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Commissioner of Income-tax Vs. Mrs. Kalavathy - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberT.C. (A) Nos. 1198 and 1199 of 1990, 125 and 382 and 1114 to 1150 of 1991 and 8 and 9 of 1992
Judge
Reported in[2003]260ITR361(Mad)
ActsIncome Tax Act, 1961 - Sections 269C, 269C(1), 269C(2) and 269D
AppellantCommissioner of Income-tax
RespondentMrs. Kalavathy
Appellant AdvocateT.C.A. Ramanujam, Adv.
Respondent AdvocateP.P.S. Janardhana Raja, Adv.
DispositionAppeal dismissed
Cases ReferredMahavir Metal Works P. Ltd. v. Union of India
Excerpt:
.....tax act, 1961 - respondent was transferee of sublet properties - government sought acquisition of property on ground that value for consideration for transfer understated - appeal - no material evidence to form reasonable belief that transfer was not truly stated with object of evasion of tax liability - held, quashing of acquisition proceedings justified. - t.n. estates (abolition & conversion into ryotwari) act, 1948 [act no. 26/1948]. sections 5(2) & 67; [a.p. shah, cj, mrs. prabha sridevan & p. jyothimani, jj] suo motu revisional powers held, on a bare reading of the provisions of section 5(2) of the act, it is clear that the power conferred on the director by section 5(2) to cancel or revise any of the orders, acts or proceedings of the settlement officer is very wide. in the..........favour of five transferees and one of the transferees is the respondent herein in the appeal.3.the competent authority, notified by the central government under the provisions of chapter xx-a of the income-tax act, 1961, initiated proceedings for acquisition of the property and the publication of notice in the official gazette was made under section 269d(1) of the act, dated january 4, 1996. the competent authority was of the opinion, that the value of the property was understated and, therefore, he initiated the proceedings for the acquisition of the property. the competent authority, after hearing the parties, passed separate orders acquiring the properties covered in the instrument of transfer.4. the respondent herein preferred an appeal, challenging the order of acquisition before.....
Judgment:

1. The appeal in Tax Case No. 1150 of 1991 is preferred by the Revenue against the order of the Income-tax Appellate Tribunal, Madras Bench 'C', dated May 31, 1998 in Income-tax (Acquisition) Appeal No. 14 (Mds) of 1998.

2. The respondent herein is one of the transferees of the properties situated in No. 301/302, Mowbrays Road, Chennai. The transfer of the said property was effected by an instrument of transfer dated April 24, 1985, in favour of five transferees and one of the transferees is the respondent herein in the appeal.

3.The competent authority, notified by the Central Government under the provisions of Chapter XX-A of the Income-tax Act, 1961, initiated proceedings for acquisition of the property and the publication of notice in the Official Gazette was made under Section 269D(1) of the Act, dated January 4, 1996. The competent authority was of the opinion, that the value of the property was understated and, therefore, he initiated the proceedings for the acquisition of the property. The competent authority, after hearing the parties, passed separate orders acquiring the properties covered in the instrument of transfer.

4. The respondent herein preferred an appeal, challenging the order of acquisition before the Income-tax Appellate Tribunal, Chennai. Other transferees have also filed separate appeals before the Income-tax Appellate Tribunal, Chennai. The Income-tax Appellate Tribunal in the common order passed in the appeals preferred by the respondent found that the competent authority had no material to form a reasonable belief that the consideration for transfer was not truly stated with the object of facilitating the reduction or evasion of the liability of the transferor to pay tax as contemplated under Section 269C(1)(a) of the Act. The Appellate Tribunal also accepted certain other contentions raised by the respondent herein before it and allowed the appeal preferred by the respondent herein.

5. The Revenue, aggrieved by the order of the Income-tax Appellate Tribunal, has preferred the appeal. Mr. T.C.A. Ramanujam, learned senior standing counsel for the Income-tax Department, appearing for the appellant vehemently argued that the order of the Tribunal is erroneous in point of law and the view of the Tribunal that the presumption as contemplated under Section 269C(2) of the Act was not available to the competent authority at the time of initiation of proceedings is erroneous. He submitted that the report of the Inspector of the Income-tax Department estimating the fair market value would constitute the material for the competent authority to form a reasonable belief that the consideration for the transfer of the property was not truly stated in the instrument of transfer. Learned senior standing counsel for the Revenue relied upon the decision in CIT v. T.V. Suresh Chandran : [1980]121ITR985(Ker) and also the decision of the Punjab and Haryana High Court in Sutlej Chit Fund and Financiers (P.) Ltd, v. CIT . teamed senior standing counsel, therefore, submitted that the presumption under subsection (2) of Section 269C of the Income-tax Act would be available to the competent authority even prior to the publication of the notice in the Official Gazette under Section 269D of the Act for initiating the proceedings for the acquisition of the property.

6. Learned counsel appearing for the respondent referring to the decision of the Gujarat High Court in CIT v. Smt. Vimalaben Bhagwandas Patel and Smt Kamlaben Kanjibhai Patel : [1979]118ITR134(Guj) and the decision of the Supreme Court in C.B. Gautam v. Union of India : [1993]199ITR530(SC) submitted that the order of the Tribunal does not warrant any interference by this court.

