Registration date governs Chapter XX-A acquisition, but understatement must still be proved on reliable material.

For Chapter XX-A acquisition proceedings, the crucial date was the date of registration, not the earlier date of execution, so the chapter applied where registration occurred after commencement. The Department nevertheless failed to establish the statutory conditions for acquisition under section 269C because the fair market value and alleged understatement of consideration were not proved on reliable material; the presumption was rebuttable on the facts. A CBDT circular directing discontinuance of acquisition proceedings below the monetary threshold was held binding and applicable even at the appellate stage. On the overall facts, the acquisition could not be sustained.

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Issues: (i) Whether Chapter XX-A of the Income-tax Act, 1961 applied to a transfer executed before its commencement but registered after its commencement; (ii) whether the Department had validly established the conditions for acquisition under section 269C, including the fair market value and the statutory presumption regarding understatement of consideration; (iii) whether the CBDT circular requiring dropping of acquisition proceedings below the monetary threshold applied at the appellate stage.

Issue (i): Whether Chapter XX-A of the Income-tax Act, 1961 applied to a transfer executed before its commencement but registered after its commencement.

Analysis: The material date for acquisition proceedings was held to be the date of registration of the transfer and not the earlier date of execution. Registration completed the transfer for the purpose of Chapter XX-A, and the relation-back principle under the Registration Act did not prevent the statutory scheme from operating where registration occurred after the chapter came into force.

Conclusion: Chapter XX-A applied to the transfer, and this issue was decided against the assessee.

Issue (ii): Whether the Department had validly established the conditions for acquisition under section 269C, including the fair market value and the statutory presumption regarding understatement of consideration.

Analysis: The fair market value had to be determined on the basis of reliable material, and the valuation adopted by the competent authority was found to rest on estimates that were not adequately supported. The Court accepted that the evidence on record, including comparable values and the wealth-tax figures, did not justify the conclusion that the apparent consideration was understated to the extent necessary for acquisition. The presumption under section 269C was treated as rebuttable on the facts found, and the Department failed to establish a sustainable basis for invoking acquisition proceedings.

Conclusion: The statutory conditions for acquisition were not made out, and this issue was decided in favour of the assessee.

Issue (iii): Whether the CBDT circular requiring dropping of acquisition proceedings below the monetary threshold applied at the appellate stage.

Analysis: The circular was held to be binding on the authorities administering the Act, and the expression referring to pending proceedings was construed broadly to include proceedings at the appellate stage. The benevolent circular was therefore applicable where the apparent consideration was below the prescribed threshold.

Conclusion: The circular applied even at the appellate stage, supporting the assessee's claim for discontinuance of the acquisition proceedings.

Final Conclusion: Although Chapter XX-A was held applicable on the basis of the registration date, the acquisition proceedings could not be sustained on the facts, and the Department's appeal failed.

Ratio Decidendi: For acquisition under Chapter XX-A, the crucial date is the date of registration of the transfer, but the statutory presumption of understatement is rebuttable on the facts and acquisition cannot be sustained unless the conditions in section 269C are satisfactorily established.

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