Fair market value valuation in Chapter XX-A acquisition must consider relevant comparables and material objections before fresh determination.

In Chapter XX-A acquisition proceedings, service of notices under section 269D(2)(a) before publication of the Gazette notice under section 269D(1) was not treated as vitiating jurisdiction on the facts noted, and that objection was rejected. The valuation exercise was held unsustainable because the Tribunal failed to address the objection that separately transferred shares required separate valuation, ignored the relevance of locality in fixing fair market value, and wrongly excluded comparable transactions merely because no acquisition proceedings had been started against them. The valuation was set aside and the matter remitted for fresh determination on the merits and in accordance with law.

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Issues: (i) Whether service of notices under section 269D(2)(a) of the Income-tax Act, 1961 before publication of the notice under section 269D(1) in the Official Gazette vitiated the jurisdiction of the Inspecting Assistant Commissioner and the acquisition order; and (ii) whether the determination of the fair market value of the property by the Tribunal and the Inspecting Assistant Commissioner was legal and valid.

Issue (i): Whether service of notices under section 269D(2)(a) of the Income-tax Act, 1961 before publication of the notice under section 269D(1) in the Official Gazette vitiated the jurisdiction of the Inspecting Assistant Commissioner and the acquisition order.

Analysis: The point had already been examined in an earlier decision on similar facts, where it was held that permitting the additional ground was erroneous and that the ground itself lacked merit. No new contention or binding contrary authority was shown to justify departure from that view.

Conclusion: The issue was answered against the respondents and in favour of the appellant.

Issue (ii): Whether the determination of the fair market value of the property by the Tribunal and the Inspecting Assistant Commissioner was legal and valid.

Analysis: The Tribunal failed to deal with a substantial objection that the two separately transferred shares required separate valuation, and instead proceeded on assumptions not warranted in law. It also ignored the importance of the locality in fixing value and wrongly excluded comparable transactions merely because acquisition proceedings had not been initiated in respect of them. These errors affected the valuation exercise and required reconsideration. The matter was therefore considered fit for remand for fresh disposal in accordance with law and the correct valuation principles.

Conclusion: The valuation determination was held to be legally unsustainable and was set aside for fresh decision.

Final Conclusion: The appeals succeeded, the earlier orders were set aside, and the acquisition proceedings were remitted for fresh determination on the merits of valuation, while the jurisdictional objection rejected against the respondents was not open to be re-agitated.

Ratio Decidendi: In proceedings for acquisition under Chapter XX-A, fair market value must be determined by applying relevant valuation principles to all legally relevant transactions and circumstances, and a tribunal acts illegally if it ignores material objections or excludes comparable transactions on irrelevant grounds.

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