RAJENDRA PRASAD v. INSPECTING ASSISTANT COMMISSIONER
[Citation -1986-LL-1127]

Citation 1986-LL-1127
Appellant Name RAJENDRA PRASAD
Respondent Name INSPECTING ASSISTANT COMMISSIONER
Court ITAT
Relevant Act Income-tax
Date of Order 27/11/1986
Assessment Year 1983-84
Judgment View Judgment
Keyword Tags principles of natural justice • co-operative housing society • district valuation officer • apparent consideration • concealment of income • construction activity • registered sale deed • residential building • cost of construction • residential purpose • departmental valuer • competent authority • condition precedent • sale consideration • search and seizure • unexplained income • urban land ceiling • immovable property • fair market value • reason to believe • registered valuer • long-term capital • rural development • unexplained money
Bot Summary: Metres comes to Rs. 5,43,221 and the total value of the property comes to Rs. 6,15,861 or Rs 6,15,000 in round figures. The competent authority states that in the revised report of the Valuation Officer the value of the compound wall was taken at Rs. 3,182 as against Rs. 18,389, treating the compound wall as belonging to Ramesh Prasad and others. The competent authority further stated as follows : Even after the State Government have revised the land rates as on 1st May, 1985, except Road No. 1 where the rate has been increased to Rs. 600 from Rs. 150, and in Road No. 12 after the house of one Shri Prasad where the rate is increased to Rs. 160 from Rs. 40, the rate that is fixed for all the roads in Banjara Hills is only Rs. 225. If really the consideration was Rs. 12 lakhs instead of Rs. 4.50 lakhs Dr. Zahir Ahmed would have invested something more than Rs. 3 lakhs in the National Rural Development Bonds or would have intimated the IT Department about the construction of a new house with the sale consideration received by him from the sale of his residential house in order to get exemption from income-tax. A specific question was asked to Dr. Zahir Ahmed and the answer to the said question is as follows : Question : The sale deed was executed by you on 17th June, 1983 and the raid was conducted on 24th March, 1984 and during this 9 months period why did you not approach the taxation authorities to make it clear that you have received a sum of Rs. 12 lakhs and not Rs. 4.5 lakhs Why did you keep quiet for 9 months Answer : Shri Naresh Kumar has stated that he has accounted only Rs. 4.50 lakhs and requested me to wait for the due date for the filing of the return before which time he would allow me to deposit the moneys in my bank. If the story of Dr. Zahir Ahmed is correct or if the real consideration of Rs. 12 lakhs is to be believed then instead of Rs. 3.50 lakhs he would have purchased National Rural Development Bonds for Rs. 7.50 lakhs also as the said amount would have earned him exemption from capital gains under s. 54E of the Act. We have already given the particulars of sale under which Shri Gwynn sold his property to Shri K.K. Bhatia for a recorded consideration of Rs. 10.80 lakhs, which was revalued by the valuation cell at Rs. 11.81 lakhs which gave the land rate of Rs. 360 per sq.


T.V. RAJAGOPALA RAO, J.M. Order These are three appeals preferred against order of competent authority dt. 31st March, 1986 passed under s. 269F(6) of IT Act, 1961 ( Act ), ordering acquisition of residential house property bearing D. No. 8-2-583/2 at Road No. 7, Banjara Hills, Hyderabad. total area of site was 2509 sq. yds. built-up area in said site covered by building with servants quarters is 2122 sq. ft. said building was built during 1971. These appeals were filed by transferees, viz., S/Shri Rajendra Prasad, Roop Karan and Naresh Kumar who are brothers and are sons of one Shri Bajrang Prasad. 2. facts or events leading to present appeals now before us may briefly be stated as follows. land under reference is part of 13,869 sq. yds. of land on which there used to be three buildings and said extent was surrounded by Road Nos. 7, 8 and 9 of Banjara Hills. said site originally belonged to HEH Nizam of Hyderabad, Sir Mir Osman Ali Khan Bahadur. late Nizam transferred this property to trust known as Barkat Villa ( trust ) on 21st March, 1958 and value of entire premises was shown in trust deed at Rs. 1,74,000. One Dr. Zahir Ahmed purchased whole property from trust for consideration of Rs. 2 lakhs under registered document No. 2310 of 1967 dt. 28th June, 1967. Dr. Zahir Ahmed transferred portions of site and houses therein to his wife and others from time to time. Dr. Zahir Ahmed thus, alienated