COMMISSIONER OF INCOME-TAX Vs. PREM NARAIN TANDON

JUDGEMENT

(1.) The Commissioner of Income-tax has filed this appeal under Section 269H of the I.T. Act, 1961, against the order of the Income-tax Appellate Tribunal, Allahabad, dated May 21, 1976, setting aside the order of the competent authority, directing the acquisition of the property in dispute under Chap. XX-A of the I.T. Act, 1961.

(2.) Briefly, the facts giving rise to this appeal are that the Assistant Commissioner, Income-tax, competent authority, appointed under Section 269A of the Act, received information that House No. 117-N/73 Kakadeo, Kanpur, was transferred by Smt. Kamini Devi, wife of Shri K. N. Mehotra, to Sri Prem Narain Tandon for consideration of rupees 49,500. After obtaining the report of the official valuer, the competent authority initiated proceedings and issued notice to the transferor and the transferee as well as to the tenant occupying the house to show cause as to why the property should not be acquired under the provisions of Chap. XX-A of the Act. The notice was issued as the competent authority had reason to believe that the property was sold by the transferor to the transferee for an apparent consideration which was less than the fair market value of the property and the consideration for such transfer as agreed to between the parties was not truly stated in the instrument of transfer with the object of facilitating evasion of liability of the transferor to pay tax in respect of the income arising from the transfer by the transferor for the purpose of income-tax. The transferor and the transferee both appeared and filed objections. The transferor, Smt. Kamini Devi, pleaded that 3/4th of the house in dispute was occupied by a tenant, who had not been paying rent and a suit had been going on between her and the tenant. Her husband was old and disabled. She wanted to sell the property and move to another locality. She got an offer from the transferee, Prem Narain Tandon, for Rs. 54,000, which was accepted, and on August 5, 1972, parties entered into an agreement for sale and the transferor received a sum of Rupees 10,000 as advance sale money from the transferee. After obtaining permission of the District Magistrate she executed the sale deed in August, 1973. She asserted that the price received by her was the fair market price of the property and there was no attempt to make any concealment or underestimate the price.

(3.) Prem Narain Tandon, the transferee, also contested the proceedings. He challenged the report of the departmental valuer and asserted that if the market price of the property was determined on rent capitalisation basis it would be found that the sale consideration represented the fair market price. He relied upon the report of one Shri H. C. Kaushal, an approved valuer, who had assessed the value of the house before the sale. According to his report the value of the property before the transfer was Rs. 38,412 only. Sri Tandon further pleaded that the sale money paid by him was the fair market value of the property. He stated that the property had been let out to a tenant since 29th November, 1971, on monthly rent of Rs. 225 and the tenant was not paying the rent. The property had been assessed by the Nagar Mahapalika, Kanpur, in the quinquennial assessment for 1973-74 to 1978-79, on the annual letting value of Rs. 3,300 and the house tax and water tax was assessed at Rs. 288.75 and Rs. 206.25, respectively.