Gross undervaluation under Chapter XXA not established where valuation and surrounding circumstances did not justify acquisition

Acquisition of two shops under Chapter XXA for alleged gross undervaluation was held unsustainable because the rent-capitalisation valuation, after repairs and collection charges, did not establish that the apparent consideration was grossly inadequate. The surrounding circumstances, including sale resolutions, the Sub-Registrar's rejection of the undervaluation objection, and the fact that proceedings stemmed from a private complaint rather than departmental initiation, showed that acquisition was not justified. The Board's circular also supported the view that acquisition proceedings were not intended for minor transactions with low apparent consideration. The appeals were allowed.

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Issues: Whether the acquisition of the two shops under Chapter XXA of the Income-tax Act, 1961 on the ground of gross undervaluation was justified.

Analysis: The shops were let out on nominal rent, and on the rent capitalisation method the value was found to be far below the consideration shown in the sale deeds, after accounting for repairs and collection charges. The surrounding circumstances, including the resolutions authorising sale, the rejection of the undervaluation objection by the Sub-Registrar, and the fact that the proceedings were not departmentally initiated but arose from a private complaint, indicated that the apparent consideration could not be treated as grossly inadequate. The circular issued by the Board also showed that acquisition proceedings were not intended for minor sales with low apparent consideration, reinforcing that such proceedings should not ordinarily be pursued in petty cases.

Conclusion: The acquisition orders were not sustainable, and the appeals were allowed.

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