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Commissioner of Income-tax, Gujarat-iii Vs. Sumatilal Chhotalal Shah - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberFirst Appeal Nos. 1031 to 1052 of 1976
Judge
Reported in(1980)15CTR(Guj)32; [1980]124ITR862(Guj)
ActsIncoem Tax Act, 1961 - Sections 269
AppellantCommissioner of Income-tax, Gujarat-iii
RespondentSumatilal Chhotalal Shah
Appellant Advocate G.N. Desai, Govt. Pleader, i/b., R.P. Bhatt, Adv.
Respondent Advocate K.H. Kaji and; K.C. Patel, Advs.
Cases ReferredNagpur v. I.A.C. of Income
Excerpt:
direct taxation - acquisition - section 269 of income tax act, 1961 - competent authority failed to record proper and necessary evidence in regard to comparable sale instances he relied upon for determining market value of subject properties sought to be acquisitioned by him - repeated requests of transferors and transferees for summoning parties to sale-instances in comparison and enabling them to cross-examine and controvert that material denied by competent authority - matter remanded to competent authority for recording necessary evidence of necessary witnesses in connection with sale instances relied by competent authority for determining fair market value of subject property and provide interested parties opportunities to lead evidence in rebuttal thereof. - - act, 1961, for.....b.k. mehta, j. 1. this group of 22 appeals arises out of a common order of the income-tax appellate tribunal, ahmedabad, of september 30, 1976, by which the tribunal set aside the order of the iac of income-tax, acquisition range, ahmedabad, for acquisition of two immovable properties comprising of the building and the lands, respectively, admeasuring 1,766 sq. yards and 2,984 sq. yards, conveyed by the deeds of conveyance bearing registration nos. 1314 and 1315 of april 11, 1974, by the respective owners thereof (hereinafter known as 'manibhai nagarsheth group' and 'sahebsing nagarsheth group') to kalyanbhai purshottamdas fadia and seven others (hereinafter known as 'fadia group') for consideration of rs. 7,28,166 and rs. 12,18,584, respectively. a few facts need be noticed in order to.....
Judgment:

B.K. Mehta, J.

1. This group of 22 appeals arises out of a common order of the Income-tax Appellate Tribunal, Ahmedabad, of September 30, 1976, by which the Tribunal set aside the order of the IAC of Income-tax, Acquisition Range, Ahmedabad, for acquisition of two immovable properties comprising of the building and the lands, respectively, admeasuring 1,766 sq. yards and 2,984 sq. yards, conveyed by the deeds of conveyance bearing registration Nos. 1314 and 1315 of April 11, 1974, by the respective owners thereof (hereinafter known as 'Manibhai Nagarsheth group' and 'Sahebsing Nagarsheth group') to Kalyanbhai Purshottamdas Fadia and seven others (hereinafter known as 'Fadia group') for consideration of Rs. 7,28,166 and Rs. 12,18,584, respectively. A few facts need be noticed in order to appreciate the contentions urged on behalf of the Commissioner in this group of appeals.

2. The competent authority by his order of November 7, 1974, recorded the reasons for initiation of the acquisition proceedings and issued notices under S. 269D(1) of the I.T. Act, 1961, for publication in the Official Gazette and for service on the parties concerned as well as for publication thereof as required under S. 269D(2)(a) and (b) of the I.T. Act, 1961. The reasons for initiation of the acquisition proceedings in respect of the aforesaid two properties are that the District Valuation Officer, on being required to submit the report of valuation in respect of the said two properties, submitted his report on October 19, 1976, before the competent authority estimating the fair market value of the two properties at Rs. 14,12,800 and Rs. 23,87,200, respectively. The competent authority, relying on that report, found that the estimated fair market value of the said two properties exceeded the apparent consideration stated in the respective instruments of transfer by the prescribed margin and, therefore, the presumption about the ulterior motive of the transaction having arisen the properties were liable to be acquired. The District Valuation Officer, in his aforesaid report, relied on two sale instances for estimating the fair market value of the aforesaid two properties. The District Valuation Officer has observed in his report as under in this behalf :

