Compulsory acquisition under Chapter XXA failed where statutory preconditions were unproved and valuation evidence was not independently assessed.

Compulsory acquisition under Chapter XXA required strict proof of the statutory preconditions on reliable evidence, and the Revenue could not rely mainly on a valuation report or shift the burden to the transferee. The competent authority was also required to independently evaluate comparable material and the objections raised; here, it failed to compare like with like, ignored material locality factors, and relied on less comparable sale instances. The valuation basis was therefore found unsustainable and the acquisition order could not stand.

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Issues: (i) Whether the acquisition proceedings under Chapter XXA of the Income-tax Act, 1961 were validly initiated and sustained when the Revenue did not establish the statutory preconditions and relied substantially on the valuation report alone; (ii) Whether the valuation adopted by the competent authority, including rejection of the Chandigarh Administration's determination and comparable sale instances relied on by the transferee, could lawfully support acquisition of the property.

Issue (i): Whether the acquisition proceedings under Chapter XXA of the Income-tax Act, 1961 were validly initiated and sustained when the Revenue did not establish the statutory preconditions and relied substantially on the valuation report alone.

Analysis: The provisions governing acquisition of immovable property were treated as penal and quasi-criminal in character, requiring strict compliance with the statutory conditions. The Revenue had the burden to show that the apparent consideration was lower than fair market value by the prescribed margin and that the statutory presumptions could legitimately arise. The record showed that the competent authority proceeded largely on the valuation report and adopted the Valuation Officer's comments without independent scrutiny, while the transferee's objections were not examined with the required judicial application of mind. The order also proceeded on the erroneous footing that the transferee had to prove the apparent consideration was true, whereas the statutory burden lay initially on the Revenue.

Conclusion: The acquisition proceedings were not validly sustained and the finding was against the Revenue.

Issue (ii): Whether the valuation adopted by the competent authority, including rejection of the Chandigarh Administration's determination and comparable sale instances relied on by the transferee, could lawfully support acquisition of the property.

Analysis: The valuation method was found unsatisfactory because it did not compare like with like and ignored material depressing factors affecting the locality. The competent authority rejected the Chandigarh Administration's valuation without adequately addressing that a Government department had itself fixed the value for purposes of unearned increase under the applicable transfer rules. The authority also failed to meaningfully consider comparable sales of similar plots in the same sector and instead relied on less comparable instances from other sectors and later transactions affected by market changes. In these circumstances, the fair market value adopted for acquisition was held to rest on conjecture rather than reliable evidence.

Conclusion: The valuation basis was invalid and the conclusion was in favour of the Assessee.

Final Conclusion: The acquisition order could not stand because the statutory prerequisites were not proved and the valuation exercise was found to be legally unsustainable.

Ratio Decidendi: In proceedings for compulsory acquisition under Chapter XXA of the Income-tax Act, 1961, the Revenue must first establish the statutory conditions on reliable evidence, and the competent authority must independently apply its mind to comparable material before forming the requisite belief that the consideration is understated.

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