JUDGMENT
T.D. Sugla, J.
1. By this petition under articles 14, 19(e), 300A and 226 of the Constitution of India, the petitioner, a Co-operative Housing Society, has challenged the notice dated September 19, 1977, under section 269D(1) and notice dated December 24, 1985, under section 269F(1) of the Income-tax Act, 1961 (for short “the Act”), issued by the Competent Authority and the Inspecting Assistant Commissioner, Range I, Bombay.
2. The relevant facts in brief are that Gautam Sarabhai Private Ltd. (for short “the owners”) were the owners of a plot of land admeasuring 8,077 square yards situate at Mount Pleasant Road. Bombay. In or about December, 1951/ January, 1952 it was agreed between the parties that the said plot of land would be leased out to the petitioner-assessee for a period of 21 years 7 months commencing from January 1, 1952, up to July 31, 1973, at a stipulated monthly rent, that the petitioner would construct 60 apartments thereon together with servants quarters, garages, swimming pool and other amenities according to the plans, mainly for residential purpose and that, on the expiry of the lease period, the petitioner would hand over vacant possession of the said plot of land along with the structure thereon to the owners without claiming any compensation whatsoever, a formal lease agreement was executed on August 4, 1953, and the rent payable from April 1, 1954, was Rs. 4,000 per month.
3. By an agreement dated December 18, 1968, the owners agreed to sell to the petitioner their reversionary rights in the property for a consideration of Rs. 20,00,000. The deed of conveyance was excecuted on March 10, 1971, and was lodged for registration on the same day. However, it was actually registered on January 29, 1977.
4. Notice dated September 19, 1977, under section 269D(1) of the Act was served on the petitioner on July 4, 1978. The notice was published in the Official Gazette on October 8, 1977. Before the issue of notice, the competent authority, it appears, heard Shri S. P. Mehta, counsel for the petitioner, and prepared a note in respect of initiation of acquisition proceedings. This note is dated September 1, 1977, and is at pages 91 to 93 in the paper-book. It further appears that this note and the report of the District Valuation Officer prepared under section 55A of the Act read with section 16A(5) of the Wealth-tax Act, 1956, in the owners, were served on the petitioner who submitted their detailed reply dated August 4, 1978, in the office of the competent authority, on which date their arguments were also heard. Nothing happened between that date and January 17, 1986, when a successor competent authority served on the petitioner a notice dated December 24, 1985, under section 169F(1) of the Act. The present petition was filed before this court on February 18, 1986.
5. Inviting the court’s attention to the provisions of section 169c of the Act under which the competent authority assumes of can assume jurisdiction to initiate proceedings for acquisition of an immovable property, Shri Chinoi, learned counsel for the petitioner, stated that the section laid down certain conditions which must be satisfied before a competent authority assumes jurisdiction under this section.
6. Referring then to this court. S judgment in the case of Unique Associates Co-operative Housing Society Ltd. v. Union of India [1985] 152 ITR 114 (Bom), learned counsel stated that the said decision was squarely applicable to the facts of the case and, therefore, the impugned notices were required to be quashed. He submitted that even though the owners had leased an open plot of land to the petitioner. The suit property was a tenanted property entitled to protection under section 12(1) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (for short “the Bombay Rent Act”. In the case of tenanted property protected under section 12(1) of the Bombay Rent Act, he further submitted that the fair market value of the property could not be estimated except by applying a multiple to the annual rental income. The fair market value of the suit property so arrived at should, he stated, not be found higher than the sale consideration in the case. Alternatively, he contended that higher than the sale consideration in this case. Alternatively, he contended that. Assuming that the fair market value of the suit property was more than the apparent consideration, there was no material whatsoever justifying the inference that the consideration was not truly stated in the sale deed and that too with a view to conceal its own or that of the owner’s income or assets. In this context, learned counsel relied on the Gujarat High Court decision in the case of CIT v. Smt. Vimlaben Bhagwandas Patel [1979] 118 ITR 134 and the Calcutta High Court decision in Subhkaran Chowdhury v. IAC of I.T. [1979] 118 ITR 77, for the proposition that the presumption raised under section 269C(2) is not available for the purpose of initiating proceedings under that section. The presumption may apply only after the proceedings are otherwise validly initiated.
