JUDGMENT
R. Jayasimha Babu, J.
1. The Revenue has come up with this appeal against the order made by the Appellate Tribunal in exercise of its appellate jurisdiction under Section 269G of the Income-tax Act, 1961.
2. The respondent purchased an extent of about 9 grounds 1239 square feet, 3 grounds 1674 square feet and 5 grounds 505 square feet, respectively, in a residential locality adjoining the Boat Club in the city of Madras for a sum of Rs. 4,28,000, Rs. 92,000 and Rs. 1,30,000 respectively, under the sale deeds dated June 6, 1980. Possession of that area had been handed over to them much earlier in June, 1979, and the entire consideration had also been paid earlier. The sale deeds were registered on July 21, 1980.
3. The Revenue initiated proceedings under Section 269C alleging that the property had been sold at a value which was less than the market value by a margin of 15 per cent. In support of that assertion sales effected in the areas which were about 5 kilometres from the plots purchased by the respondent and which showed the value at a rate much higher than the one by the respondents were cited. The respondents had purchased the plot at the rate of Rs. 40,000 per ground. The plots so purchased were also subject to certain restrictions. The purchaser was not to put up more than one building, the building was not to be used for any commercial purpose and the plot was not freely alienable inasmuch as the first option was to be given to the owners of the other plots in the same area before the sale could be effected.
4. The competent authority relying on the figures furnished by the Inspec
tor of the Department which showed a higher value for properties which
had been transacted between 1979-80 in the area five kilometers away,
held that the property had been undervalued and that the same was liable
for acquisition.
5. The respondent herein having appealed to the Appellate Tribunal, the Appellate Tribunal has allowed the appeal. We have perused the order of the Appellate Tribunal. The Tribunal has given cogent reasons for allowing the appeal and we are in agreement with the same.
6. The appellant before exercising the powers of compulsory acquisition was required to satisfy the essential ingredients of Section 269C of the Act. It was essential for the competent authority to record a finding on the basis of evidence that the consideration for the transfer of property had not been truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of the liability of the transferror to pay tax under the Act in respect of any income arising from the transfer or for facilitating the concealment of income or any moneys or other amount which have not been or which ought to be disclosed by the transferee for the purpose of the Income-tax Act or the Wealth-tax Act. The Tribunal has pointed out and its finding on this aspect is not challenged before us that there was no material whatsoever before the competent authority on the basis of which it was possible to hold that the consideration stated in the document had not been truly stated. There was also no evidence to show that the parties by this transaction were seeking to reduce or avoid the transferors liability for tax in respect of any income arising from the transfer or that the transferee was seeking to conceal any income or moneys which had not been or ought to have been disclosed. The Tribunal has pointed out that the transferor had been assessed by the Revenue on its income in the amount shown in the sale deed and not on any other higher amount and there was thus no evidence to show that the transferor had entered into the transaction with a view to evade or reduce his tax liability. There is also no material to show that the transferree was seeking to conceal any income which had not been or which was required to be disclosed by the transferee for the purpose of the Income-tax Act or the Wealth-tax Act.
7. Learned senior counsel for the Revenue, however, strongly contended that the Revenue is entitled to the benefit of the presumption under Section 269C(2)(b). That provision reads as under :
“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-section (1).”
8. “Fair market value” is defined in Section 269A Clause (d). That definition, inter alia, provides that the fair market value is the price that the immovable property would ordinarily fetch on sale in the open market on the date of execution of the instrument of transfer of such property.
9. In order to avail of the benefit of the presumption it was incumbent upon the Revenue to show that the price that the plots would have fetched if sold in the open market on the date of the execution of the sale deed was higher than the figure stated in the sale deed. There was no comparable sale in that area. It had been noticed by the competent authority that there was no sales at all in the area in which this plot is located. The opinion of the authority that the sales of properties located at a distance of five kilometres away were comparable was wholly a subjective opinion unsupported by any acceptable material and such opinion by itself, cannot amount to a proper determination of the market value. Fair market value is not any figure which the competent authority or the Department may choose to adopt. The market value is the price that a willing purchaser dealing at arm’s length would offer on the date of transaction if such an offer were open for consideration as on that date. The qualifying of the expression of the market value by the terms “fair” lays further emphasis on the need for a proper determination of the market value. That market value has to be a fair value and the determination also must be in a manner which can be regarded as fair and not arbitrary.
10. What the competent authority chose to label as the market value cannot be accepted as market value much less fair market value. Judicial notice can be taken of the fact that in a large urban property values differ sometimes radically from one area to another and sometimes the difference could be very substantial even when the physical distance was not great. The value of the property situated five kilometres away could not at all be regarded as comparable without any other material to establish that those properties in fact are comparable. A residential area situated away from the main thoroughfare could not be regarded as consuming the same price as a building situated on the main road in a commercial locality. One of the properties taken for comparison in this case is a property situated at Sterling Road which is valued at Rs. 1,00,000. The mere fact that the road is within the radius of five kilometres does not make it, ipso facto comparable to this property. As rightly pointed out by the Appellate Tribunal the competent authority had also ignored the restrictive covenants to which this plot was subjected. There were limitations on the use to which the property could be put ; buildings with multiple units were not permissible ; the use of the building or the land for commercial purpose was not permissible ; the property could not be freely sold as there was an obligation to give the first option to the others who had purchased the other plots in the same locality from the same vendor.
11. The Revenue therefore could not merely rely upon the sale transaction of the property which it chose to regard as comparable and thereafter proceeding to assert that, that value is the market value and proceeds still further to claim a presumption in its favour and property of a citizen is not to be compulsorily acquired in that manner. Section 269C is not intended to enable the Revenue to deprive the citizens of their properties by merely asserting that the price at which the property was transacted was below the market value arbitrarily determined by it.
12. We do not see any merit whatsoever in these appeals. The appeals are dismissed with costs of Rs. 1,500.