TMI Blog1989 (8) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... arages to the original tenants was term of the agreement for sale. On April 4, 1966, Carmichael Properties accepted the agreement dated January 7, 1966, with the original tenants. On March 30, 1967, Sahu Brothers conveyed the land and buildings to Carmichael Properties. On June 14, 1967, an agreement was entered into between Carmichael Properties and the promoters of the petitioner co-operative society to transfer the land and building to the latter. The petitioner society was registered on June 20, 1967. On November 12, 1968, the petitioner accepted the terms of the agreement dated June 14, 1967, between its promoters and Carmichael properties. It appears that the original intention had been to construct one new building on the land. By an agreement dated November 12, 1968, it was agreed between Carmichael Properties and the original tenants that, instead, two buildings would be constructed and that one, called Wing A, would provide for the accommodation of the original tenants and the other, called Wing B, would contain flats to be sold to outsiders on ownership basis. On November 30, 1971, Carmichael Properties conveyed the land appertaining to, and the building called Wing A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said Act in respect of any income arising from the transfer ; and/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 Income-tax Act, 1922 (11 of 1922) or the said Act, or the Wealth-tax Act, 1957 (27 of 1957) ; Now, therefore, in pursuance of section 269C of the said Act, I hereby initiate proceedings for the acquisition of the aforesaid property by the issue of this notice under sub-section (1) of section 269D of the said Act to the following persons, namely: (1) M/s. Carmichael Properties Pvt. Ltd. Carmichael Shikarkunj Co-operative Housing Society Ltd. (Transferor). (2) 1. Sri Shriyans P. Jain, 2. Smt. Kamlavati Jain, 3. Sri Gian C. Jain, 4. Smt. Satyavati Jain, 5. Sri Prem C. Jain, 6. Smt. Durgavati Jain, 7. Sri Shashi C. Jain, 8. Smt. Neera Jain, 9. Sri Sharad Kumar Jain, 10. Smt. Vandana Jain. 11. Sri Pramod Kumar Jain. 12. Smt. Usha J. Jain. (Transferee)" The 12 persons to whom the said notice was addressed as "transferees " were the original tenants. The said notice was gazetted in the Gazette of India dated D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted above, it is clear that the apparent consideration is very much below the fair market value. 4. In this view of the matter, I have reason to believe that: (i) the immovable property is of a fair market value exceeding Rs. 25,000 ; (ii) the fair market value of such property exceeds the apparent consideration therefor by more than 15% of such apparent consideration and (iii) 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 either facilitating the reduction or evasion of the liability of the transferor to tax in respect of any income including capital gains arising on the transfer or facilitating concealment of any income or any money or other assets which have not been or which ought to be disclosed by the transferee for the purposes of the Indian Income-tax Act, 1922, the Income-tax Act, 1961, or the Wealth-tax Act, 1957. 5.1. therefore, direct that proceedings for acquisition of this property be initiated under section 269D of the Income-tax Act, 1961." On March 22, 1978, the petitioners filed a writ petition in this court (being O.O.C.J. Misc. Petition No. 385 of 1978) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer was effected with one of the aforesaid objects or both the aforesaid objects as a condition precedent to the initiation of the proceedings. The Division Bench held p. 713 : "The Competent Authority, therefore, must have come, prima facie, to believe that the transfer was for reduction or evasion of tax liability of the transferor or for concealment of assets or income of the transferee. It was also possible for a prima facie conclusion or belief to be entertained by the Competent Authority that the object of the transfer was not one but both. But it is impermissible for the Competent Authority not to come to any conclusion albeit prima facie or hold a reasonable belief and be ambivalent or not be sure. The use of the conjunction 'and/or' in the notice indicates that the Competent Authority had not made up its mind as to whether the transfer was with the object of reduction or evasion of tax liability or whether it was for the purpose of concealment of income or assets of the transferee or whether it was both or it was the one or the other. It was pointed out that clauses (a) and (b) of section 269C(1) are joined with a conjunction 'or'. It was perfectly permissible for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated unless the competent authority has reason to believe that the fair market value of the property exceeds the apparent consideration therefor by more than fifteen per cent. of such apparent consideration. (2) In any proceedings under this Chapter in respect of any immovable property, (a) where the fair market value of such property exceeds the apparent consideration therefor by more than twenty-five per cent. of such apparent consideration, it shall be conclusive proof that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer ; (b) where the property has been transferred for an apparent consideration which is less than its fair market value, it shall be presumed, unless the contrary is proved, that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with such object as is referred to in clause (a) or clause (b) of sub-section (1)." The Gujarat High Court considered the ambit of the power invested in the Competent Authority by section 269C in CIT v. Smt. Vimlaben Bhagwandas Patel [1979] 118 ITR 134 (Guj) and it said (headnote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings A and B were subsequently constructed was a material consideration. In a given case, this factor might have affected the price at which the sale had taken place and in another given case it might not have, but it was a factor which had to be considered. The note of the Competent Authority annexed to the said notice shows that no account was taken of this factor. Had the Competent Authority awaited the valuation by the Valuation Officer or even sent for it and taken into account the particulars collected by the Valuation Officer, this germane factor would not have been ignored and the valuation and, consequently, the said order would not have suffered on that account. It must be stated that the affidavit-in-reply does not accept the genuineness of the original tenancies. It is made by one Hari Krishan, Deputy Commissioner of Income-tax, Acquisition Range 1, on July 27, 1989, based on the information available in the records and documents in his office. Dr. Balasubramanian told me that the affidavit-in-reply was based upon what was contained in the valuation report that had been made on April 11, 1978. An affidavit based on a later document dated April 11, 1978, cannot assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isited it or sent someone to do so he would have realised, which is not denied, that the building had no garden and playground, no swimming pool, no changing rooms or filteration plants. In taking into account a plan that, presumably, was prepared for the single building originally intended and ignoring the building that had in fact been constructed, the Competent Authority totally misdirected himself. Valuation based upon a misdirection such as this is unacceptable in the context of acquisition proceedings under Chapter XXA. The valuation of the said property being so flawed, it is impossible to hold that the Competent Authority had reason to believe that the threshold requirements of section 269C, all of which relate to valuation, were satisfied. The note suggests that the valuation was made as of 1971 for it speaks of "the cost of land in 1971 ". The judgment delivered by Pendse J in Blue Star Ltd. v. Santosh Datta, IAC [1984] 150 ITR 356 (Bom), is relevant in the context. The learned judge upheld the submission that the valuation ought to have been made as on the date when the property was agreed to be sold and not as on the date on which the conveyance was lodged for regis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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