| SooperKanoon Citation | sooperkanoon.com/62017 |
| Court | Income Tax Appellate Tribunal ITAT Amritsar |
| Decided On | May-21-1986 |
| Judge | P Mehta, P Dhillon |
| Reported in | (1988)24ITD267(Asr.) |
| Appellant | Smt. Harnam Kaur |
| Respondent | inspecting Assistant |
2. It will be necessary to state certain relevant facts. There are six sale deeds under consideration and there are six acquisition proceedings started by the Competent Authority in respect of them. The three sale deeds in the cases of Smt. Harnam Kaur, S/ Shri Bhagwan Singh & Narinder Singh and Smt. Varinder Kaur were registered on 30-3-1981 and the other three sale deeds in the names of S/Shri Kala Ram and Chuni Lal, S/Shri Narinder Singh and Bhagwan Singh and Smt.
Harnam Kaur were registered on 11th May, 1982. All these sale deeds were in respect of an immovable property belonging to a single transferor Shri Arjan Dass. The transferor thus had sold his property under six different transactions to different buyers in March, 1981 and May, 1982. He had for this purpose divided his single property, which was described by the counsel of the transferees, Shri P.N. Arora, to be a plot of land with a small 'Kotha' on a part of it, whose value was worked out by the Assistant Valuation Officer at Rs. 4,502 only. The location of the property as per the Assistant Valuation Officer's report is corner of Maheshwari Street at Kotkapura. The Competent Authority (for short C.A.) has described the property as "An Ahata situated in Shastri Market/Maheshwari Street, Kotkapura". It is also worth noting that out of six sale deeds two of March, 1981 and May, 1982 are in favour of the same buyer Smt. Harnam Kaur. She purchased 19 sq. yds. in the front portion of the property of the transferor in March, 1981 and 88 sq. yds. of the rear portion in May, 1982 for Rs. 9,500 and Rs. 14,500 respectively. Similarly, S/Shri Bhagwan Singh and Narinder Singh, who are brothers, purchased the property of the transferor twice, once 19 sq. yds. of the front portion for Rs. 9,500 in March, 1981 and again 80 sq. yds. of the rear portion for Rs. 13,500 in May, 1982. There is another joint purchase of the property of the transferor measuring 112 sq. yds. of the rear portion by a father and son by the names S/Shri Kala Ram and Chuni Lal for Rs. 18,500 in May, 1982. The remaining purchase of the land of the transferor measuring 19 sq. yds. in the front portion was made by Smt. Varinder Kaur for Rs. 9,500 in March, 1981. Thus it will be seen that the three registration deeds were in respect of joint purchases. On our enquiry, it was stated that the shares of joint owners were equal in the case of sale deeds of S/Shri Kala Ram and Chuni Lal, as described therein, but these were not specified in the two joint sale deeds of S/Shri Bhagwan Singh and Narinder Singh. It was also told to us by Shri P.N. Arora that six purchasers were not related to each other. Another feature may also be mentioned that the AVO valued the three pieces of land on the front portion of 19 sq. yds. each together at Rs. 64,355 including therein the cost of building amounting to Rs. 4,502 and it is on the basis of this value of three pieces of property taken together these acquisition proceedings have been taken up and decided. In fact, taking cue from this method, the C.A. concluded in para 3 of his order as follows : Since the transferor is the same and the property transferred vide each deed is a part of one Ahata, this amounts to a single deal and as such consolidated order is being passed.
In para 33, he considered all the six sale transactions together on the basis of one single property sold by one transferor and compared the apparent consideration of Rs. 75,000 as per six sale deeds with the total fair market value of Rs. 3,58,400 determined by the Assistant Valuation Officer.
