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Commissioner of Income-tax Vs. Dr. V.K. Bhaskaran Nair and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 4 of 1978 (Appeal No. 1 of 1978)
Judge
Reported in[1979]116ITR873(Mad)
ActsIncome Tax Act, 1961 - Sections 269F, 269F(6), 269G and 269H
AppellantCommissioner of Income-tax
RespondentDr. V.K. Bhaskaran Nair and anr.
Advocates:J. Jayaraman and ;Nalini Chidambaram, Advs.
Excerpt:
.....of property by state should not lightly be invoked or thought of in every available case - where competent authority proposes to acquire citizen's property he should be prepared to place all materials fairly and squarely before tribunal constituted as appellate authority so as to prompt it to accept so called fair valuation of valuation officer - ultimate decision of tribunal based on other materials placed should not be challenged when competent authority not prepared to place valuation officer before tribunal for purpose of substantiating his valuation - appeal dismissed. - - we fail to see any perversity in the order, much less any unreasonableness in it. apart from this inference which we are legitimately entitled to draw in the circumstances of the case, we are satisfied that..........price and that the apparent price reflected in the instrument of transfer is less than the fair market value of the property, and, if he is also of the view that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with the object of facilitating reduction or evasion of the liability of the transferor to pay income-tax or facilitating concealment of any income, etc., may initiate proceedings under the act for the acquisition of such property. in exercise of this power the competent authority issued notice to the respondents stating that a case had arisen under section 269c of the act for him to initiate proceedings and called upon them to show cause otherwise. after hearing parties in full and having had the.....
Judgment:

Ramaprasada Rao, C.J.

1. This is an appeal against the order of the Income-tax Appellate Tribunal passed under Section 269G of the I.T. Act. Under the Act a new Chap. XXA has been introduced, which provides for acquisition of immovable property in certain cases of transfers to counteract evasion of tax. This was inserted by the Amending Act of 1972. Under Section 269C power is vested in the competent authority who is the Assistant Commissioner of Income-tax, so nominated under the main Act, who, if he has reason to believe that in the case of transfer of immovable property there has been a suppression of the real price and that the apparent price reflected in the instrument of transfer is less than the fair market value of the property, and, if he is also of the view that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with the object of facilitating reduction or evasion of the liability of the transferor to pay income-tax or facilitating concealment of any income, etc., may initiate proceedings under the Act for the acquisition of such property. In exercise of this power the competent authority issued notice to the respondents stating that a case had arisen under Section 269C of the Act for him to initiate proceedings and called upon them to show cause otherwise. After hearing parties in full and having had the benefit of the report of the valuer as provided for in the new Chapter, he came to the conclusion that the fair market value of the property would be roughly Rs. 1,57,000, and that, therefore, there had been an attempt to facilitate reduction or evasion of the liability of the transferor to pay tax, or to facilitate the concealment of income. He, therefore, issued an order under Section 269F acquiring the property which was the subject-matter of transfer. We are not here concerned with the result of such order, because there are far reaching consequences which follow such acquisition. The simple question is whether the order of acquisition passed by the competent authority under Section 269F(6) pursuant to his jurisdiction under Section 269C of the Act is in order or not. Any order passed by the competent authority under Section 269F read with Section 269C is appealable under Section 269G. So the aggrieved party appealed against the order of the competent authority to the Tribunal to whom an appeal is provided under Section 269G. The Tribunal again went into the question in detail, and noticed that the transfer was made by the transferor because of his immediate necessity to leave Coimbatore for Hyderabad and that the Sub-Registrar of Assurances, who was equally a competent authority, within the dictionary meaning of the term, valued it at Rs. 1,03,000. We say, he was a competent authority, because at or about the time when the documents were being registered for the purpose of registration of such transfers, he had a right to independently value the property not only for the purpose of assessment of stamp duty, but also for the purpose of charging the instrument for appropriate registration fees. The Tribunal noted that the Sub-Registrar had valued the property at Rs. 1,03,000 and ultimately held that, since the Sub-Registrar had arrived at the proper market value of the property for the purpose of stamp duty, there was no reason to adopt a lesser price or a different price. It was in those circumstances that the Tribunal set aside the order of acquisition passed by the Assistant Commissioner. A further appeal has been provided in Chap. XXA to the High Court under Section 269H of the Act. This provision provided that the Commissioner or any person aggrieved by any order of the Tribunal passed under Section 269G may, within the prescribed period, prefer an appeal against such order to the High Court on any question of law. The Commissioner of Income-tax appeals under this provision.