'.... The Ahmedabad Municipal Corporation have sold small plots of land on Relief Road and the lowest rate in Rs. 3,175 per sq. metre. This works out to Rs. 2,655 per sq. yard. But, the plots sold by the Municipal Corporation are on the Relief Road itself and they are small in size. The plot in question is a little in the interior and is a big plot of land. Considering these aspects, the value of the plot is taken at half of Rs. 2,655 and works out to Rs. 1,320 per sq. yard. Another disadvantage with this plot is that it is not regular in shape. Some space will be wasted. The Ahmedabad Municipal Corporation also proposed to construct 50' wide road which will pass through the plot. The F.S.I. in this area is 4 and even if the Ahmedabad Municipal Corporation constructs a road, they will compensate the transferees by allowing them the full use of F.S.I. However, considering the disadvantage of irregular shape, etc., the value is further reduced to 60% of Rs. 1,328 and it works out approximately to Rs. 800 per sq. yard.'

3. In pursuance of the decision of the competent authority to initiate acquisition proceedings and directions about the public notice and the individual notice as well as locality notice, they were published on the following dates :

The notice in the Official Gazette was published in respect of both the impugned transfers on January 4, 1975. The individual notice in respect of the transfer by Manibhai Nagarsheth group was served on the transferors on February 20 and 22 of 1975, while in respect of the transfer by Sahebsing Nagarsheth group it was served on the transferors on 12th/20th February, 1975. The individual notice on the transferees in respect of the transfer by Manibhai Nagarsheth group was also served on 10th and 11th February, 1975, while in respect of the transfer by Sahebsing Nagarsheth group it was served on the transferee on 10th and 11th of February, 1975. The locality notice was published by customary method - by beat of thali and by affixation - on January 31, 1975.

4. The transferors as well as the transferees filed their objections against the proposed acquisition. It appears that some correspondence had passed between the transferors on the one hand and the competent authority on the other in the course of the proceedings. The transferors have forwarded the comments of their registered valuers by their memorandum of July 31, 1975, which was submitted on behalf of the transferors and the transferees. The competent authority forwarded the counter-comments of the District Valuation Officer to the transferors and the transferees setting out his comments on the report of the registered valuers of the transferors. It is an admitted position that these counter-comments, found at page 96 of the paper books of First Appeals Nos. 1043 and 1044 of 1976, are the same which were forwarded to the transferors and the transferees. To these counter-comments, the registered valuers of the transferors by their letter of December 17, 1975, offered further remarks on the aforesaid counter-comments of the District Valuation Officer.

5. It appears that a letter was addressed on 10th December, 1975, to the competent authority by the registered valuers of the transferors setting out their additional objections to the two sale instances relied on by the District Valuation Officer in his first report submitted to the competent authority on the basis of which the acquisition proceedings were initiated.

6. It further appears that the competent authority by his letter of December 23, 1975, acknowledged the need for a discussion as a result of the report of the registered valuers of the transferors submitted to the competent authority. However, the competent authority came across two sale instances of immovable properties situate very close to the properties proposed to be acquired. The sale instances were in favour of the Life Insurance Corporation of India executed in March, 1967, at the rate of Rs. 365.50 per sq. yard. He, therefore, by his aforesaid letter conveyed the particulars of the said property to the transferors, as in his opinion the said sale instances supported his view that the apparent consideration in the aforesaid two deeds of conveyance objected to was far below the fair market value of the properties sought to be conveyed. To this letter of December 23, 1975, the transferors objected to the consideration of the sale instances in favour of the LIC since they were not relied upon for initiation of the acquisition proceedings and now the attempt of the competent authority to support his opinion for initiation of the acquisition proceedings by relying on the sale instances in favour of the LIC was merely an after-thought. They also prayed for issuance of summons to the transferors and the LIC in order to satisfy the competent authority about the salient and significant features of the two sale instances which cannot be considered as comparable sale instances for purposes of estimating the fair market value of the properties in question. The transferors had also filed further comments of their registered valuers in respect of the two sale instances in favour of the LIC by letter of their valuers of 30th January, 1976.

7. The competent authority, however, did not inform his decision to the transferors or the transferees for summoning of witnesses as prayed for by them in their letter of January 30, 1976, and for cross-examination of the other necessary witnesses as prayed for by them in their letter of December 10, 1975. He, however, passed an order on March, 31, 1976, in the following terms after consideration of the objections of the transferors and transferees as well as the reports of their registered valuers and the material on his record :

'35. After hearing the objections and after taking into account all the relevant materials on record, I am satisfied that -

(a) the property in question is admittedly of a fair market value exceeding twenty-five thousand rupees;

(b) the fair market value of the property in question exceeds the apparent consideration therefor by more than fifteen per cent. of such apparent consideration; and

(c) the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with such object as is referred to in clause (a) or clause (b) of sub-section (1) of section 269C.

