Commissioner Of Income Tax vs Duncans Agro Industries Ltd.
1991 Latest Caselaw 90 Del

JUDGMENT

Arun Kumar, J.

(1) This is an appeal filed by the Revenue under Section 269H of the Income Tax Act against the order of the Appellate Tribunal (hereinafter referred as the Tribunal) dated 30th April 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.

(2) The facts giving rise to the present appeal are : Property bearing No. 1, Prithvi Raj Road, New Delhi comprising lease hold land measuring 3824 sq. yds. having three built up portions :

(A)residential house block; (b) servants' quaters; and (c) garrage block,

was agreed to be sold for a total consideration of rupees one crore by one Mrs. Bittoni N.C. Thorvaldsen in favor of the respondent M/s Duncans Agro Industries Ltd. vide agreement to sell dated 31st August, 1985. The sale consideration of rupees one crore included a sum of Rs. 35,27,222.00 payable on account of unearned increase to the L&DO by the vendee ond behalf of the vendor. A sum of rupees fifty lacs was paid to the vendor on execution of the agreement to sell itself while a sum of Rs. 35,27,222.00 was paid to the L&DO on behalf of the vendor by the vendee in April 1986. The balance amount of Rs. l4,72,778.00 was paid to the vendor by the vendee on 6th May 1986 when the sale of the said property was registered. The sale deed was registered before the Sub Registrar, New Delhi on 6th May 1986.

(3) Statement in form 37 Ee was filed with the Competent Authority on 27th September 1985 which was registered under section 269AB on 7th November 1985. The Competent Authority recorded reasons on 9th April 1986 as required under the proviso to Section 269C(l). This was printed in the Gazette of India on 9th August 1986. After the registration of the sale, deed on 6.5.1986, both the vendor and the vendee filed statements in form No. 37-G. A notice under Section 269C(1) came to be issued by the Iac (Acquisition) after recording reasons on 12.1.1987, which also came to be published in Gazette of India on 14.2.1887. The Competent Authority determined the fair market value of the subject property at Rs. 2.02 crores, by taking value of structure at Rs.ll,75,700.00 and value of land comprising 3824 sq. yds. at the rate of Rs. 5,000.00 per sq. yds. at Rs. 1,91,20,000.00 .

(4) The respondent herein went in appeal against the said order of the Competent Authority. The Tribunal accepted the appeal 'of the assessed (respondent herein) vide impugned order dated 30th April 1990. After a 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 contrary; (4) That the meathod 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) were 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&DO for the purpose of Realizing the unearned increase and the available Far, the serious draw back in making group housing etc. we held that both on the basis of facts and according to law the acquisition proceedings are bad and as such vacated".

(5) The above summary of 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.

(6) In view of the discussion which follows, we are of the opinion that recording of reasons and initiation of the 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 for determination in an appropriate case

(7) The Competent Authority recorded the following reasons for initiation of proceedings under section 269C(1) of the Income Tax Act : "THEsubject property admeasuring 34,514 sq. ft. or 3824 sq. yds. has been transferred vide agreement for sale dated 31st August 1985. Information in F. 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 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 vacant. Its F.M.V. is, therefore, determined by land & building method. Depreciated value of the structure is as under : . Main Building: 651.82 Sq. mts. @Rs.l500.00 Rs. 9,77,700.00 Servant Quarters : 198 Sq. mts. @ Rs. 1000.00 Rs. 1,98,000.00 Total Rs. 11,75,700.00"

(8) 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 [email protected] Rs. 50.20.00 per sq. yds. which comes to Rupees l,91,20,000.00 . Thus the tolal value of the property was assessed at Rs. 2.02 crores. The Competent Authority passed its final order dated 27.11.87 maintaining the said fair market value of. the property. In the appeal filed before the Tribunal by the assessed 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 30th April, 1990 which is subject matter of the present appeal.

(9) 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 existance of tenancy in the premises and its effect: (3) Even if the order of the Tribunal is found to be correct on some aspect while it is considered to be erroneous on other aspects, the entire order has 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, the counsel for the appellant has made a general submission saying that the order of the Tribunal is erroneous.

(10) 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, the counsel has mainly relied on the judgment of the High Court of Punjab & Haryana, reported as Sutlez Chit Fund and Financiers (P) Ltd, v. C.I.T. (P&H), (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 (C.I.T. v. Arun Mehra (Delhi), (1986) 157 Itr 380) 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 & 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.

(11) 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. yard. was Rs. 5000.00 and Rs. 4000.00 respectively. This approach of the Competent Authority was, however, wholly erroneous in view of the fact that it ignores that the Green Park and Hauz Khas plots were small plots in free hold 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 super structure of this property. After the super structure is razed to the ground, it will be an open piecs 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 Far which is permissible in this area. The Revenue had assumed the Far at 1.25. However the assumption of higher Far is belied by the communication received by the Commissioner of Income Tax that the Far is only 0.674 which is the same as claimed by the assessed. 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 Low Density Area with 25-60 persons per acre in the land use plan prepared by the Town Planning Organisation, Govt. of India. This may mean that any extensive building activity on the property may not be possible. Two instances of comparable transaction regarding 14 Prithvi Raj Road dated 13.9.1984 and 7 Prithvi Raj Road dated 10.7.1984 which give the rate as Rs. 1300.00 per sq. yds. and Rs. 1500.00 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 much better guide because they pertain to the same area and locality and the properties are also subject matter of lease by the Govt. of India. The most important aspect which has been totally brushed aside by the Competent Authority is the fact that the L&DO itself has determined the rate of land in this very area atRs.2000.00 persq.yd.or Rs.2200.00 per sq. mtr. 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&DO as a condition precedent for grant of permission to transfer the lease of the property in favore of the vendee. We think that the L & Do rates fixed by the Government itself ought to have been kept in mind by the Competent Authority before initiating any action in the matter.

(12) The Tribunal has also found that the Competent Authority had erred in ignoring the tenancy in favor of M/s Kalki Investments Ltd. in 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 a genuine tenancy, that makes a lot of difference, in the value of the property and its potential for re-development. It is a difference 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 a 'make belief affair'. The fact remains that no effect was made in this behalf by the Competent Authority which vitiates the order of the Competent Authority.

(13) The submission of the 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 corret 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 belief affair'. Therefore, there is no substance in this argument of counsel for the petitioner.

(14) 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 question of fact with which we are in agreement.

(15) We may note here that the relevant provisions of Chapter XX-A of the Income Tax Act regarding acquisition of immovable properties are m the nature of penal provisions and the same require to be strictly applied. We find that the Competent Authority has totally mis-directed itself in passing its order dated 27th November, 1987. The Income Tax Appellate Tribunal has gone into these various aspects in detail while accepting the appeal and quashes the order of the Competent Authority. We are in agreement with the order of the Income Tex 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) were not available to the competent Aythority 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.