7. Counsel further pointed out that after the notice under section 269D(1) was published and an individual notice was served on the petitioner the petitioner had submitted a detailed explanation when the case was heard by the competent authority. No further action was, however, taken for more eight years. It was, thus, a case of dropping or abandoning of the proceedings. The proceedings re-started by the issue of second notice on December 24, 1985, under section 269F(1) were barred by limitation. Besides such an action on the part of the departmental authorities is arbitrary and unreasonable and violative of article 14 of the Constitution. The respondents having not cared to file an affidavit-in reply the averments made by the petitioner in the petition, according to counsel, have to be accepted as correct.
8. According to Shri Jetley, learned counsel for the Income-tax Department, Chapter XX-A introduced in the Income-tax Act, 1961, was a code in itself. The assessee has an alternative and effective remedy. This court may not interfere at this stage in writ jurisdiction. Reliance in this behalf was placed on a Supreme Court decision in the case of Special Land Acquisition Officer v. P. Veerabhadarappa . As regards the presumptions under section 269C(2), counsel stated that the presumptions were rebuttable and there was no good reason why those presumption should not arise at the time of initiation of the proceedings. But for the presumptions, it would be impossible for the Department to initiate proceedings under section 269. It was stated that there was a time limited for initiating proceedings under section 269C/269D. But there was no time limit for the completion thereof. The mer fact that the proceedings remained dormant for some time does not lead to the conclusion that the proceedings dormant for some time does not lead to the arbitrary and unreasonable manner. The proceedings, it was reiterated. Were started within nine able manner. The proceeding, it was reiterated, were started within nine month of the registration of the sale deed. The basis of the proceedings was the valuation of the property in the case of the owners on the basis of believe” required under section 269C.
9. In order to appreciate the rival contentions. It is desirable to refer to refer to the provisions of section 269C of the Act which read as under;
“296C. (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 transfer) 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 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 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 acquisiton of such property under this Chapter :
Provided that before 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 percent 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 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).”
10. Evidently, four conditions must be satisfied before power is exercised by the competent authority under this section. As rightly pointed out by learned counsel for the petitioner. The conditions are :
“Where the competent authority has reason to believe –
(i) any immovable property of a fair market value exceeding Rs. 25,000 has been transferred by a person to another person;
(ii) for an apparent consideration which is less than the fair market value of the property;
(iii) the consideration agreed to between the parties has not been truly stated; and,
(iv) this has done with the object of.
(a) facilitating the reduction or evasion of the liability of the transferor…or
(b) facilitating the concelament of any income or any moneys or other assets which have been or which ought ot have been disclosed by the transferor…”
11. The first condition is evidently satisfied. For the second condition, the only material before the competent authority was the valuation of the suit property by the District Valuation Officer in the case of the owners. The District Valuation Officer has valued the property on the land and building method and deducted about Rs. 3,00,000 therefrom on account of estimated legal expenses likely to be incurred for getting the property vacated. The first question is whether the valuation report is good piece of material for the formation of the belief that the apparent consideration is more than 15 per cent. of the fair market value of the propety. The answer to this question will, to a large extent, depend upon whether the suit property was a tenanted property. In case it was a tenanted property as claimed, then, as held by the Calcutta High Court in the case of CIT v. Anup Kumar Kapoor , the Mysore High Court in the case of CWT v. V. C. Ramachandran [1966] 60 ITR 130, and the Punjab and Haryana High Court in the case of CIT v. Prem Nath Anand [1977] 108 ITR 549, the valuation of the property had to be made by capitalising the rental income and not otherwise.
12. In this connection, it is necessary to bear in mind the fact that the owners had leased out to the petitioner only a plot of land and that all constructions thereon were made by the petitioner. Thus, the first question is whether the plot of land leased out to the Petitioner was or could be a case of letting out of “premises” under the Bombay Rent Act. However, this question is settled, as rightly pointed out by Shri Chinoi, by the Supreme Court decision in the case of Mrs. Dossibai N. B. Jeejeebhoy v. Khemchand Gourumal, . The contention that where a mere plot of land was leased out for construction of a building for residence, in that case, was rejected. In paragraph 14 (at page 1942), the Suprmeme Court held.
