TaxTMI 
TaxTMI 
2010 (7) TMI 700
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...., lay-out plan/building plan, valuation report by the approved valuer for the above property and permanent account number, etc., of the respondent. The respondent furnished this information, vide reply dated August 28, 1985. Along with this reply, the respondent also submitted the documents as desired by the competent authority as per its preliminary enquiry notice dated July 22, 1985. As per the valuation report submitted by the respondent, the valuer had arrived at the market value of the land at Rs. 6,000 per sq. mtr., which, according to the valuer, was based on the land price for a similar area in South Delhi. He also gave valuation to the constructed portion of the property which was Rs. 6,22,800. In this manner, the value of the land was fixed by the valuer at Rs. 9,36,460 and construction costs at Rs. 6,23,820, thereby fixing the fair market value of the property at Rs. 15,60,288. After examining the matter, the competent authority decided to initiate action for take over of the said property under the provisions of section 269A of the Income-tax Act and this was done by notice dated January 30, 1986. For taking such an action, the competent authority had recorded its "reas....
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....n 15 per cent. of the value disclosed in the transaction, action could be initiated for the acquisition of such property by the income-tax authorities by offering the said consideration to the purchaser. If the competent authority forms the opinion that the fair market value is more than the consideration fixed in the transaction by more than 25 per cent., the onus is upon the transferee to show that the sale consideration as stated in the sale deed is not less than the fair market value. The fair market value is defined in clause (d) of section 269A of the Act. 5. Section 269D mandates the competent authority to initiate proceedings for acquisition by notice to that effect to be published in the Official Gazette. Section 269C gives the circumstances under which proceedings for acquisition may be initiated and sub-sections (1) and (2) whereof read as under : "(1) Where the competent authority has reason to believe that any immovable property of a fair market value exceeding one hundred thousand rupees has been transferred by a person (hereafter in this Chapter referred to as the transferor) to another person (hereafter in this Chapter referred to as the transferee) ....
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....r cent., it shall be a conclusive proof that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer. This scheme of the Act is illustratively explained by the Calcutta High Court in Competent Authority, Inspecting Assistant Commissioner of Income-tax v. Smt. Bani Roy Chowdhury [1981] 131 ITR 578 in the following words (pages 585-86) : "Under sub-section (1) of section 269C, before initiating proceedings for the acquisition of any immovable property which has been transferred, the competent authority must have reason to believe in regard to four matters, namely, (i) the immovable property has a fair market value exceeding Rs. 25,000, (ii) the apparent consideration is less than such fair market value by more than 15 per cent. of the apparent consideration, (iii) the consideration as agreed to between the parties has not been truly stated in the instrument of transfer, and (iv) such untrue statement has been made with the object of evasion of taxes as mentioned in clauses (a) and (b). Sub-section (1) consists of two stages, the first one is for the formation of belief by the competent authority and the seco....
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....s to a finding about such market value. His finding may be in favour of the parties contrary to the formation of his belief. Under clause (a) of sub-section (2) of section 269C, if the fair market value of the property exceeds the apparent consideration by more than 25 per cent. of the 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. So far as clause (b) is concerned the presumption of untrue statement of consideration, as agreed to between the parties, in the instrument of transfer, will apply if the fair market value exceeds the apparent consideration." 7. It is clear from the above that the first stage in the proceedings is preparatory to the initiation of proceedings which are yet to be initiated and at that stage the competent authority discharges some administrative functions in the matter of formation of belief on the subjective satisfaction on the basis of certain materials. When a proceeding is initiated, he proceeds judicially. In that context, the Calcutta High Court opined that the competent authority must have reasons to believe....
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..... Thus, the fair market value of the property works out to Rs. 21,39,036 which exceeds the apparent consideration of Rs. 16 lakhs by more than 25 per cent. Hence, acquisition proceedings are being initiated by the issue of notice under section 269D(1)." 8. The aforesaid reasons, inter alia, record that the respondent has submitted copies of the sale deed, lay-out plan and the valuation report from the approved valuer. Though it is mentioned in the first paragraph of the order that all of these materials have been taken into account for working out the fair market value of the property, as we shall demonstrate here- after, the valuation report of the approved valuer as submitted by the respondent was not at all looked into in the "reasons to believe" recorded by the competent authority. Instead, the competent authority took into consideration the following aspects : (a) The area of the land and the constructed portion thereupon. (b) The property was residential-cum-commercial in nature. (c) Sale deed of one residential property, bearing, F-66A, Green Park, which was sold in September, 1985, at the rate of Rs. 4,600 per sq. mtr. 9. In fact, the entire....
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....ction to initiate action only when he has reasons to believe that the fair market value of the property is more by 15 per cent. than the apparent consideration shown in the sale deed. In the instant case, since the consideration shown in the sale deed was Rs. 16 lakhs, action could be initiated only if the competent authority had reasons to believe that the fair market value is Rs. 18,40,000 or above. This itself shows that there has to be some material on the basis of which the competent authority arrives at the conclusion that the fair market value is Rs. 18,40,000 or above. It cannot be the mere ipse dixit of the competent authority or to borrow the expression from A. K. Sen [1981] 132 ITR 707 (Delhi), it cannot be based on surmises or guesses. In a case like this, it would have been more appropriate on the part of the competent authority to have the sale deed of similar commercial-cum-residential properties in that very area, i.e., Green Park, else he could have got the property in question valued from the valuer. In so far as the competent authority is concerned, it has not relied upon or rested its conclusion on the basis of any such report. In this regard, the respondent had....
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....scaped assessment) is different from the expression "opinion". The following discussion in this behalf contained in that judgment is material (pages 564-65) : "Hence, after April 1, 1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section 147 of the Act. However, on receipt of representations from the companies against omission of the words 'reason to believe', Parliament reintroduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. We quote herein below the relevant portion of Circular No. 54, dated October 31, 1989, which reads as follows (see [1990] 182 ITR (St.) 1, 29) : '7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression "reason to believe" in sec....
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....e, what can be put to commercial use is only the ground floor, that too as a shop. In a case like this, before coming to the conclusion that rates of such properties would be twice that of residential property, there has to be some cogent and solid material which is non-existent in the present case. 16. Taking into consideration all these aspects, in our opinion, the Tribunal rightly held that the "reasons to believe" as recorded by the competent authority were manifestly wrong and there was no basis for recording the same. We may note at this stage that as per the judgment of Himland Exports P. Ltd. v. ITAT [1987] 167 ITR 478 (Delhi) the question of fixing the fair market value is a question of fact. This itself will show that the present appeal which can be filed only on the substantial question of law would not be even maintainable. 17. Another contention of Ms. Chopra was predicated on the provisions of section 269C(2) of the Act. Her submission was that as per the reasons to believe, the fair market value of the property was more than 25 per cent. of the apparent consideration shown in the sale deed and, therefore, according to her, onus was upon the respondent....