NARPATRAJ BESARMAL MEHTA Vs. BAIDYA A COMPETENT AUTHORITY

JUDGEMENT

(1.) BY this petition under Art. 226 of the Constitution of India, the petitioners have challenged the jurisdiction of the Competent Authority to issue notice dt. 14th July, 1987 under S. 269D(1) and the jurisdiction of Valuation Officer to issue notice dt. 23rd Sept., 1987 under S. 269L of the IT Act, 1961.

(2.) THE petitioners purchased the suit property for a sum of Rs. 30,00,000 under an agreement of sale dt. 16th July, 1986. The property comprised of a building standing on or about 6,377 sq. mts. of land. It was tenanted and was purchased on the "as is where is" basis. Form No. 37EE was filed by the petitioners and sellers before the appropriate authority as required under S. 269AB(2) of the IT Act. Form No. 37 I was also filed on 15th Oct., 1986. A certificate under S. 269UL(3) of the IT Act, dt. 5th Feb., 1987 was issued under letter dt. 16th Feb., 1987 by the appropriate authority to the effect that the authority had no objection to the transfer of the property to the petitioners for a sum of Rs. 30,00,000. Some time thereafter, the petitioners received a notice dt. 14th July, 1987 under S. 269D(1) from the IAC requiring the petitioners to show cause why the proceedings to acquire the suit property under S. 269C should not be initiated. On 23rd Sept., 1987, the District Valuation Officer issued a notice under S. 269L. At this stage the petitioners filed the present petition.

(3.) ONE of the conditions necessary for the assumption of jurisdiction under S. 269D/269C is that apparent consideration is less than the fair market value of the property. No material in connection therewith is indicated in the impugned notice which could even prima facie show that the market value of the suit property was more than Rs. 30,00,000 as on the date of the agreement of sale. In the absence of affidavit in reply on behalf of the Department, no material has been made available to this Court on the basis of which it could examine whether the material, if any, could justify the Competent Authority's even a prima facie belief that apparent consideration was less than the fair market value of the property in question. This condition for assumption of the jurisdiction under s. 269D/269C is therefore not satisfied. Another condition for assumption of jurisdiction under S. 269D/269C is that the Competent Authority at least prima facie holds that the consideration agreed between the parties is not shown truly in the sale agreement with the object of facilitating the reduction or evasion of the liability of the transferor or facilitating the concealment of any income or assets of the transferee or both. In the present case, the Competent Authority has kept the words 'and/or' between the two objects of understatement of consideration. This indicated that the Competent Authority had not applied his mind at all as to whether the understatement was with the first object or the second object or both the objects. A similar issue had come up before a Division Bench of this Court in the case of All India Reporter Ltd. vs. Competent Authority (1986) 162 ITR 697 : (Bom) TC3R.503. It was held that in a case where a Competent Authority had not addressed itself to the question whether the object of understatement was the evasion of tax in the hands of the transferor or transferee or both, the proceedings required to be quashed for non application of mind. Following the aforesaid judgment, Bharucha J. also took the same view in his judgment dt. 9th Aug., 1989 in W.P. No. 838 of 1983. [Carmichael Shikarkunj Co operative Housing Society Ltd. vs. Union of India (1991) 189 ITR 441 (Bom) : TC3R.611]. Similar view was taken by this Court in the case of Malabar Hill Co operative Housing Society Ltd. vs. Union of India & Anr. (1990) 86 CTR (Bom) 4 : (1990) 184 ITR 216 (Bom) : TC3R.249. In view thereof, it has to be held that the second condition for assumption of jurisdiction is also not satisfied. Thus, the Competent Authority did not assume valid jurisdiction under S. 269D/269C on this ground too.