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Competent Authority,... v. Smt. Bani Roy Chowdh...
Factual and Procedural Background
Respondent No. 1 (Smt. Bani Roy Chowdhuri) purchased two plots (Nos. 29.NA(E.P) and 29.NA(W.P), 7 cottas) from the Life Insurance Corporation of India (LIC) by a registered conveyance dated 11 December 1972 at Rs. 5,000 per cotta. Hindusthan Building Society Ltd. appeared in the conveyance as a confirming party. The conveyance had been preceded by an agreement for sale dated 25 January 1972 between respondent No. 1 and Hindusthan Building Society Ltd., with LIC's approval. After purchase, respondent No. 1 improved the land and commenced construction.
On 18 June 1973 the competent authority issued notices under S. 269D(1) of the Income-tax Act, 1961 stating a reason to believe that the immovable property had been transferred for an apparent consideration less than fair market value, that the FMV exceeded the apparent consideration by more than 15%, and that the consideration had not been truly stated in the instrument of transfer with the object of tax evasion or concealment under the Indian Income-tax Act, 1922 or the Wealth Tax Act, 1957. Notices were issued to LIC, Hindusthan Building Society Ltd., and respondent No. 1 pursuant to S. 269C for initiation of acquisition proceedings.
Respondent No. 1 filed written objections and a reference was made under S. 269L(1)(a) to a valuation officer. She produced the conveyance to the valuation officer. After hearings and an adverse result before the competent authority, respondent No. 1 filed a writ petition under Article 226 and obtained Rule Nisi. The learned Judge (R.M. Datta, J.) made the Rule Nisi absolute (quashed the impugned notices). The Revenue appealed.
Legal Issues Presented
- Whether the presumption contained in sub-section (2) of S. 269C of the Income-tax Act, 1961 (particularly clause (b)) is applicable at the stage when the competent authority forms his "reason to believe" under sub-section (1) of S. 269C (i.e., before proceedings are formally initiated by issuance of notices).
- Whether the competent authority could lawfully rely on that presumption and other materials available to him at the pre-initiation stage to form his belief, especially where a confirming party (Hindusthan Building Society Ltd.) was treated as a transferor and where a statutory body (LIC) was a transferor.
Arguments of the Parties
Appellant (Revenue) — Contentions
- When the competent authority considers the question of issuing the notice under S. 269C(1), that consideration itself is a "proceeding" within the meaning of S. 269C(2), and therefore the competent authority is entitled to rely on the presumption in clause (b) of S. 269C(2).
- Reliance was placed before the Court on Mahavir Metal Works P. Ltd. v. Union of India (95 ITR 197, Delhi High Court) where the competent authority obtained a valuation before forming his belief and the presumption under S. 269C(2) was said to have arisen.
Respondent No. 1 (Smt. Bani Roy Chowdhuri) — Contentions
- There was no material before the competent authority sufficient for the formation of his belief under S. 269C(1).
- The competent authority was not legally entitled to rely on the presumption in sub-s. (2) of S. 269C at the pre-initiation stage.