36. This order has been made after obtaining the approval of the CIT, Gujarat-II, Ahmedabad.'

8. We must record our disapproval of the laconic manner in which the competent authority has conducted these proceedings and the order which was made by him, which surprisingly did not record an effective decision for acquisition of the properties in question. Though no effective order for acquisition appears to have been made by the competent authority, the transferors and the transferees, by way of greater caution, preferred appeals before the Appellate Tribunal. The Appellate Tribunal by its common order set aside the acquisition order of the competent authority broadly on the ground that there was no cogent material before the competent authority to reach the conclusion that the apparent consideration stated in the objected instruments of transfer was exceeded by the fair market value of the properties by more than the prescribed margin. The reasons which weighed with the Tribunal were that out of the two sale instances said to have been effected by the Municipal Corporation of Ahmedabad, the first in favour of M/s. Mira & Company was not at all a comparable sale instance for the obvious reasons that it was situate in a different locality at a distance from the properties under acquisition. The second sale instance on which reliance was placed by the competent authority was one alleged to be of sale by the Ahmedabad Municipal Corporation in favour of M/s. Hari Om Enterprises which gave a value of about Rs. 3,175 per sq. metre. In the opinion of the Tribunal, this sale instance was not at all a comparable sale instance because, in the first place, there was no sale proved in fact by the Ahmedabad Municipal Corporation in favour of M/s. Hari Om Enterprises; secondly, admittedly, it was merely an offer by the purchasers on certain conditions which were neither investigated nor disclosed from the record of the competent authority, and, thirdly, in any case, the off-set price fixed by the Ahmedabad Municipal Corporation for the sale of the said plot was at Rs. 2,400 per sq. metre which was in respect of a plot which was too small in size and having regard to its opening and frontage on the main Relief Road under no circumstances could furnish reliable data for purposes of estimating the fair market value of the properties under the present acquisition.

9. The third sale instance on which the competent authority relied was the sale of the two properties in favour of the LIC by two deeds of conveyance of 15th March, 1967. In the opinion of the Tribunal, the sale instance was stale inasmuch as it was too remote in point of time as compared to the date of the present acquisition, and, in any case, they did not furnish comparable data because the LIC must have purchased these properties since the properties were situate near their existing office building and, therefore, they could not be treated as between a willing vendor and a willing purchaser and more so because the situation of the said property was far superior to that of the properties under the present acquisition. In that view of the matter, therefore, the Tribunal did not find any material which justified the opinion of the competent authority that the fair market value of the properties in question exceeded the apparent consideration by the prescribed margin with the result that the acquisition order was set aside. The Tribunal, however, refused to go into the other contentions urged on behalf of the transferee and transferors in their appeals. It is this order of the Tribunal which has been challenged by the Commissioner by this group of appeal.

10. It should be noted that in First Appeals Nos. 1031 to 1042 of 1976 and First Appeals Nos. 1049 to 1052 of 1976, the respondents are the transferees, viz., M/s. Fadia group. In First Appeals Nos. 1043 and 1044 of 1976, the respondents are the transferors, viz., M/s. Manibhai Nagarsheth group, and in First Appeals Nos. 1045 to 1048 of 1976, the respondents are another set of transferors, viz., Sahebsing Nagarsheth group. It should be noted that one of the respondents in First Appeals No. 1043 and 1044 of 1976, namely, Pramilaben Kasturbhai Manibhai Nagarsheth, died during the pendency of these appeals on November 15, 1979, and at the instance of the Commissioner, who is the appellant before us, her legal representatives being executors and trustees under the will of the deceased, have been ordered to be brought on record and they will be now respondents Nos. 2/A to 2/D.

11. At the time of hearing of these appeals, the learned Government pleader, appearing on behalf of the revenue, raised the following three contentions :

(1) The Tribunal committed an error of law, inasmuch as it failed to draw a correct inference from the evidence, which has been placed on the record before the competent authority, that the fair market value of the properties in question exceeded the apparent consideration by the prescribed margin.

