Reading Time: 32 minutes

Gurbux Kaur Sandhu v Inspecting Assistant Commissioner of Income Tax

Income Tax Appellate Tribunal

CHANDIGARH BENCH

24 August 1982

Acquisition Appeal No. 6/Chd/1982; Dt. 24 August 1982.

The Order of the Court was as follows :

S.K.CHANDER, A.M.

This appeal is directed against the order of the competent authority made under s. 269F (6 ) of the IT Act, 1961 on 31st March, 1982. Ordering acquisition of plot No. 1399, Sector 33C, Chandigarh, admeasuring 1014 sq. yds. purchased by the appellant as per transfer on 2nd June, 1979.

2. The transferor, Air Commodore A.D. Dutt (now Air Vice Marshall), son of Shri M.R. Dutt, at the material time was resident of 11, South Patel Nagar. New Delhi-8. M/s Manohar Singh & Co., property dealers at Chandigarh, wrote a letter on 31st Jan., 1979 that they had come to understand that he had not built a house on the plot in question owned by him and in case he was interested in the sale of the plot he may furnish them some information as required in the said letter and they could help in its disposal. This letter appears at page 16 of the paper book filed by the assessee. Again, on 7th March, 1979 the said M/s Manohar Singh & Co. wrote a letter No. 4456 appearing at page 19 of the paper book in response to letter dt. 28th Feb., 1979 received by them from the vendor. In this letter, they informed him that the expected amount which the plot can fetch as its price in the market was Rs. 70, 000. They also informed him that in addition to the price mentioned above, the purchaser will be required to pay a out Rs. 40, 000 to the Government, i.e., 1/3rd of the amount of difference between the allotment price and the present market price. They also informed him that the purchaser will be further spending about Rs.13, 000 on the purchase of non-judicial stamp paper for execution of sale deed. The vendor appears to have written to the property dealers, M/s Manohar Singh & Co., on the 7th March, 1979 that according to his information the auction price of a 500 sq. yd. plot is around Rs.1, 00, 000. To this the property dealers replied vide letter No. 478 dt. 20th March, 1979 that they had made everything clear in their earlier letter No. 4456 dt. 7th March, 1979. They, however, reiterated what was said in their earlier letter and also informed him that the purchaser as well as the seller will be required to pay 2 per cent commission to the property dealers as the sale will take place through them. In this letter they informed him that the plot could fetch between Rs.50, 000 and Rs.55, 000. It appears that there was some rror in understanding the size of the plot in the letter dt.20th March, 1979 and, therefore, on 23rd March, 1979 the property dealers again wrote to the vendor that the market price prevails between Rs.50, 000 and Rs.55, 000 indicated to him in their letter dt. 20th March, 1979 was for a plot of 500 sq. yards. However, they realised that the plot being sold was of 1000 sq. yards. Therefore, the price earlier mentioned at Rs.50, 000 and Rs.55, 000 was through a misunderstanding. In this letter they clarified that the price of plot of 1000 sq. yards was about Rs.75, 000.

3. On 16th May, 1979, the vendot entered into an agreement to sell the above property to Mrs. Gurbux Kaur Sandhu, wife of Lt. Col. Savinder Singh Sandhu, resident of 323, Sector 9D, Chandigarh. This agreement to sell the property in question appearing at page 22 of the paper book recorded that Air Commodore A.D. Dutt, party of the first part, is the absolute owner of the residential plot No. 1399. Sector-33C. Chandigarh, that he had agreed to sell the above plot to Mrs. Gurbux Kaur Sandhu, party of the second part, for consideration of Rs.70, 000 plus any amount payable to the Estate Officer, Chandigarh, for getting permission to sell the above plot. The amount to be paid to the Estate Officer in order to obtain permission to sell the plot was indicated as approximately Rs.24, 000. The agreement made it clear that this amount would have to be paid by the vendee i.e., Mrs. Gurbux Kaur Sandhu. A sum of Rs.5, 000 was paid by the vendee to the vendor by a draft No. AK 248150 dt. 16th May, 1979 on State Bank of I dia, New Delhi. The agreement recorded that the balance of Rs.60, 000 shall be paid by the vendee at the time of registration of the plot. A time limit was placed for the registration of the plot as one month or as soon as the permission to sell the plot is given by the Estate Officer, Chandigarh, and the income tax clearance certificate is obtained by the vendor.

4. On 2nd June, 1979, the Estate Officer, Union Territory, Chandigarh Administration, accorded permission for sale of plot No. 1399, Sector 33C. Chandigarh under r. 8C (Amendment), 1979 of the Chandigarh (Sale of Sites and Buildings) Rules, 1969. This permission in the endorsement forwarding the copy to Sub-Registrar, Chandigarh, for information indicated that a sum of Rs.22, 421 representing 1/3rd of the unearned increase of the value of the plot has been acknowledged vide receipt No. 710/74, 75 dt. 2nd June, 1979. In other words, the permission to sell was granted on payment of Rs.22, 421 to the Chandigarh Administration representing 1/3rd of the unearned increase of the value of plot. It appears that the Chief Commissioner, Chandigarh, in exercise of the powers conferred upon him by s.22 of the Capital of Punjab (Development and Regulation) Act, 1952, made certain rules called the Chandigarh (Sale of Sites and Buildings) Chandigarh Administration Amendment Rules, 1979, to amend the Chandigarh (Sale of Site and Buildings) Rules, 1960. These amendment rules inserted r. 8C after r. 8B of the Chandigarh (Sale of Sites and buildings) is as under as appearing at pages 17 & 18 of the paper book :

