1. These appeals are by the Inspecting Assistant Commissioner of Income-tax, Acquisition Range, Bangalore and are directed against a common order made on April 30, 1975, by the Income-tax Appellate Tribunal, Bangalore Bench, Bangalore ('Tribunal') in I.T. (Acquisition) Appeal Nos. 15 and 16 (Bangalore)/74-75, reversing his order No. CR 62/1762 & 1763/73-74/Acq B made on November 30, 1974, under Chapter XX-A of the Income-tax Act, 1961 ('the Act').
2. A vacant site bearing No. 134 (old Nos. 170, 183 and 204) situated at 6th Cross, Gandhinagar, Bangalore City, measuring 60' x 137' or 8220 sq. ft. was owned by Sriyuths Maheshchandra Pareksh and Jaisukhlal Pareksh of Bangalore ('transferors'). On September 10, 1973, the said transferors by two separate and distinct instruments of transfer of that date transferred the site in equal half share to Sriyuths Lakshmichand and Lalchand of Bangalore (transferees) for a consideration of Rs. 60,125 to each of the said transferees. On March 12, 1974, the Inspecting Assistant commissioner examined the details of the property, sale consideration and other relevant factors and recorded his opinion under section 269C of the Act to the effect that the fair market value of the property exceeded the apparent consideration by more than 15% and directed the issue of notices under section 269D of the Act. While the notice issued under section 269D(1) of the Act was published in the Government of India Gazette on June 8, 1974, the notices issued to the transferors and transferees were served on March 25, 1974, and April 3, 1974, respectively. In conformity with the other provisions of section 269D of the Act, the Inspecting Assistant Commissioner effected all other notices thereto like locality notice and other notices in due course.
3. In answer to the show-cause notices received by them, the transferors and transferees filed their objections before the Inspecting Assistant Commissioner, inter alia, contending that the consideration stated in the instruments of transfer was the real consideration and the same represented the fair market value of the property transferred under the said instrument of transfer. Before the Inspecting Assistant Commissioner, the transferors and transferees did not raise any objection to his jurisdiction. On an examination of the evidence found on record, the Inspecting Assistant Commissioner in his order found that the fair market value of the property exceeded the apparent consideration by a sum of Rs. 1,20,250 or by more than 25% and with the approval of the Commissioner directed the acquisition of the property under section 269F(6) of the Act.
4. Against the said order of the Inspecting Assistant Commissioner, the transferees filed appeals under section 269G of the Act before the Tribunal and before those appeals were taken up for hearing, they sought the leave of the Tribunal to urge an additional ground to the effect that the proceedings initiated by effecting service of notices on them and the transferors before the publication of the notice in the Official Gazette was an invalid assumption of jurisdiction by the Inspecting Assistant Commissioner and the completion of proceedings for acquisition were void in law and invalid. On allowing the said additional ground to be urged, the Tribunal by its order made on April 30, 1975, has allowed the said appeals accepting the said additional ground as also other grounds urged on merits. Aggrieved by the said order of the Tribunal, the Inspecting Assistant Commissioner has filed these appeals under section 269H of the Act.
5. Sri K. Srinivasan, learned senior standing counsel for the Income-tax Department, has appeared for the appellant. Sri G. Sarangan, the learned advocate, has appeared for the respondents.
6. On the contentions urged before us, two points arise for our determination and they are :
'(i) Whether the issue of notices to the appellants under section 269D(2)(a) of the Act before the publication of notice under section 269D(1) of the Act in the Official Gazette vitiates the jurisdiction of the Inspecting Assistant Commissioner and the order made by him thereto under Chapter XX-A of the Act
(ii) Whether the determination of the fair market value of the property by the Tribunal and the Inspecting Assistant Commissioner is legal and valid ?'
7. We will deal with them in their order.
8. Re : Point No. (i). - Sri Srinivasan contends that the Tribunal committed an error of law in allowing the belated additional ground urged by the appellants before it and acceptance of the same was plainly illegal.
9. Sri Sarangan has sought to support the decision of the Tribunal on the very grounds found by it and other grounds also.
10. In I.T.A. Nos 5 to 8 and 25 to 29 of 1976 decided on February 27, 1985 (A. Premchand v. IAC : 153ITR774(KAR) , we have examined this very question on similar facts. In Premchand's case, we have held (i) that the Tribunal committed an error in allowing the additional ground, and (ii) that even otherwise, there was no merit in the additional ground urged and accepted by it. Sri Sarangan has not urged any new ground or relied on any binding ruling of the Supreme Court to reconsider the view we have expressed in Premchand's case : 153ITR774(KAR) . For the very reasons stated in Premchand's case, we answer point No. (i) in favour of the appellant and against the respondents.
11. Re : Point No. (ii). - Sri Srinivasan contends that in reversing the order of the Inspecting Assistant Commissioner on the fair market value of the property, the Tribunal had either not applied or misapplied the correct principles of valuation and had reached a perverse decision on the same. We will refer to them when we deal with them in due course.
12. Sri Sarangan has sought to support every one of the reasonings and conclusion of the Tribunal on the determination of the fair market value.
