1985 (3) TMI 56 - HC - Income Tax

High Court sets aside Tribunal's judgment on property valuation under Income Tax Act

The High Court set aside the Tribunal's judgment in a case involving the valuation of property under Section 269C of the Income Tax Act. The Court ... Determination Of Fair Market Value Of Property Issues:1. Valuation of property under Section 269C of the Income Tax Act.2. Consideration of auction sales in determining fair market value.3. Validity of splitting a single transfer into multiple transactions.4. Admissibility of unregistered agreement in determining fair market value.Valuation of Property under Section 269C:The case involved the sale of a property where the fair market value determined by the Valuation Officer was higher than the apparent consideration, triggering acquisition proceedings under Section 269C of the Income Tax Act. The Competent Authority relied on the valuation report and reasons to believe that the consideration was understated to facilitate tax evasion. The Tribunal's decision to exclude auction sale rates in determining fair market value was deemed erroneous by the High Court, as auction sales are indicative of market value and should have been considered.Consideration of Auction Sales:The High Court criticized the Tribunal for disregarding auction sale rates of neighboring properties that were higher than the determined fair market value of the disputed property. The court emphasized that auction sales reflect market value and should have been factored into the valuation process. The Tribunal's failure to consider these rates was considered a legal error warranting the setting aside of its judgment.Validity of Splitting a Single Transfer:The Tribunal's decision to split a single property transfer into multiple transactions was challenged by the Revenue. The High Court agreed with the Revenue's contention, stating that the transfer of the property to multiple parties through a single deed did not negate the fact that it was a single transfer. The court noted that the consideration for different shares was interconnected, leading to the conclusion that there was one sale deed executed for a price below fair market value.Admissibility of Unregistered Agreement:The High Court highlighted the importance of registered agreements in determining fair market value under Section 269F(9) of the Income Tax Act. In this case, the Tribunal's consideration of an unregistered agreement dated September 19, 1972, was deemed improper. The court emphasized that unregistered agreements cannot be relied upon to explain differences in consideration, and thus, the Tribunal erred in considering such evidence.In conclusion, the High Court set aside the Tribunal's judgment, emphasizing the importance of considering auction sales, the invalidity of splitting a single transfer, and the inadmissibility of unregistered agreements in determining fair market value under the Income Tax Act. The case was remanded to the Tribunal for a fresh decision in accordance with the law, with no order as to costs.