3. The first common legal objection, which the transferees' counsel, Shri P.N. Arora, took up in respect of three sale deeds of 19 sq. yds.
each of March 1981 (I.T. ACQ. A. Nos. 1, 2 & 3 (ASR)/1986) was that on correct appreciation of the facts about the sale the IAC had no jurisdiction to initiate acquisition proceedings. He submitted that all the three relevant sale deeds were, in fact, of separate pieces of property, each of which was situated on the front portion of the property of the transferor and there was no warrant for taking and considering the three separate sale transactions together and clubbing the sale consideration of the three to apply the provisions of Section 269C(1) of the Income-tax Act, 1961. It was contended that Section 269C(1) of the Act does not provide for initiating of acquisition proceedings for any immovable property the fair market value of which did not exceed Rs. 25,000. It was further contended that treating each sale transaction to be in respect of a separate immovable property, none of the pieces of property purchased by the three transferees either had an apparent consideration of more than Rs. 25,000 or even the fair market value determined by the AVO at more than that figure.
It was submitted that splitting the value in round figure of Rs. 64,000 for 57 sq. yds. of the land and the building thereon, it will come to Rs. 21,333, which is clearly not more than the limit of Rs. 25,000 prescribed in Section 269C(1) of the Act. In support of this submission, attention was invited also to the Revenue's own conduct in starting three separate acquisition proceedings relating to each sale.
Support was also drawn from the Kerala High Court decision in the case of CIT v. T.V. Suresh Chandran [1980] 121 ITR 985 and it was pointed out that the High Court had held that where immovable property was transferred by a deed executed by the transferors in favour of four transferees, there were four different sale transactions under which four different transferees obtained an absolute right and one single proceeding for acquisition would not lie. On this short ground, it was argued that the acquisition proceedings deserved to be quashed.
4. The departmental representative relied on paras 3 and 22 of the order of C.A. In brief, he submitted that the transferor was the same and the property transferred under each deed was a part of one Ahata and Section 2690 refers to the fair market value of any immovable property. It was explained that in this particular case the property consisted of an Ahata, which had been transferred for total apparent consideration of Rs. 75,000 vide six different deeds.
5. The assessee's counsel, Shri Arora, submitted in rebuttal that the C.A. had wrongly described the property as an Ahata, which, according to him, meant the property enclosed by boundary wall. He pointed out that it is clear from the report of the AVO, made as Annexure 'B' to the order of the CA, itself that the property sold by the transferor was not bounded by a boundary wall and attention was invited to para 8 where it was clearly stated that the front portion with built area was situated on the front of big plot at the back, which was described as Ahata and the rear portion of the plot was an open one surrounded by residential house. It was submitted that the word 'Ahata' has been used by the AVO to describe the big open plot at the back, which was surrounded by a residential house.
6. We have carefully considered the submissions made by both the sides.
The scheme of acquisition in the Income-tax Act is based on each sale deed registered. The property in the contemplation, therefore, of Section 269C(1) of the Act will be the property, which is the subject-matter of the sale deed. We see no warrant either in law or in commonsense to hold that if a transferor is the same person and the property belonging to him was treated to be a single unit of property by him, the separate sale of such property in different pieces at different points of time can be ignored for the purposes of initiating acquisition proceedings or taking acquisition action. The sameness of a transferor when sale transactions are different and to different persons is no relevant consideration. In fact, the Kerala High Court in T.V. Suresh Chandrart's case (supra), construed four different sales to four different transferees even when the sale deed was one. The Court observed that each one of the four transferees had absolute right to the property transferred to him and in the property transferred to one the other transferee had no right and, therefore, one single acquisition proceeding based on that single deed was not held to be in accordance with Section 269C(1) of the Act. Thus it follows from the Kerala authority that action for acquisition could lie in respect of each transfer of any immovable property as witnessed by a sale deed and not on the basis of the number of sale deeds. Considering the matter on this footing, the three transfers witnessed by three sale deeds relating to pieces of 19 sq. yds. of property each will have to be separately judged for the application of Section 269C(1) of the Act and the test of fair market value applied. We do not find any force in the line of reasoning of the CA as mentioned in paras 3 and 22 of his order. It is clear to us on reading the report of the AVO, which is Annexure 'B' to the order of the CA that the AVO treated the open big portion of the plot of the transferor to be an Ahata. The word used is not correct inasmuch as it is clear from the AVO's own report that the property of the transferor was not bounded by a boundary wall and this is, therefore, a case of some building built on the front portion of a big plot of land, which was largely vacant so far as the rear portion was concerned and even a part of front portion. The CA has not understood the correct meaning of Ahata and has mechanically taken the word from the report of the AVO, who also misunderstood the meanings but was using it to describe a big plot as an Ahata. Further it is obvious that none of the three sale deeds, which have given rise to IT Acquisition Appeal Nos. 1 to 3 (Asr.)/1986 is in respect of a purchase, whose fair market value is more than Rs. 25,000 even as per the valuation made by the departmental valuer. Consequently, the acquisition proceedings initiated in all the three cases are improper and these are quashed. The order of the CA acquiring the three pieces of property of 19 sq. yds. each is invalid and it is cancelled and the appeals of the three transferees, IT Acq. A. Nos. 1 to 3 (Asr.)/1986 are allowed.
