Vildirect: IncomeTax-caselaws-1991-VIL-601-DEL-DT

1991-VIL-601-DEL-DT

Equivalent Citation: [1991] 192 ITR 310, 94 CTR 203, 59 TAXMANN 58

DELHI HIGH COURT

Date: 05.02.1991

COMMISSIONER OF INCOME-TAX

DUNCANS AGRO INDUSTRIES LIMITED

BENCH

Judge(s) : ARUN KUMAR., M. C. JAIN

JUDGMENT

The judgment of the court was delivered by

ARUN KUMAR J. -This is an appeal filed by the Revenue under section 269H of the Income-tax Act, 1961, against the order of the Appellate Tribunal (hereinafter referred as "the Tribunal") dated April 30, 1990.

Under the provisions of section 269H, an appeal lies to the High Court against the order of the Tribunal passed under section 269G of the Act on a question of law alone. This means that a finality is sought to be attached to the decisions of the Tribunal so far as they relate to questions of fact.

The facts giving rise to the present appeal are :

Property bearing No. 1, Prithvi Raj Road, New Delhi, comprising leasehold land measuring 3,824 sq. yds. having three built up portions : (a) residential house block ; (b) servants quarters ; and (c) garage block, was agreed to be sold for a total consideration of rupees one crore by one Mrs. Bittoni N. C. Thorvaldsen in favour of the respondent, Messrs. Duncans Agro Industries Ltd., vide agreement to sell dated August 31, 1985. The sale consideration of rupees one crore included a sum of Rs. 35,27,222 payable on account of unearned increase to the L & DO by the vendee on behalf of the vendor. A sum of rupees fifty lakhs was paid to the vendor on execution of the agreement to sell itself while a sum of Rs. 35,27,222 was paid to the Land and Development Office (L. & D. 0.) on behalf of the vendor by the vendee in April, 1986. The balance amount of Rs. 14,72,778 was paid to the vendor by the vendee on May 6, 1986, when the sale of the said property was registered. The sale deed was registered before the Sub-Registrar, New Delhi, on May 6, 1986.

Statement in Form No. 37EE was filed with the Competent Authority on September 27, 1985, which was registered under section 269AB on November 7, 1985. The Competent Authority recorded reasons on April 9, 1986, as required under the proviso to section 269C(1). This was printed in the Gazette of India on August 9, 1986.

After the registration of the sale deed on May 6, 1986, both the vendor and the vendee filed statements in Form No. 37G. A notice under section 269C(1) came to be issued by the Inspecting Assistant Commissioner (Acquisition) after recording reasons on January 12, 1987, which also came to be published in the Gazette of India on February 14, 1987.

The Competent Authority determined the fair market value of the subject property at Rs. 2.02 crores, by taking the value of the structure at Rs. 11,75,700 and value of land comprising 3,824 sq. yds. at the rate of Rs. 5,000 per sq. yd. at Rs. 1,91,20,000.

The respondent herein went in appeal against the said order of the Competent Authority. The Tribunal accepted the appeal of the assessee (respondent herein), vide impugned order dated April 30, 1990. After detailed discussion of the various aspects involved, the Tribunal has summarised its findings as under :

" ( 1 ) that the initiation of proceedings were not proper;

(2) that, at the time of initiation, there was no material available with the Revenue ;

(3) that the Revenue has erroneously ignored certain factors affecting the valuation, but assumed to the contrary ;

(4) that the method of valuation adopted is not in consonance with the facts and evidence available at the time of initiation ;

(5) that the presumption under section 269C(2) was not then available at the time of initiation ;

(6) in view of the restrictions and limited scope of the development of property under the Urban Land Ceiling Act and the fact that the property is situated in Lutyen's Bungalow Zone, rates as fixed per sq. yd. by L. & D. O. for the purpose of realising the unearned increase and the Available FAR, the serious drawback in making group housing, etc., we hold that, both on the basis of facts and according to law, the acquisition proceedings are bad and as such vacated."

The above summary of the findings of the Tribunal shows that the findings at Sr. Nos. 1 to 4 and 6 are all in the nature of questions of fact while the finding at Sr. No. 5 alone can be said to be involving a question of law. We may add that, in view of the decision of the Tribunal on questions of fact with which we are in agreement, it was not really necessary for the Tribunal to go into the question of presumption under section 269C(2), as stated by it at Sr. No. 5 of its summary of findings.

