TMI Blog1981 (3) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... ere transferred to and vested in the Life Insurance Corporation of India on the appointed day, namely, September 1, 1956, by virtue of s. 7 of the Life Insurance Corporation Act, 1956. The said conveyance was preceded by an agreement for sale dated January 25, 1972, entered into between the respondent No. 1 and the Hindusthan Building Society Ltd. with the approval of the Life Insurance Corporation of India, Immediately, after such purchase, the respondent No. 1 had improved the land and started construction thereon and also on a contiguous one cottah plot of land purchased by her subsequently from the Life Insurance Corporation of India. The respondent No. 1 received two notices, both dated June 18, 1973, issued under s. 269D(1) of the I.T. Act, 1961, by the competent authority wherein it was stated, inter alia, that the competent authority had reason to believe that the immovable property, namely, the said two plots of land, having a fair market value exceeding Rs. 25,000 had been transferred for an apparent consideration which was less than the fair market value of the property, that the competent authority had also reason to believe that the fair market value of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the consideration for the transfer as agreed to between the transferor and the transferee has not been truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of the liability of the transferor to pay tax, etc., the competent authority relied on the presumption under cl. (b) of sub-s. (2) of s. 269C of the I.T. Act, 1961. At the hearing of the rule nisi, it was, inter alia, contended on behalf of respondent No. 1, that there was no material before the competent authority for the formation of his belief under s. 269C(1), and that the competent authority was not legally entitled to rely on the presumption under sub-s. (2) of s. 269C. Further, it was contended that the competent authority having proceeded on the assumption that the Hindusthan Building Society Ltd. was also one of the transferors, though the said society was only a confirming party, such erroneous assumption vitiated the formation of his belief and, consequently, the impugned notice. The learned judge, after considering the facts and circumstances of the case and the submissions made on behalf of either party came to the finding, inter alia, that the competent authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amend.) Act, 1972. The provisions of Chap. XX-A relate to the acquisition of immovable properties in certain cases of transfer to counteract the evasion of tax. It is urged on behalf of the revenue that when the competent authority considers the question of issuing the notice, it is a proceeding as contemplated by s. 269C(2), of the Act and, as such, the competent authority is entitled to rely on the presumption under cl. (b) of s. 269C(2). On the other hand, the contention of respondent No. 1 is that the competent authority is not so entitled, for, there is no proceeding before the notice is served on the parties. In order to consider the point, namely, whether prior to the issuance of the notice there is a proceeding or not for applying the presumption, it is necessary to refer to the provision of s. 269C, which reads as follows: " 269C. Immovable Property in respect of which Proceedings for acquisition may be taken.-(1) where the competent authority has reason to believe that any immovable property of a fair market value exceeding twenty-five thousand rupees has been transferred by a person, (hereafter in this Chapter referred to as the transferor) to another person (hereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by more than 15% of the apparent consideration, (iii) the consideration as agreed to between the parties has not been truly stated in the instrument of transfer, and (iv) such untrue statement has been made with the object of evasion of taxes as mentioned in clauses (a) and (b). Subsection (1) consists of two stages, the first one is for the formation of belief by the competent authority and the second one is for the initiation of proceedings. The second stage is dependent on the first. In other words, if there be no reason to believe in regard to the four matters specified above, there is no question of initiation of proceedings. It, therefore, follows that in the first stage there is no proceeding, but it relates to preparation for the initiation of proceedings. The boundary between the first stage and the second stage is the existence of materials on the basis of which the competent authority may form his belief and, in order to reach the second stage for the purpose of initiating proceedings for acquisition, the boundary has to be crossed. The presumption under sub-s. (2) of s. 269C can be made in any proceedings under Chap. XX-A under which s. 269C has been placed. So the, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property bad been transferred for an apparent consideration of Rs. 35,000 which was less than the fair market value of Rs. 1,12,000. It is obvious that the fair market value of the property believed by the competent authority to be Rs. 1,12,000 exceeded, on the face of it, by 25% of the apparent consideration of Rs. 35,000. If the contention of the revenue that the stage when the competent authority forms his belief under sub-s. (1) is a proceeding within the meaning of the expression " any proceeding under this chapter " occurring in sub-s. (2), is accepted, then such belief of the competent authority will be conclusive proof that the consideration as agreed to between the parties has not been truly stated in the instrument of transfer, which is absurd and will render the provisions for filing objections, determination of valuation and decision of the competent authority meaningless and nugatory. While cl. (a) provides for conclusive proof, cl. (b) raises presumption. If for the purpose of cl. (a) of sub-s. (2), the stage at which the competent authority forms his belief under sub-s. (1) is not a proceeding as contemplated by sub-s. (2), it will be quite unreasonable to think th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (income-tax Appeals Nos. 9 and 10 of 1976, disposed of on September 12, 1980) [1981] 131 ITR 380 (Cal). Thus, it appears that this court has persistently taken the view that the presumption under cl. (b) of s. 269C(2) of the Act is not applicable to the stage when the competent authority forms his belief under sub-s. (1) of s. 269C, for, there is no proceeding at that stage. Under sub-s. (1) of s. 269C of the Act, the competent authority has, inter alia, to form his belief that the consideration as agreed to between the parties has not been truly stated in the instrument of transfer. Such untrue statement is obviously due to the collusion of the transferor and the transferee. Where the transferor or the transferee is the Government or a statutory body there cannot be any scope for such collusion between the parties. The untrue statement about the agreed consideration is made only for the purpose of evasion of tax. When Government or any statutory body is a party to the transfer, the question of evasion of tax does not arise. Now, if the presumption under cl. (b) of s. 269C(2) is applied, it will mean that the untrue statement regarding the agreed consideration is made also at th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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