IMPORTANT POINT
The service of notice upon the transferor and the transferee u/s 269D(2) of the Income Tax Act, prior to the publication in the official gazette is merely an irregularity committed during the course of the proceedings and cannot have the effect of nullifying the entire proceedings.

Headnote:Income Tax Act, 1961-Sections 269A to 269S inserted by Taxation Laws (Amendment) Act, 1972 w.e.f. 15-11-1972-Proceedings for compulsory acquisition of property-Notice u/s 269D of the Act-Notices u/s 269D(2) of the Act served on transferor and transferee prior to publication of the notice in the official gazette-Proceedings challenged as illegal-Whether service of notice upon the transferor and the transferee u/s 269D(2) of the Act prior to publication of the notice in the official gazette would render the entire proceedings illegal and without jurisdiction-(No)-Prior service of notice under sub-section (2) of Section 269D is at best an irregularity-However, it cannot have the effect of rendering the proceedings either illegal or without jurisdiction.
Held : Undoubtedly, the publication of the notice in the official gazette under sub-section (1) of Section 269D is the very foundation for initiation of proceedings for acquisition of immovable property under Chapter XXA and the period of limitation for initiation of proceedings has to be reckoned with reference to the said date. The competent authority gets the jurisdiction to make an order for acquisition of property only after publication of the notice in the official gazette. The word "jurisdiction" implies the Court or Tribunal with judicial power to hear and determine a cause, and such Tribunal cannot exist except by authority of law. Jurisdiction always emanates directly and immediately from the law; it is a power which nobody on whom the law has not conferred it can exercise. In other words, "jurisdiction" has reference to the power of the Court or Tribunal over the subject matter, over the res or property in contest, and to the authority of the court to render the judgment or decree it assumes to make. It is in this sense that the publication of the notice in the official gazette confers jurisdiction on the competent authority to take proceedings for acquisition of immovable properties under Chapter XXA of the Act. The service of notice under sub-section (2) of Section 269D upon the transferor and transferee meets the requirement of natural justice so that they may file objections in writing against the action which is proposed to be taken, namely for acquisition of property. Any error or mistake committed in the service of the notice does not in any manner affect the jurisdiction conferred upon the competent authority to take proceedings for acquisition of property. The service of notice prior to the publication in the official gazette is merely an irregularity committed during the course of the proceedings and cannot have the effect of nullifying the entire proceedings which are validly commenced by publication in the official gazette. In fact, no prejudice is occasioned to the transferor or transferee by service upon them of the notice prior to the publication of the gazette. We are, therefore, of the opinion that prior service of notice under sub-section (2) of Section 269D is at best an irregularity but it cannot have the effect of rendering the proceedings either illegal or without jurisdiction. (Para 6)

JUDGMENT

G.P. Mathur, J.-This appeal, by special leave has been preferred against the judgment and order dated 21.7.1999 of the High Court of Punjab & Haryana by which the appeal preferred by the appellant under Section 269H of Income Tax Act, 1961 against the order dated 16.8.1992 of the Income Tax Appellate Tribunal, Chandigarh, was dismissed.

2. The respondent M/s Pearl Mechanical Engineering & Foundry Works (P) Ltd., Ludhiana executed a sale deed of plot No. 427, Industrial Area-A, Ludhiana in favour of M/s. Oswal Woolen Mills Limited for Rs. 10,05,000/- on 5.2.1980. The Government valuer on receipt of a reference from the Inspecting Assistant Commissioner, estimated the fair market value of the property at Rs. 18,31,000/-. Proceedings for acquisition of the property were then initiated in accordance with Chapter XXA of Income Tax Act, 1961 (hereinafter referred to as the Act ) and notice under section 269D(1) of the Act was published in the official gazette on 15.11.1980. The notices issued under Section 269D(2) of the Act were served upon the transferor and the transferee on 10.10.1980. The competent authority, after hearing the objections, passed orders for acquisition of the property. The appeals preferred against the said order by the transferor and transferee were allowed by the Income Tax Appellate Tribunal, Chandigarh, and the order of the competent authority was set aside mainly on the ground that the notices under section 269D(2) had been served prior to the publication of the notice in the official gazette. Feeling aggrieved by the order of Tribunal the Commissioner of Income Tax, preferred an appeal under section 269H of the Act but the same was dismissed by the High Court on 21.7.1999. The High Court has held that by the publication of the notice in the official gazette proceedings for acquisition of property were initiated and the service of the notice on the transferor and the transferee under Section 269D(2) prior to the publication in the gazette is meaningless and an exercise in futility rendering the entire proceedings illegal and without jurisdiction.

3. The main question which requires consideration is whether the service of notice upon the transferor and the transferee under Section 269D(2) of the Act prior to the publication of the notice in the official gazette in accordance with Section 269D(1) of the Act would render the entire proceedings illegal and without jurisdiction. Chapter XXA comprising Sections 269A to 269S was inserted by the Taxation Laws (Amendment) Act, 1972 with effect from 15.11.1972. The Statement of Objects and Reasons shows that the amendment was incorporated to counter evasion of tax through understatement of the value of immovable property in sale deeds and also to check the circulation of black money by empowering the Central Government to acquire immovable properties and to curb the widespread practice of benami holding of property with a view to tax evasion by debarring the real owner from enforcing his claim to such property in a court of law unless he has declared the income from that property or the property itself for purposes of income tax and wealth tax or has given notice of his claim to the property to the income-tax authorities.

4. Sub-section (a) of Section 269A defines "apparent consideration" and sub-section (b) defines "competent authority" which means an Assistant Commissioner of Income-tax authorised by the Central Government under Section 269B to perform the functions of competent authority under Chapter XXA. Section 269B provides that the Central Government may, by general or special order published in the Official Gazette, authorise as many Assistant Commissioners of Income-tax, as it thinks fit, to perform the functions of a competent authority under the Chapter and also define the local limits within which the competent authorities shall perform their functions. The relevant parts of Sections 269C, 269D and 269E, which have a bearing on controversy in hand,

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2004 Supreme(SC) 507

IMPORTANT POINTThe service of notice upon the transferor and the transferee u/s 269D(2) of the Income Tax Act, prior to the publication in the official gazette is merely an irregularity committed during the course of the proceedings and cannot have the effect of nullifying the entire proceedings.

Cases Referred (1)

IMPORTANT POINT
The service of notice upon the transferor and the transferee u/s 269D(2) of the Income Tax Act, prior to the publication in the official gazette is merely an irregularity committed during the course of the proceedings and cannot have the effect of nullifying the entire proceedings.