1985 (12) TMI 50 - HC - Income Tax

Court dismisses income-tax appeals as time-barred, upholds valuation methods.

The court dismissed Income-tax Appeals Nos. 1 and 2 as barred by time, noting that no question of law was raised. It held that the non-communication of ... Search And Seizure Issues Involved:1. Timeliness of appeals u/s 269G.2. Non-communication of material constituting reasons to believe.3. Validity of the Competent Authority's belief regarding understatement of consideration.4. Method of assessing fair market value.Summary:1. Timeliness of Appeals u/s 269G:Income-tax Appeals Nos. 1 and 2 were dismissed as barred by time. The court noted that an appeal u/s 269H lies only on a question of law, and no such question was pointed out by the counsel.2. Non-communication of Material Constituting Reasons to Believe:The appellants argued that the material constituting the reasons to believe that the apparent consideration was less than the fair market value was not supplied. The court referenced the Supreme Court judgment in S. Narayanappa v. CIT [1967] 63 ITR 219, which held that there is no requirement to communicate the reasons for initiating proceedings. The court found no merit in this point as the non-communication of reasons is not fatal to the proceedings.3. Validity of the Competent Authority's Belief:The appellants contended that the Competent Authority had no reason to believe that the apparent consideration was understated with the object of tax evasion. The court discussed the presumption u/s 269C(2)(b) that if the apparent consideration is less than the fair market value, it shall be presumed that the consideration was not truly stated. The court disagreed with the view that this presumption applies only after the initiation of proceedings and held that it is available even at the stage of forming the belief u/s 269C(1).4. Method of Assessing Fair Market Value:The appellants challenged the use of the rent capitalisation method for assessing the fair market value. The court noted that in the absence of comparable sales data, the Competent Authority rightly used the rent capitalisation method. The court also rejected the argument that the method more favorable to the assessee should be adopted, stating that the determination of fair market value depends on the facts and circumstances of each case. The court upheld the Competent Authority's assessment of the fair market value and dismissed the contention that the valuation was excessive.Conclusion:The appeals were dismissed without any order as to costs. The court upheld the Competent Authority's actions and methods in determining the fair market value and initiating proceedings.