“Turning now to the facts of the present case, we find that in each of these cases the lease was taken with a view to construct buildings thereon for residential, business, industrial or office purposes. The premises let are, therefore, ‘premises’ to which, under section 6(1) of the Rent Act, the provisions of Part II of the Act, apply.”
13. Accordingly, the suit property is “premises” let out to which section 6(1) of the Rent applies.
14. The next question is whether the fact that, under the lease agreemetn, the petitioner had bound itself to hand over vacant possession of the land and the structures thereon to the owners without any right to claim compensation on the expiry of the period of the lease takes the case out of the protection available to the petitioner as tenant under section 12(1) of the Bombay Rent Act. This question is also settled in view of the Supremem Court decision in the case of Abbasbhai Alimahomed v. Haji Gulamnabi Haji Safibhai, . The provisions os section 12(1) of the Bombay Rent Act were explained by the court as under (at page 1343) :
“The clause applies to a tenant who continues to temian in occupation after the contractual tenancy is determind; it does not grant a right to evict a contractual tenant without determination of the contractual tenancy. Protection from eviction is claimable by the tenant even after determination of the contractual tenancy so long as he pays or is ready and willing to pay the amount of the standard rent and permitted increases and observes and performs the other conditions of the tenancy consistent with the provisions of the Act.”
15. The result is that the suit property is a tenanted property in which the rights of the tenant, i.e., petitioner, were protected under section 12(1) of the Bombay Rent Act. The valuation of the reversionary interest of the owners which the petitioner purchased was, therefore, required to be done in this background.
16. In Unique Associates Co-operative Housing Society Ltd. v. Union of Indian [1985] 152 ITR 144, a similar question had arisen before this court. Perusal of the valuer’s report in that case showed that the valuer had valued the fair market value of the property on the basis that a part of the property was vacant and was at the disposal of the society and that the other part was a tenanted property. While the tenanted portion was valued by applying a multiplier to the yield, the vacant portion was valued on the land and building method. Finding that the valuer had wrongly assumed that a part of the property was vacant, it was held that that valuation was evidently wrong and could not form a sound basis for the formation of the belief of conditions necessary for initiation of the proceedings under section 269C of the Act. The facts in the present case are much worse for the Department for more than one reason. In the first place, the vlauation report – the sole basis for initiation of proceedings herein – was withdrwan by the Department in the case of the owners themselves. The owners had withdrwan their petition before the Gujarat High Court for that reason. In the second place, the value who estimated the fair matker value of he suit property in the case of the owners was aware of the fact that the duit property was a tenanted property. But he wrongly assumed that, on the expiry of the period of lease, the owners were entitled to vacant apossession and the petitioner was bound to hand over vacant possession of the land and building to the owners. It is because of this fallacy that the valued the reversionary interest on the land and building method and merely reduced the value by about Rs. 3,00,000 which he thought the owners might have to spend on litigation to get the suit property vacated. In view of the legal position indicated above, the owners could not evict the petitioner. Its right as tenant being protected under section 12(1) of the Bombay Rent Act. In the circumstances, the suit property was required to be valued by applying a multiplier’s to the annual yield. Considering the valuation estimated by the petitioner valuer in this background, his valuation seems to be correct. The petitioner, of course. Paid Rs. 20,00,000 which is almost three time of the market value determined by its valuer. This the petitioner did perhaps because it was in possession of the property. It is difficult to imagine whether any person other than the petitioner would have purchased the suit property even for Rs. 20,00,000. The question of taking action under section 286C of the Act, therefore, does not arise.
17. In the view taken on the question of the second condition requisite for the initiation of proceedings under section 269C(1) of the Act, it is not necessary to deal with the other contentions raised in the petition.
18. In the result, the rule is made absolute in terms of prayer clauses (a) and (b). No order as to costs.