Section 269C initiation requires evidence of tax-evasion intent, and valuation must reflect real market conditions.

Initiation of acquisition proceedings under Section 269C requires material showing both that the apparent consideration falls below fair market value by the statutory margin and that the understatement was made with the object of evading tax. Where the recorded reasons do not disclose the tax-evasion element, the initiation is invalid. On valuation, the apparent consideration was accepted as reflecting fair market value because the property's incomplete condition, the additional expenditure needed to make it occupiable, comparable sales in the same building, and market conditions at the relevant time all supported the stated price. The acquisition order was therefore unsustainable both on jurisdiction and on merits.

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Issues: (i) Whether the initiation of proceedings for acquisition under Section 269C was valid; (ii) whether the apparent consideration represented the fair market value of the flat.

Issue (i): Whether the initiation of proceedings for acquisition under Section 269C was valid.

Analysis: The competence to initiate proceedings under Section 269C depended on the existence of material showing not only that the apparent consideration was lower than fair market value by the statutory margin, but also that the understatement was with the object of evading tax. The reasons recorded by the competent authority did not indicate the second requisite condition. The binding High Court view on the statutory conditions for initiation was followed.

Conclusion: The initiation of proceedings under Section 269C was invalid.

Issue (ii): Whether the apparent consideration represented the fair market value of the flat.

Analysis: The property was purchased for Rs. 9,00,000, while the Department's valuation was based on assumptions that did not fully account for the flat's incomplete condition, the further expenditure required to make it occupiable, and comparable sales in the same building at broadly similar rates. The surrounding market conditions after the introduction of the registration requirement also supported a fall in prices during the relevant period. On the record, the apparent consideration could not be rejected as not reflecting fair market value.

Conclusion: The apparent consideration was held to represent the fair market value, and the acquisition order could not be sustained on merits.

Final Conclusion: The acquisition order was set aside and the transferees succeeded on both the jurisdictional challenge and the merits challenge.

Ratio Decidendi: For initiation of acquisition proceedings under Section 269C, the competent authority must have material not only to indicate understatement beyond the statutory margin but also to show that the understatement was made with the object of evading tax; absent such material, the proceedings are invalid.

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