“8C : Notwithstanding anything contained is the letter of allotment/conveyance deed imposing a ban on the transfer of the site/building as the case may be, or any right, title or interest therein, before the stipulated period, the Estate Officer may grant permission to the transfer by way of sale, gift, mortgage or otherwise of the site/building or any right title or interest therein after transferee has paid full price of the site/building special circumstances exist for the grant of such permission. This will be applicable to all categories of sites/buildings sold by allotment/hire purchase or on concessional rates; in the case of transfer by way of sale/gift/mortgage or otherwise of the site of any right, title or interest therein, 1/3rd of the unearned increase in the value, i.e., the difference between the price paid and the market value of the site/building at the time of permission of transfer shall be paid to the Government, before registering such sale of transfer. The market value of the proper y for this purpose shall be assessed by the Estate Officer or such other authority as may be prescribed by the Chief Administrator and the transfer shall be entitled to produce his evidence and of being heard.

Provided that 1/3rd of the unearned increase in the value will not be charged if a mortgage or charge of a site/building is created with the previous consent in writing of the Estate Officer in favour of the Central Govt., State Govt., Chandigarh Admn., Life Insurance Corporation of India or any scheduled bank for securing a loan to be advanced by them for constructing the building on the site, provided further that in the event of sale or for closure of the mortgage or charged property the Govt., shall be entitled to claim and recover 1/3rd of the unearned increase in the value of the plot as aforesaid and the amount of the Govt’s shares of the said unearned increase shall be first charge having priority over the said mortgage or charge. Provided further that the Govt., shall have the pre-emptive right to purchase the mortgaged or charged property after deducting 1/3rd of the unearned increase as aforesaid. These amendment rules were made on 9th Feb., 1979.

5. The payment of Rs.22, 420 made for geting the permission to sell the impugned plot was under these amended rules which recognised certain basic facts. To this rule and the conditions that were to be satisfied for anyone to get the permission to sell, we shall advert to later during the course of this judgment. At this stage, suffice to say that the permission to sell was obtained and the vendor and the vendee transferred and received the possession of land on 2nd June, 1979. The vendee paid in all Rs.92, 421 comprised of the amount of Rs.70, 000 for which the plot was agreed to be sold by the vendor and the payment of Rs.22, 421 paid for getting the permission to sell from the Chandigarh Administration through the Estate Officer. In other words, the deed executed showed the apparent consideration of Rs.92, 421.

6. When the deed of transfer was registered on 2nd June, 1979, the competent authority received intimation in Form No. 375 that plot No. 1399 in Sector 33C, Chandigarh, admeasuring 1014 sq. yds. was purchased by the transferee for an apparent consideration of Rs.92, 421. The competent authority thought that,”

the apparent consideration appeared to be low. The competent authority referred the matter to the V.O. on 29th Sep., 1979 to have

“an authentic opinion about the correct fair market value of the plot on the date of purchase”

. The V.O. of the Department submitted his report dt.28th Jan., 1980 which was received by the competent authority on 1st Feb., 1980. According to this report, the fair market value of the plot in question was Rs.1, 25, 702 as against the apparent consideration shown in the transfer deed of Rs.92, 421. Thereafter, the competent authority recorded the following reasons for initiation of the acquisition proceedings :

“The property consists of a vacant plot of land free hold middle residential measuring 1014 sq yds. A reference was made under s. 269 L of the IT Act, 1961 to the Valuation Officer, IT Deptt., Chandigarh, for determining the fair market value of the property as on the date of its transfer. The valuation Officer has intimated the fair market value of the property at Rs.1, 25, 700 as against the apparent consideration of Rs.92, 421. I, have carefully examined the report of the Valuation Officer and I am in agreement with it. Accordingly, I adopt the fair market value of the property at Rs.1, 25, 700.”

He issued notice under s. 269D (1 ) of the Act on 15th Feb., 1980. This notice was published in the Gazette of India on 8th March, 1980. The competent authority made a proclamation regarding the pendency of acquisition proceedings on 10th Feb., 1980. It appears that the competent authority served a copy of the notice under s. 269D (1 ) upon the transferor and the transferee. The transferee filed her objections on 17th March, 1980. In the objections filed on 17th March, 1980, the transferee drew attention of the competent authority to her letter dt 22nd Oct., 1979. In this letter she pointed out that the value of the plot had been correctly shown by her in the deed of purchase, that the consideration was, more than the prevailing value and in any case not less than the market price

“and that before receiving her letter dt. 22nd Oct., 1979, the competent authority had referred the matter to the V.O. on 22nd Sep., 1979. The competent authority, however, overruled these objections by saying that in any case he letter dt. 22nd Oct., 1979 had been sent to the V.O. and he had considered it before giving the valuation of the plot in the report made by him on 28th Jan., 1980. The transferee had asked for a copy of the valuation report and this was supplied along with the reasons recorded.

7. The competent authority had also served notice under s. 269 D (1 ) on the transferor and his objections were received vide letter dt. 19th March, 1980. The transferor also emphasised that the apparent consideration shown in the deed of transfer as genuine and that it was in conformity with the prevailing market price at the time of sale of plot. The competent authority rejected these objections,”

because of the positive findings of the VO estimating and fixing the fair market value of the plot at Rs.1, 25, 700

“.