major portion of property already retaining only 2509.7 sq. yds. of land with single-storeyed building with built-up area of 2122 sq. ft. including servants quarters, etc. This property was purchased by appellants herein from Dr. Zahir Ahmed for apparent consideration of Rs. 4,50,000 under registered sale deed dt. 17th June, 1983. document was actually registered on 18th June, 1983 in office of Joint Sub-Registrar and it was registered as document No. 3631 of 1983. copy of sale deed was provided at pages 1 to 11 of paper book No. 1 filed on behalf of appellants who are transferees under sale deed. Out of total consideration, Rs. 1 lakh was stated to have been paid on 6th May, 1983. For remaining amount of Rs. 3,50,000 appellants obtained demand draft No. DDL/760981 drawn on Central Bank of India, Charminar Branch, Hyderabad, and delivered same to Dr. Zahir Ahmed, transferor at time of registration. According to recitals of registered sale deed referred t o above, sale was stated to have taken place in pursuance of oral agreement between vendor and vendees. vendees, who are appellants before us, are joint purchasers of property under sale deed dt. 17th March, 1983. 3. IT Inspector inspector purported to have made inquiries into correct market value of this property and appeared to have submitted inquiry report of June 1983, to competent authority (IAC). In his report, inspector was stated to have visited property which is said to be one kilometer away from bus road and this property was stated to be situated behind mosque. inspector identified 10 ft. width of passage leading to impugned property. He also found in his report that house should have been constructed with bricks and cement mortar and it was having RCC roof. He also stated that house was having polished floor at time of his inspection. He further stated that appellants herein began constructing multi-storeyed house and having regard to age and type of construction of house he estimated value of house at Rs. 40 per sq. ft. Thus, valued, value of house came to Rs. 88,000 (2 20sq. ft. x Rs. 40 per sq. ft). inspector at same time estimated value of land at rate of Rs. 20per sq. yd. Thus, valued, it came to Rs. 5,01,800. Thus, total value of house and site, according to Inspector s report submitted to competent authority, was put at Rs. 5,89,800. 4. apparent consideration said to have been paid under impugned sale deed was only Rs. 4,50,000 and, thus, inspector found difference of Rs. 1,39,800 between apparent consideration stated in impugned sale deed and fair market value as on date of sale. Only from report of Inspector competent authority had derived reason to believe that apparent consideration is less than fair market value of property and consideration agreed to between two parties to document had not been truly stated in instrument of transfer. competent authority thereupon initiated proceedings under s. 269C of Act. Further, competent authority also found that difference between apparent consideration and fair market value as gathered from inspector s report submitted to him was Rs. 1,39,800 or 31 per cent of stated consideration in impugned sale deed. competent authority recorded in his order sheet dt. 14th Feb., 1984 that he had reason to believe that there is understatement of sale consideration in impugned sale deed and such understatement has been prompted with object of facilitating reduction or evasion of liability of vendor or facilitating concealment of income or wealth of vendees for purposes of their income-tax or wealth-tax assessments. He further stated in his order sheet referred to above that in view of difference between stated consideration and fair market value being more than 31 per cent of former, statutory presumptions under s. 269C(2) r/w s. 269C(1)(a)/(b) are squarely attracted. Perhaps, competent authority had recorded his reasons as per requirements under first proviso to s. 269C(1)(b) in his order sheet dt. 14th Feb., 1984, copy of which is furnished to us by Revenue. Having thus recorded reasons competent authority issued notice dt. 14th Feb., 1984 to appellants under s. 269D(1) of Act. acquisition proceedings were published in Official Gazette on 24th March, 1984 at page 6669 in compliance with requirements of s. 269D(1). In response to notices dt. 14th Feb., 1984 referred to above appellants got filed preliminary information dt. 3rd March, 1984 before competent authority. Copy of said information is now furnished at page 18 of paper book No. 1 filed by appellants. In said letter of information it was stated that property is situated on back