TaxTMI 
TaxTMI 
1988 (11) TMI 128
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....he said property had been completed in between the period 1971 to 1973 and that the said property had been sold for Rs. 17,00,000. In receipt of the aforesaid form No. 37G, the Competent Authority issued a preliminary enquiry letter to the transferee on 12th April, 1986 asking for the various details including the lay out plan of the building with floorwise covered area, the state of the property whether it was tenanted or in self possession, whether free-hold or leasehold and whether industrial, commercial or residential etc. In response to the aforesaid letter dt.12th April, 1986, the transferee submitted the following documents for this consideration: 1. Agreement to sell dt.25th June, 1985between Shri P.C. Baweja and M/s Ganga Automobiles Pvt. Ltd. 2. Agreement to sell dt.21st Oct., 1985between Shri P.C. Baweja and M/s Ganga Automobiles Pvt. Ltd. 3. Agreement to sell dt.5th Dec., 1985between Sh. P.C. Baweja and M/s G. Sagar Suri & Sons (HUF) 4.Saledeed dt.4th Feb., 1986 5. Stamp Duty Challan for Rs. 1,36,000 6. Brokerage paid Rs. 31,000 and 7. Layout Plan. The aforesaid documents were also submitted by the assessee to Sri P.K. Kohli, District Valuation O....
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....under the IT Act, 1961 in respect of any income arising from the transfer; and (b) facilitating the concealment of any income or any moneys or any other assets which have not been or which ought to be disclosed by the transferee for the propose of the Indian IT Act 1922 or the IT Act, 1961 or the WT Act, 1957. Therefore, in accordance with the provisions of s. 269C of the IT Act, 1961, I am initiating acquisition proceedings for the above mentioned property by issue of notice under s. 269D(1) of the IT Act, 1961." The computation of the value at Rs. 29,76,000 as mentioned in the aforesaid reasons has been given on the reverse of the reasons recorded and it may also be reproduced here below for ready reference as follows: "The property S-24, Green Park Extn. measures 200 sq. yds. and is situated in a commercial area as has been reported on page 13 of the Sale Deed. The land is free hold and it has constructed area of over 4,800 sq. ft. A part of the property has been stated to be on rent with M/s Ganga Automobiles Pvt. Ltd., but this again is a family concern of the Vendees. Neither the date of tenancy nor particulars of annual rent etc. has been mentioned. However, the ten....
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....at Rs. 8,25,102 after allowing depreciation @ 1.125 per cent per annum for 15 years. In this manner, the total value came to Rs. 57,37,200. The land and building method was adopted by the Valuation Officer on the ground that, "the vendee got the vacant possession of the property." For arriving at the value of Rs. 29,375 per sq. mtr, for the land the Valuation Officer adopted the exemplar of the following properties : 1. No. 17-Yusaf Sarai,New Delhi. The plot area of which was 225 sq. mtrs. The same was sold on30th July, 1984. It was leasehold property. 2. Another property referred to by the Valuation Officer was 22-Yusaf Sarai,New Delhihaving area of 150 sq. mtrs. It was sold on2nd Jan., 1984. The FAR of both the aforesaid properties was much higher than that of the property under consideration and, therefore, the Valuation Officer adjusted the value of the aforesaid exemplars to arrive at the valuation of the property under consideration. 6. The assessee challenged the aforesaid valuation report of the Valuation Officer and raised many queries about it and it was requested by the assessee that the departmental Valuation Officer may be made available to the assessee for cr....
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..... Even if the FAR of the subject property is assumed at 1.66 (but certainly not admitted) the average rate for the subjected property would work out to over Rs. 19,000 per sq. yd. as below: . B-2/2, Safdaring Enclave M-46, G.K II, M-5, G.K. II, Commercial B-1/16, Hauz khas J-10, Green Park Land rates for the givenFARsas worked out in 11(i). 8350 10,166 18,400 9,7 41 7,267 Adjustments : . . . . . For time gap @ 12 per cent p.a, (-)12% (-)15% (-)11% (-)12% (-)14% For FAR of 1.66 of the property. (+) 12% (+) 22% (+) 4% (+) 11% (+) 90% For free-hold nature of subject property (+) 22% - - - - For commercial nature of subject property (+) 100% (+) 100% - (+)100% (+)100% Net adjustment: (+) 112% (+)107% (-) 7% (+) 99% (+)176% . (-)9352 (-)11177 (-)1288 (+) 9644 (+)12796 . 17702 21343 17112 19385 20 057 Resultant Adjusted Rates : Average Rate: 17702 + 21343 +17112 +19385 +20057 95599 / 5 = Rs. 19,120 per sq. mtr. If the actually used FAR of 3.54 be taken into consideration, the land rate i....