8. After receipt of the reasons recorded by the competent authority for initiation of the acquisition proceedings along with the copy of the valuation report, the transferee submitted her further objections dt. 8th May, 1980. In these objections, she pointed out that”

the VO has erred in estimating the fair market value of the property at Rs.1, 25, 700 and that he has also ignored some basic and vital points in arriving at this figure

“. This has been recorded in para 7 of the impugned order of the competent authority. She also pointed out that there was no attempt at evasion of tax on her part. She objected to the value of the land at Rs.122 per sq. yard adopted by the V.O. for valuing the plot. Her further objections have been incorporated by the competent authority in the body of his order as under :”

(a) The comparison of the sale rates of plots in Sector 36D with those in Sector 33C is odious and unrealistic. That is because :

(i) Sector 6 has no village near it whereas the plot in question in Sector 33C is hardly 300 yards from a big village. The proximity to the village and consequent nuisance on account of cattle flies, etc., undoubtedly would go to depress the market value to a great extent.(ii) Sector 36 has fully developed and functional market whereas Sector 33 has no market worth the name.

(iii) Sector 36 is close to Sector 35 where a big commercial market has come up lately. Sector 33 is close to Sector 32 and 34 which do not have any market.

(iv) Sector 36 has scope for expansion towards Mohali Industrial Complex whereas the village located north of Sector 33, as mentioned in (i) above, has closed all avenues of expansion. The natural result is that the prices of Sector 33C are less than those of Sector 36.

(b) The ld. V.O. has ignored the very important factor relating to the market price fixed by another organ of the Govt. viz. Chandigarh Administration. It was brought to your kind notice vide Para 4 of my letter dt. 22nd Oct., 1979 (copy of Valuation Officer ) that 1/3rd unearned increase (difference between the market price and the cost price) amounting to Rs.22, 421 was paid to the Estate Officer as per their Notification dt. 9th Feb., 1979. In other words, the market price fixed by the Chandigarh Administration was Rs.83, 263 (cost price Rs.16, 000 plus unearned increase Rs.67, 263). The ld. V.O. has admitted in Para 7(iii) of his report that a sum of Rs.22, 421 had been paid as 1/3rd of the unearned increase. He, however, seems to have forgotten to take the matters to their logical ends. If admittedly, Rs.22, 421 represents 1/3rd of the unearned increase, the fair market value comes to Rs.83, 263 and nothing more. The ld. V.O. has not stated as to how he does not considered the market value fixed by the Chan igarh Administration as the fair market value for the purposes of proceedings under Chapter XXA of the IT Act, 1961.

(c) For the purposes of valuation, the comparison can be made only between like and like items and not between unlike items. I cannot believe that the ld. V.O. could not catch hold of a transaction of sale of a plot in Sector 33C. Whatever may be his reasons for not picking up a plot in Sector 33C for the purpose, I may take this opportunity to point out to you that a plot measuring 1014 sq. yds. situated in Sector 33C was sold by Lt. Col. N.N. Syal to Mrs. Gurjit Kaur W/o Sh. Kuldip Singh in two instalments of Rs.38, 015 each vide Registration No. 202 dt. 21st May, 1979 and Registration No. 209 dt. 22nd May, 1979. The total value of the plot thus comes to Rs.76, 030 only. In the light of what has been mentioned above, I hope you would feel fully satisfied about the genuineness of the transaction and the fair market value as stated in the conveyance deed. I would, therefore, request you to drop the acquisition proceedings initiated by you, should you feel the necessity for further evidence regarding any spe ific aspect of the matter, kindly let me know and I shall be too glad to comply with the same.

“9. The competent authority, thereafter, heard the transferee personally on 13th June, 1980 at his camp office at Chandigarh. He also called for the comments of the V.O. on the contentions raised by the transferee in her letter dt. 8th May, 1980. These comments he has recorded in the impugned order and are as under:”

With reference to the above the vendee’s letter referred in your reference is returned herewith and it is stated that;

(i) Village Burail is situated quite away from the instant property, there is a wide road running at the end of Sector 36 and Sector 33 and village Burali is beyond that road. Therefore, it does not have any effect on the instant property. In Sector 33 very high gentry resides and most of them are retired army officers and they have built up very nice bungalows. Sector 33 has got more posh locality than Sector 36. It is correct that Sector 33 does not have any shop but the adjacent Sector No. 34 has got proper market, also market requirements of Sector 33 can be met from Sectors 21 & 22 which are close by. The area towards Mohali from Sector 36 is still undeveloped and therefore it cannot be said that plots in Sector 36 have got more value than Sector 33.

(ii) Lt. Col. N.N. Syal’s case referred by the vendee may be available in your office and it can be compared from there. However, I give the following sale instances in support of the valuation done for the instant property :

(a) Plot No. 1351, Sector 33C having free hold middle residential plot measuring 1014 sq. yds. was sold vide registration No. 1179 dt. 7th Sep., 1979 (reference your letter No. CHD/211) in this case the consideration amount was Rs.1, 25, 000 and the land rate assessed by this office was Rs.124 per sq. yd. The same was found quite genuine. In this case the earnest money of Rs.25, 000 was paid in July, 1979. On the basis of this sale instance the valuation done for the instance property is quite justified.(b) House No. 76/19A, Chandigarh having free hold middle residential plot measuring 1500 sq. yds. was sold vide registration No. 47 of 17th April, 1979. The sale was found, genuine and the land rate assessed was Rs.143 per sq. yd. If this sale is compared with the instant sale it is seen that since Sector 19 more developed than Sector 33 a rebate of 10 per cent in the rate of Sector 19 can be reasonably allowed and thus the land rate for the instant case is worked out at Rs.129 per sq. yds. against the land rate assessed by us for the instant property only Rs.124 per sq.yd. Therefore, the land and the valuation of the instant property assessed by me was reasonable and fair.