side of mosque, that passage of 300 sq. yds. was also there leading to this land adjacent to this mosque which could only be used as passage, that shape of land is rectangular, that there is no good elevation to site, that actual cost at which they have purchased property was Rs. 4,97,675 including stamp duty and registration fee, etc. competent authority gave notice on 15th Oct., 1984 fixing date of hearing for acquisition proceedings under s. 269F on 26th Oct., 1984. Copy of said notice is provided at page 20 of paper book No. 1. competent authority referred question of valuation of impugned property to valuation cell under s. 269L of Act in RAC No. 879 of 1983-84 dt. 15th Oct., 1984 with request to ascertain fair market value of impugned property on date of sale. Valuation Officer, Unit No. 1 (Shri B.R. Rao), IT Department, reported to have inspected impugned property on 6th Nov., 1984 and by his valuation report dt. 20 th Nov., 1984 he had estimated value of impugned property at Rs. 12,34,195. His report was sent to competent authority along with covering letter and of even date. His valuation report is now furnished at pages 24 to 29 of paper book No. 1. particulars of valuation made by him formed part of his report and now given at page 28 of paper book No. 1 are as follows : Determination of fair market value of property bearing H.No. 8-2-583/2 at Road No. 7, Banjara Hills, Hyderabad, by S/Shri Roop Karan, Naresh Kumar and Rajendra Prasad as on 17th June, 1983 for acquisition purpose : (Rates based on 1976 plinth area rates) . Rs. 1. Main building, load bearing structure, single 48,263 storeyed 175.50 sq. m. at Rs. 275.00 sq. yd. 2. Services at 30 per cent 14,479 3. Extra for superior quality fittings at 10 per cent 1,448 4. Out houses, garage 42.73 sq. metre at Rs. 235 10,042 per sq. m. 5. Services at 10 per cent 1,004 6. House (open tank) LS 3,000 7. Compound wall 289 metres at Rs. 63.63/metre 18,389 . 96,625 8. Add : For increase in cost index at 191 per cent 1,84,554 . 2,81,179 9. Deduct : Depreciation 90/60 x 12 = 18 per cent ( ) 50,612 10. Net value of structures 2,30,567 11. Land value : 2509.07 sq. yds. at Rs. 400 per 10,03,628 sq. yd. 12. Fair market value of property 12,34,195 or say 12,34,000 copy of above report of Valuation Officer was forwarded to appellants by competent authority by his letter dt. 19th Feb., 1985 in which he had requested appellants to file objections, if any, to valuer s report on or before 4th March, 1985. Copy of said letter dt. 19th Feb., 1985 is furnished at page 22 of paper book No. 1. appellants filed their objections dt. 18th March, 1985 but they were received by competent authority on 21st March, 1985. Copy of objections dt. 18th March, 1985 is provided at pages 30 to 35 of paper book No. 1. In said objections it was stated for first time that appellants got valued impugned property by registered valuer before their purchase and getting conveyance for same and they purported to have enclosed copy of registered valuer s report along with their objections. Shri K.B. Subramaniam & Associates were stated to be registered valuers. illegible copy of registered valuer s report is furnished from pages 36 to 39 of paper book No. 1. From copy furnished we are unable to gather date of registered valuer s report. However, from index furnished along with paper book No. 1 we gather that date of registered valuer s report is 15th May, 1983. According to registered valuer, value of building, servants quarters, compound wall, etc. less depreciation was computed at Rs. 1,22,402. value of land which forms part of sale deed was considered in 2 bits. first bit consisted of passage land of 400 sq. yards. It was valued at Rs. 75 per sq. yard and its value came to Rs. 30,000. remaining extent of land was valued at Rs. 150 per sq. yd. Thus, total value of land was estimated at Rs. 3,46,500 whereas total value of land and building came to Rs. 4,68,902 and registered valuer ultimately estimated whole value of impugned property at round sum figure of Rs. 4,70,000. objections filed by appellants were forwarded to Departmental Valuation Officer for his comments by competent authority under his D.O. letter in RAC 789/84-85 dt. 20 th May, 1985 as said letter was referred to in revised valuation report dt. 12th July, 1985. Departmental Valuation Officer purported to have met with every objection raised by appellants and considered impact of cumulative effect of defects/objections on value of impugned property, had chosen to issue revised valuation report dt. 12th July, 1985. Copy of said revised valuation report was furnished at pages 40 to 43 of paper book No. 1 and at page 43 particulars of valuation of building and land in impugned property were given along with their estimated values in revised valuation report as follows : Revised Valuation Report of property bearing No. 8-2-583/2 on road No. 7, Banjara Hills : Hyderabad as on 17th June, 1983 . Rs. 1. Main building 2122 sq. ft. or 197.14 sq. 54,213 ms. at Rs. 275 per sq. m. 2. Services at 22.5 per cent 12,193 3. Out-houses, garrages 42.75 sq. ms. at 10,042 Rs. 235/m 4. Compound wall 100/2 metres at Rs. 3,182 63.63 per metre . 