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....he tenancy of M/s Ganga Automobiles Ltd. and, therefore, the presumption of the proceedings on the ground that no finding had been recorded by the Competent Authority with regard to the motive of the transferor and the transferee to evade taxes as visualised under s. 269C(1) and that there was no material whatsoever before the competent authority to initiate the proceedings in question. Reference was made to the judgment of CIT vs. Arun Mehra (1985) 49 CTR (Del) 119 : (1985) 157 ITR 308 (Del), in this regard to contend that when proceedings were initiated without due material and application of mind the proceedings in question deserve to be quashed. The learned Competent Authority however, brushed aside the above objections as to the initiation of proceedings by observing, inter alia, as below: "9. Regarding non-availability of the presumptions, case laws of various High Courts were cited but on this point, it is brought out that in this regard Hon'ble Delhi High Court in the case of Mahavir Metal Works (P) Ltd. vs. Union of India reported at 95 ITR 197 have held that presumptions are available at the initiation stage. Further the Hon'ble P&H High Court in the case of Sutlej Chi....
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....imate to take the FMV at Rs. 50 lakhs." 11. On the basis of the aforesaid findings, the learned Competent Authority passed the order of acquisition, after obtaining the permission of the CIT in the normal course. 12. Against the aforementioned order of the Competent Authority, the appellants have filed the present appeals. The counsel for both the appellants was the same and he argued both the appeals on similar lines. They are, therefore, being disposed of by a combined order, for the sake of convenience. 13. In respect of appeal No. 5, the following objections were, inter alia, taken by the assessee's learned counsel: (1) That the initiation of the proceedings under s. 269C was void ab initio for the following reasons: (a) the learned Competent Authority had no material before him to believe that the fair market value of the property in question was Rs. 29,76,000 as presumed by him and that all the underlying facts on the basis of which the learned Competent Authority came to hold the opinion in question were incorrect, namely, the following: (i). It was not true that vacant possession of the property in question was given by the vendor to the vendee. (ii). I....
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....not have been passed by the Competent Authority. 15. The following points were also made out by the learned counsel: (1). That it was not correct to proceed on the footing that the property acquired fell Group 3 of the Schedule issued by Land & Development Office showing the valuation of lands in various areas of Delhi. (2). That the various sale instances relied upon either by the DVO or by the learned D.R., were distinguishable on facts and did not relate either to the year in which the sale of the present property was made or to the approximate vicinity where the property in question was situated. In this connection, our attention was invited to paragraph 61 appearing at page 258 of the assessee's paper book, para 7 appearing at page 244, paras 11 & 12 appearing at page 245, para 24 of page 248 of the paper book, 32 to 34 appearing at page 252. The assessee's submission was that the objections raised in the aforesaid paragraphs have not been met by the learned Competent Authority. (3). That the built up area as taken by the DVO was not correct and that the figure mentioned by the assessee at pages 12&13 of its paper book (Index Part) was the correct figure. (4). T....
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.... the premises were handed over to M/s Ganga Automobiles, who nominated M/s G.Sagar Suri as the vendee. Even the agreement to sell dt.5th Dec., 1985between Sh. Baweja and M/s G. Sagar Suri & Sons (HUF), the nominee of M/s Ganga Automobiles Ltd. mentions this fact, vide cl.8 which reads as below: "The Vendor hereby confirms that Vendor had handed over the possession of the whole of the premises to the Vendee at the execution of this agreement," Therefore, according to the learned Department Representative, the presumption of the learned Competent Authority that the property was not a tenanted one, when it was purchased, and that the tenancy in favour of M/s Ganga Automobiles was created lately was not wrong. He also drew our attention to the file of K-114, Hauz Khas wherefrom it appears that the valuation of the land in question in that case had been done by the approved valuer of the vendor @ Rs. 5,500 per sq. yd. therefore, it was not wrong on the part of the learned Competent Authority to mension the aforesaid fact in his reasons to believe. It was this specific example which was relied upon by the learned Competent Authority as it was situated nearabout the area where the a....
