SUBHKARAN CHOWDHURY AND OTHERS Vs. INSPECTING ASSISTANT COMMISSIONER OF INCOME-TAX ACQUISITION RANGE I AND OTHERS

JUDGEMENT

(1.) In this application, under art. 226 of the Constitution, the petitioners who claim to be the purchasers of premises No. 5, Narayan Prosad Babu Lane, Calcutta, at a price of Rs. 1,35,000, challenge the proceedings initiated under s. 269D(1) of the I.T. Act, 1961, for the acquisition of the said premises and notices issued thereunder. It appears that the petitioners had entered into an agreement with one Omrao Devi Tulsan for purchase of premises No. 5, Narayan Prosad Babu Lane, Calcutta, for a sum of sum of Rs. 1,35,000. The agreement was entered into on 14th July, 1972. On the 15th July, 1972, the petitioners had paid a sum of Rs. 15,000 by cheque as earnest money. On the 8th September, 1972, Sri S. K. Das Gupta had valued the said property at Rs. 1,32,000 on rental method as the said property was fully tenanted. On the 15th November, 1972, the petitioners registered the deed of conveyance in respect of the said property and obtained possession from the vendors. On 23rd April, 1973, the respondent No. 1 issued notice under s. 269D(1) of the I.T. Act, 1961, for the purpose of acquisition of the said property. Thereupon, the petitioners on 12th June, 1973, had filed objection to the said notice and the respondent No. 1 issued notice on the 9th/10th April, 1974, fixing the date of hearing of the objection on the 25th April, 1974. Thereafter, on the 19th/20th August, 1974, the respondent No. 1 issued a letter enclosing a copy of the valuation report made by the Valuation Officer for the department and fixing the date of hearing of the objection of the petitioner on the 29th August, 1974. The said valuation report is undated. The property was inspected, it appears, from the report by the said Valuation Officer on the 22nd May, 1974. In this application, under art. 226 of the Constitution, moved on the 6th September, 1974, the petitioners challenge the said proceedings and the initiation of the said proceedings.

(2.) There are various grounds taken in this petition. It was contended that Chap. XX-A containing ss. 269A to 269S was unconstitutional as these violated the fundamental rights of the petitioners and imposed unreasonable restriction on the petitioners right to hold and dispose property and also because these violated the provisions of art. 14 of the Constitution. In the view I have taken on the other aspect of the matter, upon which the petitioners have based their challenge to the impugned proceedings, it is not necessary, in my opinion, to express any view on this aspect of the matter. I may, however, incidentally mention that the Division Bench of the Delhi High Court in the case of Mahavir Metal Works P. Ltd. v. Union of India, 1974 95 ITR 197 , has upheld the constitutional validity of Chap. XX-A of the I.T. Act, 1961. It may also be mentioned that the Division Bench was of the opinion that presumptions both under cls. (a) & (b) of s. 269C(2) of the I.T. Act, 1961, are rebuttable. According to the Division Bench, s. 269E(3) clearly showed that the parties to the proceeding were not precluded from showing that the consideration for the transfer was duly stated in the instrument of transfer. The presumptions raised under s. 269C(2) were reasonable because justice required, according to the Division Bench, that a person who acquired property for a consideration less than the market value of the property should be required to displace the presumptions. In the purchaser was a genuine one, he should be able to rebut the presumptions. In this connection, it may be appropriate to refer to s. 269C, as it is relevant for the present purpose, which reads as follows :

(3.) This view of the Division Bench of the Delhi High Court was echoed by the Orissa High Court in the case of Basudev Sahu v. Union of India, 1976 102 ITR 572. As I have indicated before, it is not necessary for me to go into this aspect of the matter in any greater detail. But I only note that the Delhi High Court had upheld the constitutional validity because it found sufficient safeguard and it also found that sub-s. (2) of s. 269C raised rebuttable presumptions only and, therefore, that rebuttable presumption could be rebutted at the stage subsequent to the initiation of the proceedings. The importance of this aspect of the matter would be relevant in considering the present question before me. On behalf of the petitioners, it was contended that the condition precedent for the initiation of the proceedings under s. 269C had not been fulfilled. It is evident that before initiation of the proceedings under that Chapter, the competent authority, in this case the IAC, must record his reasons. Secondly, there must be material for recording such reasons. Thirdly, such materials must have a nexus for the competent authority believing that the immovable property of a fair market value exceeding Rs. 25,000 has been transferred by the transferor to the transferee for a payment or consideration which is less than the fair market value of the property. Then, there must be materials for the formation of the belief that the consideration for such transfer, as agreed to between the parties, had not been truly stated in the instrument of transfer with the object of either facilitating the reduction or evasion of liability of the transferor to pay tax under this Act in respect of any income arising from the transfer or for facilitating the concealment of any income or any money or other assets which had not been or which ought to have been disclosed by the transferee for the purpose of the Indian I.T. Act, 1922, or this Act or the W.T. Act, 1957. It is also necessary that no proceedings shall be initiated unless the authority has reason to believe and there are materials for such belief to be formed that the market value of the property exceeded the apparent consideration. Now, in this case, according to the petitioners, there was no material for the fulfilment of the conditions precedent required. The recorded reasons have been annexed to the petition which only comply with terms of the section. But the reasons have really been explained in the affidavit filed on behalf of the respondents by one Sailesh Kumar Chakraborty, the IAC. In para. 10 of the said affidavit he has stated, inter alia, as follows :