Independent reason to believe is essential for acquisition proceedings; presumptions cannot replace jurisdictional satisfaction at initiation.

For initiation of Chapter XXA acquisition proceedings, the competent authority must independently form a reason to believe on relevant material showing the statutory conditions, and the presumptions in section 269C(2) cannot be used to replace that preliminary satisfaction. The recorded reasons were found to rest on mistaken facts, irrelevant material and non-application of mind, including a flawed view of the parties' roles and valuation inputs lacking a live nexus with the property. On that basis, the notice initiating acquisition proceedings was quashed.

---

---

Issues: (i) Whether the presumptions under section 269C(2) of the Income-tax Act, 1961 could be applied at the stage of formation of reason to believe for initiation of acquisition proceedings under Chapter XXA; (ii) whether the recorded reasons for initiating proceedings under section 269D(1) were vitiated by wrong factual assumptions, irrelevant material and non-application of mind.

Issue (i): Whether the presumptions under section 269C(2) of the Income-tax Act, 1961 could be applied at the stage of formation of reason to believe for initiation of acquisition proceedings under Chapter XXA.

Analysis: The statutory scheme required the competent authority first to form an independent reason to believe on the basis of the conditions in section 269C(1), including that the apparent consideration was below fair market value by more than 15 per cent and that the transaction was with the requisite tax-evading object. The presumptions in section 269C(2) were treated as rules of proof for later stages of the acquisition process, not as material that could replace the authority's own preliminary satisfaction. The expression "any proceedings" in that provision was construed as referring to proceedings after initiation, and not to the administrative stage of deciding whether proceedings should be commenced.

Conclusion: The presumptions in section 269C(2) were not applicable at the initiation stage, and the competent authority had to form its own reason to believe under section 269C(1).

Issue (ii): Whether the recorded reasons for initiating proceedings under section 269D(1) were vitiated by wrong factual assumptions, irrelevant material and non-application of mind.

Analysis: The recorded reasons proceeded on the erroneous footing that the confirming party was also a transferor, whereas it joined the conveyance only to confirm title. The valuation exercise also relied on materials that lacked a rational nexus with the property in question, including newspaper advertisements and distant or temporally mismatched transactions. The reasoning showed use of both clauses of section 269C(1) together, notwithstanding the statutory alternative, and reflected a failure to apply mind to the true nature of the transaction and to the relevant surrounding circumstances. The court held that the formation of belief must rest on relevant material having a live link with the proposed action, and that requirement was not satisfied here.

Conclusion: The initiation of acquisition proceedings was invalid because the recorded reasons were based on mistaken facts, irrelevant material and non-application of mind.

Final Conclusion: The notice initiating acquisition proceedings was quashed, and the writ petition succeeded with costs.

Ratio Decidendi: For initiation of proceedings under Chapter XXA of the Income-tax Act, 1961, the competent authority must itself form a reason to believe on relevant material having a rational nexus with the proposed action, and the evidentiary presumptions in section 269C(2) cannot be used to substitute or predetermine that jurisdictional satisfaction.

---