(2) The Tribunal committed an error of law in rejecting the two sales of 15th March, 1967, in favour of the LIC on the ground that they were stale. The Tribunal ought to have appreciated that the values of immovable properties appreciated considerably during this period from March, 1967, to the date of the proposed acquisition and inasmuch as the Tribunal ignored such an obvious fact, which has been also brought on the record, the Tribunal committed an error of law in drawing an inference from the established facts.

(3) The Tribunal failed to apply the mind to the material on record by rejecting it on the ground which was irrelevant and extraneous to the real question in issue.

12. These contentions were sought to be repelled on behalf of the respondents by urging that the entire burden of establishing the fair market value for purposes of initiation of the acquisition proceedings as well as acquisition of the properties is on the revenue, and the presumption about the ulterior motive would not arise as long as by cogent and reliable evidence the factum of the fair market value is not established. The question, whether particular sale instances are comparable sale instances or not is a question of fact and this court cannot interfere in these appeals where apparently no question of law arises from the order of the Tribunal. The competent authority has failed to record proper and necessary evidence in regard to the sale instances in question on which reliance was placed by him in spite of the repeated requests and prayers of the transferors and the transferees and, therefore, the competent authority had no material whatsoever before it on which the order of acquisition can be legally rested. The slender material which has been produced on the record of the competent authority was rightly rejected by the Tribunal while upsetting the acquisition order of the competent authority, because it suffered from a number of infirmities as pointed out by the Tribunal.

13. It is in the context of these rival contentions that we have to decide as to what should be the proper order in this group of appeals. It must be noted at the outset that the learned Government pleader, appearing on behalf of the revenue, conceded that the alleged sale said to have been made by the Ahmedabad Municipal Corporation in favour of M/s. Mira & Company cannot be relied upon, as rightly held by the Tribunal, and he did not propose to rely on that alleged sale instance in support of these appeals before us. It was also not much in dispute between the parties that the only available method for valuation was that of comparable sale instance. It is no doubt true that having regard to the nature of the proceedings and the ultimate order which can be made in these proceedings under Chap. XX-A of the I.T. Act, 1961, which are penal in nature as held by this court in CIT v. Vimlaben Bhagwandas Patel : [1979]118ITR134(Guj) , the burden of proof about the fair market value of the properties is on the revenue. It has to be established by the revenue before it decides to acquire an immovable property under S. 269F on the ground of the apparent consideration of its transfer being 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. It is equally true that the onus would shift to the transferor or transferee or any other interested person under S. 269E(3) only when the presumption as prescribed under S. 269C(2) arises. There cannot be any debate on these principles contained in Chap. XX-A of the Act. The crux of the problem before us is, whether the Tribunal has committed an error of law in setting aside the acquisition order passed by the competent authority in respect of the properties with which we are concerned in these appeals. The Tribunal has proceeded on the basis that the sale instances on which the competent authority placed reliance for purposes of his decision for acquisition of the properties in question were stale sale instances and, therefore, in the first place, they were not reliable. We have not been able to appreciate this view of the Tribunal that since the sale instances were somewhat remote in point of time or for that matter separated by an intervening substantial period, they should be totally disregarded. The competent authority has to find out the fair market value as exactly as possible when he is prima facie of the view that the fair market value exceeds the apparent consideration. The competent authority before us had the opinion of the District Valuation Officer contained in the report made to him that the value of the property would be about Rs. 800 per sq. yard. It is no doubt true that the District Valuation Officer has relied on sales of two small plots of land bearing Nos. 21-22 and 22-24 admeasuring 285 sq. meters and 388 sq. meters respectively in favour of M/s. Mira & Company and M/s. Hari Om Enterprises, at the rate of Rs. 3,601 and Rs. 3,175. It is also true that so far as the sale in favour of M/s. Hari Om Enterprises is concerned, it was not established that there was in fact a sale and what has been brought out and established finally on the record was that there was merely an offer by the intending purchaser to the Ahmedabad Municipal Corporation. The sale in favour of M/s. Mira & Company has been given the go-by by the competent authority. None the less, when he initiated the acquisition proceedings, there was some material before him in the nature of the report containing the opinion of the District Valuation Officer that the fair market value of the properties in question was far in excess of the apparent consideration. It should be noted at this stage that the apparent consideration in the objected instruments of transfer was to the tune of Rs. 412 per sq. yard including that of the building standing on the land. The competent authority, therefore, cannot be blamed for initiation of the acquisition proceedings because ultimately the material on which the District Valuation Officer opined did not substantiate, in the opinion of the Tribunal, the decision of acquisition of the properties. The competent authority, when he decides to initiate acquisition proceedings, decides on the prima facie material before him, which in the course of the proceedings will be tested and accepted or rejected according to its strength and weakness. The competent authority had, in the course of the proceedings, come across two sale instances of March, 1967, in favour of the LIC. It is no doubt true that when he decided to initiate the acquisition proceedings this material was not before him. None the less, in the course of the proceedings, he came across this material and disclosed the same to the transferors and the transferees and invited their comments in connection therewith.

