G.P. Singh, C.J.
1. One Rai Bahadur Mathuradas, who was an assessee under the Indian I.T. Act, 1922, owned a building known as Moti Building which is situated in Sadar Bazar, Jabalpur. The building was attached in 1948 for recovery of arrears of income-tax dues of Rai Bahadur Mathuradas in execution of a certificate issued by the ITO, Bombay, where he was assessed. After the death of Rai Bahadur Mathuradas, the building was inherited by his son, Kasturilal. The building was purchased by Trilokinath Dubey, Khemchand Golecha, Rajendra Prasad Dubey and Nemichand Golecha in July, 1977, with the consent of the TRO for an apparent consideration of Rs. 1,05,000. The IAC (Acquisition Range), Bhopal, who is the competent authority under Section 269C of the I.T. Act, 1961, initiated proceedings under that section for acquisition. On January 22, 1980, the competent authority passed an order under Section 269F of the Act directing acquisition of the building. Against this order there were five appeals, four by the purchasers and the fifth by Kasturilai, which were all allowed by the Tribunal by a common order dated May 7, 1980, and the order of the competent authority was set aside. It is against this order that the Department has filed Miscellaneous (First) Appeals Nos. 220, 248, 254, 256 and 263, all of 1980, under Section 269H of the Act to this court which are being disposed of by this common order.
2. Moti Building is an old building. It was constructed some time in 1886. The future life of the building was estimated to be fifteen years in 1977. The building has two wings, one is double storeyed and the other is partly double storeyed and partly three storeyed. The ground floor, except a few portions in the rear, is used as shops, whereas the rest is residential. The built up area is 3,155 sq.m. There are temporary country tiled huts measuring 142.00 sq.m. in open land. The open land left out is 65.00 sq.m. The condition of the building in 1977 was very poor and the same was out of maintenance since long. Certain portions in the rear fell down, affecting the adjacent portions. The building is entirely tenanted. The tenants are protected and the rent is controlled under the. M.P. Accommodation Control Act, 1961. The gross monthly income from rent is Rs. 1,359. The land over which the building stands is within the jurisdiction of the Cantonment Board. The land is held under a lease granted by the Secretary of State. The lessee, Rai Bahadur Mathuradas, was permitted to erect the building subject to terms and conditions of the lease. A perusal of these terms and conditions goes to show that the lessee was not given any interest in the land. The lessee was the owner of the superstructure only. The lease in accordance with condition No. 9 is resumable, on a month's notice in writing, by the Local Govt. on payment of compensation for the superstructure. Further, in case of destruction of the building by any cause whatsoever if the building is not reconstructed, the Local Govt. can resume the lease by giving one month's notice.
3. In reply to a letter dated July 15, 1975, written by Kasturilai, the IAC, AV-Range, Bombay, wrote on August 7, 1975, that the Commissioner has allowed him to make a private sale of Moti Building, and that a valid title would pass to the purchasers in spite of the attachment of the property by the TRO provided a sum of Rs. 1,00,000 realised on sale of the property, is paid in the treasury towards the income-tax dues. On April 25, 1979, the purchasers wrote to the TRO, Jabalpur, that they were interested in purchasing Moti Building and that they were offering a sum of Rs. 70,000 for the building. In reply to this letter, the TRO wrote to the purchasers that the minimum price fixed for Moti Building was Rs. 1,00,000. It was also mentioned that the fixation of minimum price will not prejudice the claim of the Department under Chap. XX-A. The purchasers were informed that in case they were interested they should contact Kasturilal and the concerned TRO, Bombay. On May 10, 1977, Kasturilal wrote to the purchasers that as the income-tax dues could not be paid, Moti Building was being sold by the I.T. Dept. to recover the dues and that he had no objection and will have no claim on the property if the purchasers purchased the property provided the sale proceeds were paid to the I.T. Dept. to reduce the income-tax dues. It is further stated in this letter that 'Upon paying the money to the income-tax Department and obtaining their certificate of sale and obtaining confirmation of sale, the valid title and