Mani Singh Avtar Singh v. Inspecting Asst. Commr. Of Income Tax Acquisition Range

1. This is an appeal under section 269h of the i.t. act, 1961, against the order of the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, dated July 31, 1976, preferred by two brothers, Mani Singh and Avtar Singh, whose purchased residential house was acquired under Chapter XX-A of the Act.

2. Broad facts giving rise thereto are these : A house numbered in the municipal registers as B-XX/693 in Gurdev Nagar, Ludhiana, stands built on khasra Nos. 68/20-4 and 20-5 in khata 394/374 terf karabars. The site thereunder was purchased by one Santokh Singh Grewal in 1964, and the house was built thereon in 1965, totally costing Rs. 40,000. In December, 1972, the house was sold to the present appellants for an apparent consideration of Rs. 80,000. On April 16, 1973, the appellants mortgaged with possession one-half share thereof with one Sudesh Kumar Thapar for an apparent consideration of Rs. 45,000. The Competent Authority, appointed for the purpose under Chapter XX-A of the Act, issued a notice of acquisition on June 13, 1973, under Section 269D(1), which was served on the appellants on June 15, 1973. Thus commenced the proceedings.

3. The house in question is a single storeyed building. It is built on a plot of land measuring 800 square yards. Its covered area is 2,500 square feet. The appellants objected to the acquisition and maintained that the fair market value of the property in question did not exceed the apparent consideration and, in any case, it did not exceed 15 per cent, of the consideration paid. In support thereof, they filed a report prepared by Shri Chandan Singh Kang, determining the fair market value of the property at Rs. 78,293. Shri Kang valued the land at Rs. 36,800, i.e., at the rate of Rs. 46 per square yard and the superstructures at Rs. 41,493. The departmental Valuation Officer was asked to determine the value thereof, taking into account the report given by Shri Kang. The departmental Valuation Officer valued the land at Rs. 48,000, i.e., at the rate of Rs. 60 per square yard and the superstructures at Rs. 55,713--total Rs. 1,03,713.

4. The report of the departmental Valuation Officer was made available to the appellants as also to the transferor and the mortgagee-with-possession. Since the departmental Valuation Officer had put the valuation of the property far in excess of 20 per cent, of the apparent consideration, it was taken as proved that the consideration reflected had not truly been stated in the instrument of transfer. After enquiry, the Competent Authority, vide order dated March 30, 1976, ordered acquisition of the property in question at the price suggested by the departmental Valuation Officer, i.e., for Rs. 1,03,713, and thus recorded a finding that the fair market value of the property had exceeded the apparent consideration by more than 25 per cent, thereof. The appellants took the matter in appeal before the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, but the order of the Competent Authority was confirmed with a slight modification inasmuch as the cost of the superstructure was reduced from Rs. 55,713 to Rs. 52,000. The cost of the land at Rs. 48,000 was maintained. The total value of the house in question thus worked out to Rs. 1,00,000. By such reduction, as the difference found was not more than 25 per cent., the Tribunal concluded that there would thus be no conclusive proof against the assessee under Section 269C(2)(a) and for the said difference, there was a rebuttable presumption created against the appellants but, on the material before it, the presumption had not been rebutted.

5. The learned counsel for the appellants, assailing the order of the Tribunal as also that of the Competent Authority, has confined primarily to the price of the plot and maintained that the finding, in that regard, recorded by the Tribunal, was perverse and based on irrelevant considerations. In addition thereto, it was asserted that the Tribunal had misread documentary evidence, and had ignored important evidence and other aspects of the case, proceeding merely on conjectures and surmises. On the other hand, the learned counsel for the Revenue maintained that the finding recorded by the Tribunal was one of fact and, since no question of law arose, no relief could be granted in the appeal.

6. The multifold contentions of the learned counsel for the appellants may now well be summarized. The first one is with regard to the doubt entertained by the Tribunal about the location of the properties, instances of which had been quoted by Shri Kang in his valuation report. The Tribunal, in paragraph 14 of the order under appeal, had observed that the transferees' valuer did not even mention that the four instances given by him were in respect of Gurdev Nagar (where the house in question is admittedly situated). It is pointed out that the Tribunal did not give a positive finding that the said four instances were not in respect of Gurdev Nagar. On the other hand, it was pointed out from paragraph 8 of the order of the Competent Authority that it was undisputed that the four instances of sales of plots of land, referred to by Shri Kang, were in Gurdev Nagar. A comparison had been drawn by the Competent Authority of the price situation in Gurdev Nagar and Sarabha Nagar. This seems to us plain that the Tribunal put the undisputed matter in doubt as a first step to demolish the report of Shri Rang and, in our view, not on any sound legal reasons. Secondly, the four instances of sales in Gurdev Nagar, which bear the following details, Sl. No. Sale deed No. Date of transaction Sale for the amount Area of plot Averageprice per sq yard Rs.

