JUDGMENT
J.V. Gupta, J.
1. This appeal on behalf of the Commissioner of Income-tax, Jullundur, has been filed under Section 269H of the I.T. Act, 1961 (hereinafter called ” the Act “), against the order of the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter called “the Tribunal”), whereby the order of the Competent Authority under Section 269F of the Act, acquiring the plot in question was held to be invalid.
2. Briefly stated, the relevant facts are that the plot, measuring approximately 16 marlas (3,360 square feet), was sold by M/s. Guru Nanak Public Welfare Trust, Milap Chowk, Jullundur, to M/s. Amrit Sports Industries, Basti Nau, Jullundur, the respondent, for a sum of Rs. 40,000,
vide registered sale deed No. 3809 dated September 8, 1977. Shri Nirmal Singh, Inspector, made his report dated April 20, 1978, to the effect that the plot in dispute was of the market value of Rs. 1,32,000 on the date of the sale. The Competent Authority initiated the proceedings under Section 269C of the Act. The relevant notice was published in the official Gazette on June 3, 1978. It appears, in the meantime, the respondent had built some shops on the plot in question and had let them out to some tenants. The notice of the proceedings was served upon the respondent, but no such notice was served individually on some of the above-said tenants. The Competent Authority, vide its order dated March 21, 1980, held that the case fell under Section 269F(6) of the Act and as such ordered the acquiring of the plot in dispute. The respondent alone filed the appeal before the Tribunal. It first took the view that even though the respondent had been duly served (a notice) under Section 269D(2), yet the mere failure to serve (notices to) the tenants of the shops on the disputed property was a material defect which vitiated both the proceedings and the consequential order, and for that reason alone, the order under appeal was liable to be struck down. However, as an additional reason, it held that there was no adequate material for the finding with regard to the objects specified in Clause (a) or (b) of Section 269C(1) of the Act, and, therefore, the order of the Competent Authority was set aside and the property was directed to be released forthwith. Earlier, this case came up for hearing before the Division Bench consisting of M. R. Sharma and S. S. Kang JJ., where on account of an apparent conflict of authorities, the case was referred to the Full Bench. Before the Full Bench, the two questions which came up for consideration, were as follows :
“(i) Whether the initiation of proceedings for the acquisition of immovable property in certain cases of transfers to counteract evasion of tax under Chapter XX-A of the Income-tax Act, 1961, is complete by the publication of the notice in the Official Gazette under Section 269D(1) of the said Act ? and,
(ii) Whether, the transferee though himself personally served with an individual notice under Section 269D(2)(a) of the Income-tax Act, 1961, can assail the said acquisition proceedings on the alleged non-service on any other person or persons interested in the said property?”
3. Both these questions were answered by the Full Bench ([1983] 144 ITR 113) in the following terms (p. 126):
“To finally conclude, the answer to question No. (i) formulated at the outset is rendered in the affirmative and it is held that under Section 269D of the Act, the initiation of proceedings for acquisition and the consequent assumption of jurisdiction by the Competent Authority is completed by the publication of the notice in the official Gazette.
The answer to question No, (ii) is rendered in the negative and it is held that it is only the person aggrieved by the non-service of the individual notice under Section 269D(2)(a) of the Act upon him who can make a grievance thereof. Consequently, the transferee who has been validly served cannot assail the acquisition proceedings on the alleged ground of the non-service on the tenant of the property.”
4. Since the parties before the Full Bench were agreed that apart from the abovesaid two questions, other issues on merits also arose in this case, therefore, it was directed that the case be placed before a Division Bench for a decision thereon in accordance with the answers rendered to the legal questions. It is under these circumstances that this case has come up for hearing before us.
5. The main contention raised on behalf of the appellant is that the Tribunal has wrongly allowed the respondent to raise the question of wrong initiation of the proceedings by the Competent Authority as it was never raised earlier before it. The only point urged before it was with regard to the valuation of the property which the Tribunal has not decided. In any case, according to the learned counsel, for the purpose of the issuance of the notice, the report of the inspector was sufficient and it has been wrongly held by the Tribunal that there was no legally valid material apart from the conjectures and surmises, which had led to the finding about the existence of the objects specified in Clause (a) or (b) of Section 269C(1) of the Act. In support of this contention, the learned counsel relied upon U. S. Awasthi v. I AC [1977] 107 ITR 796 (All), CIT v. Vimlaben Bhagwandas Patel [1979] 118 ITR 134 (Guj) and G. V. Swaika Estate (P.) Ltd. (Rai Bahadur) v. M.N.Tewari [1980] 126 ITR 310 (Cal). On the other hand, the learned counsel for the respondent argued that the objection as to the jurisdiction of the Competent Authority could be taken at any time and that the learned Tribunal rightly allowed the same to be raised at the appellate stage. Besides, argued the learned counsel, as a matter of fact, the objection as to the jurisdiction to initiate the proceedings was taken before the Competent Authority in the objections filed before it. In support of this contention, the learned counsel relied upon CIT v. Kurban Hussain Ibrahimji Mithiborwala [1971] 82 ITR 821 (SC) and Vijay Kumar Jain v. CIT [1975] 99 ITR 349 (P & H). The learned counsel also contended that :
(i) the contents of the report of the inspector, dated April 20, 1978, did not constitute the relevant material to come to the conclusion that the fair market value of the plot was Rs. 1,32,000;
(ii) in the absence of the availability of presumption under Sub-section (2) to Section 269C of the Act, there was no material before the Competent Authority to entertain the belief that the consideration for the transfer agreed to between the parties had not been truly stated in the instrument of transfer;
(iii) no reasons were recorded by the Competent Authority for initiating the proceedings; and
(iv) there was no application of mind by the Competent Authority to the matter in dispute.