- The competent authority wrongly proceeded on the assumption that Hindusthan Building Society Ltd. was a transferor whereas it was only a confirming party; that erroneous assumption vitiated formation of belief and the impugned notices.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Mahavir Metal Works P. Ltd. v. Union of India, 95 ITR 197 (Delhi High Court) | Counsel for the Revenue relied on it to support the proposition that the presumption under S. 269C(2) can arise where the competent authority, before issuing the notice, obtains a valuation showing FMV exceeds stated value. | The Court noted reliance on this decision but observed that it did not appear the specific point (applicability of the presumption at the pre-initiation stage) was squarely argued or decided there; the decision was not treated as controlling authority on the central point in this case. |
| Sarabhai M. Chemicals Pvt. Ltd. v. P.N. Mittal, 126 ITR 1 (Gujarat High Court) | Held that the presumption under sub-s. (2) of S. 269C is not available at any stage prior to initiation of proceedings and issue of notice under S. 269C(1). | The Court cited this decision as supporting the view that the presumption cannot be invoked at the stage of forming belief; it aligns with the Court's conclusion in the present case. |
| Subhkaran Chowdhury v. Inspecting Assistant Commissioner of Income-tax, 118 ITR 777 (Calcutta Bench; Sabyasachi Mukharji, J.) | Single Bench decision taking the view that the presumption in S. 269C(2) is not applicable at the pre-initiation stage when the competent authority forms his belief. | Used as supporting precedent indicating the Court's own earlier view in similar matters. |
| Tube Mill (India) P. Ltd. v. Inspecting Assistant Commissioner of Income-tax, 122 ITR 12 (M.N. Roy, J.) | Single Bench decision consistent with the view that S. 269C(2) presumption does not apply before proceedings are initiated. | Cited as part of a line of single Bench decisions corroborating the Court's holding on the inapplicability of the presumption at the belief-formation stage. |
| Rai Bahadur G.V. Swaika Estate P. Ltd. v. M.N. Tewari, 126 ITR 310 (Chittatosh Mookerjee, J.) | Held that "proceedings" in S. 269C(2) refers to judicial proceedings under the Act and not pre-initiation administrative steps. | The Court relied on this reasoning to conclude that S. 269C(2) could not be used by the competent authority in forming a pre-initiation belief under S. 269C(1). |
| Commissioner of Income-tax West Bengal II, Calcutta v. Madho Properties Ltd., Income Tax Appeals Nos. 9 & 10 of 1976 (Division Bench: D.K. Sen & C.K. Banerji, JJ.), disposed 12 Sept 1980 | Division Bench expression of a view similar to the single Bench authorities that the presumption under S. 269C(2) is not applicable at the stage of forming the belief under S. 269C(1). | Referenced as recent Division Bench support for the proposition that the presumption is inapplicable prior to initiation of formal proceedings; the Court treated the line of authorities as consistent with its conclusion. |
Court's Reasoning and Analysis
The Court identified the core statutory structure and the two-stage character of sub-s. (1) of S. 269C:
- Stage 1 (formation of belief): The competent authority must form a subjective "reason to believe" on four matters (FMV > Rs. 25,000; apparent consideration less than FMV by required percentage; consideration as agreed has not been truly stated; such untrue statement made with object of tax evasion or concealment). This stage is preparatory and administrative: the authority forms belief on available materials without having an opportunity to hear parties or receive evidence.
- Stage 2 (initiation of proceedings): If the authority has reason to believe these matters, he records reasons and may initiate formal proceedings under Chapter XXA; once proceedings are initiated, the authority proceeds judicially — objections can be filed, valuation obtained, evidence adduced and the authority reaches findings.
On the question whether the presumption in sub-s. (2) of S. 269C (clauses (a) and (b)) is available at the belief-formation stage, the Court reasoned as follows:
- The phrase "any proceedings under this Chapter" in sub-s. (2) must be read to mean proceedings that are actually under way — i.e., the judicial/administrative proceedings that follow initiation — not the preliminary preparatory act of forming a belief. Therefore, the presumption in sub-s. (2) applies to proceedings after initiation, not to the pre-initiation belief-formation stage.
- Applying the presumption at the formation-of-belief stage would render the subsequent statutory processes (filing objections, determination of valuation, hearing of evidence and final decision) meaningless or nugatory. For example, clause (a) of sub-s. (2) supplies conclusive proof when FMV exceeds apparent consideration by 25%; if that could be conclusively applied at the belief stage, it would preempt the statutory evidentiary process.
- The presumption in clause (b) (that the consideration has not been truly stated unless contrary is proved) likewise presupposes that fair market value can be determined on evidence adduced in proceedings; FMV cannot properly be the subject matter of a mere pre-initiation belief.
