Chapter XX-A acquisition and property valuation must account for real legal restrictions, not hypothetical redevelopment assumptions.

Chapter XX-A acquisition could not be initiated without relevant primary material supporting a prima facie belief that the stated consideration was understated, and the section 269-C presumption could not be used to supply that missing foundation. The valuation also had to reflect the tenancy arrangement and the restrictions imposed by the Urban Land (Ceiling and Regulation) Act, 1976, because the property could not be treated as an unencumbered asset or valued on hypothetical redevelopment assumptions. Those legal burdens materially affected transferability, development potential, and market realisation, so the Revenue's valuation approach was unsustainable.

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Issues: (i) Whether the acquisition proceedings under Chapter XX-A were validly initiated in the absence of proper material to form the requisite belief that the apparent consideration was understated; (ii) Whether the tenancy arrangement and the restrictions under the Urban Land (Ceiling and Regulation) Act, 1976 had to be taken into account in valuing the property and in choosing the valuation method.

Issue (i): Whether the acquisition proceedings under Chapter XX-A were validly initiated in the absence of proper material to form the requisite belief that the apparent consideration was understated.

Analysis: For initiation under section 269-C, the authority had to possess relevant primary facts and material enabling a reasonable prima facie belief that the stated consideration was not the true consideration. The record showed that the valuation proceeded on assumptions and on an abstract approach to market value, without sufficient foundational material at the stage of initiation. The presumption under section 269-C(2) could not be invoked in the absence of such basic material.

Conclusion: The initiation of the acquisition proceedings was not valid.

Issue (ii): Whether the tenancy arrangement and the restrictions under the Urban Land (Ceiling and Regulation) Act, 1976 had to be taken into account in valuing the property and in choosing the valuation method.

Analysis: The tenancy mentioned in the transaction documents was a relevant factor at the stage of valuation, but the property could not be valued as if it were an unencumbered asset. The statutory restrictions under the Urban Land (Ceiling and Regulation) Act, 1976 materially affected the extent of permissible development, transferability, and market realisation. The property's redevelopment potential was limited by the applicable ceiling regime and by the location constraints, so hypothetical assumptions of extensive development and higher FAR could not govern the valuation. The existing legal burdens had to be reflected in the fair market value.

Conclusion: The tenancy-related and ceiling-law restrictions were material valuation factors, and the Revenue's valuation approach was not sustainable.

Final Conclusion: The acquisition order could not stand in law or on facts, and the assessee succeeded in having the proceedings set aside.

Ratio Decidendi: For acquisition under Chapter XX-A, the authority must have concrete material to form a prima facie belief of understatement, and the fair market value must be determined by taking into account all legally enforceable restrictions affecting the property's transferability and development potential.

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