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High Court Of Calcutta
CHITTATOSH MUKHERJEE
RAI BAHADUR G.V.SWAIKA ESTATE P.LTD. - Appellant
Versus
M.N.TEWARI - Respondent
C. R. 590 (W) Of 1974
Decided On : 08/08/1979
INCOME TAX - Acquisition of immovable property - Initiation of proceedings - Conditions precedent - True statement of consideration - Presumptions under Section 269c(2) - Applicability - Stage of initiation or adjudication.
Fact of the Case:
The Life Insurance Corporation of India (LIC) sold a property to petitioner No. 1. The Income Tax authorities initiated proceedings for the acquisition of the property under Chapter XXA of the Income Tax Act, 1961, on the ground that the consideration for the transfer was not truly stated in the instrument of transfer.
Finding of the Court:
The court held that the presumptions under Section 269c(2) of the Income Tax Act, 1961, which provide that certain facts shall be conclusively proved or presumed to be true, are not applicable at the stage of initiation of acquisition proceedings under Section 269c(1). These presumptions can only be applied during the adjudication of the acquisition proceedings.
Issues: 1. Whether the presumptions under Section 269c(2) of the Income Tax Act, 1961, are applicable at the stage of initiation of acquisition proceedings under Section 269c(1).
Ratio Decidendi: The court held that the presumptions under Section 269c(2) are not applicable at the stage of initiation of acquisition proceedings because: * The language of Section 269c(2) indicates that it applies to "any proceeding under this Chapter," which suggests that it applies to proceedings after they have been initiated, not to the initial decision of whether to initiate proceedings. * The presumptions in Section 269c(2) are rules of evidence, and rules of evidence are generally not applicable to administrative proceedings like the initiation of acquisition proceedings. * The purpose of the presumptions in Section 269c(2) is to simplify the process of proving certain facts during the adjudication of acquisition proceedings, not to determine whether acquisition proceedings should be initiated in the first place.
Final Decision: The court quashed the impugned acquisition proceedings initiated by the Income Tax authorities, holding that they were without jurisdiction because there were no materials for the formation of the belief that the consideration for the transfer had not been truly stated by the LIC in the instrument of transfer executed in favor of the petitioner No. 1.
( 1 ) THE Life Insurance Corporation of India was previously the owner of premises No. 4a, Pollock Street, Calcutta, which contained 17 cottahs, 10 chittaks and 30 square feet of land together with several structures standing on portions thereof. The LIC had issued advertisement inviting offers for purchase of the said premises on 30th December, 1974. The LIC had agreed to sell the said premises to B. K. Chirimar, who was the karta of a Hindu undivided family, or his nominee for Rs. 5,04,077 or Rs. 29,000 per cottah whichever was more subject to a marketable title being made out by the vendors. Thereafter, B. K. Chirimar had nominated petitioner No. 1 as the purchaser of the said premises under the aforesaid agreement. On July 30, 1973, the LIC executed a conveyance in favour of petitioner No. 1 transferring the said premises for a consideration of Rs. 5,12,333. 30.
( 2 ) ON 18th February, 1974, the IAC of Income-tax, Acquisition Range-I, as the Competent Authority issued a notice under Section 269d of the I. T. Act, 1961, initiating proceedings for the acquisition of the said premises No. 4a, Pollock Street. The said proceedings for the acquisition of the aforesaid property is the subject-matter of challenge in the present rule obtained by the petitioners, inter alia, on the ground that the conditions precedent for the initiation of the said proceedings were absent. According to the petitioners, the Competent Authority had no material before it for forming his belief that the consideration for the transfer as agreed between the parties had not been truly stated with the object either of Clause (a) or of Clause (b) of Sub-section (1) of Section 269c of the I. T. Act, 1961.
( 3 ) THE Competent Authority under Section 269c (1) of the Act may initiate proceedings for the acquisition of an immovable property when there was a transfer of the said immovable property either by way of sale or by way of exchange. Secondly, if the Competent Authority has reason to believe that: (i) the fair market value of the immovable property exceeds Rs. 25,000 ; (ii) the apparent consideration for the transfer is less than the fair market value; (iii) the consideration for such transfer as agreed has not been truly stated in the instrument of transfer ; (iv) the object of such untrue statement about the consideration for transfer was for- (a) facilitating reduction or evasion of the transferor's tax liability in respect of the income arising from such transfer, or (b) concealment of any income or money or other assets of the transferee which he ought to have disclosed for the purposes of the I. T. Act or the W. T. Act.
( 4 ) THE second proviso to Sub-section (1) of Section 269c provides that such acquisition proceedings shall not be initiated unless the Competent Authority has reason to believe that the fair market value of the property exceeds the apparent consideration by more than 15%.
( 5 ) MR. Bajoria, learned advocate for the petitioners, has submitted that in the instant case, there was no material for formation of the belief by the Competent Authority that the consideration for the transfer by the LIC in favour of petitioner No. 1 had not been truly stated in the conveyance. Secondly, even if the consideration has not been correctly specified in the instrument of transfer, the same cannot justify initiation of a proceeding for acquisition unless the Competent Authority has reason to believe that such untrue statement about the consideration in the instrument of transfer had been made either with the object of evading the liability of the transferor to pay tax on the capital gains arising from such transfer. Alternatively, the Competent Authority must have reason to believe that such untrue statement has been made in order to conceal his income or money which ought to be disclosed for the purposes of the I,t, Act or the W. T. Act. In other words, the mere untrue statement about the consideration in an instrument
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