2011 (3) TMI 1426 - HC - Income Tax

Court upholds acquisition decision under Income-tax Act, deems notices valid, and justifies procedural aspects.

The Court upheld the Competent Authority's decision to initiate acquisition proceedings, finding sufficient grounds for 'reason to believe' under Section ... Acquisition proceedings u/s 269C - held that:- Merely because the certificate under s. 230A of the Act was issued, it cannot be held that the option of the IT Department to compulsorily acquire this land stood foreclosed. Coming now to the argument about not giving opportunity to cross-examine the DVO, we have to consider as to what role the DVO has to play. According to s. 269C r/w s. 269F, the Valuation Officer is merely called upon to determine fair market value of a particular immovable property. He merely acts as an expert and adviser to the Competent Authority for the purpose of enabling such Competent Authority to determine fair market value of the property firstly at the stage of initiation of proceedings and finally at the time when he has to decide the question whether property has to be acquired under s. 269F. - no prejudice was caused to the assessee by mere fact that he could not cross-examine the DVO. Argument that valuation of the land in the hands of transferor Jai Marwar Company (P) Ltd., Jodhpur has been accepted by the IT Department, cannot be upheld because the Tribunal by its order dt. 8th Nov., 2002 has merely held the assessment order for asst. yr. 1985-86 as invalid on the ground that since sale deed was executed on 1st Feb., 1982, the capital gain can be assessed in asst. yr. 1982-83 and not in asst. yr. 1985-86. It is thus evident that the Tribunal without final determination of valuation of the land and the capital gain thereon, simply deleted such addition for the asst. yr. 1985-86. It cannot therefore be said to have given finality to valuation of land submitted by the transferor. Amount received as service charges - So far as assessee is concerned, said amount was receivable as service charges from construction company in question in the previous year relevant to assessment order under reference. - There is no reason to hold that it was not includible in assessee's income. The allowance or disallowance of the same in the hands of the payer is of no relevance in deciding the taxability of the same in the hands of the recipient. The present matter does not fall in any of five categories enumerated in para 52 above and, therefore, we answer all the four questions of law enumerated in para 6 of this judgment in affirmative, in favour of the Revenue and against the assessee. Issues Involved:1. Reason to believe under Section 269C(1) of the Income-tax Act, 1961.2. Validity of notices under Section 269D(2) of the Act.3. Compliance with statutory requirements under Section 269D(2)(b) of the Act.4. Validity and reasonableness of the orders passed by the lower authorities.Issue-wise Detailed Analysis:1. Reason to Believe under Section 269C(1) of the Act:The appellant argued that the Competent Authority lacked the 'reason to believe' required under Section 269C(1) to initiate acquisition proceedings. The Competent Authority relied on a valuation report indicating the fair market value of the property was significantly higher than the declared sale consideration. The Court held that the Competent Authority had sufficient material to form a belief that the consideration was understated, satisfying the requirement of 'reason to believe.' The Court cited several judgments, including ITO vs. Lakhmani Mewal Das and Ganga Saran and Sons (P) Ltd. vs. ITO, to support the position that the belief must be reasonable and based on relevant material, but the sufficiency of the material is not open to judicial review.2. Validity of Notices under Section 269D(2) of the Act:The appellant contended that the notice issued under Section 269D(2) was defective as it used the terms 'and/or,' indicating non-application of mind. The Court rejected this argument, stating that the use of 'and/or' did not invalidate the notice. The Court referred to Section 292B of the Act, which cures procedural defects and held that the notice was sufficient for the purpose of initiating proceedings. The Court also referenced the judgment in I. Devarajan and Ors. vs. Tamil Nadu Farmers Service Co-operative Federation and Ors., where a similar issue was addressed.3. Compliance with Statutory Requirements under Section 269D(2)(b) of the Act:The appellant argued that notices were not served on all members of the society, violating Section 269D(2)(b). The Court held that service of notice on the society was sufficient as the society represented the interests of its members. The Court cited CIT vs. Premanand Industrial Co-operative Service Society Ltd., where it was held that objections regarding non-service of notice can only be raised by the person on whom the notice was not served.4. Validity and Reasonableness of the Orders Passed by the Lower Authorities:The appellant challenged the acquisition order and the Tribunal's decision on several grounds, including the delay in passing the order, the valuation method used, and the denial of the opportunity to cross-examine the Valuation Officer. The Court found that the delay was justified due to pending proceedings under the Urban Land (Ceiling and Regulation) Act, 1976. The Court also upheld the valuation method used by the Competent Authority, which was based on comparable sale instances and the commercial potential of the land. Regarding the denial of cross-examination, the Court held that no prejudice was caused to the appellant as the Valuation Officer's report was only one piece of evidence considered by the Competent Authority.Conclusion:The Court dismissed the appeal, affirming the orders of the Competent Authority and the Tribunal. The Court held that the Competent Authority had valid reasons to initiate proceedings, the notices were properly served, statutory requirements were complied with, and the orders were neither perverse nor unreasonable. The appeal was dismissed with no order as to costs.