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Smt. Darshan Kaur Vs. Inspecting Assistant - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Amritsar
Decided On
Judge
Reported in(1984)9ITD32(Asr.)
AppellantSmt. Darshan Kaur
Respondentinspecting Assistant
Excerpt:
.....authority, passed under section 269f of the income-tax act, 1961 ('the act'), acquiring a house property at 66-ranjit nagar, jalandhar.2. smt. darshan kaur, widow of shri dev pal singh, sold the aforesaid property for an apparent consideration of rs. 40,000 vide sale deed no.5508 of 7-12-1981. the purchaser was smt. palwinder kaur, wife of shri lakhbir singh resident of village chima khurd, tehsil nurmahal, district jalandhar. the competent authority, having reason to believe, on the basis of the valuation report dated 9-8-1982 that the apparent consideration stated in the sale deed at rs. 40,000 was understated, initiated proceedings under chapter xx-a of the act to acquire the property. he caused proper notices to be issued under section 269d of the act to the parties and.....
Judgment:
1. The transferor, Smt. Darshan Kaur, is in appeal against the order of the competent authority, passed under Section 269F of the Income-tax Act, 1961 ('the Act'), acquiring a house property at 66-Ranjit Nagar, Jalandhar.

2. Smt. Darshan Kaur, widow of Shri Dev Pal Singh, sold the aforesaid property for an apparent consideration of Rs. 40,000 vide sale deed No.5508 of 7-12-1981. The purchaser was Smt. Palwinder Kaur, wife of Shri Lakhbir Singh resident of Village Chima Khurd, Tehsil Nurmahal, District Jalandhar. The competent authority, having reason to believe, on the basis of the valuation report dated 9-8-1982 that the apparent consideration stated in the sale deed at Rs. 40,000 was understated, initiated proceedings under Chapter XX-A of the Act to acquire the property. He caused proper notices to be issued under Section 269D of the Act to the parties and called for their objection against the acquisition on the ground that there was understatement of the apparent consideration. The transferor and the transferee filed objections on 10-9-1962. These objections were examined by the competent authority, but he did not find any substance in them and, therefore, he overruled those objections and by his order passed on 16-6-1983, directed that the aforesaid property be acquired for the understatement of the apparent consideration. According to him, the apparent consideration of Rs. 40,000 fell far short of the fair market value determined by the Valuation Officer at Rs. 1,12,000. It is against this order, the transferor is in appeal before us.

3. The learned Counsel for the transferor has sought to impugn this order on the basis of number of pleas, raised in his grounds of appeal, numbering 22. However, during the hearing before us, he pressed only his contentions contained in ground Nos. 9, 13 and 20. According to his submission, the competent authority could not, on the facts of the case, have any reason to believe. It was submitted by him that Sub-section (1) of Section 269C of the Act provided that where the competent authority has reason to believe that any immovable property has been transferred by a person to another person for an apparent consideration, which is less than the fair market value, with the object of reducing or evading tax liability, the competent authority may cause the proceedings to by initiated. According to his submission, the reason to believe, as was used in the provision, was a strong expression and was to be distinguished from the expression 'reason to suspect'. It was also to be distinguished from the misgiving based on surmises and conjectures. According to his submission, the competent authority has reached his finding that the apparent consideration of Rs. 40,000 was understated, on the basis of its valuation by the Valuation Officer at Rs. 1,12,000. Referring to the Valuation Officer's report, he pointed out that this report was made in haste without a proper appraisal of relevant facts and documents. The Valuation Officer, himself, has mentioned that the case was getting time barred and, therefore, he prepared the ex parte valuation, although the transferee had not responded to the notice nor has caused the relevant documents to be produced. What could be the utility of such a valuation, which was based on total ignorance about the relevant factors and documents, which had not been brought to the notice by the transferee and, therefore, had not been properly considered. It was within his knowledge that a sum of Rs. 15,000 had been spent by the transferee because the land on which the house stood was uneven. There were depressions where the rain water collected and which also had been used for piling up the refuse. The purchaser felt the extreme necessity of filling the depression as these caused insanitary environment about the house. It was also brought to his knowledge that two rooms and a temporary shed were dismantled by the purchaser. In their place, three rooms, a kitchen and a garage had been constructed. Nobody normally purchases a house property to demolish it and reconstruct the same. It is only when the property is in a very dilapidated condition and does not serve the need of the purchaser, the property is dismantled and reconstructed and a further cost is undertaken. According to the submission of the learned Counsel, one could easily realize the value of such a property, which needed to be dismantled and reconstructed. In reaching a valuation of the property, the Valuation Officer had not taken into account the situation or shape of the building site on which the house property stood. There is no reference, in his report, to the type of the construction or its age. There is no account taken of the covered area or the number of rooms and amenities available in the house. When these factors are considered cumulatively, would any one consider such a valuation report to be a reasonable approach to the issue of its valuation. He has not described the site nor given any site plan to find out where the plot was situated. He has applied the highest rate prevailing in this area. Not all plots will carry the same rate. It is only those plots which were advantageously situated on the main highway with a lot of potentiality will alone go for the highest rate. But those plots, which are situated in a by-lane or at its fag end, will not get the same rate. The Valuation Officer has ignored these basic aspects, which should have been taken into account in valuing the property. He has not even considered whether the house was a single storeyed or double storeyed. Similarly, the sale instances, he has relied upon, did not indicate the situation or shape of the plots of the properties referred to those sales. There is no information available about the type of construction or the age of the property.

