Chittatosh Mookerjee, J.
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 toB. 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 theCompetent 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 of transfer by way of sale or exchange without any object for evasion of tax either by the transferor or transferee cannot justify initiation of acquisition proceeding under Chap. XXA of the I.T. Act. In this connection, Mr. Bajoria referred to several cases where the value of the consideration for the transfer of an immovable property is determined by the Central Government or the Reserve Bank. In such cases, the Government or the Reserve Bank may determine the consideration at a figure lower than the fair market value of the property. Similarly, the vendor in a particular case may transfer by way of sale or exchange a property for inadequate consideration without any object of evading income-tax. In these classes of cases it cannot be assumed that the vendor had made any untrue statement in the instrument of transfer about the amount of consideration with the object of evading tax either by the vendor or by the vendee. Thus, every case of transfer of immovable property by way of sale or exchange for less than its fair market value cannot warrant the initiation of acquisition proceeding under Chap. XX-A of the I.T. Act.
6. Section 269C(1) involves the exercise not of judicial or quasi-judicial but administrative powers. In forming its belief for initiation of proceedings for acquisition, the Competent Authority acts on its subjective satisfaction which is arrived at upon the application of his mind to certain objective factors. But in initiating such proceedings the Competent Authority cannot act arbitrarily and he has to form his belief after applying his mind to the relevant factors specified in Sub-section (1) of Section 269C. Therefore, although the court exercising its writ jurisdiction cannot question the sufficiency or adequacy of the reasons for the formation of the belief by the Competent Authority that an acquisition proceeding should be initiated, the court may ascertain whether or not all the conditions precedent for the formation of such a belief exist and whether the Competent Authorityhad applied his mind to the said relevant conditions. At, the stage of initiation the Competent Authority who acts in his administrative capacity does not arrive at his finding but forms a prima facie opinion (vide the observations of the Supreme Court in respect of the court's power vis-a-vis initiation of proceedings under Section 34 of the Indian I.T. Act, 1922, and Section 148 of the I.T. Act, 1961, in Calcutta Discount Co.'s case : [1961]41ITR191(SC) , S. Narayanappa v. CIT : [1967]63ITR219(SC) . Chhugamal Rajpal's case : [1971]79ITR603(SC) and ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) .
7. In the instant case, the LIC was the transferor and the respondents do not seriously suggest that the LIC as the vendor did not truly state the consideration for the instrument of transfer executed by it. Secondly, it is not suggested that there was any attempt on the part of the LIC which was the transferor to evade its liabilities to pay tax under the I.T, Act. Further, in the present case, it has not been prima facie established that the consideration for the transfer as agreed upon had not been truly stated in the instrument of transfer. Therefore, there is no question of nondisclosure by the petitioner No. 1 of its income or money for the purpose of evading payment of income-tax or wealth-tax. The respondents have, however, urged that the Competent Authority in forming bis belief under Sub-section (1) of Section 269C was entitled in law to apply Sub-section (2) of Section 269C. According to the Competent Authority, the fair market value of the property exceeded the amount of consideration specified in the instrument by more than 25%. Therefore, there was conclusive proof under Section 269C(2){a) of the Act that the consideration for the transfer by the LIC in favour of petitioner No. 1 was not truly stated.
8. The learned advocate for the petitioners, on the other hand, has submitted that Sub-section (2) of Section 269C is not applicable at the stage when the Competent Authority considers whether a proceeding for acquisition under Chap. XX-A of the I.T. Act should be initiated. According to the learned advocate for the petitioners, after a proceeding is initiated, the Competent Authority, while adjudicating, may apply the said provisions. In support of the above proposition the learned advocate for the petitioners has relied upon several reported decisions.
