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Smt. Pratipal Kaur Vs. Inspecting Assistant Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberSecond Appeal No. 21 of 1976
Judge
Reported in[1984]145ITR19(All); [1984]17TAXMAN127(All)
ActsIncome Tax Act, 1961 - Sections 269C, 269D and 269D(1)
AppellantSmt. Pratipal Kaur
Respondentinspecting Assistant Commissioner of Income-tax
Appellant AdvocateA.N. Mahajan, Adv.
Respondent AdvocateM. Katju, Adv.
Excerpt:
- - mahajan, urged that the proceedings were void ab initio as the competent authority had served notices on the transferor as well as the transferee much before the publication of the notice in the official gazette. the competent authority as well as the appellate tribunal found the official valuer to be reliable and discarded the report of the transferor's valuer on the finding that the same was unrealisicand incorrect. the method of land and building is a well recognized one and has been accepted for the purpose of finding out the correct value of the property. ' 11. on the facts and in the circumstances of the present case, the competent authority as well as the appellate tribunal were right in applying the aforesaid method and finding out the fair market value of the house......the competent authority made enquiries through an i.t. inspector, who reported that the fair market value of the house was rs. 1,00,000 (rs. one lakh). this estimate was based on the finding that the value of the land on which the house was constructed was rs. 60,000 at the rate of rs. 150 per square yard and the value of the building was rs. 40,000. on receipt of this report of the inspector, the competent authority referred the matter to the valuation cell, unit no. ii, kanpur, for determination of the market value of the house as on the date of the execution of the sale deed. the valuation officer estimated the fair market value of the house at rs. 67,750. after examining the reports of the inspector and the valuation officer, the competentauthority found that the fair market.....
Judgment:

K.C. Agarwal, J.

1. This is an appeal under Section 269H of the I.T. Act, 1961, filed by Smt. Pratipal Kaur against the judgment of the Income-tax Appellate Tribunal, dated 30th April, 1975, dismissing the appeal.

2. Govind Dev Bhartiya was the owner of house No. 111/275, Harsha-nagar, Kanpur. By the sale deed 26th July, 1973, which was registered on 28th July, 1973, he sold the house to Smt. Pratipal Kaur, the appellant, for Rs. 48,000. On the aforesaid transfer, the Competent Authority received information from the Sub-Registrar, Kanpur, under Form No. 37G. On receipt of this intimation, the Competent Authority made enquiries through an I.T. inspector, who reported that the fair market value of the house was Rs. 1,00,000 (Rs. one lakh). This estimate was based on the finding that the value of the land on which the house was constructed was Rs. 60,000 at the rate of Rs. 150 per square yard and the value of the building was Rs. 40,000. On receipt of this report of the inspector, the Competent Authority referred the matter to the Valuation Cell, Unit No. II, Kanpur, for determination of the market value of the house as on the date of the execution of the sale deed. The Valuation Officer estimated the fair market value of the house at Rs. 67,750. After examining the reports of the inspector and the Valuation Officer, the CompetentAuthority found that the fair market value of the house sold to Smt. Pratipal Kaur exceeded the apparent consideration by more than 15% and that the consideration for which the transfer was agreed between the parties had not been truly stated in the sale deed with the object of facilitating the concealment of money by the transferee for the purpose of the I.T. Act, 1961. The Competent Authority recorded reasons and initiated acquisition proceedings, A notice dated 14th December,1973, was issued. This notice was published in the Official Gazette on 19th January, 1974, and copies of the same were served on the transferor and the transferee on 3rd January, 1974, and 17th December, 1973, respectively.

3. In pursuance of the notice, the transferor and the transferee filed objections. Both of them pleaded that the house had been sold at a fair market value and that the apparent value was not less than the real. They claimed that Rs. 48,000 was the maximum which the house could fetch. The Competent Authority rejected the objections. In his view as all the conditions of Section 269F(6) had been established, he made an order for acquiring the house. Against this order of the Competent Authority an appeal was taken by the appellant to the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal dismissed the appeal. Being aggrieved, the appellant has filed the present appeal.

4. Section 269H, under which the present appeal has been filed in this court, lays down that an appeal against an order of the Appellate Tribunal can be preferred on any question of law. We are, therefore, required to consider whether the Income-tax Appellate Tribunal committed an error of law in upholding the judgment of the Competent Authority.

5. For the appellant, the learned counsel, Sri A.N. Mahajan, urged that the proceedings were void ab initio as the Competent Authority had served notices on the transferor as well as the transferee much before the publication of the notice in the Official Gazette. In the present case, the notice was published in the Official Gazette on 19th January, 1974, whereas copies were served on the transferor and the transferee on 3rd January, 1974, and 17th December, 1973, respectively .

