Fair market value under Chapter XXA must consider comparable auction sales and cannot rely on an unregistered agreement to sell.

In Chapter XXA acquisition proceedings, fair market value must be determined on all relevant valuation material, including comparable auction sales in the locality; excluding such evidence because it was not adopted by the departmental valuer is incorrect. A subsequent lower sale cannot by itself displace a higher market value on the relevant date. An unregistered agreement to sell cannot be relied on to explain the gap between apparent consideration and fair market value, because such evidence is barred in these proceedings. The question whether the arrangement involved one transfer or multiple transfers depends on a fresh appraisal of the evidence.

---

---

Issues: (i) Whether the Tribunal was justified in ignoring auction sales and other material evidence while determining the fair market value of the property for the purpose of section 269C of the Income-tax Act, 1961. (ii) Whether the Tribunal was justified in relying on an unregistered agreement to sell and in treating the transaction as separate transfers, affecting the applicability of Chapter XXA.

Issue (i): Whether the Tribunal was justified in ignoring auction sales and other material evidence while determining the fair market value of the property for the purpose of section 269C of the Income-tax Act, 1961.

Analysis: Auction sales of comparable properties in the locality were material evidence bearing on market value. The Competent Authority had relied upon them along with the valuation material, but the Tribunal declined to consider them on the ground that they had not been adopted by the departmental valuer. The exclusion of such evidence was untenable. The valuation evidence had to be assessed on the basis of all relevant material, and the Tribunal erred in treating the auction sales as irrelevant. The Tribunal also attached undue weight to a subsequent sale to the Union of India at a lower rate, although that transaction did not prevent determination of a higher fair market value on the relevant date.

Conclusion: The Tribunal was wrong in ignoring relevant evidence on fair market value, and its finding on that issue could not stand.

Issue (ii): Whether the Tribunal was justified in relying on an unregistered agreement to sell and in treating the transaction as separate transfers, affecting the applicability of Chapter XXA.

Analysis: In proceedings under Chapter XXA, an assessee could not rely upon an unregistered agreement to explain the difference between the apparent consideration and the fair market value, because section 269F(9) shut out such evidence. The Tribunal therefore acted illegally in placing reliance on the unregistered agreement. As to the nature of the transfer, the Competent Authority had found that the consideration for the shares of the co-transferees was also provided by one transferee, and the Tribunal had not properly dealt with that aspect. The controversy required reappraisal of the evidence and could not be finally resolved without fresh consideration.

Conclusion: The Tribunal erred in law in relying on the unregistered agreement, and the issue whether the transaction involved one transfer or multiple transfers required reconsideration.

Final Conclusion: The appellate judgment was set aside and the matter was sent back for fresh decision in accordance with law.

Ratio Decidendi: In acquisition proceedings under Chapter XXA of the Income-tax Act, 1961, all relevant valuation material, including comparable auction sales, must be considered, and an unregistered agreement to sell cannot be relied upon to explain the gap between apparent consideration and fair market value.

---