Chapter XX-A acquisition requires pre-initiation material and a proper valuation; invalid notice and quashed acquisition followed.

For acquisition under Chapter XX-A of the Income-tax Act, the competent authority must have relevant pre-initiation material to form the requisite belief that statutory conditions exist; the presumption under section 269C(2) cannot be used to justify initiation itself, so a notice based only on a valuation report was invalid. The property's fair market value had to be assessed as actually transferred, including its undivided one-third share character and tenancy burdens. On the corrected valuation, the apparent consideration did not fall short of fair market value by more than the statutory margin, so the acquisition order could not be sustained and the proceedings were quashed.

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Issues: (i) Whether the initiation of acquisition proceedings under Chapter XX-A of the Income-tax Act, 1961 was valid in the absence of sufficient material to form the requisite belief; (ii) Whether, on the valuation materials on record, the property could be said to have been transferred at an apparent consideration lower than fair market value by more than fifteen per cent so as to justify acquisition.

Issue (i): Whether the initiation of acquisition proceedings under Chapter XX-A of the Income-tax Act, 1961 was valid in the absence of sufficient material to form the requisite belief.

Analysis: The statutory scheme required the competent authority to have reason to believe, on relevant material, that the property had been transferred for inadequate consideration and that the statutory conditions for acquisition existed. The presumption under section 269C(2) could not be drawn at the stage of initiation. The notice disclosed no material beyond the valuation report, and the authority could not rest initiation on a presumption which was available only after proceedings were validly commenced.

Conclusion: The initiation of proceedings was invalid and is decided in favour of the assessee.

Issue (ii): Whether, on the valuation materials on record, the property could be said to have been transferred at an apparent consideration lower than fair market value by more than fifteen per cent so as to justify acquisition.

Analysis: The property comprised undivided one-third shares sold by three separate conveyances, and valuation had to reflect that feature. The record also showed substantial tenancy restrictions and the need to consider the property as sold subject to existing burdens. On a proper computation, including correction of the arithmetical mistake in the departmental valuation and allowance for the undivided share element, the apparent consideration did not fall short of fair market value by the statutory margin. The mixed valuation approach was permissible, but on the actual figures the statutory threshold was not crossed.

Conclusion: The acquisition order could not be sustained and is decided in favour of the assessee.

Final Conclusion: The acquisition proceedings and the order made thereunder failed to satisfy the statutory requirements under Chapter XX-A, so the impugned acquisition was quashed.

Ratio Decidendi: For acquisition under Chapter XX-A, the competent authority must possess valid pre-initiation material satisfying the statutory conditions, and the fifteen per cent deficiency threshold must be assessed on a proper fair market valuation of the property as actually transferred, including the effect of undivided shares and existing burdens.

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