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....e property and that the consideration for such a transfer as agreed to between the parties had not been truly stated in the instrument of transfer with the objects mentioned in cls. (a) and (b) of s. 269C(1) of the Act. It is true that s. 269C(1) of the IT Act, 1961, involved the exercise not judicial or quasi-judicial but administrative powers as held in Rai Bahadur G.V. Swaika Estate P. Ltd. vs. M.N. Tewari (1980) 16 CTR (Cal) 75 : (1980) 126 ITR 310 (Cal). Although the Court exercising its writ jurisdiction cannot question the sufficiency or adequacy of the reasons for formation of the belief by the competent authority it is certainly entitled to know whether or not all the conditions precedent for the formation of such a belief existed an whether the competent authority had applied his mind to the said relevant conditions." 19. So far as the satisfaction of the competent authority as to the oblique motive of understanding the apparent consideration in the sale deed was concerned, the presumption in question as automatically raised in this regard by the statute on account of the operation of s. 269C(b) r/w second proviso to sub-s.(1) of s. 269C. He disputed the contention of ....
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....the Valuation Officer was the correct one as he had physically measured the area and any different version from his should be rejected by us because the assessee had not taken the stand that the learned Valuation Officer have not undertaken the physical measurements and that those measurements were demonstrably wrong. The location of the area was in the heart of the commercial centre of Uphar market and, therefore, the learned competent authority was entirely justified in going by the impression that the property in question was commercial. It was being used for commercial purposes by the transferee itself and even prior to that since its construction, the property was being used for commercial purposes. The commercial use of the property had been recognised by the Municipal Corpn. ofDelhiwhile fixing the house tax for the building. There was, therefore, no merit in the theoretical contention of the assessee that the property was not purely commercial but commercial-cum-residential. The FAR of the property had to be worked out with reference to the actual area constructed vis-a-vis the area of the plot of land on which the building was constructed and thus computed FAR was 3.54. He....
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....s. 17 lacs by pointing out that the transferee had got much more from the tenant, M/s Ganga Automobiles than was the apparent consideration of the property in so far as he had been given not only the security of Rs. 10 lacs but the advance rent to the extent of Rs. 10,80,000 vide cls. 4 and 12 of the lease-agreement dt.19th Dec., 1985placed at pages 72 and 73 of the assessee's paper book. M/s Ganga Automobiles, May it be remembered, were the original party to the agreement to sell with M/s P. C Baweja, and it is they who had nominated Sagar Suri & Sons for purchasing the said property for Rs. 17 lacs, when the property in question was, according to the estimate of Ganga Automobiles itself, worth Rs. 30,000 p.m by way of rent and in respect of which they agreed to pay Rs. 20,80,000 to M/s G. Sagar Suri & Sons, if the use of the said property was permitted to M/s Ganga Automobiles P. Ltd. M/s Ganga Automobiles Ltd would not pay Rs. 20,80,000 for the property, if its real value was Rs. 17 lacs. No doubt, it was a family concern of Suris and Mr. Ashwani Suri, who was one of the Managing Director of the said company was one of the coparceners of the appellant family. But it was the stan....
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....the order of the learned Competent Authority. 24. The learned Deptl. Res. referred to the valuation report of the assessee's approved valuer and pointed out that it was based not on physical measurement of the property but on the basis of the papers, which were supplied to him by the assessee. Therefore, according to the learned Deptt. Representative, the area which was taken by him for working out the value of the structure could not be relied upon. Besides it is pointed out that the structure was insured by the transferee for Rs. 15 lacs soon after its purchase. Its valuation at about Rs. 4 lacs by the approved valuer was prima facide ridiculously low. It is also stressed by the learned Deptt. Representative that the assessee's approved valuer had taken up instances of sales of flats for comparison and not of building built on its on land. It would be wrong, according to him, to go by such examplars. 25. In rejoinder, the learned counsel for the assessee submitted that FAR of K-114, Hauz Khas will be 1.50 and not 1.00 as was presumed by the learned Competent Authority while adopting the value of the plot of K-114 for the purpose of computing the land value of the property u....