- In the facts of the case, the competent authority recorded a belief (per Annexure 'A') that the FMV was Rs. 1,12,000 and that the apparent consideration was Rs. 35,000. If the presumption were applied at that stage, the competent authority's belief would amount to conclusive proof (absurdly short-circuiting the procedure); this reinforces that the presumption is inapplicable at the pre-initiation stage.
- The Court considered the special character of transfers involving a statutory body (LIC). It observed that where the transferor is the Government or a statutory body, collusion to understate consideration (the evil aimed at by the provision) is implausible; applying the presumption in such a situation would lead to irrational results — the idea that LIC would permit an untrue conveyance to evade tax is untenable.
- Additionally, the competent authority mistakenly treated Hindusthan Building Society Ltd. as a transferor when it was a confirming party; the authority failed to appreciate that confirming parties commonly join to perfect title and are not necessarily transferors. This error undermined the authority's stated basis for belief.
- The Court reviewed precedents (both single Bench and Division Bench decisions) that supported the proposition that the presumption in S. 269C(2) is not available before initiation of proceedings; the Court found that consistent authority and accepted that line of reasoning.
Taking these points together, the Court concluded that the competent authority acted illegally and without jurisdiction in issuing the impugned notices because (a) he relied on the presumption at a stage when it was inapplicable, and (b) he overlooked that LIC was the transferor and that Hindusthan Building Society Ltd. was merely a confirming party.
Holding and Implications
Holding: The judgment of the learned Judge (R.M. Datta, J.) was affirmed and the appeal by the Revenue was dismissed. The impugned notices issued by the competent authority were quashed as illegal and without jurisdiction.
Implications and direct consequences:
- The Rule Nisi obtained by respondent No. 1 was made absolute; the impugned acquisition notices were quashed.
- In view of the facts, the Court ordered that there would be no costs.
- The Revenue's oral prayer for a certificate to appeal to the Supreme Court under Article 234A of the Constitution of India was refused; the Court declined to grant the certificate.
- The Court's decision follows and reinforces a line of authorities holding that the presumption in S. 269C(2) cannot be invoked by the competent authority at the pre-initiation "belief" stage; the opinion emphasizes that the statutory process of filing objections, valuation and adducing evidence must not be circumvented by applying the presumption prematurely. The Court did not purport to create a new rule contrary to existing authorities but affirmed the applicability of the two-stage analysis and the limitation on the use of the presumption.
M.M Dutt, J.:— In this appeal, the Revenue has challenged the propriety of the judgment of R.M Datta J. whereby the learned Judge has made the Rule Nisi obtained by the respondent No. 1, Smt. Bani Roy Chowdhuri, on her application under Article 226 of the Constitution, absolute.
2. By a registered conveyance dated December 11, 1972, the respondent No. 1 purchased from the respondent No. 4, the Life Insurance Corporation of India, two plots of land being plots Nos. 29.NA(E.P) and 29.NA(W.P) of Block B of the New Alipore Development Scheme, measuring 7 cottas, at Rs. 5000/- per cotta. In the conveyance, the respondent No. 5, Hindusthan Building Society Ltd., was confirming party. The said Society having been the controlled business of the Hindusthan Co-operative Insurance Society Ltd., its assets and liabilities were transferred to and vested in the Life Insurance Corporation of India on the appointed day, namely, September 1, 1956 by virtue of S. 7 of the Life Insurance Corporation Act, 1956. The said conveyance was preceded and by an agreement for sale dated January 25, 1972 entered into between the respondent No. 1 and the Hindusthan Building Society Ltd., with the approval of the Life Insurance Corporation of India. Immediately after such purchase, the respondent No. 1 had improved the land and started construction thereon and also on a contiguous one cotta plot of land purchased by her subsequently from the Life Insurance Corporation of India.
