The Competent Authority must record reasons for initiating proceedings under Section 269C(1) of the Income-tax Act, 1961, before acquiring immovable property. Failure to do so renders the proceedings illegal.

J.V.Gupta, J.

1. This appeal on behalf of the Commissioner of Income-tax, Jullundur, has been filed under Section 269H of the I.T. Act, 1961 (hereinafter called " the Act "), against the order of the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter called "the Tribunal"), whereby the order of the Competent Authority under Section 269F of the Act, acquiring the plot in question was held to be invalid.

2. Briefly stated, the relevant facts are that the plot, measuring approximately 16 marlas (3,360 square feet), was sold by M/s. Guru Nanak Public Welfare Trust, Milap Chowk, Jullundur, to M/s. Amrit Sports Industries, Basti Nau, Jullundur, the respondent, for a sum of Rs. 40,000, vide registered sale deed No. 3809 dated September 8, 1977. Shri Nirmal Singh, Inspector, made his report dated April 20, 1978, to the effect that the plot in dispute was of the market value of Rs. 1,32,000 on the date of the sale. The Competent Authority initiated the proceedings under Section 269C of the Act. The relevant notice was published in the official Gazette on June 3, 1978. It appears, in the meantime, the respondent had built some shops on the plot in question and had let them out to some tenants. The notice of the proceedings was served upon the respondent, but no such notice was served individually on some of the above-said tenants. The Competent Authority, vide its order dated March 21, 1980, held that the case fell under Section 269F(6) of the Act and as such ordered the acquiring of the plot in dispute. The respondent alone filed the appeal before the Tribunal. It first took the view that even though the respondent had been duly served (a notice) under Section 269D(2), yet the mere failure to serve (notices to) the tenants of the shops on the disputed property was a material defect which vitiated both the proceedings and the consequential order, and for that reason alone, the order under appeal was liable to be struck down. However, as an additional reason, it held that there was no adequate material for the finding with regard to the objects specified in Clause (a) or (b) of Section 269C(1) of the Act, and, therefore, the order of the Competent Authority was set aside and the property was directed to be released forthwith. Earlier, this case came up for hearing before the Division Bench consisting of M. R. Sharma and S. S. Kang JJ., where on account of an apparent conflict of authorities, the case was referred to the Full Bench. Before the Full Bench, the two questions which came up for consideration, were as follows :

"(i) Whether the initiation of proceedings for the acquisition of immovable property in certain cases of transfers to counteract evasion of tax under Chapter XX-A of the Income-tax Act, 1961, is complete by the publication of the notice in the Official Gazette under Section 269D(1) of the said Act ? and,

(ii) Whether, the transferee though himself personally served with an individual notice under Section 269D(2)(a) of the Income-tax Act, 1961, can assail the said acquisition proceedings on the alleged non-service on any other person or persons interested in the said property?"

3. Both these questions were answered by the Full Bench ([1983] 144 ITR 113) in the following terms (p. 126):

"To finally conclude, the answer to question No. (i) formulated at the outset is rendered in the affirmative and it is held that under Section 269D of the Act, the initiation of proceedings for acquisition and the consequent assumption of jurisdiction by the Competent Authority is completed by the publication of the notice in the official Gazette. The answer to question No, (ii) is rendered in the negative and it is held that it is only the person aggrieved by the non-service of the individual notice under Section 269D(2)(a) of the Act upon him who can make a grievance thereof. Consequently, the transferee who has been validly served cannot assail the acquisition proceedings on the alleged ground of the non-servic