14. The Tribunal has also found these two sale instances as stale sale instances, which in its view, could not be considered to be comparable sale instances on that count. It is no doubt true that the Tribunal has in the alternative examined that material on its merits. We cannot, however, lose sight of the fact that the approach of the Tribunal was conditioned in so far as it considered these sale instances in favour of the LIC as stale sale instances. We will hereafter consider the view of the Tribunal on merits in respect of the two sale instances. But for the time being, we are concerned with the question, whether the Tribunal was right on a matter of principle in discarding the sale instances merely because they were stale in the sense of being remote in point of time from the date of the initiation of the acquisition proceedings. If in the material on the record before the competent authority, no other evidence in respect of comparable sale instances is available, the competent authority, or for that matter the Tribunal, cannot brush aside or refuse to consider the evidence of the sale which may be, in a given case, remote in point of time from the date of initiation of the acquisition proceedings for purposes of estimating the fair market value. In the land acquisition proceedings compensation may not be awarded on the basis of sales remote in point of time from the date of notification under S. 4 of the Land Acquisition Act. However, if the evidence on record comprises of such sales only, the court will not be absolved from finding out the fair market value and awarding compensation accordingly.

15. A Division Bench of this court in Fabrics P. Ltd. v. Special Land Acquisition Officer, Kaira [1971] 12 GLR 319, in a slightly different context, held that neither the valuer nor the court would be justified in rejecting the sale instance of a small plot as one that is not a comparable sale instance only on the ground of difference in size, and a large plot of land may, in a given case, justly be valued on the basis of the sale instance of a small plot of land after making suitable deductions and allowances from the sale price of the small plot of land on account of the largeness of the size of the land sought to be evaluated : and that it is permissible, in the facts and circumstances of a given case, to evaluate large tracks of land by reference to the sale instance of a small plot of land. This court in Fabrics P. Ltd.'s case [1971] 12 GLR 319 in holding as above, followed the decision of the Supreme Court in L. Ramaswami Naidu v. Dist. Welfare Officer, Coimbatore (Civil Appeal No. 617 of 1966 decided on April 21, 1969). On the same parity of reasoning, it cannot be accepted as a correct position in law that if a sale instance sought to be relied upon is remote in point of time to the date of acquisition, and if that is the only evidence for purposes of estimating the fair market value, even then, it can be totally ignored or rejected. The Tribunal, in our opinion, therefore, committed an error of law in approaching the problem in the manner in which it did by holding that because the two sales of March, 1967, in favour of the LIC were stale in point of time, they could not be considered. The learned advocates for the transferors and transferees urged that under land acquisition this principle may be true, because there the property is acquired and compensation is to be awarded, and for that purpose the fair market value of the property sought to be acquired has got to be estimated. But in the perspective of penalty proceedings this cannot be said to be a correct approach and the Tribunal was perfectly justified in rejecting these two sale instances in favour of the LIC since they were of March, 1967. We are afraid, we cannot agree with such a broad submission obviously for the reasons that in spite of the different perspective of the acquisition proceedings under Chap. XX-A of the I.T. Act, 1961, the initial exercise which the competent authority has to do on forming the opinion is to estimate the fair market value of the property in question.

16. Now, in the course of that exercise, if there are a few sale instances, which are remote in point of time, we do not think that there would be justification on the part of the competent authority, or, for that matter, the Tribunal, in totally disregarding that evidence and more particularly when no other cogent and reliable evidence before the authorities is available. We are, therefore, of the opinion that the Tribunal was wrong in law in approaching the problem in the manner in which it did by holding that since the two sale instances in favour of the LIC were remote in point of time from the date of acquisition of the properties in question, they could not be regarded as comparable sale instances.

