TMI Blog1983 (11) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1971, for a consideration of Rs. 3,55,000. The property held by respondents Nos. 4 and 5 was tenanted, and respondent No. 10 entered into an agreement with the tenants to sell the respective flats on ownership basis. Respondent No. 10 was in occupation of an additional flat constructed by respondent No. 4. Respondent No. 10 entered into an agreement with the existing tenants with a view that the tenants will purchase the respective portions and ultimately form co-operative society. Accordingly, on September 22, 1972, the petitioner Co-operative Housing Society was registered under the provisions of the Maharashtra Co-operative Societies Act, 1960, and on the same day respondents Nos. 4 and 5 executed a deed in favour of the petitioner society. Respondents Nos. 6 to 10 were the confirming parties. The consideration for the purchase of the property stated in the deed was Rs. 3,55,000. The deed of conveyance was lodged for registration on September 25, 1972, and ultimately the document was registered only on October 12, 1976. By the Taxation Laws (Amendment) Act, 1972, the I.T. Act, 1961, was amended and Chapter XX-A was introduced consisting of 19 sections, namely, ss. 269A to 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocument of transfer was undervalued or such under valuation was with the object of facilitating the reduction or evasion of liability under the provisions of the I.T. Act, 1961, or the W.T. Act, 1957. The learned counsel urged that the only material available before the competent authority was the valuation report and that was not sufficient to warrant the conclusion that the consideration for the transfer has not been truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of tax. Shri Dastur further submitted that the mode or the basis of valuation was not correct and the reliance by the competent authority on the report was misconceived. It was also urged that the provisions of Chapter XX-A of the I.T. Act, 1961, are not attracted, as there was no consideration for the transfer between respondents Nos. 4 and 5 on the one hand and the petitioners on the other. The petitioners have also challenged the vires of Chapter XX-A of the I.T. Act on the ground that it infringes the fundamental rights guaranteed under article 19 of the Constitution of India. The petitioners also claim that proceedings under Chapter XX-A of the Act could not be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). " It is not in dispute that immovable property of a fair market value exceeding Rs. 25,000 has been transferred by respondents Nos. 4 and 5 to the petitioners. The consideration mentioned in the deed of conveyance is Rs. 3,55,000 and that is the apparent consideration. For exercise of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Chapter would be attracted even in cases where the documents are lodged for registration earlier, provided the registration is not complete on the date of introduction of the Chapter. My decision was taken in appeal and was upheld in Appeal No. 563 of 1981 decided on 5th April, 1982. [Amarchand Jainarain Agarwal v. Union of India [1983] 142 ITR 410 (Bom)]. In view of the decision of the Division Bench, it is not open to the petitioners to raise this contention in the present proceedings. Shri Dastur then submitted that the provisions of s. 269C are not attracted to the facts of the case, because the deed of assignment of transfer does not amount to sale. In support of the submission, reliance is placed on the definition of the expression " transfer " in s. 269A(h) of the Act, where the word " transfer " has been defined as transfer of property by way of sale or exchange. The learned counsel urged that there is transfer but it is not by way of sale, because the consideration has not flown from the petitioners to respondents Nos. 4 and 5. The submission is entirely misconceived. It is undoubtedly true that the housing society has not paid any consideration to respondents Nos. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and was at the disposal of the petitioner society. Shri Dastur has seriously challenged the correctness of the report on the ground that the assumption of the valuer about certain portion of the property being vacant and available is erroneous, and the grievance of the learned counsel is just. A perusal of the deed of transfer dated September 22, 1972, in favour of the petitioner society clearly indicates that the petitioner society had agreed with respondent No. 10 (who was referred as the third confirming party in the document) that respondent No. 10 shall be at liberty to sell, assign or otherwise deal with and/or dispose of the unsold flats of the building to any person or persons and the society shall accept the purchaser of such flat as its member without taking any objection or demanding any charges. This covenant in the deed of transfer makes it crystal clear that though the society has purchased the entire property from respondents Nos. 4 to 10, the right to dispose of the vacant flats was retained by respondent No. 10 and the society accepted the obligation to accept the purchasers of these flats as members of the society. It is, therefore, obvious that the valuer had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the conclusion that the consideration stated was untrue and the object was to evade tax, and in the absence of any such material, the competent authority had no jurisdiction to initiate the proceedings. In support of the submission, reliance is placed on the decision of the Gujarat High Court in CIT v. Smt. Vimlaben Bhagwandas Patel [1979] 118 ITR 134. The Division Bench of the Gujarat High Court observed (headnote p. 135) : " 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 I.T. Act or the W.T. 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority [1980] 126 ITR I (Guj). This view is also taken by the Calcutta High Court in Subhkaran Chowdhury v. IAC [1979] 118 ITR 777, Smt. Bati Roy Chowdhury v. Competent Authority, IAC [1978] 112 ITR III (Cal) and Rai Bahadur G. V. Swaika Estate P. Ltd. v. Tewari [1980] 126 ITR 310 (Cal). Shri Dastur also relied upon the decision of the Supreme Court in Varghese v. ITO [I 981] 131 ITR 597. In this decision, the Supreme Court was considering the powers of the income-tax authority to invoke sub-s. (2) of s. 52 of the I.T. Act, 1961, and observed that the powers can be exercised where the consideration for the transfer of the capital asset has been understated by the assessee, or, in other words, the full value of the consideration in respect of the transfer is shown at a lesser figure than that actually received by the assessee and the burden of proving such understatement or concealment is on the Revenue. Mr. Justice Bhagwati, speaking for the court, observed (p. 614) : " Thus, it is not enough to attract the applicability of sub-s. (2), that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... got to be viewed and established independently before sub-s. (2) can be invoked, and the burden of doing so is clearly on the revenue. It is a well-settled rule of law that the onus of establishing that the conditions of tax ability are fulfilled is always on the revenue and the second condition being as much a condition of taxability as the first, the burden lies on the revenue to show that there is an under statement of the consideration and the second condition is fulfilled. More over, to throw the burden of showing that there is no understatement of the consideration, on the assessee, would be to cast an almost impossible burden upon him to establish a negative, namely, that he did not receive any consideration beyond that declared by him." The observations of the Supreme Court, though in a different context, can well be applied while construing the provisions of s. 269C of the Act. Indeed, the powers to be exercised under s. 269C of the Act are circumscribed by various conditions which are set out in the section itself. In my judgment, the submission of Shri Dastur that the competent authority had no jurisdiction to initiate the proceedings because there was no material wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the competent authority can initiate proceedings under s. 269C of the Act only on fulfilment of certain basic conditions and the mere fact that the Department finds some difficulty in gathering the material is no consideration to conclude that initiation of proceedings is permissible even without complying with the requirement of the section. Shri Joshi urged that it is difficult for the Department to ascertain what was the object of the parties in incorrectly stating the consideration in the instrument of transfer and the competent authority is justified in drawing an inference that the object was to evade the tax from the mere fact that the apparent consideration was less than the fair market value by 15% of such apparent consideration. This submission cannot be accepted because the competent authority cannot proceed to reach a conclusion that the object was to evade the tax from the mere fact that there is some material to indicate that the apparent consideration was less than the fair market value by 15% of such apparent consideration. The competent authority must have some material to reach the conclusion that the consideration stated in the instrument of transfer was untrue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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