13. Earlier we have noticed that the transferors who jointly owned the property had jointly transferred two separate and distinct extents of one and the same property they owned to two separate and distinct individuals who happen to be brothers, on which basis only the Inspecting Assistant Commissioner initiated proceedings under Chapter XX-A of the Act. But, having so done, the Inspecting Assistant Commissioner expressed thus :
'The property in question is a big vacant site measuring 8,220 sq. fit. situated in the 6th Cross, Gandhinagar, Bangalore It is a vacant rectangular site enclosed by a compound wall on all sides. Although the property has been split up for purposes of registration, there is no line of demarcation on the property and this fact has been noted by the Valuation Officer attached to the Valuation Cell in his report dated March 7, 1974.
Gandhinagar is the nerve centre of film activity in Bangalore. Most of the film distribution companies, production companies and other offices, relating to films are situated in Gandhinagar. The offices of advocates and chartered accountants are also situated in this area. Gandhinagar has got several cross-roads, one of which is the 6th Cross. A large number of film distribution companies have their offices on this road. A leading chartered accountant has also an office in this area. It is thus commercial and residential in nature. As this area is most sought after by the film people, Gandhinagar has always been commanding a very high price in the open market. Only a few open plots are available in this area and, therefore, an open plot of land in this area is a veritable gold mine for a real estate dealer.'
14. On this basis, the Inspecting Assistant Commissioner determined the fair market value of the property and reached his conclusion. In their appeals, the transferees took objections to this on two grounds. (i) that their properties should have been separately valued, and (ii) that the Inspecting Assistant Commissioner should not have made one composite order in respect of two separate and distinct proceedings.
15. On the second ground, the Tribunal held that it was only an irregularity and did not vitiate the proceedings. We are of the view that the Tribunal was right in reaching this conclusion. Even otherwise, for a proper appreciation and determination of each other's case and the case of the Department also, it was necessary to deal with them together.
16. We find that the Tribunal did not at all deal with the first ground on the view it expressed on the second ground. We need hardly say that the rejection of the second ground cannot by itself be a ground for not dealing or rejecting the first ground. The first ground was a separate and distinct ground by itself and was a substantial ground that touched on the valuation of the fair market value of the properties. Even the view of the Inspecting Assistant Commissioner that the two brothers had separately purchased the same to develop it as one composite unit or property had its own impact and relevance in determining the valuation. Unfortunately the Tribunal did not at all deal with these aspects as it was bound to and examined the valuation on certain assumptions and presumptions, which are obviously illegal. We are of the view that the Tribunal committed an error of law in not dealing with the first ground and determining the valuation on assumptions that were unwarranted in law which necessarily means that its order cannot be upheld.
17. In determining the fair market value, the Inspecting Assistant Commissioner had taken into consideration the importance of the locality of the city where the property was situated. But, in reaching a different conclusion on the same which it was entitled to do, the Tribunal totally ignored the importance of the locality of the city. In determining the fair market value of a property, the importance of the locality cannot be ignored and must always be kept in view. After all, valuation is not and cannot be made on a vacuum. Without any doubt, the Tribunal committed an error of law in ignoring the same.
18. In accepting the case of the transferees, the Tribunal observed thus :
'None of those properties are the subject matter of acquisition proceedings although they come within the purview of Chapter XX-A.'
19. In observing or holding as above, as we understand, the Tribunal is of the view that the failure of the authority to initiate proceedings under Chapter XX-A of the Act in respect of certain other properties of the locality relied on or adverted to by the Inspecting Assistant Commissioner had to be excluded. We find it difficult to read this observation of the Tribunal in any other manner. We need hardly say this is plainly illegal and improper. In determining the fair market value, the failure, if any, to initiate proceedings under Chapter XX-A justifiably or even unjustifiably is hardly relevant and is not a legal ground to ignore that transaction at all. A crime does not cease to be a crime on the ground that another crime has not been detected or punished. In evaluating the fair market value, the other transactions cannot be ignored and must be taken into consideration. As to what value should be attached to the same is a matter again for the authority to decide. But, the transaction itself cannot be ignored on the view expressed by the Tribunal.
20. On these very grounds themselves, the matter undoubtedly, in any event, requires to be reconsidered by the Tribunal. But, we consider it more appropriate to remit the matter to the Inspecting Assistant Commissioner for fresh disposal without ourselves examining the soundness of other grounds like the aptness or otherwise of the belting method and all other matters. In this connection, we consider it necessary to draw the attention of the Inspecting Assistant Commissioner to our decision in Premchand's case : 153ITR774(KAR) and Subhas Malharirao Kachure v. IAC Acquisition : 159ITR726(KAR) (I.T. As Nos. 9 to 13 of 1976) in which cases we have indicated the correct legal principles of valuation that should be borne in determining the fair market value of the property under Chapter XX-A of the Act. We also consider it proper to reserve liberty to both the parties to lead all such further evidence as they propose to place in support of their respective cases and urge all such contentions as are available to them on the determination of the fair market value.
21. In the result, we make the following orders and directions :
(1) We allow these appeals, set aside the orders of the Tribunal and the Inspecting Assistant Commissioner.
(2) We remit the cases to the Inspecting Assistant Commissioner with a direction to him to restore the proceedings to its original file and redetermine the proceedings initiated by him in accordance with law and the observations made in this order and the orders made by us in ITAs Nos. 9 to 13 of 1976 after recording all such further evidence as may be placed before him and to be collected by him, with all such expedition as is possible in the circumstances of the cases. But, we however direct the Inspecting Assistant Commissioner not to permit the respondents to urge any contention on the validity of the proceedings initiated by him on the ground urged before the Tribunal or before us and found against them in this order.
22. I.T. Appeals are disposed of in the above terms. But, in the circumstances of the cases, we direct the parties to bear their own costs.