TaxTMI 
TaxTMI 
2008 (6) TMI 545
X X X X Extracts X X X X
X X X X Extracts X X X X
....d against respondent No. 3 and accepting this statement, respondent No. 3 is dropped. The relevant facts of the case may be stated as under : One flat in a building called "Twin Towers" situated at Prabhadevi, Mumbai, was offered for sale by its owner one Scale Investments Ltd. to the petitioners in November, 1984. The petitioner agreed to purchase the flat (Flat No. A-271 and four covered car parking spaces) for an aggregate consideration of Rs. 44,00,000 on March 5, 1985, paying Rs. 4,00,000 as earnest money and agreeing to pay the remaining amount of Rs. 40,00,000 by April 30, 1985. It was specifically contemplated that either the petitioner's would buy the said flat or it would be bought by one of its associate companies. Ultim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....greed that the petitioner would pay Rs.65,00,000 as consideration for the flat. Thereafter, application in Form No. 37-I of the Act was filed in which the apparent consideration for transfer was mentioned as Rs. 65,00,000. Respondent No. 3 further informed respondent No. 1 Appropriate Authority appointed under section 269UB of the Act in March, 1988. That the effective price of the flat was more than Rs. 65,00,000. They said they had received the amount of Rs. 46,00,000 earlier and used it and thereby interest at 18 per cent. per annum on the said sum was incurred. They stated that the amount of interest would be Rs. 19,17,258. However, on March 23, 1988, the Appropriate Authority passed the order under section 269UD(1) of the Act and direc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thereby the principles of natural justice were breached. He also took us through the facts of the case to suggest that even on the facts, the flat in question was not transferred below the market value. On the other hand, Mr. Asokan, learned counsel appearing for the Revenue explained that prior to the decision of this court in the case of Vimal Agarwal v. Appropriate Authority [1994] 210 ITR 16 there was no practice of determining the fair market value. He also said that that was for the petitioner to proceed before the Appropriate Authority on such material and also as to justify the amount for which the flat was purchased. Mr. Asokan also suggested that since the Appropriate Authority had inspected the flat and since the order came to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r paid for the flat. Had the price been less by 15 per cent. or more than the fair market value, then probably they could have taken further steps in the matter, there would have been rebuttable presumption of attempt to evade tax, etc. This important exercise, as said above, was essential but was not resorted to and is conspicuously absent. Mr. Asokan' s submission noted earlier that earlier to the decision in the case of Vimal Agarwal [1994] 210 ITR 16 (Bom) there was no such practice is a lame excuse. We have mentioned above as to why the determination of the " fair market value" was necessary. It was necessary in the light of the judgment of the Supreme Court in the case of C. B. Gautam [1993] 199 ITR 530. So failure to determine the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ice is the Appropriate Authority' s refusal to give inspection of the material used by it before issuing the show-cause notice. As said above, it perused the District Valuation Officer' s report and also the notings of the Inspecting Assistant Commissioner of Income-tax. The petitioner in his reply requested inspection of these two documents but, in vain. This resulted in denial of opportunity to peruse the documents which were used against the petitioner and thus the principles of natural justice were violated. The refusal to show these documents to the petitioner would prompt the court to draw an adverse inference against the Appropriate Authority inasmuch as, we are tempted to hold that the documents referred to above were really not sup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rity in the impugned order expressed serious doubts about the actual cash flow between the parties when they asserted that the amount of Rs. 65,00,000 had changed hands. The appreciation on this aspect by the Appropriate Authority has serious flaw when they perfunctorily relied on the receipts and ignored the record of the bank showing the actual cash flow at the given dates. The Appropriate Authority even ignored the fact that both the purchaser and the vendor showed this transaction in their income-tax returns and took a cynical view saying " unless full statement of accounts are furnished, it cannot be ascertained whether the consideration in reality flowed from the intending transferee to the intending transferor." This finding is so....