9. Ramendra Mohan Dutta J. in Smt. Bani Roy Chowdhury v. Competent Authority, IAC : [1978]112ITR111(Cal) , inter alia, held that so far as the provisions of Sub-section (2) of Section 269C were concerned the same was a matter of proof and the Legislature intended to simplify the procedure so far as the revenue was concerned by applying such rules of evidence relating to presumptions and to matters of proof so that in the absence of evidence to the contrary, the Competent Authority might not be faced with any difficulty at the hearing stage of the proceeding in arriving at its conclusion when any positive proof therefor that the transfer was so effected with, the object of evading the tax as mentioned. Ramendra Mohan Dutta J. in Mrs. Bani Roy Chowdhury's case : [1978]112ITR111(Cal) , inter alia, held that in the process of formation of its belief the Competent Autho-rity cannot rely upon Sub-section (2) of Section 269C and the Competent Authority at the stage of forming his belief, was bound to consider whether a transaction was entered into with the object of evading taxes. In Smt. Bani Roy Chowdhury's case, the LIC of India had sold the immovable property in question to the petitioner, Smt. Bani Roy Chowdhury, and the Hindusthan Building Society Ltd., was a confirming party in the document. The learned judge held that the Competent Authority had proceeded entirely on an erroneous basis that the Hindusthan Building Society Ltd. was one of the transferors and observed that if the Competent Authority had appreciated the said fact he might not have any reason to believe that in the matter of such a transfer the LIC which is a statutory body could possibly have tried to evade tax. Ramendra Mohan Dutta J., in the said case, further held that in arriving at the market valuation the Competent Authority did not apply his mind properly and took into consideration irrelevant facts.
10. In Subhkaran Chowdhury v. IAC : [1979]118ITR777(Cal) , Sabyasachi Mukharji J., at pages 784-85 of the report, agreed with the views of Ramendra Mohan Dutta J. in Smt. Bani Roy Chowdhury's case : [1978]112ITR111(Cal) , that evidentiary value of presumptions which Sub-section (2) of Section 269 postulates are not attracted at the time of the initiation. The petitioners have also relied upon an unreported judgment of Manash Nath Roy J. in Tube Mill (India) P. Ltd. v. IAC (Civil Rule No. 5320(W) of 1974, disposed of on 10th November, 1978) [since reported in : [1980]122ITR72(Cal) ]. Manash Nath Roy J. also followed the decision in Smt. Bani Roy Chowdhury's case.
11. The learned advocate for the petitioners has pointed out that recently a Division Bench of the Gujarat High Court in CIT v. Smt. Vimlaben Bhagwandas Patel : [1979]118ITR134(Guj) has taken the same view that the presumptions prescribed by Clauses (a) and (b) of Section 269C(2) do not operate at any stage prior to the decision of the Competent Authority for initiation of the proceedings.
12. The aforesaid three single Bench decisions of this court are binding upon me but Mr. Pal, appearing on behalf of the respondents, has submitted that this rule should be referred to the Division Bench for reconsideration of the said decisions. Mr. Pal submitted that the expression 'In any proceeding under this Chapter' in Sub-section (2) of Section 269C is wide enough to cover the stage of initiation of a proceeding under Sub-section (1) of Section 269C. In this connection Mr. Pal relied upon the decision of the Supreme Court in S. Narayanappa's case [1967] 63 ITR 219. The Supreme Court in S. Narayanappa's case had observed that the proceedings forassessment or reassessment under Section 34(1)(a) of -the Indian I.T. Act, 1922, started with the issue of a notice and it is only after the service of the notice that the assessee whose income is sought to be assessed or reassessed becomes a party to such proceedings. The earlier stage of the proceeding for recording the reasons of the ITO and for obtaining the sanction of the Commissioner are administrative in character and are not quasi-judicial. Whether the word 'proceeding' should be given a narrow or a wide import would depend upon the nature and the scope of an enactment and the particular context in which the expression appears. In its wider connotation, 'a proceeding', according to the judicial interpretation, means every step in an action. But the expression 'every proceeding' in sub- Section (2) of Section 269C clearly indicates that only the proceedings under the Act after their initiation are covered by the said sub-rules. Both cls. (a) and (b) can apply only in judicial proceedings. Where the authority is required to record its findings and not merely form its belief about the existence or non-existence of variable facts, I respectfully agree with the views of Ramendra Mohan Dutta J. in Smt. Bani Roy Chowdhury's case : [1978]112ITR111(Cal) , that the word 'proceeding' in