6. The submission made is devoid of substance. There is nothing in Section 269D(1) or (2) which laid down the requirement of service of the notice personally on the transferor and the transferee and its publication in the Official Gazette. Section 269D(1) requiring the notice to be published in the Official Gazette is no doubt mandatory, but it would not be correct to say that the notice to be served under Sub-section (2) of Section 269D had to proceed (sic) the publication in the Gazette. This submission has no merit and is, therefore, rejected.

7. The next argument raised by the learned counsel for the appellant was that the Competent Authority had initiated proceedings without forming a reasonable belief on the basis of the material which was before him. We find no merit in this submission. The Competent Authority had sufficient material before him for holding that the apparent consideration was less than its fair market value. The materials in possession of the Competent Authority have been mentioned by us in the opening part of this judgment. It is not necessary to refer to them again.

8. The next submission of the learned counsel was about the valuation. He urged that Rs. 48,000 was the fair market value of the house and the Competent Authority was not justified in holding to the contrary. The submission made was that the house being in the possession of the transferor himself, the Competent Authority should have applied the rental method for the purpose of finding out the fair market value. It may be true that the provisions relating to compulsory acquisition of immovable property are penal and that Competent Authority should not only find out that the statement about consideration mentioned in the transfer deed is untrue, but also that the ulterior motive of the parties was evasion or concealment of income-tax. The Competent Authority has to give a finding that the apparent value was deliberately concealed with a view to evade payment of income-tax. However, that apart, learned counsel's main submission was that the valuation of the property should have been found out by more than one method so as to cross check and adopt an average. He emphasised that, on the facts and in the circumstances of the present case, the Competent Authority should have applied the rental value, and that too should have been determined in accordance with the standard rent liable to be paid under Sections 8 and 9 of the U.P. Act No. 13 of 1973.

9. Before dealing with the argument relating to rental value, we may point out that the Competent Authority had obtained reports from the valuer, who has assessed the value of the property at Rs. 67,750, and also from the income-tax inspector. The valuer had applied the land and the building method for holding that the value was Rs. 67,750. In fact, from the papers on record, it appears that there was not much difference in the estimate of the valuer of the structures as made by the official valuer and the transferor's valuer. According to both, the value of the house was Rs. 39,000. The transferor's valuer had valued the land at Rs. 50 per square yard whereas the official valuer had valued the plot at the rate of Rs. 90 per square yard. The Competent Authority as well as the Appellate Tribunal found the official valuer to be reliable and discarded the report of the transferor's valuer on the finding that the same was unrealisicand incorrect. On this finding, the Appellate Tribunal found that the Competent Authority's estimate of fair market value at Rs. 67,750 was fair and correct.

10. Neither before the Competent Authority nor before the Appellate Tribunal, the appellant urged that the rental method should have been applied for finding out the valuation of the house. It is for the first time in this court that the learned counsel has made the argument before us. Apart from the fact that in the second appeal, no argument on a question of fact can be permitted, we find it, even on merits, unsustainable. The method of land and building is a well recognized one and has been accepted for the purpose of finding out the correct value of the property. Parks, in his book Principles and Practice of Valuations, 4th Edn., p. 54, has stated about this method of valuation as under:

'When land is not developed by buildings erected thereon or where the buildings that are erected do not fully develop the land, it becomes difficult to value a property on the Rental Method of valuation, and the method that is usually adopted in these cases is to value by the Land and Building Method. The method may be briefly stated to be:

'To the market value of the land at the material time add the value of the buildings at the material time.' The building value may be the prime cost less depreciation ; it may be the old material value of the structure, or something more than old material value, and less than the depreciated value. Many factors have to be taken into account and these will now be discussed in detail.'

11. On the facts and in the circumstances of the present case, the Competent Authority as well as the Appellate Tribunal were right in applying the aforesaid method and finding out the fair market value of the house. So far as the rental method is concerned, it may be sufficient to point out that the house was in the occupation of the transferor himself. There was no evidence before the authority about the rent payable in respect of similar accommodation situated in the locality. Therefore, the insistence of the learned counsel that the rental method should have been applied, is unjustified. It is also incorrect to say that in every case of valuation, the rental method is the only basis which can give the correct valuation of the property sold. No doubt, rental method is one of the methods recognized for the said purpose, but to which case a particular method would suit, depends on the facts emerging in that case. In the instant case, the submission of the learned counsel for the appellant for applying the rental value, on the basis that the rental method should have been applied, cannot be accepted.

12. Lastly, it is pointed out that this is an appeal under Section 269H and is entertainable on a question of law. The question raised by the learned counsel is not that of law.

13. The appeal is dismissed with costs.


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