Section 269C initiation needs reliable material proving understatement and tax-evasion intent, not an unsafe valuation report alone.

Initiation of acquisition proceedings under section 269C requires material showing both a statutory margin between fair market value and apparent consideration and that the stated consideration was untrue with the object of tax evasion. An erroneous valuation report based on an incorrect assumption about vacant property, where the conveyance showed retained rights over unsold flats, could not by itself supply the requisite belief. In the absence of independent material beyond that unsafe valuation, the competent authority lacked jurisdiction to commence proceedings, and the statutory presumption under section 269C(2) was unavailable at the initiation stage.

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Issues: Whether proceedings for acquisition of immovable property under section 269C of the Income-tax Act, 1961, could be initiated when the only material before the competent authority was an erroneous valuation report and there was no material to show that the consideration stated in the instrument of transfer was untrue with the object of tax evasion.

Analysis: The preconditions for invoking section 269C require not only that the fair market value exceed the apparent consideration by the statutory margin, but also that the consideration in the transfer instrument was not truly stated with the object of facilitating tax evasion or concealment. The satisfaction of the competent authority must rest on material having a rational connection with the belief formed. The valuation report relied upon proceeded on an incorrect assumption that a part of the property was vacant and available to the transferee society, although the conveyance itself showed that the right to dispose of the unsold flats had been retained by a confirming party. That serious infirmity rendered the valuation unsafe as a basis for the requisite belief. In the absence of any material beyond the valuation report, the competent authority could not validly infer that the apparent consideration was understated with the requisite ulterior object. The statutory presumption under section 269C(2) was not available at the stage of initiation, and strict construction of the taxing provision required compliance with the jurisdictional facts before proceedings could be commenced.

Conclusion: The initiation of proceedings under section 269C was without jurisdiction and was liable to be quashed.

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