In view of the above, I do not consider any necessity of revising my valuation amounting to Rs.1, 35, 700 against consideration amount of Rs.92, 421.

“10. The matter, however, did not end there because the transferee further objected vide letter dt. 12th Sep, 1980 and the competent authority gave a hearing on 11th July, 1980 where she was asked”

to offer her remarks on the counter comments of the V.O. on her letter dt. 8th May, 1980

“. The transferee attached a report of the registered valuer. According to the registered valuer, the value of the plot was Rs..1, 01, 400. The transferee had drawn the attention of the competent authority to the valuation of the plot made by the Chandigarh Administration at Rs.83, 260 for the purpose of working out profit on unearned increase in the value. She contended that this valuation by the Chandigarh Administration at Rs.83, 263 was correct because it was adopted for realising Administration’s share of the profit on the transfer of this plot. In her objections dt. 8th May, 1980, the transferee had pointed out to the case of Col. N.N. Syal which was comparable to the case of the transferee but to which the VO had not mad any comments. The Valuation Officer had taken into consideration the sale of plot No. 1351 in Sector 33C, Chandigarh, for Rs.1, 25, 000 sold on 7th Sep., 1979 and the transferee pointed out that this was not a comparable case as in the transferee’s case the plot was sold on 2nd June, 1979 and in the intervening period the prices had gone up and as such the valuation could not be taken on the basis of that case. The VO had compared the rate of land in Sector 19A, Chandigarh, to value the plot which was acquired to which the transferee contended that Sector 19 was developed 20 years earlier and that it cannot be made the basis for estimating the fair market value of the plot situated in Sector 33C.

11. To all these objections, the competent authority has not given any cogent reasons as would be clear from para 11 of the impugned order. However, in para 12 he has observed that the registered valuer’s report filed by the transferee in support of her case “was not realistic”.

12. The transferee, however, filed further objections dt. 31st Oct., 1980. These were in response to the notice issued by the competent authority on 16th Oct., 1980 to show cause why property be not acquired. On receipt of these objections, the competent authority has dealt with the point of valuation of the plot made by the Estate Officer, Chandigarh. He has observed that Estate Officer, Chandigarh, does not go into the question of fair market value on the basis of the market rates prevailing on the date of sale. He takes into consideration the sales made in the three months preceding the date of transaction of transfer and calculates 1/3rd share of profit. This method of working out the value by the Estate Officer is defective and not realistic at all”

. According to this competent authority, the method adopted by the Estate Officer, Chandigarh, did not reflect the fair market value of the property on the date of its sale. He, therefore, rejected it. He also pointed out that the valuation made by the Es ate Officer, Chandigarh Administration, was not binding upon the competent authority in view of the Gujarat High Court Judgment in the case of CIT vs. Indiraben Jaisukhalal Desai 1979 Indlaw GUJ 29052 (Guj). The reason given for this was that the competent authority is an independent authority implementing the specific provisions of Chap. XXA of the IT Act, 1961 for check mating tax evasion. The competent authority, was therefore, not bound by what he called “the wrong valuation made by the Estate Officer”.

13. The transferee further filed objections on 19th Nov., 1980 because it appears that there was some show cause notice issued by the competent authority. In these objections she pointed out what she thought to be the basis adopted by the Estate Officer, Chandigarh Administration in valuing the plot for determining the 1/3rd share in the unearned increase in value. The competent authority sent that letter to the Valuation Officer along with the registered valuer’s report who gave his comments thereon. The VO pointed out to the competent authority particularly that in so far as Lt. Col. N.N. Syal’s plot stated to have been sold in two parts vide registration No. 202 dt. 21st May, 1979 and No. 209 dt. 22nd May, 1979 are concerned, these might have been dealt with within the IAC Acquisition Office and its comparison be made from the notices of the IAC’s file. According to the VO, the registered valuer had erred in valuing the property as he did.

14. The competent authority recorded the above comments of the VO given on the objections filed by the transferee. Thereafter in para 17 of the impugned order, the competent authority has observed that he was in agreement with the VO’s findings. He held that there was no evidence with the transferee to prove conclusively that the apparent consideration was the real consideration. Thus the onus of proof was thrown upon the transferee and by holding that the transferee had not discharged this onus, the competent authority proceeded to acquire the property and made the impugned order. Hence the present appeal.