7. Next, we take up IT Acq. A. Nos. 4 to 6 (Asr.)/1986. On the basis of the principles laid down by the Punjab and Haryana High Court covering the conditions precedent for initiating acquisition proceedings, enunciated in CIT v. Amrit Sports Industries [1984] 145 ITR 231, Shri Arora submitted that, as can be seen from the reasons recorded by the CA in the three cases, which were at pages 12 to 14 of transferees' combined paper book, none of these proceedings had been validly initiated. He in particular attacked that the CA had initiated the acquisition action in the three cases without applying his mind and in a mechanical fashion by using a stereotyped form and such an action cannot fulfil the condition of reason to believe prescribed in Section 269C(1) of the Income-tax Act. For this purpose, he read out the reasons in all the three cases and stated that they were identical and CA had used a cyclostyled proforma filling therein certain information.
It was pointed out that the CA had merely looked into the report of the AVO given in respect of three sales of March, 1981, which are the subject-matter of appeals in IT Acq. A. Nos. 1 to 3 (Asr.)/ 1986, and mechanically applied the rate of Rs. 1,050 per sq. yd. in respect of pieces of the plot sold in three sale transactions of May, 1982. Shri Arora pointed out that neither the CA considered the size of the plots sold in May, 1982 nor their location, which was very much disadvantageous and nor even the location of the property of the sale instance, which was considered by the AVO for preparing his report about the land rate to be applied in respect of three sales made in March, 1981. Shri Arora referred to the report of the AVO, which is Annexure 'B' of the order of the CA to say that the AVO considered the sale of a shop in Shastri Market near Maheshwari Street, and not of a plot of land in Maheshwari Street and by some process not explained derived from the sale price of the shop the rate per sq. yd. of land underneath the shop. It was contended that if the CA had applied his mind, which he was required to do to form his reasons to believe, he would not have failed to notice the discrepancy in the approach of the AVO in the earlier valuation report about the sales in March, 1981 and further fairly advised he should have also considered the location of the plots sold vis-a-vis three pieces of property sold earlier in March, 1981. It was stated that barring the front portion of the property, there was no access to the rear portion of the property of the transferor. It was also explained that the two purchasers of the front plot Smt. Harnam Kaur and S/Shri Bhagwan Singh and Narinder Singh purchased the rear portions of their plots in May, 1982 and thus they had an access while the third purchaser S/Shri Kala Ram and Chuni Lal when they purchased the back portion had no access until they purchased the front portion purchased by Smt. Varinder Kaur in June, 1982. It was submitted that all these facts show the great importance of the location in these three cases for the purposes of determining the fair market value. It was contended that when the CA has initiated the acquisition action without having any proper material or applying his mind to the relevant facts, his action is nothing but a mechanical action by the use of a stereotyped form and such an action cannot give rise to a 'reason to believe' in the eye of law. In support, two decisions of the Amritsar Bench of the Tribunal were cited and relied upon, which were Kewal Krishan v. IAC [IT Acq. Appeal Nos. 9 to 11 (Asr.) of 1985 dated 17-4-1985] and Subash Vohra v. IAC [IT Acq. Appeal Nos. 2 to 4 (Asr.) of 1985 dated 6-4-1985]. These were included in the counsel's paper book.
