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PUNJAB & HARYANA HIGH COURT
Ashok Bhan and N.K.Sodhi JJ.
Commissioner Of Income-tax
Versus
Export India Corporation (P.) Ltd.
Income Tax Appeal No. 1 of 1980,
Decided On : FEBRUARY 20, 1996
INCOME TAX - Acquisition of immovable property - Fair market value - Approval of Commissioner - Applicability of Circular No. 455 dated May 16, 1986 - Held, Circular No. 455 dated May 16, 1986, would be applicable to the proceedings pending at the appeal stage as well if the apparent consideration of the immovable property is below Rs. 5 lakhs. The proceedings under Chapter XX-A are liable to be dropped on this count as well.
Fact of the Case:
The assessee, Raja Mechanical Company Private Limited, transferred its freehold property to Export India Corporation (P.) Limited for a sum of Rs. 1,90,000 by a registered instrument of sale dated May 8/9, 1975. The competent authority initiated proceedings under Section 269D of the Income-tax Act, 1961, and passed an order under Section 269F(6) of the Act on March 31, 1979, acquiring the property. The assessee filed an appeal against the order of the competent authority before the Tribunal, which was accepted by the Tribunal on October 30, 1979. During the pendency of the appeal, Chapter XX-C was introduced in the Act by the Finance Act, 1986, with effect from October 1, 1986. The Central Board of Direct Taxes issued Circular No. 455 (see [1986] 159 ITR (St.) 105) on May 16, 1986, which stated that with effect from April 1, 1986, acquisition proceedings will not be initiated under Section 269C in respect of an immovable property if the apparent consideration is Rs. 5 lakhs or less, and where acquisition proceedings have been initiated by issue of notice under Section 269D, the proceedings will be dropped if the apparent consideration of the immovable property is below Rs. 5 lakhs.
Finding of the Court:
The Tribunal erred in recording the finding that in the absence of the proposed order of acquisition, the approval granted by the Commissioner of Income-tax is no approval in the eyes of law or would be deemed to be a mechanical approval without application of mind. The approval by the Commissioner has to be after application of mind as stated above, but all the same, it partakes the nature of an administrative action provided to ensure that the competent authority does not act in an arbitrary manner. The Commissioner had given his approval in accordance with law and in terms of Section 269F(6) and thereafter the competent authority passed the order. The competent authority did not determine the fair market value properly, keeping in view the facts and circumstances of the case. As regards the conditions provided under Clauses (a) and (b) of Sub-section (1) of Section 269C of the Act, the findings recorded by the Tribunal are correct. It is held that the consideration for transfer as agreed to between the parties has been truly stated and there was no intention on the part of the transferor or the transferee to either reduce or evade the liability to pay the taxes or conceal any income. Circular No. 455 (see [1986] 159 ITR (St.) 105), dated May 16, 1986, would be applicable to the proceedings pending at the appeal stage as well if the apparent consideration of the immovable property is below Rs. 5 lakhs. The proceedings under Chapter XX-A are liable to be dropped on this count as well.
Issues: Whether the approval granted by the Commissioner of Income-tax is valid in the absence of the proposed order of acquisition? Whether the competent authority determined the fair market value properly, keeping in view the facts and circumstances of the case? Whether the conditions provided under Clauses (a) and (b) of Sub-section (1) of Section 269C of the Act are satisfied? Whether Circular No. 455 (see [1986] 159 ITR (St.) 105), dated May 16, 1986, is applicable to the proceedings pending at the appeal stage as well?
