Court quashes tax acquisition proceedings due to lack of "reason to believe"

The court quashed all proceedings under s. 269D read with s. 269C of the I.T. Act, 1961, regarding the acquisition of the petitioner's share in a property in Calcutta. The judge emphasized that a reasonable belief must precede the initiation of proceedings and that conclusive proof and presumption do not apply at that stage. The court ruled in favor of the petitioner, citing the lack of additional supporting material to form a "reason to believe" for acquisition. The judgment had implications for related cases, with no costs awarded in this instance.

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Issues:
Challenge to proceeding under s. 269D(1) of the I.T. Act, 1961 regarding acquisition of property of petitioner's share in premises, validity of notices issued, compliance with s. 269C conditions.

Analysis:
The petitioner challenged a proceeding under s. 269D(1) of the I.T. Act, 1961, related to the acquisition of their 1/9th share in a property in Calcutta. The petitioner purchased the share for Rs. 2 lakhs, and subsequent notices were issued by the Valuation Officer and respondents under s. 269D(1) of the Act. The petitioner's grievance was based on the conditions set out in s. 269C for forming a "reason to believe" for acquisition. Dr. Pal argued that the material to form such a belief was lacking, as the authority relied only on conclusive proof and presumption under sub-section (2) of s. 269C without additional supporting material. This argument was supported by references to legal precedents. Mr. B. L. Pal, representing the respondents, acknowledged the contrary judgment of the Calcutta High Court in another case but mentioned an appeal pending against it. The judge, Bimal Chandra Basak, upheld the previous judgments of the court on the point, stating that the formation of a reasonable belief precedes the initiation of proceedings, and the language of s. 269C(2) refers to proceedings after the notice is issued. The judge emphasized that conclusive proof and presumption do not apply before the initiation of proceedings, as they require a subjective opinion based on objective facts, and a lis or dispute between parties. Consequently, the judge allowed the application, quashing all proceedings under s. 269D read with s. 269C of the I.T. Act, 1961, without prejudice to other points, as the case was heard solely on this issue. No costs were awarded. Similar orders were passed in related cases in view of this judgment.

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