Sq. Yds Rs P

1. 2987 4-7-1972 6,500 222 2950

2. 5203 15-11-1972 20,000 509 3930

3. 6144 8-2-1973 10,000 250 4000

4. 1020 3-5-1973 8,000 200 4000 were rejected by the Tribunal on the ground that three plots, measuring 222 square yards, 250 square yards and 200 square yards, were smaller plots as compared to the plot of 800 square yards in question as also the one measuring 509 square yards, on the ground that it was not known whether it had similar advantages as the plot on which the building in question stood constructed. So far as the three smaller plots are concerned, it is a well-accepted recognizable fact that, in urban housing, smaller plots of these sizes, which readily attracted lower middle class customers, fetch yardwise more price than bigger plots. As it seems from the aforesaid chart, one of those plots had been sold in July, 1972, before the sale in question, at the rate of Rs. 29'50 per square yard, and the remaining two in February and May, 1973, after the date of the sale in question, each at the rate of Rs. 40 per square yard. The rejection of these instances on the ground of their pertaining to smaller plots, to our mind, was surmising, disadvantageous to the appellants and conjecturing in realm, far away from hard realities. So far as the fourth instance is concerned, the yardstick applied was that its position, whether it was advantageous or not as compared to the plot on which the building in question stood, could legitimately be applied to the three instances of Gurdev Nagar adopted by the Competent Authority and the Tribunal also, for there is no positive finding whether those plots compare favourably or otherwise as to the advantages of the plot in question. This is the subject-matter of the third-comment. It would be seen from the details below, Sl. No. Plot No.

Date of sale Sale price Area of plot Average rate per sq. yd.

Sq. Yds Rs. P.

1. 17 October, 1973 18,630 270 69-00

2. 41 30-4-1973 24,000 400 60-00

3. 44 29-3-1973 26,000 400 65-00 that the first instance aforementioned was taken into account by the Competent Authority in preference to the instances of Sarabha Nagar, relied upon by the departmental Valuation Officer. Admittedly, the said Valuation Officer did not take into account any instance of Gurdev Nagar. The latter two instances, afore-quoted, were added and employed by the Tribunal and, on a reading of all the three, the price of the land at the rate of Rs. 60 per square yard was maintained. As is plain, the plot of the first instance too is a small plot and was sold at the highest price of Rs. 69 per square yard. But it is of a period which is ten months later to the sale in question. The second and third instances too are of medium-sized plots and those too are four months and three months, respectively, later than the sale in question. Their location too, as compared to the plot in question, is not known and none of them was even closely proximate to the date of the transfer. The only closest sale to the date of the transfer was as reflected in the second instance quoted by Shri Kang, which, as dealt earlier, was overlooked by the Tribunal and, in our view, illegally. On this analysis, the finding of the Tribunal that the three instances relied upon by it appear to be more favourable than the instances relied upon by the value of the appellants, is patently arrived at on irrelevant factors. If these three instances had to play their part, they could not do so in isolation to the disadvantage of the appellants, as the four instances, quoted by the appellants' valuer too were equally comparable and those had to be taken into account, if not comparably, in any event, with others, cumulatively. And, if taken cumulatively, the average price would have come to Rs. 49 per square yard. That should have been the right method in the instant case, especially when all the instances related to Gurdev Nagar. No advantage or disadvantage, as compared to any of those plots as to the plot in question, had been pointed out and all of them had been within the extended limits on either side of the sale in question. Calculating the price of the plot at that rate, it would come to Rs. 39,200. Adding the value of the superstructures, as found by the Tribunal, to that figure, the value of the house was assessable at Rs. 91,200, which figure was not more than 15 per cent, of the apparent consideration of the house in question, especially when the land-and-building method to evaluate the property had been applied. We hold the price thereof, accordingly, mentioning lastly and added that the price of a plot built upon cannot compare favourably with that of an unbuilt plot on which the purchaser has the opportunity of exercising a wide choice of building. But, in the former case, he is no chooser. Applying that principle, the price of the plot could even rateably have been reduced by a reasonable percentage. But, since we have, in the instant case, stuck to the principle of averages, we would not cause any reduction, having already granted relief to the appellants. In this view of the matter, no one can say that a finding of fact had been arrived at by the Tribunal, which was not questionable by this court. No authority for the purpose is required, though some were sought to be cited by both the counsel.

7. For the view taken above, we have no hesitation to allow this appeal and set aside the orders of the Tribunal and the Competent Authority as also the proceedings for acquisition. The appellants must get their costs.

Rajendea Nath Mittal, J.

8. I agree.