Chapter XX-A acquisition needs objective material at initiation; later evidence cannot cure a defective jurisdictional basis.

Acquisition under Chapter XX-A required objective material existing at the time of notice to form a rational belief that the fair market value exceeded the apparent consideration and that understatement served the prohibited object; the inspector's report alone was insufficient, and later material could not cure the defective foundation. The presumptions under section 269C(2) were rebuttable and could operate only after valid initiation, not to justify commencement. On the facts, the alleged secret agreement and later affidavit were rejected, the transferor's first statement and comparable sale instances supported the declared price, and the acquisition order was unsustainable.

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Issues: (i) whether the acquisition proceedings under Chapter XX-A were validly initiated on the material available at the time of notice; (ii) whether the presumptions under section 269C(2) could be invoked at the stage of initiation; and (iii) whether the apparent consideration reflected the true market value and, on the facts, acquisition could be sustained.

Issue (i): whether the acquisition proceedings under Chapter XX-A were validly initiated on the material available at the time of notice.

Analysis: The initiation of proceedings had to rest on objective material giving rise to a rational belief that the fair market value exceeded the apparent consideration and that understatement was for the prohibited object. The inspector's report was held to be insufficient objective material, and subsequent valuation reports, affidavits, and other later-gathered material could not be relied upon to cure the defect in the initial foundation. The proceedings were treated as quasi-criminal in nature, requiring a valid pre-initiation basis.

Conclusion: The initiation of acquisition proceedings was invalid.

Issue (ii): whether the presumptions under section 269C(2) could be invoked at the stage of initiation.

Analysis: The presumptions under section 269C(2) were held to be rebuttable and operative only after valid initiation of proceedings. They could not be used to justify the very commencement of acquisition proceedings. The statutory scheme required the competent authority first to satisfy the conditions precedent on objective material before the presumptions could operate.

Conclusion: The presumptions under section 269C(2) were not available at the stage of initiation.

Issue (iii): whether the apparent consideration reflected the true market value and, on the facts, acquisition could be sustained.

Analysis: The alleged secret agreement and the later affidavit were rejected as unreliable and self-serving. The first statement of the transferor at the time of search was treated as trustworthy, while the comparable sale instances and the revised valuation report supported the assessee's case that the difference between the declared price and the market value did not cross the statutory threshold. On the evidence, the stated consideration was accepted as the real consideration and the acquisition order could not stand.

Conclusion: The stated consideration was accepted as the real consideration and acquisition was unsustainable.

Final Conclusion: The acquisition proceedings failed both on the jurisdictional foundation and on the merits, and the orders directing acquisition were annulled.

Ratio Decidendi: For acquisition under Chapter XX-A, the competent authority must have valid objective material at the time of initiation to form a reason to believe that understatement and the prohibited object exist, and later material or statutory presumptions cannot retrospectively supply that jurisdictional defect.

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