17. We must, at this stage, indicate that the Tribunal was perfectly justified in rejecting the evidence of the alleged sale said to have been made by the Ahmedabad Municipal Corporation in favour of M/s. Hari Om Enterprises. We agree with the reasoning of the Tribunal that at the most this was an offer said to have been made by M/s. Hari Om Enterprises to the Ahmedabad Municipal Corporation, but since the conditions on which this offer was made were neither investigated nor disclosed on the record of the competent authority, the said evidence cannot furnish data of comparable value for purposes of estimating the fair market value of the properties in question.

18. We have, therefore, to examine whether the Tribunal was right in rejecting the evidence regarding LIC on merits. The Tribunal has opined that the sale instances in favour of the LIC cannot be relied upon because they did not furnish the evidence of transactions being between a willing vendor and a willing purchaser. The Tribunal has considered this evidence on the assumption that it was not stale. The Tribunal thereafter proceeded to observe :

'.... Now, it is an admitted position that when the life Insurance Corporation of India purchased the said land it owned a property which was very near the said land and in the corner of the Relief Road and ABC road (on the map). It, therefore, stands to reason that the Life Insurance Corporation of India would be interested in acquiring the said land even by paying a price higher than the market value. But apart from that, the land purchased by the Life Insurance Corporation of India has two frontages one on 35 feet road of the Relief Road leading to the old civil hospital and the other on the ABC road. Thus, this land was more advantageous and better situated than the property in question. Again, from the facts stated before us, it would appear that property purchased by the Life Insurance Corporation of India was an open land while the property in question when sold had old structures standing thereon. Therefore, considering all facts and circumstances, the properties cannot be considered to be similarly situated or comparable. Now, even if we consider the said land purchased by the Life Insurance Corporation of India and situated as stated above as comparable with the property in question which abuts on 17 feet wide lane, i.e., Dr. Baptista Road, it is difficult to determine the fair market value of the property in question on the basis of the land or property purchased by the Life Insurance Corporation of India. As stated above, the Life Insurance Corporation of India purchased the property at the rate of Rs. 365.50 per sq. yard in March, 1967. The average rate at which the property in question was sold works out to Rs. 410 per sq. yard. There is no material on record to indicate at what rate the prices of land or immovable properties have gone up between 1967 and 1974. In the absence of such data, it is difficult to say on the basis of sale instance of the Life Insurance Corporation of India that the rate of Rs. 410 per sq. yard at which the property in question was sold was not the fair market value.'

19. It is on these grounds that the Tribunal felt itself unable to agree with the competent authority that the sale instances in favour of the LIC would furnish evidence of the value of comparable properties in the locality. It is no doubt true that the property sold to the LIC has some better advantage in its situation. But we have not been able to appreciate the conclusion reached by the Tribunal when it found it reasonable that the LIC had interest in securing the said land even by paying a price higher than the market value because they had their office building adjoining to the land which they had purchased in March, 1967. In our opinion, this is entirely conjectural on the part of the Tribunal and the Tribunal was not justified in reaching the conclusion as a reasonable conclusion on the material which was on the record. The view of the Tribunal that since there was no material on the record to indicate as to what was the rise in the prices in the intervening period between 1967 and 1974, therefore, also the competent authority erred in referring to that value worked out in the sale transactions in favour of the LIC for purposes of estimating the fair market value of the properties in question is not correct. It does not require much of evidence or imagination to find out that there is considerable appreciation in value of the properties in the recent years. In Dollar Company v. Collector of Madras : AIR1975SC1670 , a contention was advanced on behalf of the claimant that the High Court was in error in awarding compensation on the basis of the price worked out under sale instances of 1949-50. Rejecting this contention about the consideration of sale instances at low prices in the year 1949-50, for estimating compensation for acquisition proposed by S. 4-Notification of August 12, 1959, Krishna Iyer J. observed as under (p. 1673) :

'Nevertheless, Sri Natesan contended strenuously that the sales showing low prices were not reliable for two reasons. They were 'distress' sales and prices had gone up from the dates of those deeds which were of 1949-50. Neither argument is conclusive. True, a few of the sales suggest some pressure inducing the vendors to dispose of their land. But there are other deeds which are unblemished by any such depressant. Having gone through the documents in question we are satisfied that none of the sales bear marks of throw-away prices.