15. In appeal before us, the ld. counsel for the transferee submitted that the impugned order made by the competent authority is ab initio void and bad in law on many grounds. He proceeded to argue that the competent authority could possibly infer from the report of the Valuation Officer that the apparent consideration was less than the fair market value. However, the competent authority could not raise the presumptions under cls. (a) and (b) of s. 269C (1 ) & s. 269C (2 ). Since the competent authority has not gathered any other evidence but the report of the VO there was no evidence with him to raise these presumptions for acquisition of a property. For this proposition, reliance was placed upon the judgment of the Gujarat High Court in the case of Sarabhai M. Chemicals (P) Ltd vs. P.N. Mittal 1980 Indlaw MUM 131; 1980 Indlaw MUM 3959 ( (Guj). The ld. counsel for the assessee submitted that we should appreciate the background under which the sale of the impugned plot took place. In this regard he submitte that the transferor is a highly placed Government Official and was at the material time residing in Delhi and was as such not in a position to look after his property which was to be sold. From Delhi he sold the property for the consideration which has actually been recorded and, therefore, even if all the conditions may be satisfied for raising the presumptions under s. 269C by the competent authority, here being actually no understatement of the consideration, the Tribunal may come to the conclusion that it is not a fit case for acquisition of the impugned property. There is a duty cast on the Tribunal to decide whether acquisition should be permitted even if a difference between apparent consideration and the fair market price exceeds 15 per cent . For this proposition, reliance was placed upon the Bombay High Court judgment in the case of CIT vs. Ganesh Builders 1977 Indlaw MUM 3452 (Bom). The ld. counsel for the assessee submitted that the Government of India through the CBDT had clarified to the Chambe of Commerce & Industry, Punjab, Haryana and Delhi that where the value as shown in the deed of conveyance has been approved by the Reserve bank of India or other Government Departments, acquisition proceedings should not be started vide F. No. 316/76-77/ WT dt. 11th July, 1979 appearing at page 3 of the transferee’s paper book. Referring to this the ld. counsel for the assessee submitted that it is a beneficial sort of circular which should be followed in the case of the assessee because it is well settled now that the beneficial circulars of the CBDT have to be followed by the field officers. In the case of the assessee, he submitted, the Chandigarh Administration had taken a part of the consideration on account of unearned increase. This has been taken by determining the fair market value of the property and, therefore, a Government Department has approved the sale consideration and as such there was no case for the competent authority to have reason to believe that the apparent consideration shown in th deed of transfer was not the same as fair market value of the impugned property. To such cases, it was submitted, the acquisition proceedings are not applicable also in view of the judgment of the Calcutta High Court in the cases of CIT vs. Madho Properties Ltd.1980 Indlaw CAL 9088 (Cal) and Competent Authority vs. Smt. Bani Roy Chowdhury 1981 Indlaw CAL 70 (Cal).

16. The ld counsel for the assessee further submitted that taking into consideration the ratio of the judgments in the cases of Subhkaran Chowdhury vs. IAC 1979 Indlaw CAL 123 (Cal), Tube Mill (India) (P) Ltd vs. IAC (Cal) 1978 Indlaw CAL 8738 (Cal) and G.V. Swaika Estate (P) Ltd vs. M.N. Tewari (Cal) 1979 Indlaw CAL 42(Cal) and the judgement of the Tribunal Cochin Bench in the case of Mathew M Thomas vs. IAC 1982 1 ITD 115, the acquisition proceedings and the order resulting therefrom are bad in law.

17. The ld counsel for the assessee submitted that in valuing the property even for the purpose of acquisition proceedings to ascertain whether the fair market value of the property is more than the stated consideration in the transfer deed, the method which is most beneficial to the assessee should be followed and in determining the method to be followed in valuing the property the choice should be left to the assessee in view of the judgment of the Punjab & Haryana High Court in the case of Jaswant Rai vs. CIT 1977 Indlaw PNH 12 (P&H) and the judgment of the Gujarat High Court in the case of CIT vs. Vimlaben Bhagwandas Patel 1979 Indlaw GUJ 11; 1979 Indlaw GUJ 29057 (Guj) at p. 196.

18. The ld. counsel for the assessee concluded his submissions with the plea that the competent authority did not have evidence before him for raising the statutory presumptions enshrined in s. 269C(2) . The competent authority also did not follow the principles of law enunciated by the Courts during the course of acquisition proceedings. The competent authority did not follow the beneficial circular issued by the CBDT and he disregarded the fact that valuation of the property had been done by one of the Departments of the Government, i.e., Chandigarh Administration, which was in fact lower than (Rs.83, 263) the considerations stated in the transfer deed and, therefore, the entire acquisition proceedings and the order resulting therefrom were bad in law. The order of acquisition may, therefore, be cancelled.

19. These submissions were strongly opposed by the Sr. Deptl. Rep. Smt. Sudha Sharma. Relying upon the judgment of the Gujarat High Court in the case of CIT vs. Sumatilal Chhotalal Shah 1979 Indlaw GUJ 29072; 1979 Indlaw GUJ 29072 (Guj), the ld. Deptl. Rep. contended that on the basis of the valuation report received by the competent Authority the initiation of acquisition proceedings could be undertaken by him. The presumptions required to be raised under s. 269C (2 ) are rebuttable presumptions but these presumptions are in favour of the Revenue and, therefore., the onus lay upon the assessee to rebut the same. These presumptions have not been rebutted. The initiation of acquisition proceedings was in accordance with law and the order that resulted therefrom was good in law.

20. It was contented that the valuation taken by the Chandigarh Administration was for different purposes and as stated by the competent authority, that valuation could not be considered for the purpose of acquisition proceedings. Therefore, the competent authority by not following the circular referred to by the ld. counsel for the transferee., in his arguments-in-chief, could not be said to have flouted the circular. The entire acquisition proceedings were in accordance with law and the property had been acquired in accordance with law. The order of the competent authority may, therefore, be confirmed and the appeal of the transferee dismissed.

21. We have given careful consideration to the rival submissions. Before we proceed to consider the nival contentions on merits we may record what appears to us to be the position of law on acquisition of the property contained in Chap. XXA of the IT Act, 1961. Chapter XXA came on the statute book by way of insertion by s. 4 of the Taxation Laws (Amendment) Act, 1972 w.e.f. 15th Nov., 1972. This chapter consists of 19 sections beginning from 269A to 269S. Sec . 26 9A deals with the definitions and s. 269B provides for appointment of competent authority . It is s.269C that deals with the immovable property in respect of which proceedings for acquisition may be taken. Proceedings can be initiated only if the competent authority has reasons, which are to be recorded, to believe that (i) the property concerned which is sought to be transferred has a fair market value exceeding Rs.25, 000, (ii) it has been transferred for an apparent consideration which is less than the fair market value of the property by 15 per cent or more and; (iii) the consideration has not been truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of the liability of the transferor to pay tax under the IT Act or with the object of facilitating the concealment of any income or assets which ought to be disclosed by the transferee for purposes of IT Act or WT Act.

