Pre-notice presumption under Income-tax acquisition law unavailable; proceedings failed for lack of material supporting reasonable belief.

Presumptions under section 269C(2) of the Income-tax Act, 1961 apply only after initiation of acquisition proceedings by publication of notice in the Official Gazette under section 269D(1), and not at the pre-notice stage. The competent authority must first have material to satisfy the jurisdictional conditions under Chapter XX-A, including transfer of immovable property, understatement of apparent consideration by the requisite margin, and a reasonable belief that the understatement was made to evade tax or conceal income. An Inspector's report may have evidentiary value on market value, but it is insufficient by itself to show that extra consideration passed or that the apparent consideration was falsely stated with an evasive motive. On that basis, the acquisition proceedings were unsustainable for want of requisite material.

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Issues: Whether the presumption under section 269C(2) of the Income-tax Act, 1961 could be relied upon before the publication of notice in the Official Gazette under section 269D(1), and whether the competent authority had material to form the requisite reasonable belief for acquisition of the property.

Analysis: The statutory scheme of Chapter XX-A requires the competent authority to satisfy the jurisdictional conditions before initiating acquisition proceedings, including a transfer of immovable property, understatement of apparent consideration by the requisite margin, and a reasonable belief that the understatement was with the object of tax evasion or concealment of income. The Court preferred the view that the presumptions in section 269C operate only after initiation of proceedings by publication of the statutory notice, and not at the pre-notice stage. It further found that the Inspector's report, though having some evidentiary value on market value, did not by itself furnish material to conclude that extra consideration had passed or that the apparent consideration was falsely stated with an ulterior tax-evading motive.

Conclusion: The presumption under section 269C(2) was not available prior to publication of notice under section 269D(1), and the acquisition proceedings were unsustainable for want of material to form the requisite reasonable belief.

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