TMI Blog1976 (6) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, 1961 (43 of 1961), have reason to believe that the immovable property, having a fair market value exceeding Rs. 25,000 and bearing No. 29/NA (E.P. W.P.) situated at Block 'B', New Alipur (and more fully described in the Schedule annexed hereto), has been transferred as per deed registered under the Indian Registration Act, 1908 (16 of 1908), in the office of the registering officer at Dist. Registrar, 24-Parganas, Alipur, on 12-12-72 for an apparent consideration which is less than the fair market value of the aforesaid property and I have reason to believe that the fair market value of the property as aforesaid exceeds the apparent consideration therefor by more than fifteen per cent. of such apparent consideration and that the consideration for such transfer as agreed to between the transferor(s) has not been truly stated in the said instrument of transfer with the object of-- (a) facilitating the reduction or evasion of the liability of the transferor to pay tax under the Income-tax Act, 1961 (43 of 1961), 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istant Commissioner of Income-tax, Acquisition Range-II) P-13, Chowringhee Square, Calcutta- 1. Seal of the Inspecting Assistant Commissioner of Income-tax, Acquisition Range-II. Date 18-6-73." The petitioner gave a reply to the said notice disputing and challenging the scope, purport and validity of the said notice. It was, inter alia, mentioned therein that the said notice proceeded on the basis that Hindusthan Building Society Ltd. was one of the two transferors though the said Hindusthan Building Society Ltd. was acting merely as a confirming party, as described in the said conveyance whereby the said property was conveyed to the petitioner. It was stated that the confirming party was not the owner of the land and it could not, therefore, transfer the same to the petitioner and, accordingly, the notice was void ab initio with the result that section 269 of the Income-tax Act which was invoked by the said authority had no application. It was pointed out that the pre-requisite condition for assumption of jurisdiction by the said authorities were not satisfied in this Case. It was further pointed out to the said authority that the rights and obligations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased by the petitioner also from the Life Insurance Corporation of India. The petitioner received two notices, both dated 10th June, 1973, under section 269D(1) of the Income-tax Act as stated hereinabove from the competent authority whereby the said authority purported to state that it had reason to believe that the immovable property 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 said property and that the said competent authority had reason to believe that the fair market value of the said property exceeded the apparent consideration thereof by more than 15% of such apparent consideration and that the consideration for such transfer as agreed to by and between the transferor and transferee had not been truly stated in the said instrument of transfer with the object of facilitating the reduction or evasion of liability of the transferor to pay tax under the Act in respect of an income arising from the transfer and/or facilitating the concealment of any income or any monies or other assets which have not been paid or which ought to have been disclosed by the transferee for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary is proved, that the consideration for such transfer is 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 has to be noted that this is a new Chapter being Chapter XXA which has been inserted into this Income-tax Act by the Taxation Laws (Amendment) Act, 1972, which has come into effect on and from 15th November, 1972. The said Chapter consists of 19 sections, i.e., from section 269A to section 269S and provides for the machinery whereby proceedings under this Chapter are to be had. The heading of the Chapter is as follows : " Acquisition of immovable properties in certain cases of transfer to counteract evasion of tax." It would appear from the said section 269C that the competent authority would have to form his reason to believe, first, that the property concerned which is sought to be transferred has a fair market value exceeding Rs. 25,000. Secondly, it has been transferred by the transferor to the transferee for an apparent consideration which is less than the fair market value of the property by more than 15%. To quote the language of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds of sub-section (2) relate to the various proceedings which are provided under Chapter XXA and the expression " any proceedings " there cannot, in my opinion, include the administration stage when the competent authority has to arrive at his independent reason to believe that such a transaction had taken place in which proceedings ought to be commenced, inter alia, for the reason that the transferor and the transferee agreed to give such untrue price in the instrument with the object of evasion of taxes. The provision of sub-section (2) was originally placed under section 269F which provided for hearing of objections when the matter was set out in the Bill before it was passed in Parliament. Thereafter, when the matter was referred to the Select Committee, it was placed as sub-section (2) under section 269C without in any way altering the language thereof. It would appear that since the language remains the same it must refer to the stage of proceedings which is to be initiated after the competent authority would form his reason to believe under sub-section (1) independently of the said presumption of the said matter of proof which are provided for simplifying the law of evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could rely on the Select Committee Report in incorporating or construing the sections of the Act. Mr. Pal relied on the following cases: Debendra Narain Roy v. Jogendra Narain Deb, AIR 1933 Cal 559; Krishna Ayyengar v. Nallaperumal Pillai, AIR 1920 PC 56, 59 ; Dina Nath Pal v. Raja Sati Prasad Garga Bahadur, AIR 1923 Cal 74, 77; Mt. Tami Jannessa Katun v. Purna Chandra Chakravarti, AIR 1927 Cal 821, 822; Mobarik Ali Ahmed v. State of Bombay, AIR 1957 SC 957, 871 and Central Bank of India v. Their Workmen, AIR 1960 SC 12, 21. In the last mentioned case, the Supreme Court observed that the statement of objects and reasons was not admissible in evidence in construing the sections nor could it control the actual words used. The last of such pronouncements is by the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-tax [1975] 101 ITR 234. At page 252, the Supreme Court has observed as follows : " It is true that it is dangerous and may be misleading to gather the meaning of the words used in an enactment merely from what was said by any speaker in the course of a debate in Parliament on the subject. Such a speech cannot be used to defeat or det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " would denote that the competent authority in appropriate cases might as well form its reason to believe that the proceeding should not be initiated because of certain special factors which are taken into account, according to it would not make it worthwhile that the proceedings