3. The respondent No. 1 received two notices, both dated June 18, 1973, issued under S. 269D(1) of the Income-tax Act, 1961 by the competent authority wherein it was stated, inter alia, that the competent authority had reason to believe that the immovable property, namely, the said two plots of land, having a fair market value exceeding Rs. 25,000/- had been transferred for an apparent consideration which was less than the fair market value of the property, that the competent authority had also reason to believe that the fair market value of the property exceeded the apparent consideration thereof by more than 15% of such apparent consideration, and that the consideration for such transfer as agreed to by and between the transferor and the transferee had not been truly stated in the said instrument of transfer with the object of facilitating the reduction or evasion of liability of the transferor to pay tax in respect of an income arising from the transfer and/or facilitating the concealment of any income or any monies or other assets which had not been paid or which ought to have been disclosed by the transferee for the purpose of Indian Income-tax Act, 1922 or the Wealth Tax Act, 1957. The competent authority, as stated in the said notices, initiated proceedings in pursuance of S. 269C of the Income-tax Act, 1961 by issuing the said notices to the Life Insurance Corporation of India, Hindusthan Building Society Ltd., and to the respondent No. 1, Sm. Bani Roy Chowdhury. Both the Life Insurance Corporation of India and the Hindusthan Building Society Ltd., were described as transferors and the respondent No. 1 was described as the transferee. Further, it was stated that objections, if any, to the acquisition of the said property should be made within the time as specified in the notices.
4. The respondent No. 1, Sm. Bani Roy Chowdhury, filed a written objection to the impugned notices and the proposed acquisition of the said two plots. Thereafter, a reference was made to the valuation officer under S. 269L(1)(a) of the Income-tax Act, 1961 for valuing the property. The respondent No. 1 produced the conveyance before the valuation officer. There was a hearing by the competent authority, but nothing in favour of the respondent No. 1 having resulted, she moved they writ petition and obtained the Rule Nisi out of which this appeal arises.
5. The Revenue entered appearance in the Rule Nisi and opposed the same by filing an affidavit-in-opposition sworn by the Inspecting Assistant Commissioner (Acqn) Range— II, the competent authority. Annexure ‘A’ to the affidavit-in-opposition is a copy of the reasons recorded by the competent authority before he issued the impugned notices. The competent authority relied on certain materials and observed that he was convinced that the fair market value of 7 cottas of land purchased by the respondent No. 1 could not be less than Rs. 1,12,000/- even if valued at Rs. 16,000/- per cotta. In recording its reason to believe that the consideration for the transfer as agreed to between the transferor and the transferee has not been truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of the liability of the transferor to pay tax etc., the competent authority relied on the presumption under clause (b) of sub-s. (2) of S. 269C of the Income-tax Act, 1961.
6. At the hearing of the Rule Nisi, it was inter alia, contended on behalf of the respondent No. 1 that there was no material before the competent authority for the formation of his belief under S. 269C(1), and that the competent authority was not legally entitled to rely on the presumption under sub-s. (2) of S. 269C. Further, it was contended that the competent authority having proceeded on the assumption that the Hindusthan Building Society Ltd., was also one of the transferors, though the said society was only a confirming party, such erroneous assumption vitiated the formation of his belief and, consequently, the impugned notices.
7. The learned Judge, after considering the facts and circumstances of the case and the submissions made on behalf of either party came to the finding, inter alia, that the competent authority took into its consideration any and every materials that were available to him without even considering that the same were not materials for the purpose of arriving at the correct and fair market value of the property. The learned Judge observed that the competent authority completly failed to consider the fact that a party usually joins in a conveyance as confirming party not in the capacity of transferor, but mainly for the purpose of making out a good marketable title to the property so that in future there might not be any difficulty in the matter of passing title to the property to the vendee. Further, it was observed that if the competent authority had appreciated that fact, he might not have any reason to believe that the Life Insurance Corporation of India could possibly have tried to evade the tax by entering into such an agreement with the respondent no. 1 and might have reached a different conclusion. As to the presumption under the provision of sub-s. (2) of S. 269C, the learned Judge took the view that the said provision related to makers of proof for the purpose of simplifying the law of evidence in so far as the competent authority was concerned. Further, the expression “any proceedings” cannot, in the opinion of the learned Judge, include the administration stage when the competent authority has to arrive at independent reason to believe that proceedings ought to be initiated, inter alia, for the reason that the transferor and transferee agreed to give untrue consideration in the instrument of transfer with the object of evasion of tax. Accordingly, the learned Judge held that as the presumption did not apply, there was no material before the competent authority for the formation of the belief that the consideration as agreed to between the transferor and the transferee was not truly stated in the instrument of transfer. In the aforesaid view of the matter, the learned Judge quashed the impugned notices and made the Rule Nisi absolute. Hence this appeal by the Revenue.