absolute ownership would vest with Shri Trilokinath Dubey and others'. It appears that the purchasers deposited a bank draft dated May 9, 1977, for Rs. 1,05,000 with the TRO, Bombay, who on May 11, 1977, wrote to Kasturilal that the deposit was provisionally accepted to consider the feasibility to adjust the same towards tax arrears. It was further stated in this letter that the matter has been referred to the Commissioner (Acquisition Range), Bhopal. The IAC (Acquisition Range), Bhopal, Shri R.K. Bali, by his letter dated June 23, 1977, wrote to the IAC, AV-Range, Bombay, that on the basis of the valuation report of the Asst. Valuation Officer, Jabalpur, the fair market value has been determined at Rs. 1,05,000 and that no acquisition proceedings would be initiated if the property known as Moti Building is sold for Rs. 1,05,000. On June 30, 1977, Kasturilal wrote to the TRO, Jabalpur, that with the permission of the I.T. Dept., Bombay, the property known as Moti Building had been sold to Trilokinath and others. On the same date, the TRO, Bombay, wrote to the TRO, Jabalpur, that the Commissioner of Income-tax, Bombay, by his letter dated May 21, 1974, had allowed a private sale of Moti Building and that Kasturilal, the legal heir of the assessee, had sold the property to the purchasers on May 10, 1977, and the sale proceeds of Rs. 1,05,000 had been deposited in the permanent deposit account of the TRO, Bombay. The TRO, Jabalpur, was requested to issue the necessary sale certificate, under Rules 63(1) and 65 read with Rule 66 of the Second Schedule to the I.T. Act, 1961, to the purchasers for enabling them to register the property in their names. On July 4, 1977, the TRO, Jabalpur, passed an order confirming the sale. The sale is referred to as a sale in favour of the purchasers conducted by Kasturilal by private negotiations on May 10, 1977. On the same date, July 4, 1977, a certificate of sale was issued by the TRO, Jabalbur, in favour of the purchasers. The TRO, Jabalpur, also wrote to the Military Estate Officer Jabalpur, on July 4, 1977, that Moti Building had been sold to the purchasers ' by this Department for recovery of income-tax ' and that permission may be granted for registration of the property. This letter was sent to the Military Estate Officer for obtaining permission under the Urban Land Ceiling Act. The Military Estate Officer is the competent authority for Cantonment Area under that Act. The certificate of sale was later registered with the Registrar.
4. The IAC (Acquisition Range), Bhopal, Shri R.K. Bali, initiated proceedings under Section 269C by publication of a notice under Section 269D(1) in the Official Gazette on April 1, 1978. Notice under Section 260D(2) was served on Kasturilal on May 9, 1978, and on the purchasers on June 10, 1978.
5. Kasturilal and the purchasers raised before the competent authority the following objections:
(1) Initiation of proceedings was barred by limitation as notice under Section 269D(2) was not served on Kasturilal and the purchasers within nine months from the date of sale.
(ii) The IAC was estopped by the doctrine of promissory estoppel to initiate proceedings for acquisition when before the sale of the property he had written that if the property is sold for Rs. 1,05,000, there would be no acquisition proceedings.
(iii) The apparent consideration of Rs. 1,05,000 was not less than the fair market value of the property.
(iv) There was no material to hold that the consideration was not truly stated in the instrument of transfer with the object of evading the liability of the transferor to pay tax.
(v) The sale was by the I.T. Dept. and not by Kasturilal and Section 269C was not attracted to such a sale.
6. The competent authority rejected all these contentions and held that the fair market value of the property exceeded the apparent consideration by more than 15% and that the conditions for the application of Section 269C were fully satisfied. In appeal the purchasers and Kasturilal repeated all the contentious which were advanced before the competent authority. The Tribunal held that the sale was a sale by private negotiation and not by the I.T. Dept. But it further held that the fair market value of the property did not exceed the apparent consideration for the transfer; that the acquisition proceedings were barred by limitation as notices under Section 269D(2) were not served on the purchasers and Kasturilal within nine months; and that the IAC (Acquisition Range) was estopped from taking proceedings under Section 269C on the ground of promissory estoppel.
