1990 (8) TMI 58 - HC - Income Tax

Court rules Competent Authority lacked jurisdiction in tax notices issuance

The court ruled in favor of the petitioners, finding that the Competent Authority lacked jurisdiction to issue notices under sections 269D(1) and 269L of ... Penalty, Writ Issues: Challenge to jurisdiction of Competent Authority and Valuation Officer under sections 269D(1) and 269L of the Income-tax Act, 1961.Analysis:The petitioners challenged the jurisdiction of the Competent Authority to issue a notice under section 269D(1) and the Valuation Officer to issue a notice under section 269L of the Income-tax Act, 1961. The petitioners had purchased a property for Rs. 30,00,000 under an agreement of sale. They had filed the necessary forms as required under the Income-tax Act. Subsequently, they received notices from the Inspecting Assistant Commissioner of Income-tax and the District Valuation Officer. The petition was filed challenging these notices. The court noted that one condition for assuming jurisdiction under section 269D/269C is that the apparent consideration is less than the fair market value of the property. However, the impugned notice did not provide any material to show that the market value exceeded Rs. 30,00,000. Without an affidavit-in-reply from the Department, the court lacked material to assess the Competent Authority's belief regarding the property's value, thus concluding that this condition was not satisfied.Another condition for jurisdiction under section 269D/269C is that the consideration agreed between parties is not truly reflected in the sale agreement to evade tax liability or conceal income/assets. The Competent Authority's notice indicated a lack of clarity regarding whether the understatement was for tax evasion by the transferor, transferee, or both. Citing previous judgments, the court emphasized the need for the Competent Authority to apply its mind to this aspect. The court referred to a circular by the Central Board of Direct Taxes and a 'No objection' certificate issued earlier, stating that the Competent Authority could not have initiated proceedings based on the circumstances. The circular was deemed applicable, and the court held that the Competent Authority's actions were without jurisdiction.The court allowed the petition, ruling in favor of the petitioners and making the rule absolute in terms of the prayer clause. No costs were awarded in this matter. The court did not delve into other contentions raised, as the decision on the mentioned issues was sufficient for the judgment.