1. These appeals are by the appellants and are directed against the common order dated December 26, 1975 of the Income-tax Appellate Tribunal, Bangalore Bench (Tribunal) in I.T. (Acq.) Nos. 26 to 30/Bangl 1974-75, affirming the order No. 900(12/737/73-74H) dated January 25, 1975, of the Inspecting Assistant Commissioner of Income-tax, Acquisition Range, Dharwar ('the IAC'), made under Chapter XXA of the Income-tax Act of 1961 ('the Act').
2. A small house property bearing No. CTS 3094 situated at Ward No. III Bhuspet, Hubli City, was owned by Sriyuths Kodanpur Gurulingappa Mallikarjunappa and Kodanpur Gurulingappa Channaveerappa (transferors). On June 30, 1973, the transferors sold the said property under a registered instrument of that date to Sriyuths Vasant Malharirao Kachure, Shrikant Malharirao Kachure and Subbas Malharirao Kachure (transferees) for a sum of Rs. 25,000. On an examination of the details of the property, the apparent consideration stated in the instrument of transfer and recording his reasons thereto under section 269C of the Act to the effect that the fair market value of the property exceeded the apparent consideration by more than 15 per cent., the Inspecting Assistant Commissioner directed the issue of notice under section 269D of the Act. The notice under section 269D(1) of the Act was published in the Government of India Gazette, dated December 22, 1973, and the notice under section 269D(2)(a) of the Act were duly served on the transferors and the transferees. Even the other notices were duly effected by the Inspecting Assistant Commissioner.
3. In answer to the notices served on them, the transferors and transferees filed their objections before the Inspecting Assistant Commissioner, inter alia, contending that the apparent consideration stated in the instrument of transfer was the real consideration paid and received and the same was the fair market value of the property as on June 30, 1973, and, therefore the proceedings initiated by him under the Act be dropped. But the Inspecting Assistant Commissioner by his order made on January 25, 1975, under section 269F(6) of the Act, holding that the fair market value of the property was Rs. 60,000 and the same exceeded the apparent consideration by 25%, with the approval of the Commissioner, directed the acquisition of the property under the said provision.
4. Against the said order of the Inspecting Assistant Commissioner, the transferors and transferees filed appeals in Appeals Nos. 26 to 30/Bang/74-75, before the Tribunal under section 269G of the Act, which by its order made on April 15, 1975, called for findings from the Inspecting Assistant Commissioner, who duly complied with the same. On an examination of the earlier and additional findings recorded by the Inspecting Assistant Commissioner, the Tribunal by its order made on December 26, 1975, dismissed the said appeals and affirmed the order of the Inspecting Assistant Commissioner. Aggrieved by the said orders of the Tribunal and the Inspecting Assistant Commissioner, the transferors and the transferees have filed these appeals under section 269H of the Act.
5. Sri G. Sarangan, learned advocate has appeared for the appellants. Sri K. Srinivasan, senior standing counsel for the Income-tax Department, has appeared for the respondent.
6. On the contentions urged before us, only one point arises for our consideration and that is this : Whether the determination of the fair market value of the property by the Tribunal and the Inspecting Assistant Commissioner is legal and valid
7. Sri Sarangan contends that the Tribunal and the Inspecting Assistant Commissioner, in determining the fair market value of the property, had not applied the correct legal principles and had refused to examine and rely on evidence that was relevant to the same.
8. Sri Srinivasan has sought to support the orders of the Tribunal and the Inspecting Assistant Commissioner.
9. In determining the fair market value of the property, the Tribunal and the Inspecting Assistant Commissioner had adopted the comparable sales method which is the very best method as held by us in ITA Nos. 5 to 8 C/W 25 to 29/1976, decided today (A. Premchand v. IAC : 153ITR774(KAR) . But the question is whether the principles of that method had been properly applied and the evidence bearing on them had been examined and the findings recorded by the Tribunal and the Inspecting Assistant Commissioner.
10. Before the Tribunal and the Inspecting Assistant Commissioner, the appellants relied on the sales of properties recorded at or about the time of sale in the Lamington Road area of the city reported by the very Departmental valuer.
11. We find from the pleadings, the evidence, the orders and the report of the departmental valuer that Lamington Road area in Hubli City is one of the very important commercial and residential areas, of the city and the locality where the property was situated, namely, Bhuspet area, was not as important as Lamington Road area. We need hardly say that transactions of sales recorded in Lamington Road area at or about the time of sale, would be relevant and had to be taken into consideration in determining the fair market value of the property. From this it follows that the valuation report of the Departmental valuer on the sale transactions of Lamington Road area at or about the time of the transfer of property, was relevant to determine the fair market value of the property. But still the Tribunal and the Inspecting Assistant Commissioner have ignored the same on the sole ground that the sales effected in the very locality of the city were available. We are of the view that this was hardly a legal ground to ignore the sale transactions of Lamington Road area and evaluate the same. We are of the view that the sale transactions in a more important and prominent locality of the very city would undoubtedly be relevant and cannot be ignored at all in determining the fair market value of the property.
12. Admittedly the property sold, with irregular dimensions and very odd features of its own, was a small property adjoining another house property of the transferees commanding certain advantages and having disadvantages of its own. On the other hand, the sale of a larger piece of land on the other side of the road though situated in front of the very property with its own special advantages and disadvantages cannot be the sole criteria or basis for determining the fair market value of the property in dispute. Even here the Tribunal and the Inspecting Assistant Commissioner ignoring this relevant aspect or principle had determined the fair market value of the property. We are of the view that this was an error in principle and calls for our interference.
13. As the Tribunal and the Inspecting Assistant Commissioner had misapplied the legal principles and had ignored the relevant evidence and have failed to appreciate the evidence on record with due regard to the relevant principles, the only course that is open to us is to set aside their orders and direct the Inspecting Assistant Commissioner to re-determine the matter, with liberty reserved to the parties to place all such further evidence as they propose to place in support of their respective cases.
14. In the result, we allow these appeals, set aside the orders of the Tribunal and the Inspecting Assistant Commissioner and direct the Inspecting Assistant Commissioner to restore the case to its original file and re-determine the proceeding in accordance with law and the observations made in this order with all such expedition as is possible in the circumstances of the case. Before the Inspecting Assistant Commissioner both parties are free to place all such additional evidence they propose to place in support of their respective cases which necessarily means that the Inspecting Assistant Commissioner is free to collect further evidence and rely on the same in the determination of the case.
15. Income-tax appeals are disposed of in the above terms. But, in the circumstances of the case, We direct the parties to bear their own costs.
16. Let this order be communicated to the respondent within 15 days from this day.