8. The principal point that is involved in this appeal is as to the applicability of the presumption under sub-s. (2) of S. 269C of the Income-tax Act, 1961 at the stage when the competent authority has to form his belief under sub-s. (1) of S. 269C of the Act. It may be stated here that Chapter XXA containing Ss. 269A to 269S was incorporated in the Income-tax Act 1961 by the Taxation Laws (Amendment) Act, 1972. The provisions of Chapter XXA relate to the acquisition of immovable properties in certain cases of transfer to counteract the evasion of tax. It is urged on behalf of the Revenue that when the competent authority considers the question of issuing the notice, it is a proceeding as contemplated by S. 269C(2) of the Act and, as such, the competent authority is entitled to rely on the presumption under clause (b) of S. 269C(2). On the other hand, the contention of the respondent No. 1 is that the competent authority is not so entitled, for there is no proceeding before the notice is served on the parties. In order to consider the point, namely, whether prior to the issuance of the notice there is a proceeding or not for applying the presumption, it is necessary to refer to the provision of S. 269C which reads as follows:—
“269C. Immovable property in respect of which proceedings for acquisition may be takeu—(1) Where the competent authority has reason to believe that any immovable property of a fair market value exceeding twenty five thousand rupees has been transferred by a person (hereafter in this Chapter referred to as the transferor) to another person (hereafter in this Chapter referred to as the transferee) for an apparent consideration which is less than the fair market value of the property and that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with the object of.
(a) facilitating the reduction or evasion of the liability of the transferor to pay tax under this Act in respect of any income arising from the transfer; or
(b) facilitating the concealment of any income or any monies or other assets which have not been or which ought to be disclosed by the transferee for the purpose of the Indian Income-tax Act, 1922 (II of 1922) or this Act or the Wealth Tax Act, 1957 (27 of 1957);
the competent authority may, subject to the provisions of this Chapter, initiate proceedings for the acquisition of such property under this Chapter.
Provided that before initiating such proceedings, the competent authority shall record his reasons for doing so:
Provided further that no such proceedings shall be initiated unless the competent authority has reason to believe that the fair market value of the property exceeds the apparent consideration therefor by more than fifteen per cent of such apparent consideration.
(2) In any proceedings under this Chapter in respect of any immovable property.
(a) Where the fair market value of such property exceeds the apparent consideration therefor by more than twenty five per cent of such apparent consideration, it shall be conclusive proof that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer;
(b) Where the property has been transferred for an apparent consideration which is less than its fair market value, it shall be presumed unless the contrary is proved, that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with such object as is referred to in clause (a) or clause (b) of sub-s. (1).”
9. Under sub-s. (1) of S. 269C, before initiating proceedings for the acquisition of any immovable property which has been transferred, the competent authority must have reason to believe in regard to four matters, namely, (i) the immovable property has a fair market value exceeding Rs. 25,000/-, (ii) the apparent consideration is less than 15% of such fair market value, (iii) the consideration as agreed to between the parties has not been truly stated in the instrument of transfer and (iv) such untrue statement has been made with the object of evasion of taxes as mentioned in clauses (a) and (b). Sub-section (1) consists of two stages—the first one is for formation of belief by the competent authority and the second one is for the initiation of proceedings. The second stage is dependent on the first. In other words, if there be no reason to believe in regard to the four matters specified above, there is no question of initiation of proceedings. It, therefore, follows that in the first stage there is no proceeding, but it relates to preparation for the initiation of proceedings. The boundary between the first stage and the second stage is the existence of materials on the basis of which the competent authority may form his belief and, in order to reach the second stage for the purpose of initiating proceedings for acquisition, the boundary has to be crossed. The presumption under sub-s.(2) of S. 269C can be made in any proceedings under Chapter XXA under which S. 269C has been placed. So the presumption is applicable to any proceeding that may be initiated at the second stage under sub-s. (1) of S. 269C. It will have no application at the first stage when the competent authority forms his belief on the basis of materials available to him for the simple reason, as stated already, that the first stage is preparatory to the initiation of a proceeding which is yet to be initiated. Really, in the first stage, the competent authority discharges some administrative functions in the matter of formation of belief on the subjective satisfaction on the basis of certain materials. When, however, a proceeding is initiated, he proceeds judicially.