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.... on no material and, therefore, it was Arun Mehra's case which applied to the facts of the present case and therefore, he requested that we should quash the proceedings. He drew our attention to the judgment of the Hon'ble Bombay High Court in the case of Unique Coop. House Building Society Ltd. vs. Union of India & Ors. (1985) 152 ITR 114 (Bom) and to the judgment of the Hon'ble Supreme Court in the case of K.P. Verghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC) and submitted that on the basis thereof, the departmental case should be rejected because on evidence whatsoever has been brought on record to show that there was in fact understatement of the fair market value in the sale deed. 26. Coming to the facts of the case, he stressed that Varandha on the ground floor measuring 72 1/2 ft.x 30ft. was not in the assessee's possession and that it was being used by the general public and, therefore, it should have been excluded while working out the valuation of the structure. He also stressed the fact that the property was residential-cum-commercial and not commercial alone and, therefore, there was mistake in the order in the of the learned competent authority in t....
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....s not found mentioned in the notice printed in the Gazette under s. 269D(1) and that, therefore, the proceedings in question were void ab initio. Reference in this connection was made to the following authorities: 1. CIT vs. Amirt Sports Industries (1983) 36 CTR (P&H) 121 (FB) : (1983) 144 ITR 113 (P&H) (FB) 2. CIT vs. Smt. Phoolmati Devi (1983) 35 CTR (All) 331 : (1983) 144 ITR 954 (All). 28. On behalf the Revenue, the learned Deptt. Representative pointed out that notice under sub-s. (2) of s. 269D had been duly served on M/s Ganga Automobiles Pvt. Ltd and there was no time limit of nine months for the service of the notice under s. 269D(2). Under s. 269D(1), there was no mandate regarding the name of the tenant being included. He drew our attention to the decision of the Hon'ble Delhi High Court in the case of Jawahar Lal vs. Competent Authority wherein it has been held by their Lordships that the tenant of the property which was a subject matter of acquisition proceedings was not a "person interested" as defined under s. 269A (g) and, therefore, there was no need to include his name in the notice which was published in the gazette under s. 269D(1). So far as the assess....
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.... valuing the aforesaid property. (7) The cost of construction of 4,800 sq. ft. @ Rs. 150 would be Rs. 7,20,000 and that after allowing depreciation of 20 per cent approximately out of the aforesaid value of the super structure, the adjusted value would be Rs. 5,76,000. (8) That land rates in the area where the property was situated for residential plots varied at the relevant time between Rs. 5,000 to Rs. 6,000 per sq. yd. and that the rates for commercial plots were 2 to 3 times the rates of residential plots (9) That property No. K-114, Hauz Khas Enclave, a residential one measuring 500 sq. yds. was sold for Rs. 35 lacs and that the vendor had himself estimated the value of the land @ Rs. 5,500 per sq. yd. in Nov., 1985. (10) That in comparison, the property under consideration was not only commercial but had a smaller plot area with FAR expatiation of more than 2.66, that of K-114, being only 1. (11) That Govt. of Indian's for leasehold properties for commercial purposes in identical localities had been given at Rs. 6,000 per sq. mt. which was for a FAR of 1.5. converting it to FAR of 2.66, the price would be Rs. 10,640 as below: 600x2.66/1.50=10,640 (....
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....o look at the evidence which was on record and see whether there is any live link between the formation of the belief by the competent authority and the said evidence. The Court cannot go into the adequacy or sufficiency of the evidence at this stage. The evidence on record must, of course, be relevant evidence. If any authority for the above view is needed, one may refer to the judgment of the Hon'ble Supreme Court in the case of S. Narayanappa vs. CIT (1967) 63 ITR 219 (SC). We have, therefore, to see the facts of the present case in the light of the law as laid down by their Lordships in the aforementioned case and which has also been by their Lordships of Hon'ble Delhi High Court in the case of Jawahar Lal. vs. Competent Authority & Ors.. When we view the facts stated as above and the reasons recorded by the competent authority, we find that it is not a case where there was no evidence whatsoever before the competent authority to form the belief that the fair market value of the property in question would be Rs. 29,76,000 as against the apparent consideration of Rs. 17 lacs. All the various factors which he took note of while coming to the above valuation were relevant pieces o....