Section 269C(2) of the Act only refers to judicial proceedings under the Act and not pre-initiation administrative steps taken by the Competent Authority. Clause (a) of Sub-section (2) of Section 269C, inter alia, provides that where the fair market value of an immovable property exceeds the apparent consideration therefor by more than 25% of its apparent consideration it shall be conclusive proof that the consideration for the transfer has not been truly stated in the instrument of transfer. Clause (b) of Sub-section (2) raises a rebuttable presumption in case the property is transferred for an apparent consideration which is less than its market value. Thus, cls. (a) and (b) both contain rules of evidence. The majority decision in Smt. Somawanti v. State of Punjab : [1963]2SCR774 , with reference to the expression 'conclusive proof' in Section 6(3) of the Land Acquisition Act, had observed :
'Since evidence means and includes all statements which the court permits or requires to be made, when the law says that a particular kind of evidence would be conclusive as to the existence of a particular fact it implies that that fact can be proved either by that evidence or by some other evidence which the court permits or requires to be advanced. Where such other evidence is adduced it would be open to the court to consider whether, upon that evidence, the fact exists or not. Where, on the other hand, evidence which is made conclusive is adduced, the court has no option but to hold that the fact exists... Statutes may use the expression 'conclusive proof' where the object is to make a fact non-justiciable. But the Legislature may use some other expression such as 'conclusive evidence' for achieving the same result. There is thus no difference between the effect of the expression 'conclusive evidence' from that of 'conclusive proof ', the aim of both being to give finality to the establish- ment of the existence of a fact from the proof of another.'
13. Sub-section (3) of Section 269E is in the nature of a clarification of the scope of Clause (a) of sub-s, (2) of Section 269C of the Act. Sub-section (3) has removed the doubt as to whether the rule of conclusive evidence would be a bar to adducing evidence about the fair market value in order to establish that the amount of consideration stated in the instrument of transfer does not in fact exceed by more than 25% the price which the immovable property would ordinarily fetch on sale in the open market on the date of execution of the instrument of transfer of such property. In other words, an objector against proposed acquisition of an immovable property is not precluded from proving by evidence that the fair market value of the property in question has not been correctly determined by the Competent Authority and, therefore, the rule of conclusive evidence contained in Section 269C(2)(a) cannot be applied in such a case. I am inclined to hold that Sub-section (3) of Section 269E in fact is indicative of the fact that the rule of evidence contained in Sub-section (2) of Section 269C is attracted after a proceeding for acquisition has been initiated. At the stage of initiation the authority is not required to record any finding that in fact the consideration has not been correctly stated in an instrument of transfer of immovable property valued at more than Rs. 25,000 with the object of evading tax. But at the stage when Sub-section (1) of Section 269C is applicable the Competent Authority, upon application of his mind to the points specified therein, has to decide whether there are reasons to believe that the state of things specified in Sub-section (1) prima facie exists. At the stage of Section 269C, the Competent Authority forms his subjective satisfaction upon consideration of certain objective matters. He acts not judicially but administratively. Therefore, regarding the question of proof, rules of evidence, which are relevant in a judicial or quasi-judicial proceeding, can have no application at the stage prior to initiation, which is merely an administrative proceeding.
14. In the above view of the matter I hold that Sub-section (2) of Section 269C could not be invoked for forming the belief by the Competent Authority as to whether proceedings for acquisition of the immovable property in question should be initiated. In the instant case, there were no materials whatsoever for 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 favour of the petitioner No. 1. Therefore, the impugned proceeding is without jurisdiction and should be quashed.
15. I accordingly make this rule absolute. Let a writ of mandamus issue commanding the respondents not to proceed any further with the saidimpugned proceeding under Chap. XX-A of the I.T. Act. Let a writ of certiorari issue quashing the said proceedings. There will be no order asto costs.
16. Let the operation of this order be stayed for six weeks.