registration was effected by the vendor (under section 269D), makes the legislative intent also clear, that the crucial date for the purpose of initiation of acquisition proceedings is the date of registration of the deed of transfer and not any date earlier to that. In Amarchand Jainarain Agarwal v. Union of India [1983] 142 ITR 410 (Bom), the Bombay High Court while considering this aspect held that for the purpose of acquisition of immovable property under section 269C of the Income-tax Act, 1961, the transfer was complete not on the date of the execution of the document of sale but only on its registration and where a sale deed was executed before the introduction of section 269C in the Income-tax Act, 1961, but was registered after the introduction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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