There is no reference to the covered area nor any description of the house, whether it is one storeyed or double storeyed. Therefore, such a valuation report could not have been depended upon by the competent authority to impart him a reason to believe that there was understatement of apparent consideration. On the other hand, the learned departmental representative supported the acquisition order on the ground that the valuation report could be relied upon by the competent authority to entertain the belief that the consideration was understated. It has been brought out in the judicial pronouncements, according to the departmental representative, that adequacy of the material, on which the belief is based, is not a requirement of law and cannot be questioned.

4. We have considered the rival submissions. But it does not appear that, on a proper appraisal of facts, we can overrule the contention of the learned Counsel on behalf of the transferor that the competent authority could not have reason to believe, on the facts of the case, that the consideration had been understated in the instrument of sale.

No doubt, the competent authority had relied upon the Valuation Officer's report, but the report of the Valuation Officer, as has been indicated in the report itself, was made without obtaining proper data and also the relevant documents. The Valuation Officer found that time was running out for taking action and, therefore, he dished out a report without collecting the relevant documents. In reaching the valuation, the Valuation Officer ignored to properly appreciate the facts that the transferor had dismantled a portion of the house property after purchase and incurred heavy expenditure in filling the land in evaluating the property. He did not take into consideration the age or the kind of the construction of the building. He did not take into account the shape or the particular situation of the plot on which the building stood. He did not even refer to such a relevant information as the covered area available in the house sold by the transferor. He did not take into account that this property had been purchased by the transferor two years ago for a sum of Rs. 32,000. If time was running short, he could have at least approached the Registrar/Sub-Registrar's Office and found out the relevant documents which he wanted the transferee to avail to him. Although an inspection is said to have been made by him, it appears to have been made in a routine way without making any effort to collect the required particulars about the house sold by the transferor. At least a perusal of his report does not show that he applied his mind in an intelligent way in making appraisal of its valuation. His reliance on the sale instances equally suffers from the infirmity pointed out by the learned Counsel. There is no information about the size or shape of the properties referred to in the sale instances. There is no mention about the type of construction or the age of those houses, which should have a bearing on the valuation. There is no account taken of the built up area available in those properties. The comparison of the properties in question with this property in issue does not and cannot lead to a proper appraisal of a correct valuation of the property in question.

Their Lordships of the Gujarat High Court in the case of CIT v. Smt.

Vimlaben Bhagwandas Patel [1979] 118 ITR 134, observed: ... The satisfaction of the competent authority for initiation of acquisition proceedings is a subjective satisfaction of the objective facts stated above. The reasons for the formation of the belief must have a rational and direct connection with the material coming to the notice of the competent authority ....

As has been brought out in this decision as well as by the Calcutta High Court in the case of Jai Kumar Kankaria v. Competent Authority [1981] 130 ITR 593 that 'the presumptions available in Sub-section (2) of Section 269C are not available to the competent authority at the time of the formation of his belief as will appear from the following extracts: ... The language of the relevant provisions of Sections 269C and 269D makes it clear that the 'proceeding under this Chapter' does not refer to a stage before a notice has been given. The formation of reasonable belief is not a part of such proceeding. There must be material for the formation of the opinion irrespective of the provision for conclusive proof or presumption at the proceedings stage....

Therefore, the competent authority cannot derive any force strictly from these presumptions provided in Sub-section (2). He has to show that he had proper material before him on the basis of which he was led to have reason to believe. Regarding the sale instances, relied upon by the Valuation Officer, the Orissa High Court, in the case of Joseph Vallooran v. CIT [1977] 108 ITR 544, pointed out that sale deeds of other lands do not offer any guidance because firstly, the lands do not have similar advantages. Therefore, whatever we may look at, we cannot find that the valuation report, which was relied upon by the competent authority, could lead the competent authority to have a reason to believe that the consideration of such house was understated.

5. Having reached this finding, we are unable to uphold the order of the acquisition made by the competent authority. We vacate it and order if the property has been acquired, it should be forthwith released.


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