2. The main contention of Mr. J. Jayaraman, learned counsel for the appellant, is that the order, taken as a whole, cannot be said to be a pronouncement based on reason or proper appreciation of facts. He would invite our attention to the valuer's report and the treatment of such report by the Tribunal and would say that no particular acceptable reason has been given by the Tribunal to ignore the valuer's report and to accept the market value fixed by the Sub-Registrar.

3. In the first instance, we are not able to see any question of law in the case. Assuming, however, that the alleged perverse decision of the Tribunal in the circumstances of the case can be viewed as raising a question of law, we heard counsel. We fail to see any perversity in the order, much less any unreasonableness in it. Before the Tribunal and under the Act an opportunity is given to the competent authority to substantiate the valuer's report. This is provided for in Clause (3) of Section 269L of the Act, which reads as follows:

'If in an appeal under Section 269G against the order for acquisition of any immovable property, the fair market value of such property is in dispute, the Appellate Tribunal shall, on a request being made in this behalf by the competent authority, give an opportunity of being heard to any Valuation Officer nominated for the purpose by the competent authority.'

4. Admittedly, no attempt has been made by the competent authority to produce the Valuation Officer before the Tribunal so that the Tribunal could hear him so as to assess the fairness or otherwise of the valuation made by the Valuation Officer. For what reason the Valuation Officer has been kept out from the purview of the Tribunal is not clear. It, however, appears to us that the Valuation Officer was not placed before the Tribunal, because he could not support his report. Apart from this inference which we are legitimately entitled to draw in the circumstances of the case, we are satisfied that the Tribunal did weigh the pros and cons and came to the conclusion that the order of the competent authority was not sustainable.

5. In a progressive society, when tax laws become stringent and more stringent by the passing of the calendar at every financial year, care should be taken to see that such stringent provisions, which result in appropriation of property by the State, should not lightly be invoked or lightly thought of in every available case. This new Chapter has made an inroad into property rights. It contemplates acquisition of property in case there is a discovery by the competent authority, namely, the Assistant Commissioner of Income-tax, that there has been transfer of immovable property for consideration which falls short by 15 per cent. of the fair market value. This is a quasi-penal provision. We have already observed that we are not considering the other portions of the Chapter which provide for the following action resulting in the order of acquisition of property of the citizen. Suffice it, however, for our purposes, to state that, even in cases where the competent authority proposes to acquire a citizen's property, he should be prepared to place all materials fairly and squarely before the Tribunal which is constituted as the appellate authority so as to prompt it to accept the so-called fair valuation of the Valuation Officer. But in cases where the competent authority is not prepared to place the Valuation Officerbefore the Tribunal for the purpose of substantiating his valuation whichis styled as the fair market value of the property, then it would be unfairto badge the ultimate decision of the Tribunal based on other relevantmaterial noticed by it as a perverse order. In the instant case, two singular factors formed the basis as it were for the conclusion of the Tribunal.Firstly, the Tribunal noticed that it was a distress sale, and that wasbecause the transferor had to leave Coimbatore for Hyderabad for good.This is accepted and there is no challenge over this finding before us.Secondly, the Tribunal relied upon the valuation of another statutory officerwho had also certain privileges as well as duties under a parallel enactment. The Tribunal accepted the valuation of the Sub-Registrar of Assurances, who, in those days, had the right to value properties for the purposeof stamp duty and impound documents, if he was of the view that the consideration recited in the relevant document did not represent the fairmarket value. While thus accepting the valuation of the Sub-Registrar,who had arrived at such proper and fair market value of the property forthe purpose of assessment of stamp duty and registration fees, the Tribunaldid not, in our view, commit any error.

6. We, therefore, see no reason to interfere with the order of the Tribunal. The tax case (appeal) is accordingly dismissed.


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