1980 Supreme(Cal) 359

High Court Of Calcutta
DIPAK KUMAR SEN, C. K. BANERJEE
COMMISSIONER OF INCOME-TAX - Appellant
Versus
MADHO PROPERTIES LTD. - Respondent
Income-Tax Appeal 10  Of  1976
Decided On : 09/12/1980

The court held that the acquisition proceedings were not validly initiated because the Competent Authority had drawn a presumption under Section 269c (2) and had recorded that he had reasons to believe that the agreed consideration had not been truly stated in the conveyance with the object of evasion, reduction and/or concealment within the meaning of Section 269c (1) solely on the basis of the report of the Valuation Officer. The court held that it was not open to the Competent Authority to draw any presumption under Section 269c (1) prior to the initiation of the acquisition proceedings.

Headnote:

The transaction involved in these appeals under Section 269h of the I. T. Act, 1961, is the transfer of premises No. 13, Gurusaday Road, Calcutta (hereinafter referred to as "the property"), comprising of 16'642 cottahs of land and a one storey structure, by M/s. Madho Properties Ltd. (hereinafter referred to as "the transferor") to M/s. Shree Co-operative Housing Society Ltd. (hereinafter referred to as " the transferee") under a deed of conveyance dated the 4th July, 1974, for a stated consideration of Rs. 14,50,000. The issue before the court was whether the acquisition proceedings were validly initiated.

Fact of the Case:

The property was situated in a detached area requiring land to be left vacant in any proposed construction and that the existing structure would be demolished to utilise the land for multi-storeyed constructions. On the basis of the aforesaid they valued the land by what is known as the "belting method". The front belt value of the land up to a depth of 100 ft. was found to be Rs. 30,000 per cottah. The final computation was as follows : I Belt 24. 525 K : 24. 525 X 1 = 24. 525 units II Belt 3. 913 K : 3. 913 X 3/4 = 2. 935 units II Belt 22. 033 K : 22. 033 X 2/3 = 14. 689 units II Belt 13. 510 K : 13. 510 X (3/4 X 2/3) = 6. 755 units Recess III Belt 0. 671 K: 0. 671 X = 0. 335 units Total 64. 652 K : 49. 239 units Less 5% for size 2. 462 units 46. 777 units Co-efficient 46. 777 64. 652 = 0. 72 units . ( 3 ) THE average land value was determined at Rs. 30,000x 0. 72-21,600 per cottah which was rounded off to Rs. 22,000. The value of 16'642 cottahs was thus estimated at about Rs. 14,22,000.

Finding of the Court:

The court held that the acquisition proceedings were not validly initiated. The court found that the Competent Authority had drawn a presumption under Section 269c (2) and had recorded that he had reasons to believe that the agreed consideration had not been truly stated in the conveyance with the object of evasion, reduction and/or concealment within the meaning of Section 269c (1) solely on the basis of the report of the Valuation Officer. The court held that it was not open to the Competent Authority to draw any presumption under Section 269c (1) prior to the initiation of the acquisition proceedings. The court also held that the presumption under Section 269c (2) can be drawn only where the fair market value of the property has been finally determined and not before.

Issues: 1. Whether the "belting method" of valuation of land was appropriate in the instant case? 2. Whether the Competent Authority was entitled to initiate proceedings in the instant case on the basis of presumptions in the absence of any further material? 3. Whether the acquisition proceedings were validly initiated?

Ratio Decidendi: 1. The court held that the "belting method" of valuation of land was appropriate in the instant case. The court noted that the Supreme Court in Mathura Prosad Rajgharia had held that where a large area of land was being acquired in an urban locality the method of belting for determining the value thereof was appropriate and that it was common knowledge that land in urban areas having a frontage on the main road was more attractive than the land which has no such frontage. 2. The court held that it was not open to the Competent Authority to draw any presumption under Section 269c (1) prior to the initiation of the acquisition proceedings. The court held that Section 269c lays down that such presumption can be drawn only in any proceeding under that chapter. Section 269d similarly lays down equally clearly that proceedings for acquisition under that chapter can be initiated only by a notice to be issued under that section. 3. The court held that the acquisition proceedings were not validly initiated. The court found that the Competent Authority had drawn a presumption under Section 269c (2) and had recorded that he had reasons to believe that the agreed consideration had not been truly stated in the conveyance with the object of evasion, reduction and/or concealment within the meaning of Section 269c (1) solely on the basis of the report of the Valuation Officer. The court held that it was not open to the Competent Authority to draw any presumption under Section 269c (1) prior to the initiation of the acquisition proceedings.

Final Decision: The appeals failed and were dismissed with costs.