Auction sale prices are not comparable market value for Chapter XX-A acquisition where payment is deferred and bidding is competitive.

Auction prices fetched under the Chandigarh (Sale of Sites and Buildings) Rules, 1960 were held not to be a reliable basis for determining fair market value under Chapter XX-A of the Income-tax Act, 1961. The Court noted that such auctions involved competitive bidding and deferred instalment payment, unlike a private sale requiring full payment in lump sum, and that this difference materially affected the price realised. The Tribunal's reliance on earlier auction sales, and rejection of the registered valuer's report without adequate basis, could not support acquisition on the footing that market value exceeded apparent consideration. The acquisition order and the Tribunal's order were therefore unsustainable and were set aside.

---

---

Issues: Whether the price fetched in an auction sale conducted under the Chandigarh (Sale of Sites and Buildings) Rules, 1960 could be treated as reflecting the fair market value of a comparable plot for acquisition proceedings under Chapter XX-A of the Income-tax Act, 1961.

Analysis: The property was acquired on the footing that its fair market value exceeded the apparent consideration by more than the statutory margin. The Tribunal relied on earlier auction sales of Chandigarh plots and rejected the registered valuer's report for want of supporting basis. The sale conditions under Rules 6 and 10 showed that an auction purchaser was required to pay only twenty-five per cent of the price upfront, with the balance payable in instalments carrying limited interest. Such auction sales involved competitive bidding and deferred payment, unlike a private sale where the purchaser must ordinarily pay the full price in lump sum. The difference in sale conditions and payment structure materially affected the price fetched and made auction prices an unreliable indicator of the market value of a comparable private sale.

Conclusion: The auction sale price under the 1960 Rules could not be treated as the fair market value for the purpose of Chapter XX-A acquisition. The acquisition order and the Tribunal's order were unsustainable and were set aside in favour of the assessee.

Ratio Decidendi: For determining fair market value under Chapter XX-A of the Income-tax Act, 1961, auction prices fetched under a statutory scheme permitting deferred instalment payment and competitive bidding are not comparable to private-sale prices and cannot, by themselves, establish market value.

---