22. Having regard to the purpose underlying the powers vested in the competent authority under s. 269C (1 ) of the Act, the conditions precedent for exercise of such powers and the presumptions to be raised in connection therewith in respect of untrue statement of consideration as well as ulterior object of concealment of income or tax evasion prescribed under s. 269C (2 ) r/w the deeming fiction provided in s. 269 J (4 ) of the Act laying down that the amount of difference in compensation payable for the property acquired and its fair market value will be treated as penalty realised by the Central Government and the transferee will not be exposed for further penalty under the WT Act or IT Act, there could be no room for argument or doubt that the nature of the powers vested in the competent authority are penal in character and the proceedings in respect thereto are quasicriminal in nature. The provisions of s. 269C clearly show that the conditions laid down thereunder are mandatory. The findings under s. 26 C (2) are required to be arrived at independent of the findings under s. 269C (1 ). This is so because the requirements under sub-s. (2) exclude and are independent of those under ss . (1) o f s. 269C . That is what the Gujarat High Court has held in the case of Vimalaben Bhagwandas Patel (supra).

23. For the purpose of s. 269C , the price which an immovable property may fetch if sold in the open market could be the price that a prudent purchaser will be willing to pay. For this purpose, the conditions like the extent and the quality of title to the property of the vendor and other factors like location, type of construction, the market condition at the time the property sold and in fact all factors which have depressing or appreciating effect on the value of the property have to be taken into account. If the considerations germane for such ascertainment have not been taken into account or if the irrelevant considerations have entered the enquiry, the findings become vitiated in law.

24. The determination of the fair market value should not be arbitrary or capricious. The burden of proof about the fair market value of the properties in proceedings for the acquisition of the property under Chap XXA of the Act is on the Revenue as held by the Gujarat High Court in the case of Sumatilal Chhotalal Shah (supra) and upon which reliance was placed by the Revenue. This High Court has also held that it has to be established by the Revenue before it decides to acquire an immovable property under s. 269 F that the apparent consideration of its transfer was less, by the prescribed margin than its fair market value and it is only then that the presumption arises about the tax evasion or concealment of income. The onus would shift to the transferor or transferee or any other interested person under s. 269E (3 ) of the Act only when the presumption as prescribed under s. 269C(2) arises.

25. The conditions prescribed in s. 269C are not disjunctive and each of them must exist before the proceedings can be validly initiated. It is not open to the competent authority to draw any presumption under s. 269C (1 ) prior to initiation of acquisition proceedings. If the presumption can be drawn prior to the initiation of acquisition proceedings, then all that is required for the competent authority to initiate proceedings under the said Chapter is to record his reasons for the belief that the fair market value of the property being transferred was in excess of the apparent consideration by the prescribed percentage and nothing more. This will lead to incongruous results because if such being the position of law, even properties transferred with the approval of the Government can be acquired by the competent authority.

26. Sec . 26 9D has a title note “Preliminary Notice”. It in fact deals with the initiation of acquisition proceedings. In our considered opinion, initiation of proceedings includes the following steps :(i) Issuance of a notice to that effect and publishing it in the Official Gazette;

(ii) Serving such notice on the transferor, the transferee, the person or persons in occupation of the property and every other person whom the competent authority knows to be interested in the property;

(iii) Affixing a copy of such notice to a conspicuous place in the office of the competent authority;

(iv) Affixing a copy of such notice to a conspicuous part of the property concerned so that the matter may be publicly known in the locality and;

(v) Making known i.e., making known substance of such notice by proclamation of the language of the district by beat of drum or other customary mode in the locality.

Unless all the above noted requirements are met, s. 269D cannot be said to have been complied with. it is to be remembered that the purpose behind the requirement of s. 269D is that all interested persons should know that the property is being acquired and should be put on notice so as to prefer any objection under s. 269E . It is equally important that such persons by such means of communication should be able to question the jurisdiction of the competent authority if necessary.

27. If the initiation is taken as final, as contended by the Revenue, with only notification in the Official Gazette, then it must be presumed that every person who has interest in any immovable property worth more than Rs.25, 000 must keep himself informed of at all times of publication of all notices in the Gazette in terms of s. 269D . Unless he keeps track of such notices, he may lose his right of questioning the competent authority regarding his competence to initiate the proceedings and his jurisdiction in a given case. This to our mind is a preposterous presumption in a type of proceedings which are quasi-criminal in character. Therefore, this contention has to be rejected. In fact, the legislature in its wisdom has provided under s. 269D itself that after recording of reasons, the competent authority has to cover various stages and various requirements before the initiation of proceedings can be said to have been completed. The provisions of s. 269D (2 ) would become otiose if the initiation is consi ered as complete with the notice published in the official gazette under s. 269D (1 ). Since the redundancy cannot be attributed to the legislature, we are not prepared to make a presumption that sub-s (2) of s. 269D was brought on the statute book for no purpose.