7. We have carefully considered the submissions of learned senior standing counsel for the Revenue and the learned counsel for the respondent. Chapter XX-A of the Act, was introduced in Parliament on August 12, 1971, by the Taxation Laws (Amendment) Bill of 1971 on the basis of the recommendations of the Direct Taxes Enquiry Committee recommending certain measures to unearth the black money and prevention of tax evasion. Under Chapter XX-A of the Act, the Revenue was empowered to acquire such properties which were transferred at grossly understated consideration and resulting in the forfeiture of the property with the payment of the apparent consideration and also 15 per cent. of the apparent consideration in the nature of solatium.

8. We find that the conditions precedent for the exercise of the jurisdiction of the competent authority under Section 269C of the Act are : (1) There must be a transfer of immovable property worth more than Rs. 25,000 in value; (2) The fair market value of the transferred property should exceed over the apparent consideration by 15 per cent. thereof; (3) There should be an ulterior motive for tax evasion by concealing the income through untrue statement regarding apparent consideration in the instrument of transfer ; (4) The competent authority should record the reasons ; and (5) A notice for acquisition should be published in the Official Gazette.

9. The short question that arises for consideration is whether the presumptions prescribed under Section 269C of the Act would be available at any stage prior to the decision of the competent authority for acquisition of the property. We find that on this point there are divergent views expressed by the different High Courts. The Kerala High Court in CIT v. T. V. Surest Chandran : [1980]121ITR985(Ker) and the Punjab and Haryana High Court in Sutlej Chit Fund and Financiers (P) Ltd. v. CIT have taken the view that the presumptions in Sub-section (2) to Section 269D of the Act would be available in the proceedings prior to the publication of the notice under Section 269D of the Act for acquisition of the property.

10. On the other hand, the Gujarat High Court in CIT v. (1) Smt. Vimdaben Bhagwandas Patel (2) Smt. Kamlaben Kanjibhai Patel : [1979]118ITR134(Guj) and the Calcutta High Court in Competent Authority, IAC of I. T. v. Smt. Bani Roy Chowdhury : [1981]131ITR578(Cal) have taken the view holding that the presumption prescribed in Clauses (a) and (b) of Section 269C of the Act would not operate at any stage prior to the initiation of the proceedings. We have carefully gone through all the decisions on this point and we are of the view that the views expressed by the Calcutta High Court as well as by the Gujarat High Court are preferable and we, therefore, hold that till the proper notice in the Official Gazette is published the proceedings for acquisition are not initiated and the presumption prescribed in Clauses (a) and (b) of Section 269C of the Act would not be available to the competent authority prior to the decision of the competent authority for initiation of the proceedings.

11. The Supreme Court in C.B. Gautam v. Union of India : [1993]199ITR530(SC) while considering the validity of the provisions of Chapter XX-C of the Act quoted the decision of the Gujarat High Court in CIT v. Smt. Vimalaben Bhagwandas Patel and Smt. Kamlaben Kanjibhai Patel : [1979]118ITR134(Guj) without dissent and held as under (page 550) :

'It has been pointed out that, before resorting to the provisions of the said Chapter, the competent authority must have reason to believe that the fair market value of the property of more than Rs. 25,000 exceeds the apparent consideration stated in the instrument of transfer and the parties have agreed to make the untrue statement with an ulterior motive of tax evasion or concealment of income.'

12. It is also relevant to notice that the Gujarat High Court in CIT v. Smt. Vimalaben Bhagwandas Patel and Smt. Kamlaben Kanjibhai Patel : [1979]118ITR134(Guj) while deciding the case, had noticed the views expressed by the Delhi High Court in Mahavir Metal Works P. Ltd. v. Union of India : [1974]95ITR197(Delhi) . We are of the view that when the Supreme Court noticed the decision of the Gujarat High Court in CIT v. Smt. Vimalaben Bhagwandas Patel and Smt. Kamlaben Kanjibhai Patel : [1979]118ITR134(Guj) it must be taken that it has approved the view expressed by the Gujarat High Court in CIT v. Smt, Vimalaben Bhagwandas Patel and Smt. Kamlaben Kanjibhai Patel : [1979]118ITR134(Guj) in preference to the decision of the Delhi High Court in Mahavir Metal Works P. Ltd, v. Union of India : [1974]95ITR197(Delhi) . Moreover, we find that Chapter XX-A is made inapplicable to the transfers of the immovable property made after October 1, 1986, as the new Chapter XX-C had been introduced. The Central Board of Direct Taxes, after introduction of Chapter XX-C of the Act, has issued a circular wherein it is stated that the competent authority must have reason to believe that the difference between the apparent consideration and the fair market value of the immovable property exceeds the aforesaid margin and he must proceed on the basis that the instrument of transfer did not correctly represent the consideration that has actually passed.

13. We find that there was no evidence before the competent authority to form a reasonable belief that the consideration was not truly stated with the object of facilitating the reduction or evasion of tax liability either of the transferor or transferee. The Appellate Tribunal has noticed the report of the Inspector of income-tax, on which heavy reliance was placed by the learned senior standing counsel and it found that though the report of the Inspector has some evidentiary value regarding the market value of the property, it would not constitute the material for the formation of the reason to believe that the apparent consideration was not truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of tax liability of the transferor or transferee or concealment of income by any one of them. In effect, there was no evidence to show that the extra consideration was passed. In the absence of any material before the competent authority to form a reasonable belief that there was an ulterior motive of tax evasion or concealment of income-tax due to untrue statement of the apparent consideration in the instrument of transfer, we hold that the order of the Appellate Tribunal quashing the acquisition proceedings does not call for interference. Accordingly, we dismiss the appeal preferred by the Revenue, confirming the orders of the Appellate Tribunal.

14. In the result, the appeal filed by the Revenue fails and is dismissed. No costs.


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