Income-tax------

----Acquisition of immovable property---Condition precedent---Finding that property had been under-valued---No basis for determination of fair market value by Valuation Officer---Order of acquisition was not valid---Indian Income Tax Act, 1961, S.269-C.

Held, that the only material that the competent Authority had before it while deciding to initiate the proceedings for acquisition was the report of the Valuation Officer. All that had been stated in this report was that the plot was situated at Jhajjar Road, Rohtak, in the main market and its area was 1,350 square yards, the cost of which at the market rate of Rs.120 per square yard worked out to Rs.1,62,000. What had been determined by the Valuation Officer was the cost of the plot and not its fair market value. As to how the market rate of Rs.120 per square yard had been worked out had not been mentioned in the report. The report of the Valuation Officer was vague. There was no relevant or cogent material before the competent Authority on which it could have reason to believe that proceedings for acquisition ought to be initiated. The order of acquisition was not valid.

R.P. Sawhney, Senior Advocate with Ms. Aaradhana Sawhney and Atul Thubral for Appellant.

B.S. Gupta, Senior Advocate with Sanjay Barisal for Respondent.

JUDGMENT

N.K. SODHI, J.---This order will dispose of Income-tax Appeals Nos.4 and 5 of 1979, arising out of the same acquisition proceeding and in which common questions of law and fact are involved.

Chuni Lal son of Din Dayal, resident of Railway Road, Rohtak, sold Property No.B-IV/96-97, situated at Jhajjar Road, Rohtak, to five persons, namely, Surat Singh, Sat Pal Singh, Chuni Lal son of Jaut Ram, Dalip Singh and Dharampal, for an apparent consideration of Rs.93,000 as per sale-deed, dated January 10, 1973. The total area of the land sold was 1,493 square yards, including 426.7 square yards of constructed area. On receipt of information from the Sub-Registrar concerned, the competent Authority made a reference to the Valuation Officer on June 12, 1973, to determine the fair market value of the property purchased by the above mentioned transferees. The Valuation Officer was required to submit his report within a fortnight as the acquisition proceedings, if necessary, had to be commenced within a period of six months from the end of the month in which the property was transferred. It was reported by the Valuation Officer that the cost of the plot at the market rate of Rs.120 per square yard worked out to Rs.1,62,000. Some buildings like garage and office, etc., which were constructed on the plot did not belong to the transferor and, therefore, the construction was not taken into account. On receipt of the report the competent Authority decided to initiate proceedings for acquisition of the aforesaid property under section 269-C of the Income Tax Act, 1961 (for short "the Act"). Notice for initiating such proceedings under section 269-D(1) of the Act was sent to the Government Press on July 10, 1973, and the same was published in the Official Gazette on July 21, 1973. Copies of this notice were served on the transferor and the transferees on different dates and it is the common case of the parties that each of them was served personally prior to the publication of the notice in the Official Gazette. The competent Authority after hearing the affected persons came to the conclusion that the fair market value of the property in question was Rs.1,62,000 and the said value exceeded the apparent consideration thereof by more than 15 per cent. of the apparent consideration and that the consideration for such transfer as agreed to between the parties had not been truly stated in the instrument of transfer with such object as is referred to in clause (a) or (b) of subsection (1) of section 269-C. Consequently, by an order, dated September 30, 1978, the aforesaid property was acquired. Being aggrieved by this order of acquisition, two of the transferees, namely, Surat Singh and Dalip Singh, filed separate appeals before the Income-tax Appellate Tribunal, Chandigarh. It was contended on their behalf before the Tribunal that the material before the competent Authority was not sufficient for it to form the belief that the aforesaid property had been transferred for an apparent consideration which was less than the fair market value and that the conditions precedent for initiating proceedings for acquisition under section 269-C(1) of the Act were not satisfied. It was also urged that notices on the transferor and the transferees had been served prior to their publication in the Official Gazette and therefore, the said notice was in contravention of the mandatory provisions of section 269-D of the Act and for this reason the order of the competent Authority was liable to be set aside. On a consideration of the submissions made by the parties, the Tribunal came to the conclusion that the competent Authority did not have sufficient material before it to from the belief that the proceedings for acquisition should be initiated under section 269-C(1) of the Act. The Tribunal found that the conditions precedent for initiating the proceedings were not satisfied and, therefore. the order of the competent Authority was set aside. In view of this finding, the Tribunal did not examine the other contention raised before it. It is this order of the Tribunal which has now been impugned before us in these two appeals filed by the Revenue under section 269-H of the Act.

We have heard counsel for the parties. Learned counsel for the Department contended that the material before the competent Authority was sufficient for initiating the proceedings for acquisition under section 269-C of the Act and that the Tribunal took a wrong view in the matter. In our opinion there is no merit in this submission. The only material that the competent Authority had before it while deciding to initiate the proceedings for acquisition was the report of the Valuation Officer: All that is stated in this report is that the plot is situated at Jhajjar Road, Rohtak, in the main market and its area is 1,350 square yards, the cost of which at the market rate of Rs.120 per square yard works out to Rs.1,62,000. What has been determined by the Valuation Officer is the cost of the plot and not its fair market value. As to how the market rate of Rs.120 per square yard had been worked out has not been mentioned in the report. This report is, dated July 4, 1973. It appears that the competent Authority was not satisfied with the report and discussed the matter with the 'Valuation Officer on the same day, i.e., the date on which the report was given. It recorded an interim order on its file on July 4, 1973, stating that the case discussed with Valuation Officer who informed the former that there was another plot in the same locality farther away from the town which had been sold at the rate of Rs.100 per square yard and from this circumstance an inference was drawn that the fair market value must be Rs.120 per square yard. What was the size of that other plot and how far it was from the property in question have not been mentioned by the competent Authority in its note. It is stated therein that reasons for initiating action under section 269-C of the Act have been separately recorded. The reasons as recorded mention that at the rate of Rs.120 per square yard the fair market value of the property in question works out to Rs.1,62,000 as against the apparent consideration of Rs.93,000 stated in the instrument of transfer. This was the only material that was before the competent Authority on the basis, of which it formed an opinion that action ought to be initiated under section 269-C(1) of the Act. The bald report of the Valuation Officer is apparently vague and it did not properly determine the fair market value. It appears that time for initiating action was running out as is clear from the communication, dated June 12, 1973, addressed to the Valuation Officer and the officer who was the competent Authority went to Rohtak where the Valuation Officer gave the report. The matter was discussed there and then and after recording its reasons on the same day, notice-under section 269-D of the Act was also issued on that date. In our opinion, all this was done in haste and there was no relevant or cogent material before the competent Authority on which it could have reason to believe that proceedings for acquisition ought to be initiated. We have, therefore, on hesitation in upholding the finding of the Tribunal in this regard.

Having upheld the aforesaid finding of the Tribunal it is not necessary for us to deal with the other contention of the transferees, namely, that the mandatory provisions of section 269-D of the Act had been violated.

In the result both the appeals are dismissed with costs which are assessed at Rs.1,000 in each of the appeals.

M.B.A./1546/FC???????????????????????????????????????????????????????????????????????????????? Appeals dismissed.