28. Sec . 269E (3) lays down that no person shall be entitled to call in question the jurisdiction of the competent authority in respect of any immovable property after the expiry of 30 days from the date on which such competent authority initiates proceedings under s. 269D for the acquisition of a particular property. The period of 30 days is to be counted from the date of initiation of proceedings under s. 269D as a whole and not under s. 269D (2 ) alone. If the publication of the notice in the Gazette without personal service which is mandatory under s. 269D (2 ) is to be taken as proper initiation of acquisition proceedings, the very purpose of serving individual notice is brought to nought and s. 269D (2 ) is rendered otiose. As we have stated earlier, such a situation cannot be attributed as having been envisaged by legislature because there is no place for redundancy in a statute.

29. In view of the above position of law, we consider the facts of the case before us to decide the issue before us on merits. We have given the background leading to the acquisition of the property by the impugned order made under s. 269 F (6 ) of the Act with a purpose on mind. It is clear from the facts stated above that the transferor who was in Delhi disposed of the properties situated at Chandigarh. Before disposing of the property he entered into correspondence with the property dealers and took pains to ascertain the probable amount that he may fetch in the open market. The correspondence with the property dealers shows what they expected the amount the plot of land could fetch in the open market as its fair market value. The agreement to sell dt. 16th May, 1979 between the vendor and the vendee fixed the consideration of the plot at Rs. 70, 000 plus the amount payable to the Estate Officer, Chandigarh for getting his permission to sell the plot. This was indicated in the agreement to sell approxima ely at Rs.24, 000. However, when the Estate Officer determined the fair market value for the purpose of determining his share of unearned increase, the payment required was only of Rs.22, 421 as mentioned in paras 4 and 5 above. It is clear that a Department of the Central Government, to say, had itself intervened before the actual transfer took place in fixing the fair market value of the impugned plot. In our considered opinion, in such a situation, the competent authority was not having any basis for the presumptions to be raised under s. 269C .

30. The Calcutta High Court in the case of Smt. Bani Roy Chowdhry, cited supra, has held that under subs-s. (1) of s. 269C , the competent authority has, inter alia, to form his belief that the consideration for the transfer of immovable property as agreed to between the parties has not been truly stated in the instrument of transfer and the untrue statement must be due to the collusion of the transferor and the transferee. The Court has further held that where the transferor or the transferee is the Government or a statutory body there cannot be any scope for such collusion between the parties. The untrue statement about the agreed consideration is made only for the purpose of evasion of tax. When the Government or any statutory body is a party to the transfer (emphasis added), the question of evasion of tax does not arise. In the case before us, it may not be stated that the Government is either the vendor or the vendee in the transfer deed. But in the peculiar facts of the case, in view of the provision of r. 8C of the Chandigarh Administration (Amendment) Rules, 1979, discussed in para 4 of this judgment above, the Chandigarh Administration, which in our opinion, is a Department of the Central Government, became a party of the deal because before allowing the transfer, it determined the fair market value round about the date of sale for the purpose of sharing a portion of the unearned increase, that is to say, increase in the capital value of the land without there being any investment for purpose of improvement. Hence the circular or the letter bearing F. No. 316/76-77/WT dt. 11th July, 1979 was applicable to the facts of the case and the competent authority was not justified to start the acquisition proceedings. On this ground alone the order of the competent authority is bad in law and has to be cancelled.

31. The position of law emerging from the judicial pronouncements noted supra is that the acquisition proceedings are quasi-criminal and penal in character. The onus of proof that the apparent consideration adopted in the sale deed falls short of the fair market value by more than 15 per cent and that the consideration stated in the deed with the objects stated in s. 269C is undoubtedly on the Revenue in view of the judgments of the Orissa High Court in the case of Joseph Vallooran vs. CIT 1975 Indlaw ORI 64 (Ori) and of Gujarat High Court in the case of CIT vs. Sumatilal Chottalal Shah 1979 Indlaw GUJ 29072 (Guj). The entire order made by the competent authority shows that the competent authority understood the position of law entirely in the opposite proportion. The tone and tenure of his acquisition order shows that he believed that it was for the transferee to establish with necessary evidence that the apparent consideration was the real consideration. The position of law as already stated above, however is that for raising the presumptions mentioned in s. 269C , it was the competent authority that was required to bring on record necessary evidence as proof in its support. This has not been done. The presumptions raised therefore, could not be available to the competent authority.

32. The competent authority could have initiated the proceedings by getting report from the VO but in order to complete initiation and to make an order of acquisition it was for the competent authority to apply his judicial mind to discharge his judicial obligations in a matter in which the proceedings are quasi-criminal and penal in character. The whole order of the competent authority, however, shows that whatever objection or evidence was put to him by the transferees, it was not examined independently by him. The evidence or the objections were merely sent to the VO for his comments and whatever comments were made by the VO were simply adopted by the competent authority as his own. There is neither any evidence nor any basis for the competent authority to raise the presumptions under s. 269C and to have the right to acquire the property. On this ground as well the acquisition proceedings are bad in law because he has failed to discharge the onus that lay upon his shoulders. It is to be noted that the ompetent authority is acting under the special provisions and is not bound to accept the report of the VO as a WTO is under the WT Act. In this case, the competent authority acted as if the observations of the VO were a gospel truth to be accepted without any enquiry, investigation or judicate consideration. In the valuation report given by the Departmental Valuer and which was made the basis for acquisition of the property, he had apparently not compared like with like to give the valuation of the property at Rs. 1, 25, 700. This becomes clear from the fact that the VO had made a comparison of sale of rates of plots in Sector 36D with those in Sector 33C though they were entirely different and uncomparable for determination of the fair market value of the property sold in Sector 33C. The factors that there was no functional market in Sector-33C, that Sector 33C was adjacent to a big village having nuisance of flies and bad odour’s, that there was no scope of expansion of the sector further were depressing fa tors which were not taken into consideration. The VO took into consideration for purpose of comparison the sale of house No. 76, Sector 19A, Chandigarh. It appears that there was no appreciation of the fact that Sector-19A could not bear any comparison with Sector 33 at all. Sector 19A has commercial establishments and other facilities such as proximity to the town centres of education such as, schools, colleges and university, the commercial centre in Sector 17 and recreational centres like the Sukhna Lake and Rose Garden etc. Sector 19A therefore, could not at all be compared with Sector 33 in a type of proceedings that were before the competent authority. Even if the Valuation Officer had compared Sector 19A with Sector 33, it was the competent authority who should have applied his mind to see whether this comparison was justified and the report based thereon could be formed or could be taken as the basis for initiation of acquisition proceedings in a quasi-criminal and penal proceedings. This has not be n done.