Ratio Decidendi: The approval by the Commissioner has to be after application of mind as stated above, but all the same, it partakes the nature of an administrative action provided to ensure that the competent authority does not act in an arbitrary manner. The Commissioner had given his approval in accordance with law and in terms of Section 269F(6) and thereafter the competent authority passed the order. The competent authority did not determine the fair market value properly, keeping in view the facts and circumstances of the case. As regards the conditions provided under Clauses (a) and (b) of Sub-section (1) of Section 269C of the Act, the findings recorded by the Tribunal are correct. It is held that the consideration for transfer as agreed to between the parties has been truly stated and there was no intention on the part of the transferor or the transferee to either reduce or evade the liability to pay the taxes or conceal any income. Circular No. 455 (see [1986] 159 ITR (St.) 105), dated May 16, 1986, would be applicable to the proceedings pending at the appeal stage as well if the apparent consideration of the immovable property is below Rs. 5 lakhs. The proceedings under Chapter XX-A are liable to be dropped on this count as well.
Final Decision: Appeal dismissed with no order as to costs.
Ashok Bhan, J.
1. The Commissioner of Income-tax, Haryana, Rohtak, has directed this appeal under Section 269H of the Income-tax Act, 1961, against the order passed by the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, whereby the appeal filed by the transferee against the acquisition order passed by the Competent Authority, Rohtak, on March 51, 1979, has been set aside.
2. In pursuance of an agreement of sale dated March 25, 1975, Raja Mechanical Company Private Limited, Sadar Bazar, Delhi, transferor (hereinafter referred to as "the transferor") transferred its free-hold property, namely, a factory shed and land comprising 5,990 square yards situate on Gurgaon-Delhi Road in Village Dudi Khera, Tehsil and District Gurgaon, to Export India Corporation (P.) Limited, New Delhi, transferee (hereinafter referred to as "the transferee"), for a sum of Rs. 1,90,000 by a registered instrument of sale dated May 8/9, 1975. On receipt of information regarding the sale transaction, the matter of determination of the fair market value of the property was referred by the Inspecting Assistant Commissioner (Acquisition) (hereinafter referred to as "the Competent Authority") to the Valuation Officer, under Section 269L of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The Valuation Officer made his report to the competent authority on November 10, 1975. According to this report, the fair market value of the transferred property was Rs. 3,32,800 against the apparent consideration recorded in the instrument of transfer, namely, Rs. 1,90,000. In view of the difference between the fair market value as returned by the Valuation Officer and the apparent consideration being more than 15 per cent. than the apparent consideration recorded in the instrument of transfer, the competent authority recorded its reasons under Section 269C of the Act on November 22, 1975, and initiated proceedings under Section 269D of the Act, by publishing the notice in the Official Gazette dated December 13, 1975.
3. Both the transferor and the transferee were served with these notices, as required by law, on January 15, 1976. They appeared before the competent authority and submitted their objections to the initiation of the proceedings. These objections were supported by three reports submitted from time to time by the transferor and the transferee. The first report was from N.K. Jain and Associates, Architects, Engineers and Town Planners, New Delhi, approved valuer, dated April 19, 1978, according to which the fair market value of the transferred property was determined at Rs. 1,90,250. Later on, another report was submitted of another approved valuer, Shri T.R. Takulia, dated June 24, 1978, according to which the market value was fixed at Rs. 1,66,000 by land and building method and Rs. 1,63,000 by rent capitalisation method. Later on, a third report was submitted by Shri T.R. Takulia direct to the competent authority, according to which the market value of the subject-matter of the sale was determined at Rs. 1,66,000.
4. After detailed inquiry into the matter, the competent authority moved the Commissioner of Income-tax for approval of the proposed acquisition on March 28, 1979, and after getting the approval of the Commissioner on March 30, 1979, the acquisition order was duly passed by the competent authority on March 31, 1979, under Section 269F(6) of the Act.
5. The transferor and the transferee, being aggrieved by the order of the competent authority, filed separate appeals. So far as the appeal of the transferor was concerned, the same was found by the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal") to be barred by time and it was dismissed as such. So far as the appeal of the transferee was concerned, the same was accepted by the Tribunal by its impugned order dated October 30, 1979.
6. Before the Tribunal, the transferee filed two paper books during the pendency of the appeal. The first one was
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