In view of the discussion which follows, we are of the opinion that recording of reasons and initiation of proceedings by the Competent Authority itself was wrong in the facts and circumstances of this case and, therefore, we need not go into the question of the stage of availability of the presumption under section 269C(2) of the Income-tax Act which is the subject-matter of finding No. 5 of the Tribunal and we leave the said question open for determination in an appropriate case.

The Competent Authority recorded the following reasons for initiation of proceedings under section 269C(1) of the Income-tax Act:

The subject property admeasuring 34,514 sq. ft. or 3,824 sq. yds. has been transferred, vide agreement for sale dated 31st August, 1985. Information in Form No. 37EE was received on 27th September, 1985, and was registered in this office on 7th November, 1985. A preliminary notice issued on 2nd July, 1986, requiring the transferee to file certain relevant information has remained uncomplied with. Though the property is stated to be in the occupation of some Kalki Investments Ltd., in the absence of details such as nature of occupancy, amount of rent, area under occupancy and other relevant conditions about it, I ignore it and treat the property as vacant. Its F. M. V. is, therefore, determined by land and building method. Depreciated value of the structure is as under:

Rs.

Main building : 651.82 sq. mts. at Rs. 1,500 9,77,700

Servant quarters : 198 sq. mts. at Rs. 1,000 1,98,000

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Total 11,75,700

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Placing reliance on two sale instances of property No. J-7, Green Park, New Delhi, constructed on a plot measuring 800 sq. yds. and property No. K-114, Hauz Khas, New Delhi, constructed on a plot measuring 500 sq. yds., the Competent Authority valued the land of the property in question at Rs. 5,000 per sq. yd. which comes to Rs. 1,91,20,000. Thus, the total value of the property was assessed at Rs. 2.02 crores.

The Competent Authority passed its final order dated November 27, 1987, maintaining the said fair market value of the property. In the appeal filed before the Tribunal by the assessee under section 269G of the Income-tax Act, the very basis of the findings of the Competent Authority was challenged. The Tribunal has gone into the various points urged before it in its detailed order dated April 30, 1990, which is the subject-matter of the present appeal.

Before us, counsel for the appellant has made the following submissions in support of the appeal :

1. the finding of the Tribunal that the presumption under section 269C(2) were not available at the time of initiation of proceedings is not correct;

2: there are contradictions in the order of the Tribunal on the question of existence of tenancy in the premises and its effect ;

3. even if the order of the Tribunal is found to be correct on some aspects while it is considered to be erroneous on other aspects, the entire order has to be set aside because it is not possible to say as to which point really prevailed with the Tribunal in passing the order ;

4. lastly, counsel for the appellant has made a general submission saying that the order of the Tribunal is erroneous.

In support of his first submission that the Tribunal was wrong in law in holding that the presumption under section 269C(2) was not available at the time of initiation of proceedings, counsel has mainly relied on the judgment of the High Court of Punjab and Haryana in Sutlej Chit Fund and Financiers (P.) Ltd. v. CIT [1986] 161 ITR 174. It has been further submitted that reliance placed on the Division Bench judgment of this court in Arun Mehra's case (CIT v. Arun Mehra [1986] 157 ITR 308) by the Tribunal in support of its said finding is not correct because the said case does not deal with that aspect of law at all. On the contrary, counsel for the respondent submits that the view taken by the Punjab and Haryana High Court is not correct. As already observed by us, this question need not be gone into in the facts and circumstances of the present case and the same can be decided in an appropriate case. In this case, there is otherwise ample material to hold that the order of the Competent Authority is not correct and as such the same was rightly quashed by the Tribunal.

The other submissions are inter-connected and the same can be conveniently dealt with together.