7. The learned standing counsel for the Department in support of these appeals has challenged the adverse findings of the Tribunal. The learned counsel appearing for the purchasers and the learned counsel for the legal representatives of Kasturilal have, on the other hand, supported the order of the Tribunal on all the grounds which were taken before the competent authority. One more point has been argued in support of the Tribunal's order that the appeal filed against Kasturilal was non est as Kasturilal died before the filing of the appeal and that as the order of the Tribunal against Kasturilal had become final, it also become final against the purchasers on the principle of res judicata.
8. The point raised about the non-tenability of these appeals arises on the following facts. Kasturilal died on May 5, 1980, in New York, one day before the Tribunal delivered its order. Neither the Tribunal nor the departmental representative was given information about Kasturilal's death. The certified copy that was issued to the Department showed the name of Kasturilal as the appellant before the Tribunal. Appeal No. 254 of 1980 was filed in this court against Kasturilal on July 21, 1980. The appeal was admitted by a Bench of this court on October 28, 1980. The report of the process-server dated February 27, 1981, indicated that Kasturilal had died. This information was noted by the standing counsel on March 31, 1981. The standing counsel then wrote to the I.T. authorities at Bhopal to find out the names of the legal representatives of Kasturilal. After the information about the legal representatives was gathered, an affidavit was sworn to by the IAC on May 5, 1981. The High Court was closed for summer vacation from May 4, 1981, to June 21, 1981. On the opening day, i.e., on June 22, 1981, applications for amendment and correction of the cause title of the appeal, condonation of delay and joinder of legal representatives were made.
9. The legal representatives of Kasturilal were represented before us by Shri Nema, advocate, who filed memo of appearance on their behalf. On the facts stated above, it is clear that Kasturilal had died before the filing of the appeal in this court. The Department and its standing counsel were, however, not in the know of the death of Kasturilal, who died in America. As the certified copy of the order of the Tribunal also showed Kasturilal as the appellant, it was but natural for the Department to file Appeal No. 254 of 1980, showing Kasturilal as the respondent. It was only from the service report that the standing counsel came to know on March 31, 1981, of the death of Kasturilal. Thereafter, prompt action was taken to find out the names of his legal representatives and necessary applications were made on June 21, 1981. Now, as Kasturilal had died before the filing of the appeal, there is no question of any abatement of the appeal. All that is necessary is to join the legal representatives of Kasturilal as respondents as they were the only proper persons who ought to have been shown as respondents in the appeal. It is true that on June 21, 1981, when the application to join them was made, the period of limitation for filing appeal against them had expired but the delay in the special circumstances of the case could be condoned under Section 5 of the Limitation Act, 1963. In our opinion, there was sufficient cause for the delay in filing the appeal against the legal representatives of Kasturilal and this is a fit case where the discretion under Section 5 of the Limitation Act should be exercised.
10. The learned counsel for the legal representatives of Kasturilal, however, submitted that Section 5 has no application in view of the special provision made in the proviso to Section 269H(1) of the I.T. Act. This proviso reads as follows :
' Provided that the High Court may, on an application made in this behalf before the expiry of the said period of sixty days, permit, by order, the appeal to be presented within such further period as may be specified therein, if the applicant satisfies the High Court that he has sufficient cause for not being able to present the appeal within the said period of sixty days. '
11. Section 5 of the Limitation Act will have application to an appeal under Section 269H because of Section 29(2) of the Limitation Act unless it can be said that its application is ' expressly excluded ' by the proviso to Section 269H. A reading of the proviso will go to show that an application under it for the extension of limitation can be made only before the expiry of sixty days. It can apply only in cases where the event, which may prevent the filing of the appeal within sixty days, is within the knowledge of the appellant. The proviso cannot apply to those cases where the appellant is unaware of the cause which may prevent him in filing the appeal against a person within sixty days and, therefore, it cannot be construed to expressly or impliedly exclude the application of Section 5 of the Limitation Act, to such cases. We do not agree with the ruling of the Patna High Court in IAC of Income-tax (Acquisition) v. Kedar Nath Jhunjhunwalla : 133ITR746(Patna) , on which reliance was placed by Shri Nema that the proviso to to Section 269H(1) is exhaustive and that the application of Section 5 of the Limitation Act is completely excluded. Now, in the instant case, the Department was not in the know of the death of Kasturilal within the period of limitation of sixty days. It was, therefore, impossible for it to apply for an extension of limitation within the proviso. The proviso does not apply to such a case. The Department is, therefore, entitled to take the benefit of Section 5 of the Limitation Act. We condone the delay in making the legal representatives as parties to Appeal No. 254 of 1980. We allow the application and join them as parties. The counsel for the legal representatives was fully heard on merits also and so there is no question for any further hearing in this appeal. The argument that the order of the Tribunal against Kasturilal had become final, as no appeal was filed against the legal representatives within time, cannot be accepted. The other appeals cannot, for the same reason, be held to be barred by res judicata.