ought to be initiated. If that be the correct position, viz., that the competent authority has still a discretion in the matter, there would not be such a position as to bring about an anomaly because if it is bound to apply the presumption then no discretion is left to it to decide whether such proceedings would be initiated or not because the matter is already a fait accompli. Under such circumstances it would have no other alternative to initiate proceedings. Under such circumstances the expression " reason to believe " is bound to lose its very vital effect and much of its force. The further fact that the mandatory provisions have been made in the section itself to the effect that the competent authority must have to record his reasons for initiating such proceedings would go to support the view I have taken because this creates a further safe-guard so far as the question of exercising his discretion i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t upon it to record its reasons for arriving at the belief. Merely quoting the section would not do. The relevant factors which led him to believe must be recorded. Supposing he comes across a case where from the nature of the transaction he finds that even though the apparent consideration is lesser by 15% than the fair market value but statutory bodies or semi-government organisations or bodies have entered into such transactions, the competent authority under such circumstances might legitimately feel that there could not have been any such object of evading taxes as contemplated under clauses (a) and (b) of sub-section (1), and, in such circumstances, he must be left free to use his discretion not to initiate proceedings in such matter. To my mind, it was not the intention of the legislature to fetter his hands by directing him to apply the presumptions and to come to such a stage of his belief that he would have no other alternative but to initiate such proceeding. In such event it would not be its own belief and the expression " reason to believe " under such circumstances would be a redundant expression which, to my mind, the legislature could never have intended. On the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ror and the transferee has not been truly stated in the instrument of transfer with the object of : (a) Facilitating the reduction or evasion of the liability of the transfer to pay tax under the Income-tax Act, 1961, in respect of income arising from the transfer, and (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, or this Act or the Wealth-tax Act, 1957. In fact, this is the presumption raised by section 269C(2)(a) and (b). I, therefore, hereby initiate proceedings for the acquisition of this property by the issue of notice under section 269D(1). Sd/- M. N. Tiwary 18-6-73 Competent Authority " On a perusal of the said recorded reasons it would be apparent on the face of it that the competent authority has misguided itself by wrongly assuming that the said Hindusthan Building Society Ltd. was one of the transferors in the transaction and accordingly the said Hindusthan Building Society Ltd. has been shown as one of the transferors even though it has been described as a confirming party. It would seem that the competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative of the said Hindusthan Building Society Ltd., which, in fact, could not have any interest in the matter any longer whatsoever except figuring as a confirming party in the matter of the said conveyance. Mr. Pronab Pal submits that the competent authority proceeded on an entirely erroneous basis in arriving at the fair market value of the property. It has referred to another file No. A/c-6/R- II/Cal/73-74 which is not a file in connection with this case. Under those circumstances, learned counsel contends that there was no proper enquiry by an inspector in respect of the prevailing market rate of the land in question. Furthermore, the inspector's report to the extent of Rs. 16,000 per cottah relates to a period of June, 1973, whereas the conveyance in the matter was executed during the end of 1972. Then again, the competent authority has referred to an advertisement in the Statesman newspaper dated 28th April, 1973, whereunder a buyer had offered up to a sum of Rs. 1.5 lakhs for 3/4 cottahs of land in south/central Calcutta and has thereby tried to arrive at a valuation. To my mind, here also the competent authority has misguided itself completely inasmuch as the advertis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment." In the same page it was observed further as follows: " The powers of the Income-tax Officer to reopen assessment, though wide, are not plenary. The words of the statute are ' reason to believe , and not ' reason to suspect '. The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and refer to at the time of hearing of this application." In fact, if the correct position was appreciated by the competent authority, it would not have misguided itself in the manner it has done by taking into consideration the fact that apart from the Life Insurance Corporation of India, there is another transferor, viz, Hindusthan Building Society Ltd., which entered into the said transaction as one of the transferors thereon. It is to be further noticed that the competent authority, in this case, has not applied its mind nor has correctly appreciated the position and even if it had done so, in its over-zealous mental condition, it had applied both clauses (a) and (b) of sub-section (1) in arriving at its belief whereas, ordinarily, it was required to apply only one of the said two clauses and that would have been sufficient. In other words, the expression it " or " which has been mentioned in between the clauses (a) and (b) appear to have been overlooked and what has been relied on is both clauses (a) and (b) as would appear from the word " and " used in the recorded reasons. Thereby, the transferor Life Insurance Corporation also has been sought to be equally made a guil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same is sought to be collected by the Government. Hence, it should not be a public purpose within the meaning of article 31 of the Constitution. It is contended by counsel that Chapter XXA does not mention any reason as to why the properties of the citizens would be acquired. It is contended that the Income-tax Act does not deal with anything else but revenue but by enacting this provision what was sought to be recovered was additional tax apart from other tax. It is contended that, according to its own estimate, the Government valuation would be more than at least Rs. 16,000 per cottah, i.e., Rs. 1,12,000 for seven cottahs of land and under such circumstances the revenue should not be entitled to this balance amount. Mr. B. L. Pal, on the other hand, contends that this point was thoroughly dealt with and fully covered in the case of Mahavir Metal Works P. Ltd. v. Union of India a Bench decision of the Delhi High Court reported in [1974] 95 ITR 197 as also in the case of Basudev Sahu v. Union of India [1976] 102 ITR 572 (Orissa). To my mind, in view of my findings on the other points as discussed above, it is not necessary for me to go into these points and, accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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