The other argument that prices must have inexorably risen from 1949 to 1959 is no axiomatic proposition. True, generally speaking, there has been an inflationary spiral in India which has not spared realty. But there is evidence in the present case to show that between 1949 and 1952 lands in this very area stood stationary in their prices. Various geoeconomic factors have affected land prices, some to boost them, others to slump them. Therefore, we cannot be persuaded to hold that a relentless rise in land prices has come to stay. Take but one example : If a land adjoins a factory which needs to be expanded further, a higher price may be offered by that factory owner. Likewise, if a heavy tax on construction of buildings or ceiling on vacant urban land is in the offering prices of building sites may come down. It may even be said that such a factor as the application of the MISA to smugglers may depress prices of many items, including land and foreign cars, in certain places. Another exotic example. In some American cities the influx of certain coloured races into the downtown area brings down the market value of real estate, under current social conditions.'

20. This decision of the Supreme Court indicates that not only the sale instances remote in point of time from the date of acquisition can be considered but a general presumption about the all-round rise in the prices including that of realty can be raised which can be rebutted by evidence to the contrary that the prices had become stagnant in the locality for some valid reasons. It is an admitted position that the properties under the present acquisition with which we are concerned in these appeals and the lands which were sold in March, 1967, are situate in the same locality though the lands purchased by the LIC had certain advantages. It should be noted at this stage that when the competent authority disclosed these two sale instances to the transferors and the transferees, a request was made on their behalf for summoning the owners of the lands, sold to the LIC, and also the officers of the LIC for establishing that the said sales were not between willing vendors and willing purchasers and for special reasons the LIC had purchased the properties at a special price. As a matter of fact, the registered valuers of the transferors and transferees had stated in their comments as regards the sales in favour of the LIC that they had learnt from knowledgeable sources in the locality that they were not the instances of prudent sales. The competent authority has not only refused to grant the prayer of the transferors and the transferees for examining the witnesses in connection with the sales in favour of the LIC, but has also failed to record the evidence of the registered valuers of the transferors and transferees.

21. The learned advocates for the transferors and transferees attempted to persuade us that if the competent authority decided not to grant the prayer made by the transferors and transferees for examination of the vendors of the properties sold to the LIC, he must thank himself for the lacuna which we find on the material on his record. That was a valid ground for the Tribunal to reject the evidence of the sales in favour of the LIC as not comparable. We do see some force in this contention. However, we must also note that so far as the revenue was concerned, the prevalent opinion and advice was that the proceedings before the competent authority were not judicial proceedings where he was required to record evidence in the manner in which the evidence is recorded in the courts or before quasi-judicial authorities, or for that matter he was not legally bound to permit the parties or persons affected to cross-examine the witnesses or to permit them to lead oral evidence (vide the decision of the Income-tax Appellate Tribunal, 'A' Bench, Bombay in I.T. Acq. Appeal No. 1 of 1974-75, decided on May 26, 1975, in the matter of Smt. Ushabai S. Dhanwatay (Ind.), Nagpur v. I.A.C. of Income-tax, Bombay, and other companion matters [1975] Taxation, Vol. 40(6), page 138.