12. Now, we take up the point relating to the fair market value of the property which is the most important point in these appeals. According to the report of the Assistant Valuation Officer, Shri Gupta, dated June 14, 1977, the market value of the building worked out to Rs. 92,000 on the basis of capitalisation of rental income and the offer of the purchasers of Rs. 1,05,000 represented the fair market value. Shri Gupta estimated the life of the building to be fifteen years. The net rental income was determined to be Rs. 10,780. Capitalising the net annual income, allowing interest on capital at 5% and for redemption of capital at the same rate, for fifteen years, the capital value was determined at Rs. 1,11,896 by using 10.38 as the multiplier. Out of this amount, Rs. 20,000 were deducted for repairs of the collapsed portion and other portions and the net market value was estimated to be Rs. 91,896. The competent authority in disagreeing with this valuation report, referred to another valuation report made on October 16, 1973, in which the fair market value was reported to be Rs. 1,36,700. The competent authority's opinion was that Shri Gupta in making the report dated June 14, 1977, had not taken into account the reversionary value of the land which, according to the earlier report of 1973, was Rs. 93,350. Adding it to Rs. 92,000 determined as market value in the report of 1977, the competent authority held that the fair market value was Rs. 1,85,000. The competent authority also took into account a sale deed dated September 27, 1977, in respect of a house. This sale deed related to a house from which there was a gross rental income of Rs. 3,693 per year. The house was nearly 60 years old and was sold for Rs. 41,700. As the gross rental from Moti Building was 4 1/2 times more, the competent authority was of opinion that its value ought to be Rs. 1,80,000.
13. The competent authority did not find any fault with the valuation report of Shri Gupta, the Asst. Valuation Officer, made in June, 1977, except for the omission to take into account the reversionary value of the land. In our opinion, having regard to the terms and conditions of the lease to which reference has already been made by us, the lessee had no reversionary interest in the land and its value could not be added in the computation of fair market value. The two conditions material in this connection are that the Local Govt. could, at any time, after giving a month's notice, resume the lease on paying compensation for the super-structure and in case the building stood destroyed for any cause whatsoever, the lease could be resumed without paying any compensation by the Local Govt. on a month's notice if the building was not re-erected within six months. These conditions make it abundantly clear that the lessee had no property in the site. The structure alone was held by the lessee, i. e., Rai Bahadur Mathuradas, the assessee. Reversionary value of land can be added only when the site of the building as open land has any value in the hands of the assessee. When the assessee, who is the owner of the building, has no interest in the site and can hold it only till the building exists, there cannot be any addition for reversionary value of the land. This is the view which the Tribunal has taken and we agree with it. As regards the sale deed dated September 27, 1977, of a house which the competent authority has taken into account for determination of fair market value, the house sold is comparatively much smaller. The competent authority itself stated that the gross rental of Moti Building was 4 1/2 times more than that of the house. If Moti Building is divided into four or five blocks and each block is sold separately that may fetch a higher price but that is not the criterion to be adopted here. As the house sold under the sale deed dated September 27, 1977, is much smaller in size, this sale cannot furnish a safe guide for determination of the fair market value of Moti Building. Further, we do not know as to what was the condition of this house when it was sold. The condition of Moti Building as, we have already mentioned, was deplorable. In 1977, it was estimated to last only for fifteen years as it was in complete disrepair and a part of it had already fallen down. The Tribunal has observed that the sale deeds referred to by the competent authority could not be used as comparable sales and we agree with that finding.