8. In regard to the joint purchase specifying equal shares made by Kala Ram and Chuni Lal [IT Acq. Appeal No. 4 (Asr.) of 1986, dated May 1986), a further contention about the proceedings being improper was raised on the basis of ruling of the Kerala High Court in T.V. Suresh Chandran's case (supra). It was contended by Shri Arora that the one sale deed was in respect of two transactions of sale in equal shares and, therefore, one single proceedings for acquisition was not justified as per Section 269C(1) of the Income-tax Act.
9. The departmental representative, on the other hand, submitted that the CA had applied his mind and on the basis of the earlier report of the AVO had entertained a reason to believe.
10. On a consideration of the rival submissions, we find force in the submissions of transferees' counsel, Shri P.N. Arora. Indeed the CA has used a cyclostyled form, which was used in all the three acquisition proceedings, for recording that he had reason to believe on the basis of certain information typed in the first part of that proforma. The information given in the first part clearly showed that the CA had acted mechanically and not applied his independent thinking either to the facts and the circumstances of the case or to the contents of the report of the AVO in respect of three sale transactions of March, 1981.
When we look into that report, which is Annexure 'B' to the order of the CA, we find that the sale considered is of a shop in Shastri Market near Maheshwari Street, which is away from the pieces of land purchased by three transferees concerned in these appeals and also not a backward portion of a plot situated in Maheshwari Street. The AVO himself stated in his report that the property under reference was situated in Maheshwari Street in continuation of Shastri Market and was not, therefore, part of Shastri Market as is the impression given while describing the location at item 3 of the first page of the order of the CA. Again that shop was sold for Rs. 26,000 and had an area of 31 sq.
yds. Without indicating how, from the sale of built shop AVO found the value of land underneath, nevertheless he fixed it at the rate of Rs. 709 per sq. yd. Again from that figure of Rs. 709 per sq. yd. he determined the value of land on estimate at Rs. 1,050 per sq. yd. for sale transactions made in March, 1981. If the CA had indeed carefully read this report, he would not have failed to notice the difficulties inherent therein. Further he neither applied his mind to the location of the three pieces of plot sold in May, 1982, which, according to the counsel of the transferees, was very much disadvantageous, as per his submissions noted above, nor to the size of the plots vis-a-vis the sale instances. From the angle of Revenue too, he did not attach any importance to the time-gap of 14 months between March, 1981 and May, 1982. He mechanically followed the formula of AVO and in such circumstances, we find great substance in the criticism of the transferees' counsel that he acted without any proper material and in a mechanical fashion shutting his eyes to the relevant facts of the case.
His action in all the three cases, IT Acq. A. Nos. 4 to 6 (ASR)/1986 is not in accordance with law and he cannot be said to have formed any reason to believe. The initiation of acquisition proceedings in all the three cases is bad and the proceedings finalised on such a basis have, therefore, to be quashed and the order acquiring the property cancelled. We order accordingly.
11. We may also deal with the additional reason advanced by Shri Arora in the case of joint sale of S/Shri Kala Ram and Chuni Lal. As per the decision of the Kerala High Court, in the case of that sale, in fact, separate acquisition proceedings should have been started for the shares of plot purchased by S/Shri Kala Ram and Chuni Lal and the one action taken by the CA was not in accordance with law. On that further ground also the order in IT Acq, A. No. 4 (ASR)/1986 of the CA is cancelled.
12. In the result, the three appeals, IT Acq. A. Nos. 4, 5 and 6 (ASR)/1986 also succeed and are allowed.
13. We may also clarify one more point that it is clear from our above findings that the CA's approach in treating all the six transactions to be a single transaction is not approved by us at all and the appeals have been decided by considering each transaction separately.
14. Shri P.N. Arora also wanted to argue the appeals on merits but it has not considered necessary when weighty legal objections about the initiation of acquisition proceedings has been advanced.