Understated consideration and tax-evasion purpose must be supported by reliable material before Chapter XX-A acquisition can proceed.

Under Chapter XX-A, jurisdiction could not be assumed unless the authority had reliable material to believe that the sale consideration was understated and a clear finding was recorded that the understatement was made to facilitate tax reduction or evasion. The only material here was an Inspector's report, but it lacked a site visit and omitted essential valuation factors such as location, shape, neighbourhood, and physical condition, including the depression requiring filling work. On that record, the report was not dependable material for the statutory belief, and the required finding on tax-evasion purpose was also absent. The note therefore states that the jurisdictional basis for acquisition was invalid.

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Issues: Whether the competent authority had valid material to form the requisite reason to believe that the consideration stated in the sale deeds was understated, and whether the statutory prerequisite of a finding that understatement was made with the object of facilitating reduction or evasion of tax liability was satisfied.

Analysis: The only material relied upon was the Inspector's report. The report did not show a site visit and omitted essential valuation factors such as the exact location, shape, neighbourhood and physical condition of the plots, including the depression requiring substantial filling expenditure which was accepted on the record. In such circumstances, the report could not constitute reliable material for forming the statutory belief. The authority also had to record a clear and conclusive finding, supported by material, that understatement was made with the object of facilitating reduction or evasion of tax liability by the transferor or transferee. Such a finding was absent.

Conclusion: The assumption of jurisdiction for acquisition under Chapter XX-A was invalid, and the acquisition order was cancelled.

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