33. The VO followed a peculiar method of valuing the impugned plot. He had worked out the value of the land of residential plot in Sector 19A sold under registration No 47 on 17th April, 1979 at Rs. 143 per sq. yd. In order to find out the value of the land in Sector 33 he has allowed an arbitrary rebate of 10 per cent in the rate of Sector 19 sale and arrived at the conclusion that in so working the rate per square yard would come to Rs. 129 in Sector 33. He took the rate at Rs. 124 and valued the plot at Rs. 1, 25, 700 as against the sale consideration of Rs. 92, 421 shown in the transfer deed.

He also took into consideration the sale of plot No. 1351 in Sector 33C admeasuring 1014 sq.yd. sold vide registration No. 1179 dt. 7th Sept., 1979. In this deed the land was valued @ Rs. 124 per sq.yd. However, he did not take into consideration that there was sea change in the real estate prices from what they were at the time when the agreement to sell and the sale deed in the case of the assessee was executed as against the month of September when this plot No. 1351 was sold. In the interregnum there had been factors like the interest of migrant Indians desirous to return home and spurt in the prices of real estate beginning from Sept., 1979. Therefore, the sale that had taken place at a time when the prices were low could not be compared with a sale that took place when the prices had increased. This difficulty in appreciating the case of the assessee led the VO to adopt the value of the land at the rate of Rs. 124 per sq.yd. without justification. He forgot to consider that this sale consideration s own in the transfer deed was constituted of Rs. 70, 000 agreed to be given for the plot of land by the transferee to the transferor and Rs. 22, 421 paid by the transferee for getting the permission to sell from the Chandigarh Administration through the Estate Officer. In other words, the transferee had paid in all Rs.92, 421 and there was a Central Government Department, a party to the determination of the sale consideration against which there is an estimate of the value of the plot on conjectures and surmises without comparing like with like and that has been made the basis of the acquisition proceedings. In our considered opinion, such a method and manner dealing with the acquisition of a property in the type of proceedings that the competent authority was conducting is unjustified and any order based upon such proceedings cannot be justified. The competent authority was pointed out the factum of Chandigarh Administration having valued the property for sharing the unearned increase. However he has dismissed this with the observations that the competent authority was not bound to follow it because the Estate Officer, Chandigarh does not go into the question of the fair market value on the basis of prevailing market rates. This, to our mind, does not have any substance because the Chandigarh Administration itself is desirous of sharing with the vendor any increase in the value of the property originally allotted to him. For this purpose, specific rule has been made that we have abstracted above and the Administration determines the value of the property on the date of sale and takes a portion thereof under the said rule.Thus, it cannot be said that the Chandigarh Administration is not interested in the fair market value of the property. This was clearly one Government Department contradicting the other. In this case the competent authority, therefore, was duty bound to point out evidence that the Chandigarh Administration had failed to take late consideration any material evidenee and how the sale consideration declared in the sale deed did not represent the fair market value of the property. However, there is no such attempt in the entire proceedings. We hold the order as bad in law and not justified on merits.

34. The transferee had pointed out that in Sector 33C itself Lt. Col. N.N. Syal had sold a plot of land to Mrs. Gurjit Kaur W/o Sh. Kuldip Singh in two instalments of Rs. 38, 015 each vide registration No. 202 dt. 21st May, 1979 and registration No. 209 dt. 22nd May, 1979. Thus the total value of the plot was Rs. 76, 030 only and the plot had been sold in May, 1979. The admeasurement of this plot was 1014 sq.yds. The admeasurement of the plot that has been acquired was incidentally 1014 sq.yds. This however, has not been compared by the VO or by the competent authority and we do not find any comments from the VO when the objections of the transferees were sent to him by the competent authority. To this, the VO has stated that

“Lt. Col. N.N. Syal’s case referred by the vendee may be available in your office and it can be compared from there”

. However, we find that the competent authority has not given any convincing reasons for not taking this particular sale instance which is of an identical plot in the sam Sector into consideration. The competent authority appears to have taken the observations of the VO as sacrosanct which could not even be scrutinised by him though under the law it was the competent authority that was required to exercise a judicial mind before acquisition of the property.

35. There should have been serious considerations given and serious contemplations made besides reference to the VO in order to see whether there was any evidence or indication that the apparent consideration shown in the sale deed was not the real consideration and that the fair market value of the property was either 15 per cent or in excess thereof over the consideration entered in the deed so as to invest the competent authority with the power to initiate and acquire the impugned property. This has not been done. Therefore, on each of the above counts, the order of the competent authority made under s. 269F(6) of the Act is bad in law and is cancelled.