14. The learned standing counsel for the Department has laid great emphasis on a point which was neither taken before the competent authority nor before the Tribunal that the Asst. Valuation Officer in giving his report of June, 1977, has not considered the salvage value of the building which ought to have been taken into account. In this connection, the learned counsel has referred to the valuation report of 1973, where the salvage value was estimated at Rs. 85,910. The learned standing counsel submitted that if this salvage value is added to the valuation of Rs. 92,000 made in the report of June, 1977, the fair market value will work out to Rs. 1,77,910and on this valuation also the conditions necessary for application of Section 269C would be satisfied. Salvage value is the price of dismantled materials of a structure less the cost of dismantling. Naturally enough, the salvage value depends on the nature of components of structures. In certain cases such as components of R.C.C. structure or cement masonry, the cost of dismantling may far exceed the value of salvaged material and thus the salvaged value may be negative. Salvage value of structures may thus vary from zero to 20% of the cost of reproduction (see Mitra's Valuaation, p. 220). The salvage value of a building is a pure question of fact. The report of valuation made in 1977 was before the competent authority. The competent authority, however, did not take into account any salvage value in the computation of fair market value and there is no reference whatsoever to a salvage value in the order of the competent authority. Similarly, when the case reached the Tribunal, in the appeals filed by the purchasers and Kasturilal, the point that the building will have any salvage value and salvage value should be taken into account for computation of fair market value, was again not raised by the Department. An appeal to this court under Section 269H lies on a question of law alone. A pure question of fact cannot be raised for the first time before us in these appeals. In our opinion, as the question of salvage value which is purely one of fact was not raised either before the competent authority or before the Tribunal, it cannot be allowed to be raised here for the first time.
15. The learned standing counsel for the Department has also argued that in an auction held in 1957 a bid of Rs. 1,71,000 was offered for the building and that the value of the building in 1977, could not be less than what was offered in the auction of 1957. We have no material before us to find out as to what was the condition of the building in 1957. Very likely, the building was then in an excellent condition and after twenty years of continued disrepair, it was in a very bad shape in 1977. Therefore, merely because an offer of Rs. 1,71,000 was made in 1957, it cannot be held that the fair market value in 1977 of that building would be more.
16. The learned standing counsel also submitted that the tenants of Moti Building had formed themselves into a co-operative society and had offered Rs. 3 lakhs for purchasing it. The learned standing counsel was, however, unable to show any material on record to show that any offer of Rs. 3 lakhs was made by any one before the building was sold. Any offer made after the building was sold cannot be taken seriously.
17. Having regard to all the circumstances of the case, we do not accept the argument of the learned standing counsel that the Tribunal committed any error of law in reaching the finding that the fair market value of the building on the date of transfer did not exceed Rs. 1,05,000. It is well recognised that the determination of fair market value of a capital asset is generally a matter of estimate based, to some extent, on guess-work and despite the utmost bona fides, the estimate of the fair market value is bound to vary from individual to individual (See K.P. Varghese v. ITO : 131ITR597(SC) . Therefore, unless a clear error of law is discernible in the finding reached by the Tribunal on the question of fair market value, no interference can be made in an appeal under Section 269H which lies on a point of law alone.
18. In view of our finding that the Tribunal rightly held that the fair market value did not exceed the apparent consideration for the sale, it is clear that Section 269C was not attracted and the competent authority was in error in ordering acquisition. In view of this conclusion, it is not necessary to decide other points raised in these appeals.
19. Before concluding we may point out that some of the tenants in occupation of the building were parties before the competent authority. Their contention was that there was no legally valid sale of Moti Building and so acquisition proceedings could not be taken. After the order of the competent authority directing acquisition, the tenants did not file any appeal. They were also not joined as parties in the appeals filed before the Tribunal by the purchasers and Kasturilal. The tenants applied in this court for intervention, but that application cannot be allowed, for, they did not go up in appeal to the Tribunal and they were also not joined as parties in the appeals before the Tribunal.
20. All the appeals fail and are dismissed with costs. Counsel's fee Rs. 200 in each appeal.