6. Thus, argued the learned counsel, the very assumption of jurisdiction by the Competent Authority under Section 269C(1) of the Act was illegal. In support of this contention, the learned counsel relied upon Ajantha Industries v. CBDT [1976] 102 ITR 281 (SC), Jamna Lal Kabra v. ITO [1968] 69 ITR 461 (All), Chhugamal Rajpal v. 5. P. Chaliha [1971] 79 ITR 603 (SC) and Sheo Nath Siugk v. AAC [1971] 82 ITR 147 (SC).
7. As regards the question whether the objection as to the jurisdiction of the Competent Authority to initiate the proceedings could be taken up in appeal or not, the same stands settled. In Vijay Kumar Jain’s case [1975] 99 ITR 349 (P & H), it was held by the Division Bench of this court that if the notice issued under Section 148 of the Act was invalid for any reason the entire proceedings taken by the ITO would be void for want of jurisdiction. In that situation, the Tribunal was not justified in refusing to consider the validity of the notice under Section 148 even though the ground challenging the same had not been pressed before the AAC. Apart from that, in the present case, we further find that such an objection was raised on behalf of the respondent in the objections filed, but the Competent Authority wrongly observed that no such objection was raised. However, since it relates to the assumption of the jurisdiction, we are of the considered opinion that the Tribunal rightly allowed the respondent to raise the same in appeal even if we presume that it was not specifically argued before the Competent Authority.
8. The main question to be decided in this appeal is whether the Competent Authority before initiating the proceedings under Section 269C of the Act, applied its mind and recorded the reasons for doing so on the material furnished by the inspector in his report dated April 20, 1978. Section 269C(1) reads:
” 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 moneys or other assets which have not been or which ought to be disclosed by the transferee for the purposes of the Indian Income-tax Act, 1922 (11 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. ”
9. Thus, it is evident that the conditions precedent for the exercise of the jurisdiction to initiate the acquisition proceedings are,–
(i) transfer of immovable property worth more than Rs. 25,000 in value ;
(ii) the fair market value of the property exceeds the apparent consideration by fifteen per cent.;
(iii) ulterior motive of tax evasion or the concealment of income for such untrue statement of apparent consideration in the instrument of transfer of such property ;
(iv) recording of the reasons by the Competent Authority ; and
(v) the publication of the notice to that effect in the Official Gazette.
10. It is not disputed and it was so held in Vimlaben Bkagwandas Patel’s case [1979] 118 ITR 134 (Guj), that it is not merely the untrue statement of consideration in the instrument of transfer, but coupled with that, the ulterior motive of tax evasion or concealment of income is the gist of the offence and till that ulterior motive is established and found, the power in question cannot be exercised. Since for purposes of effectuating the said objective, immovable properties are transferred, Parliament has, in its legislative wisdom, thought it fit to provide for the acquisition thereof at something more than the grossly understated consideration and, consequently, provided for the forfeiture of the amount of the difference
between the consideration and the fair market value to the Government as penalty. Thus, the power under Section 269C of the Act, is penal in nature and the proceedings initiated thereunder are quasi-criminal.
11. In the present case, the Competent Authority on the report of the inspector, dated April 20, 1975, passed the following order :
" Seen. Initiate action. (Sd./-)Â Â 28/4. "
12. Admittedly, no reasons whatsoever were given by the Competent Authority before initiating the proceedings as required by the statute. To say that since the orders were passed on the basis of the report as such by the Competent Authority and he initiated the proceedings on the basis of the said report, is nothing but violating the statutory requirements as provided under Section 269C(1) of the Act. It is for the Competent Authority to believe that there exist reasons to conclude that the consideration for the transfer as agreed to between the parties had not been truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of the liability to pay tax or facilitating the concealment of any income, etc., and not for any other authority to have his own opinion in the matter. Keeping that purpose in view, it was obligatory on the part of the Competent Authority to apply his own mind to the material before it and to come to his own independent conclusion and record the same by giving reasons for initiating the proceedings. In the present case, since the Competent Authority did not record any reasons as required, it is manifest that he never applied his mind and passed the orders to initiate the proceedings mechanically which was not warranted by the statute. Under the circumstances, it is held that the Competent Authority has assumed jurisdiction to initiate the proceedings in this case arbitrarily without following the statutory requirements. Thus, the whole proceedings taken by the Competent Authority are vitiated being illegal.
13. The question whether there was sufficient material before the Competent Authority, valid in law, to initiate the proceedings or not, need not be gone into in the present case though the learned Tribunal found the same in favour of the respondent, as, in the present case, the stage of going into the validity of the material does not arise as the appeal is failing for lack of reasons. As a matter of fact, it would be a question of fact in each case as to whether the matter before the Competent Authority was sufficient and valid in law to form the requisite opinion or not because at that stage it would be the subjective satisfaction of the Competent Authority to come to the conclusion whether or not there was
a fit case for initiating the proceedings under Section 269C(1) of the Act, and this court may be reluctant to substitute its own opinion for that of the Competent Authority in the absence of any compelling circumstances.
14. As a result of the above discussion, the order of the Tribunal is maintained, though on different grounds. Thus, the appeal fails and is dismissed with costs.
