COMMISSIONER OF INCOME TAX Vs. VIMLABEN BHAGWANDAS PATEL

JUDGEMENT

(1.) THESE two appeals under S. 269H of the IT Act, 1961, at the instance of the CIT, Gujarat II, Ahmedabad, are directed against the common order of the ITAT, Ahmedabad Branch, Ahmedabad, of 25th July, 1975 allowing the two appeals filed by the respective respondent transferee herein from the order of the IAC, Acquisition Range II, Ahmedabad, passed on 16th Jan., 1975, acquiring two industrial sheds of type A bearing block Nos. 1/3 and 1/4 situate in the Industrial Estate set up by the Baroda Industrial Development Corporation (hereinafter referred to as 'BIDCO' for the sake of convenience) under S. 269F(6) of the aforesaid Act as the fair market value of the respective shed exceeded the apparent consideration in the respective instrument of transfer of 5th Feb., 1973, and had not been truly stated with the ulterior object of tax evasion and/or facilitating concealment of income or assets. Since the questions raised in both these appeals before us are identical, and also because the facts and circumstances of both the cases are similar, we intend to dispose of these two appeals by this common judgment. In order to appreciate the rival contentions raised in these two appeals before us in proper perspective, it would be profitable to set out, briefly, the nature of the property, the history of transfer, how the proceedings were initiated by the Competent Authority, what opportunity of hearing was given to the persons interested whether known or unknown in course of the proceedings, what material was collected and relied upon by the said authority for reaching the conclusion as he did, how did he ascertain the fair market value of the properties in question, and what influenced him in spelling out the ulterior object of the transferor or transferee in stating the consideration for transfer of the properties, and certain other connected relevant developments.

(2.) THE two properties with which we are concerned in these appeals are the two industrial sheds of A type bearing block Nos. 1/3 and 1/4 situate in the Industrial Estate of BIDCO in the city of Baroda. These two sheds are standing on the plots of land of S. Nos. 1034 and 1035 respectively, each admeasuring 6424 sq. ft. having built up structure of 4927 sq. ft. out of which pucca structure is occupying a built up area of 2427 sq. ft. while temporary structure is occupying 2467 sq. ft. in each of plots leaving the remaining plot of land open. It should be noted that there is a marginal discrepancy of about 31 ft. in the total built up area as compared to the break up of the area of the permanent and temporary structures as given in the order of the Tribunal. The respective respondent transferee of each of these appeals has paid a consideration of Rs. 29,521 to the transferor M/s. Sigil (India) Services Pvt. Ltd., which had its factory in the sheds for manufacturing diesel engines which they shifted to some other area in the city of Baroda with the result that they decided to dispose of the two sheds. The deed of conveyance was executed by and between the principal officer of M/s. Sigil (India) Services Pvt. Ltd., and the respective respondent transferee on 5th Feb., 1973. It has been, inter alia, stated in the respective deed of conveyance that the transferor company was the original allottee of the two sheds from BIDCO and consequently purchased the same in pursuance of the ownership scheme of the State Government, which prompted BIDCO to sell the sheds to their original allottees, and accordingly, the transferor company had acquired the sheds by purchase under the deed of conveyance of 19th Aug., 1970 for a consideration of Rs. 19,105 and since the respective transferees were desirous of purchasing the sheds in question in view of their requirement, the transferor company had agreed to sell the sheds in question with the permission of 25th Nov., 1972 accorded by the Board of Directors of BIDCO for a consideration of Rs. 29,521 to each transferee on the condition to observe the approved terms of the ownership scheme. It is common ground that both the sheds are of the same type viz. type A, and of the same size and having the same built up area of permanent as well as temporary structures. The permanent structure is a pucca built up industrial shed while the temporary structure is only having a roof over it with all sides open. It is also an admitted fact that the respondent transferee in each case was desirous of purchasing the respective shed as her husband had a factory in the adjoining sheds in partnership with his brothers. It is not disputed that each of the respondent transferees had purchased shares of BIDCO of the face value of Rs. 18,600 in all which the transferor company was holding under the original scheme of allotment in pursuance of which they were holding as allottees as well as under the ownership scheme in pursuance of which they purchased. Under the original scheme of allotment of BIDCO, there were different charges for the right of occupation of these sheds of different types, and accordingly the relevant rules known as "Baroda Industrial Estate Rules, 1958" prescribed Rs. 180 per month by way of charges for occupying A type block. These charges were raised to Rs. 304.50 Ps. per month with effect from 1st July, 1963. There is some dispute as to the nature of these charges, whether they were in the nature of rent or they were in the nature of licence fees by way of compensation for occupation. We shall refer to it at appropriate time. The allottee of A type block was under obligation, under the aforesaid rules, to purchase four shares of BIDCO of the nominal value of Rs. 1,000 each. The extraordinary general meeting of the BIDCO was convened on 24th March, 1969 to consider, and if though fit, to pass, with or without modification, a resolution that the sheds be sold to the existing holders for a consideration of Rs. 19,105 for an A type shed provided the holder subscribes and purchases at par 13 shares of Rs. 1,000 each of BIDCO besides one share from the shareholder of BIDCO not being a holder of a shed of the nominal value of Rs. 1,000 at Rs. 1,600. The resolution adopted at the aforesaid meeting has not been placed on the record of the Competent Authority or before the Tribunal, but it transpires from the copy of the letter of 10th Jan., 1974, addressed to the respondent transferee of First Appeal No. 1105/75 by the Secretary of BIDCO that at the instance of the Government of Gujarat, the ownership scheme was passed in the aforesaid extraordinary general meeting of the Company held on 24th March, 1969, and the selling cost for A type shed was Rs. 19,105 being the cost of the block besides Rs. 18,600 being the value of shares. It appears that each respondent transferee has given on leave and licence basis the pucca shed to M/s. Jyoti Ltd., one of the leading public limited companies manufacturing electrical motors, switches etc. at the net rate of Rs. 1,583 per month exclusive of all outgoings by way of charges for occupation with effect from 1st April, 1973. Each of the temporary sheds has been let out by the respective respondent transferee with effect from 1st Sept., 1973 to M/s. Ashok Engineering Works, in which husbands of the transferees before us are partners, for net rent of Rs. 500 per month under the two lease deeds of 29th Dec., 1973. Each of the respondent transferees thus could manage to earn Rs. 2,083 for each industrial shed with the result that the net annual yield which each of them realised was to the tune of about Rs. 24,996.

(3.) THE aforesaid notice initiating proceedings was first served on the respondent transferees as well as the licensee occupier on 5th July, 1973 as required under S. 269D(2)(a). Strangely, it was published in the Gazette of 7th July, 1973 as required under S. 269D(1) while it was published, as required under S. 269D(2)(b) in the office of the Competent Authority as well as in the locality by affixing a copy thereof to a conspicuous place in the office and a conspicuous part of the property as well as by the beat of drum on 3rd Dec., 1973. These dates have relevance since a serious grievance has been made about the validity of the proceedings. It appears that the respective respondent transferee on receipt of the notice on 5th July, 1973 sought for a fortnight's time for