10. We may consider the question from another point of view. Under sub-s. (1) of S. 269C, the competent authority must have reason to believe certain facts as mentioned in sub-s. (1). The formation of belief must be on the basis of some materials the sufficiency of which cannot be questioned. The competent authority has not to come to any firm finding about any of the matters under sub-s. (1) on evidence. He has only to form his belief on materials that may be available to him for initiating proceedings for acquisition. At that stage, he is alone and has no opportunity to hear the transferor or the transferee or to receive any evidence. It is only after the service of notice, the transferor or the transferee files objections, valuation of the property is made and evidence is adduced. The competent authority, after considering the evidence as to the fair market value of the property, comes to a finding about such market value. His finding may be in favour of the parties contrary to the formation of his belief. Under clause (a) of sub-s. (2) of S. 269C, if the fair market value of the property exceeds by 25% of the apparent consideration, it shall be conclusive proof that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer. So far as clause (b) is concerned the presumption of untrue statement of consideration, as agreed to between the parties, in the instrument of transfer, will apply if the fair market value exceeds the apparent consideration. In the instant case, it appears from annexure ‘A’ to the affidavit-in-opposition containing the recorded reasons of the competent authority, that he had reason to believe that the property had been transferred for an apparent consideration of Rs. 35,000/- which was less than the fair market value of Rs. 1,12,000/-. It is obvious that the fair market value of the property believed by the competent authority to be Rs. 1,12,000/- exceeded on the face of it by 25% of the apparent consideration of Rs. 35,000/-. If the contention of the Revenue that the stage when the competent authority forms his belief under sub-s. (1) is a proceeding within the meaning of expression ‘any proceeding under this Chapter’ occurring in sub-s. (2), is accepted, then such belief of the competent authority will be conclusion proof that the consideration as agreed to between the parties has not been truly stated in the instrument of transfer, which is absurd and will render the provisions for filing objections, determination of valuation and decision of the competent authority meaningless and nugatory. While clause (a) provides for conclusive proof, clause (b) raises a presumption. If for the purpose of clause (a) of sub-s. (2), the stage at which the competent authority forms his belief under sub-s. (1) is not a proceeding as contemplated by sub-s. (2), it will be quite unreasonable to think that it is a proceeding for raising the presumption under clause (b) of sub-s. (2). The presumption under clause (b) will arise if the fair market value of the property exceeds the apparent consideration. The fair market value has to be determined on evidence including that may be adduced by the parties and cannot, in our opinion, be the subject matter of the belief of the competent authority for the purpose of raising the presumption under clause (b).
11. Now we may consider the decisions cited at the Bar. Mr. Balai Paul, learned Counsel for the Revenue has placed reliance on a decision of the Delhi High Court in Mahavir Metal Works P. Ltd. v. Union of India, 95 ITR 197. In that case, the competent authority before forming his belief got the property valued by a values. According to that valuation, the fair market value exceeded the stated value. It was observed that the presumption under S. 269C(2) that the consideration agreed to between the parties had not been truly stated in the instrument of transfer arose. It does not, however, appear that the point was specifically raised and argued in the case.