22. The learned Government pleader for the revenue, however, conceded that this view of the revenue is now no more good view having regard to the decision of this court in Vimlaben's case : [1979]118ITR134(Guj) . We do not think that the contention on behalf of the transferors and transferees that refusal by the competent authority to summon the witnesses in connection with the sales in favour of the LIC would now estop the revenue from contending before us that having regard to the decision of this court in Vimlaben's case : [1979]118ITR134(Guj) , it would be necessary for the competent authority to examine the witnesses for purposes of finding out what is the value of the comparable properties in the locality since the denial by the competent authority in the course of the proceedings to grant the prayer for the examination of necessary witnesses was according to the opinion then prevalent in the department having regard to the decision of the Bombay Bench of the Income-tax Tribunal. The nature of the proceedings under Chap. XX-A of the I.T. Act, 1961 is, as we have held in Vimlaben's case : [1979]118ITR134(Guj) quasi-judicial and the competent authority has to act fairly at all stages and if a request is made in that connection for summoning witnesses or for leading any evidence or for cross-examining any witnesses, the competent authority cannot reject that application or prayer on the ground that the rules of evidence are not binding on him, or that he is not under any obligation to conduct the proceedings as conducted in courts or for that matter before the quasi-judicial authorities. In our opinion, the Tribunal ought not to have ruled on that count that the acquisition proceedings are themselves bad in law because the necessary evidence to substantiate the ultimate view of the competent authority was not there on the record. The Tribunal ought to have appreciated that the competent authority acted according to the opinion and advice then prevalent and, therefore, ought to have given an opportunity to the competent authority to record evidence as prayed for by the parties, or as may be necessary in the circumstances of the case. The view of the Tribunal, as we have stated above, that the sales in favour of the LIC were not sales between willing vendors and willing purchasers, inasmuch as it was reasonable to infer from the situation of the office of the LIC which is adjoining to the lands, which they had purchased in March, 1967, that they had paid more price than that prevalent in the market is not correct since there was no material whatsoever to warrant that conclusion. The Tribunal ought to have permitted the competent authority to collect materials and for that purpose remanded the matter to him so as to enable him to collect the material which may indicate one way or the other as to whether the sales in favour of the LIC were prudent sales or not. This court, in Vimlaben's case : [1979]118ITR134(Guj) held that having regard to the nature of the power under Chap. XX-A, which is penal, and also having regard to the nature of the proceedings, which are quasi-criminal, the competent authority must be held to be a quasi-judicial authority. In an inquiry, under that Chapter, the principles of natural justice must be followed, though the rules of natural justice are not inflexible nor is there any straitjacket formula in that behalf. By and large in an inquiry under Chap. XX-A the transferor and/or transferee as well as the occupant and any other known interested person should be told the nature of the allegations against them, including the material collected till that stage by the competent authority, and be furnished copies of the statements recorded, and those of the documents collected by the competent authority on which he intends to rely, and he has to give that person interested or affected an opportunity to state his case and to correct or controvert the material sought to be relied upon. Now, it is common ground that the transferors and/or the transferees did apply for an opportunity to controvert the material which the competent authority had collected, or had on his record in connection with the sales in favour of the LIC, which opportunity was not given to the transferors and/or transferees. But, as stated above, at the cost of repetition, it should be emphasised that the competent authority went by the opinion then prevailing in the department that having regard to the nature of the proceedings, he was not bound to record the evidence as prayed for, or permit the parties affected to cross-examine the witnesses for purposes of controverting the material which is sought to be used against them. It is also, in that view of the matter, necessary that the competent authority should have inquired in the manner as indicated by us in our judgment in Vimlaben's case : [1979]118ITR134(Guj) and ought to have given an opportunity to the persons affected by the material on which he intended to rely so as to enable them to controvert that material. We do not think that this will virtually amount to giving a premium to the wrong committed by the competent authority in refusing to accede to the prayer of the transferors and transferees for summoning the witnesses in connection with the sales of the lands in favour of the LIC. This is only in order to adopt a course which is in the best interest of justice having regard to the position of law which was prevalent to the knowledge of the authorities in the revenue, and also having regard to the subsequent exposition of law by this court in Vimlaben's case : [1979]118ITR134(Guj) .

23. In that view of the matter, therefore, we set aside the orders of the Tribunal as well as of the competent authority, and remand the matter to the competent authority for recording evidence of the necessary witnesses in connection with the two sale instances of 15th March, 1967, in favour of the LIC including the parties to the said transactions as may be prayed for by the transferors and/or transferees, and for summoning them for recording their evidence as witnesses for the revenue, and permitting the transferors and/or transferees and other interested or affected persons, if there are any, before the competent authority to cross-examine the said witnesses and also to permit them to lead necessary evidence in rebuttal thereof. The competent authority shall be at liberty also to record evidence about the rise, if any, in prices of the immovable properties in this locality in which the properties under acquisition are situate in the period between 1967 and 1974 and permit the transferors and/or transferees to test the said evidence by cross-examination or in any other manner and to lead evidence in rebuttal thereof. The competent authority shall complete this inquiry within three months of the receipt of the record by him and pass appropriate orders in this behalf on a consideration of the newly recorded material before him and in accordance with the correct legal principles. Having regard to the facts and circumstances of this case, there will be no order as to costs.

24. Appeals are allowed accordingly with no order as to costs.


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