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.... was no material before the competent authority to come to the tentative conclusion that the value of the said property would be Rs. 29,76,000 as against the apparent consideration of Rs. 17 lacs stated in the sale deed. 34. That brings us to the question of motive of the sale for the purpose of avoiding tax payments by the transferor and the transferee. In this connection, both the competent authority and the learned Deptt. Representative have based themselves on the presumptions raised in this regard by cls. (a) and (b) of sub-s(2) of s. 269C which read as below: "(2) In any proceedings under this Chapter in respect of any immovable property- (a) where the fair market value of such property exceeds the apparent consideration therefor by more than twenty-five per cent of such apparent consideration, it shall be conclusive proof that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer; (b) where the property has been transferred for an apparent consideration which is less than its fair market value, it shall be presumed, unless the contrary is proved, that the consideration for such transfer as agr....
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....perty. The following observations of their Lordships of the Hon'ble Punjab & Haryana High Court may be noted with advantage that this stage: ":The words used in the opening part of sub-s(2) are "in any proceedings under this Chapter". The reason given is that the proceedings are initiated under s. 269D (1) only when the notice is published in the Official Gazette, because the word "proceedings", according to the learned judge, has to be interpreted carrying the same meaning throughout the whole Chapter. With due respect to the learned judge, we are unable to subscribe to this view. The word "proceedings" has to be interpreted in the context in which it has been used in the various sections. The word "for the acquisition of such property". Similarly, this word has been qualified in sub-s. (1) of s. 269D. The word "proceedings" in the above context obviously means the proceedings for the acquisition of the property under the said Chapter. However, in sub-s. (2) the words used are "any proceedings under this Chapter" and not "proceedings for the acquisition of such property". The word "proceedings" in sub-s(2), therefore, does not signify the proceedings for the acquisition of such....
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....ing the presumption, the word "may" shall operate like "shall" the Competent Authority has to initiate proceedings, in discharge of the obligation imposed upon him by virtue of the provisions of s. 269C." The following observations appearing at pages 186 and 187 also deserve to be noted: "Now, we may notice our reasons for taking the view that the presumption contained in sub-s.(2) of s. 169C would be available even during the proceedings prior to the publication of the notice under s. 269D initiating proceeding for the acquisition of the property. Firstly, if the material is already available on the record for the Competent Authority in form a belief that the consideration has been understated with the objects contained in cl. (a) or cl. (b) of sub-s. (1), there would be no necessity to make a provision for raising a presumption at the final stage of the proceedings. In such a situation, the vendor and the vendee would be confronted with the said material and required to prove the contrary. It would be then for the Competent Authority to arrive at its own conclusion after taking into consideration all the material available on the record including the material produced by th....
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....f 95 ITR. We would, therefore, hold that the initiation of the proceedings in the present case by the learned competent authority was in accordance with the law as laid down in s. 269C. 37. That brings us to the merits of the case namely whether the valuation as finally arrived by the learned competent authority is justified. The contention of the learned Deptt. Representative was that the provisions of s. 269C and the subsequent provisions contained in s. 269F did not require of the competent authority to determine the exact price of the property which was acquired by him. The law merely required that he should be able to show that the property which had been acquired by him had fair market value more than 15 per cent of the apparent consideration mentioned in the sale deed. Sub-s. (6) of s. 269F was read in this connection and reliance was placed on it. The said sub-section reads as below: "(6) If after hearing the objections, if any, and after taking into account all the relevant material on record, the competent authority is satisfied that,- (a) the immovable property to which the proceedings relate is of a fair market value exceeding (one hundred) thousand rupees: ....
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....uilding method adopted by the competent authority and the assessee's own Valuation Officer would, in our opinion, yield a much higher fair market value even if the assessee's contention be taken at its face value and we so take it that the FAR of the property in question was only 1.66 and not 3.54. The figure of Rs. 19,120 per sq. mt. worked out by the competent authority in paragraph 28 taking FAR of 1.66 appears to us to be correct. Rounding it upto Rs. 13,000 per sq. mt., the value of the assessee's plot area (167 sq. mt.) would be Rs. 31,73,000 approx. To this if the value of the super structure as worked out by the assessee's own valuer be added namely Rs. 4,04,790, the fair market value of the aforesaid property would work out to Rs. 35,77,790. The aforesaid valuation eliminates all the various objections raised by the assessee's learned counsel as to the FAR of the property and as to the cost of structure of the property. The contention of the assessee's learned counsel that the property in question was residential-cum-commercial does not appeal to us for the stark fact remains that the property is situated in the Uphar market complex which is a commercial area and the prope....