1997 (8) TMI 45

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.... 13, 1992. The consideration for the transfer as set out therein is Rs. 67,50,000. The extent of the property is 4 grounds and 1,555 sq. ft. A show-cause notice was issued to the petitioner alleging that a property comparable in value measuring 1 ground 1,350 sq. ft. at a location very near the property of the petitioner had been sold for Rs. 29,75,000 which worked out to a rate of Rs. 16.12 lakhs per ground and the consideration as set out in the agreement between the petitioner and the purchaser worked out to a figure which was much less than the same and, therefore, there was undervaluation presumably with the intention to avoid payment of income-tax. In the show-cause notice, it was stated that the comparable property is located o....

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....st 15 per cent. more." It is only by the addition of 15 per cent. that the appropriate authority could possibly claim that there had been undervaluation. If the rate at which the property sold on the II Cross Road had been adopted, there would have been no basis whatever for alleging any undervaluation. The owner as also the purchaser had in their replies pointed out that the property in question is situated opposite to a school, that there are no neighbours in the immediate vicinity, that the place will be deserted in the evenings and that the location cannot, therefore, be regarded as being very much more valuable than the residential property situated in the cross road. The provision in the Income-tax Act providing for pre-emptive ....

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....lish that the transaction was between willing buyer and willing purchaser acting at arm's length that such a transaction will provide the proper basis for determining the market value. It is, therefore, all the more necessary that when an appropriate authority holds that the property has been undervalued, its determination should be based upon firm foundations of fact and does not give room for arbitrariness. The authority is not required under the terms of the Act to direct purchase of each and every property in respect of which declarations are filed before it. It is not constituted as a buying agent for the Government. It is only required to ensure that parties to the transactions transact honestly and do not avoid payment of tax by d....