Reason to believe for property acquisition failed where valuation material was unreliable and comparable sales were not truly comparable.

The competent authority must have reliable material showing that the apparent sale consideration was understated before invoking Chapter XX-A acquisition powers under the Income-tax Act, 1961. A valuation report prepared without proper data, relevant documents, or adequate consideration of material factors affecting value, such as the property's condition, age, shape, situation, and covered area, was held unreliable. Comparable sale instances also had not been shown to be truly comparable on relevant features. Because the statutory belief required a rational and direct connection between the material and the conclusion reached, presumptions could not replace proper initiation material. The acquisition order therefore could not be sustained.

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Issues: Whether the competent authority had material to form a reason to believe that the apparent consideration shown in the sale deed was understated so as to justify acquisition of the property under Chapter XX-A of the Income-tax Act, 1961.

Analysis: The recorded valuation was found to be unreliable because it had been prepared without proper data, without relevant documents, and without adequate consideration of material facts affecting value, such as the condition, age, shape, situation, and covered area of the property. The report also depended upon comparable sale instances that were not shown to be truly comparable on relevant features. The formation of belief under the acquisition provisions required a rational and direct connection between the material available and the belief formed, and the presumptions applicable at the stage of proceedings could not substitute for proper material at the stage of initiation.

Conclusion: The competent authority did not have sufficient material to form the requisite reason to believe, and the acquisition order could not be sustained.

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