The Competent Authority has mainly taken into consideration the instances of sale of two properties, namely, J-7, Green Park, New Delhi, and K-114, Hauz Khas, New Delhi, where the rate of land per sq. yd was Rs. 5,000 and Rs. 4,000, respectively. This approach of the Competent Authority was, however, wholly erroneous in view of the fact that it ignores that the Green Park and Hauzkhas plots were small plots in freehold localities. It is well-recognised that small plots in developed colonies fetch much higher price as compared to large areas of land. A most important aspect which militates against the potential value of the property in question is regarding the Urban Land Ceiling Act. Without a clearance under the said Act, the property cannot be built upon. It is obvious from the order of the Competent Authority that no buyer is likely to retain the existing superstructure of this property. After the superstructure is razed to the ground, it will be an open piece of land which will attract the provisions of the Urban Land (Ceiling and Restrictions) Act. Without the prospect of development on this property, the same will not have much value. Another aspect worth consideration would have been that, in the event of permission to develop and carry out new construction in the nature of group housing or otherwise being granted by the Competent Authority under the Urban Land Ceiling Act, the vendee may have to pay huge extra amounts to the L. & D. O. for making that kind of use of the land. Yet another aspect of the matter which brings down the building potential of this property is the low F. A. R. which is permissible in this area. The Revenue had assumed the F. A. R. at 1.25. However, the assumption of a higher F. A. R. is belied by the communication received by the Commissioner of Income-tax that the F. A. R. is only 0.674 which is the same as claimed by the assessee. This shows that the potential of that property for redevelopment is low as compared to the instances taken into consideration by the Competent Authority. Another factor which was lost sight of by the Competent Authority is that the property is located in an area which is described as a low density area with 25-60 persons per acre in the land use plan prepared by the Town Planning Organisation, Government of India. This may mean that any extensive building activity on the property may not be possible. Two instances of comparable transactions regarding 14, Prithvi Raj Road, dated September 13, 1984, and 7, Prithvi Raj Road, dated July 10, 1984, which give the rate as Rs. 1,300 per sq. yd. and Rs. 1,500 per sq. yd., respectively, have been ignored by the Competent Authority. We feel that these transactions ought not to have been ignored as they would have been a much better guide because they pertain to the same area and locality and the properties are also the subject-matter of lease by the Government of India.

The most important aspect which has been totally brushed aside by the Competent Authority is the fact that the L & D. O. itself has determined the rate of land in this very area at Rs. 2,000 per sq. yd. or Rs. 2,200 per sq. mt. for the purposes of charging unearned increase. Actually, it is on the basis of these rates that the vendee has paid unearned increase to the L. & D. O. as a condition precedent for grant of permission to transfer the lease of the property in favour of the vendee. We think that the L. & D. O. rates fixed by the Government itself ought to have been kept in mind by the Competent Authority before initiating any action in the matter.

The Tribunal has also found that the Competent Authority had erred in ignoring the tenancy in favour of Messrs. Kalki Investments Ltd. in the subject property. The factum of tenancy is mentioned in the agreement to sell itself along with particulars of the tenant. The same finds mention in Form No. 37EE as also in the reasons recorded by the Competent Authority for initiation of the proceedings. In spite of this, no effort seems to have been made to find out about the nature of the tenancy. If there is genuine tenancy, that makes a lot of difference to the value of the property and its potential for redevelopment. It is a different matter that the Tribunal itself made a spot investigation in a bid to ascertain the nature/ genuineness of the tenancy and it came to the conclusion that it was make-believe affair. The fact remains that no effort was made in this behalf by the Competent Authority which vitiates the order of the Competent Authority.

The submission of learned counsel for the petitioner that the order of the Tribunal is contradictory inasmuch as it finds that the Competent Authority erred in ignoring the tenancy, while, at the same time, the Tribunal found that the tenancy was not genuine. We do not find that the argument is quite correct. When the Tribunal observes that the Competent Authority erred in ignoring the tenancy, the observation is quite correct and it means that the existence or non-existence of tenancy in the premises is an important factor to be taken into consideration by the Competent Authority in such matters. It is quite a different thing that, ultimately, the Tribunal itself went into the question of existence of tenancy and found it to be a "make-believe affair". Therefore, there is no substance in this argument of counsel for the petitioner.

The argument of counsel for the appellant that, if a judgment is based on several considerations and one out of them is found to be erroneous, the whole judgment is vitiated has no force in the facts and circumstances of the case. This argument has been advanced in support of the submission that the order of the Tribunal which is the subject-matter of the present appeal being erroneous on account of its finding No. 5 is liable to be set aside in its entirety. Firstly, we have left the point regarding finding No. 5 of the Tribunal open which does not mean that we accept the submission of counsel for the appellant that the same is erroneous. Secondly, this finding of the Tribunal is independent of, and is separable from, the findings of the Tribunal on questions of fact with which we are in agreement.

We may note here that the relevant provisions of Chapter XX-A of the Income-tax Act regarding acquisition of immovable properties are in the nature of penal provisions and the same require to be strictly applied. We find that the Competent Authority has totally misdirected itself in passing its order dated November 27, 1987. The Income-tax Appellate Tribunal has gone into these various aspects in detail while accepting the appeal and quashing the order of the Competent Authority. We are in agreement with the order of the Income-tax Appellate Tribunal which is the subject-matter of the present appeal except in so far as it holds that the presumption under section 269C(2) was not available to the Competent Authority at the time of initiation of the proceedings. As already stated, we leave this question open to be decided in an appropriate case. This appeal is, accordingly, dismissed.

Appeal dismissed.

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