12. On the other hand, Mr. Pranab Paul, learned Counsel for the respondent No. 1, has cited before us a decision of the Gujarat High Court and a few decisions of this Court. In Sarabhai M. Chemicals Private Ltd. v. P.N Mittal, 126 ITR 1, the Gujarat High Court has taken the same view as we have, that the presumption under sub-s. (2) of S. 269C is not available at any stage prior to the initiation of proceedings and issue of notice under S. 269C(1) of the Income-tax Act, 1961. The same view has been taken in some single Bench decisions of this Court - Subhkaran Chowdhury v. Inspecting Astistant Commissioner of Income-tax, 118 ITR 777 (Sabyasachi Mukharji, J.), Tube Mill (India) P. Ltd. v. Inspecting Assistant Commissioner of Income-tax, 122 ITR 12 (M.N Roy, J.) and Rai Bahadur G.V Swaika Estate P. Ltd. v. M.N Tewari 126 ITR 310 (Chittatosh Monkerjee, J.). In the last mentioned case, it has been observed by Mookerjee J. that the word “proceedings” in S. 269C(2) refers to judicial proceedings under the Act and not pre-initiation administrative steps taken by the competent authority and the competent authority cannot, therefore, rely on S. 269C(2) for forming his belief under S. 269C(1). Recently, a Division Bench of this Court consisting of D.K Sen and C.K Banerji, JJ. has also expressed a similar view in Commissioner of Income-tax West Bengal II, Calcutta v. Madho Properties Ltd., Income Tax Appeals Nos. 9 and 10 of 1976 disposed of on September 12, 1980. Thus it appears that this Court has persistently taken the view that the presumption under clause (b) of S. 269C(2) of the Act is not applicable to the stage when the competent authority forms his belief under sub-s. (1) of S. 269C, for there is no proceeding at that stage.
13. Under sub-s. (1) of S. 269C of the Act, the competent authority has, inter alia, to form his belief that the consideration as agreed to between the parties has not been truly stated in the instrument of transfer. Such untrue statement is obviously due to the collusion of the transferor and the transferee. Where the transferor or the transferee is the Government or a statutory body there cannot be any scope for such collusion between the parties. The untrue statement about the agreed consideration is made only for the purpose of evasion of tax. When Government or any statutory body is a party to the transfer, the question of evasion of tax does not arise. Now, if the presumption under clause (b) of S. 269C(2) is applied, it will mean that the untrue statement regarding the agreed consideration is made also at the instance of the Government or the statutory body, which is absurd. In the instant case, the Life Insurance Corporation of India is the transferor and it is impossible to think that it would allow the respondent No. 1 to make an untrue statement in the conveyance regarding the consideration as agreed to between them. The competent authority had, therefore, no justification for his belief that the consideration agreed to between the parties had not been truly stated in the instrument of transfer. The competent authority completely overlooked the fact that Hindusthan Building Society Ltd. was merely a confirming party and not one of the transferors and, it was because of that, he assumed that the agreed consideration had not been truly stated in the conveyance. The competent authority also failed to notice that the property in question, namely, the said two plots, was the property of the Life Insurance Corporation of India and not of the said Society. Be that as it may, we are of the opinion, that the competent authority issued the impugned notices illegally and without jurisdiction and the learned Judge was perfectly justified in quashing the same.
14. For the reasons aforesaid, the judgment of the learned Judge is affirmed and this appeal is dismissed. In view of the facts and circumstances of the case, there will be no order for costs.
15. Mr. Ajit Sengupta, learned Counsel appearing on behalf of the Revenue prays for a certificate for appeal to the Supreme Court under Article 234A of the Constitution of India. In our opinion, in view of the fact that the Life Insurance Corporation of India was the transferor there could not be any question of untrue statement about the agreed consideration in the instrument of transfer on the basis of which the impugned notices were issued and, accordingly, we are not inclined to grant the certificate for appeal as prayed for. The oral prayer for a certificate is disallowed.
16. A.K Sarkar, J.:— I agree.
Appeal dismissed.
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