79,634 Add : For increase of cost index at 191 per 1,52,100 cent . 2,31,734 Deduct : Depreciation at 90/60 x 13= 19.5 45,188 per cent . 1,96,456 Deduct : Amount spent by purchaser for 30,000 immediate repairs . 1,56,546 Land . For 2129.07 sq. yds. at Rs. 150 per sq. yd. 3,19,360 For 380 sq. yds. (passage) at Rs. 100 per 34,000 sq. yd. Total 5,13,906 or say 5.14 lakhs Hyderabad (B.R. Rao) Valuation dt. 12th July, 1985 Officer, Unit I IT Department, . Hyderabad If revised valuation report is taken to be representing fair market value of impugned property difference between stated consideration in impugned sale deed and fair market value estimated in revised valuation report would be only Rs. 64,000 which would work out to less than 15 per cent of Rs. 4,50,000. 5 . competent authority in his impugned orders stated that as per first report of Departmental Valuation Officer he found valuer adopting land value at Rs. 400 per sq. yd. whereas in his revised report he had adopted land value at Rs. 150 per sq. yd. and also valued passage land of 380 sq. yds. at Rs. 100 per sq. yd. extent valued at Rs. 150 per sq. yd. is 2129 sq. yds. He further commented that estimated value of structures in first report was Rs. 2,30,568 whereas in revised report Departmental valuer had estimated same structures at Rs. 1,56,546. 6 . competent authority did not accept revised report of Departmental valuer. competent authority held inquiry under s. 269F. He rejected registered valuer s report dt. 15th May, 1983 stating that estimated value of structures on land adopted by him was incredibly low. registered valuer adopted cost of construction at Rs. 60 per sq. ft. which is low. So also, registered valuer estimated value of land covered by passage at Rs. 75 per sq. yd. and remaining land of 2110 sq. yds. at Rs. 150 per sq. yd. which again is absolutely low. estimation of registered valuer was not supported by any evidence of comparable cases of sale. Ultimately, competent authority commented that estimation of registered valuer looked as if he wanted to fall in line with directions given by transferees to put estimate at particular figure. To establish that consideration paid for impugned property was fair and reasonable following sale instances were cited by appellants before competent authority : (a) Property H. No. 6-3-248/1/4, Road No. 1, Banjara Hills purchased by Jay Bee Hotels & Theatres . (P) Ltd. on 23rd Dec., 1982 . Rs. Cost of building on date of sale 3,75,000 Cost of land with Rs. 150 per sq. yd. frontage on 6,25,000 Road No. 1, total area 2500 sq. yds. . 10,00,000 locality in which this property stands is in well commanding position and in fact later five-star . hotel is being constructed in said site. (b) Property H. No. 8-2-413, in Road No. 5, Banjara . Hills Date of deed of conveyance : August 1982 . purchased by Shri Suresh Mehra & others amount Rs. 5,00,000 Property with . building and land Old building portion value as on Rs. date of sale 2,00,000 Land 3,00,000 . 5,00,000 land rate works out to Rs. 76 per sq. yd. . (c) Property H. No. 8-2-316, 8-2-316/3/3, Road No. . 4, Banjara Hills Date of deed of conveyance 6th May, 1984 . purchased by Shri S.N. Bhalla ; amount Rs. 3,60,000 It is new building 3,00,000 Land value for 560 sq. yds. 60,000 . 3,60,000 In this case land rate works out to Rs. 100 per . sq. yd. (d) Property H. No. 8-2-583/1, Road No. 8 Banjara . Hills Date of deed of conveyance 7th March, 1984 . purchased by Ramesh Prasad & others . Building value 2,00,000 Land 1985 sq. yds. 2,00,000 . 4,00,000 land rate works out to Rs. 100 per sq. yd. 7 . competent authority had considered sale instances cited in support of appellants valuation. Taking first of sale instances cited above competent authority found that extent of land sold was 2500 sq. yds. with building constructed during 1967-71 and consideration was Rs. 10 lakhs. Though sale took place on 23rd Dec., 1982 advance of Rs. 1 lakh was paid on 8th May, 1982. competent authority states that as per version of transferees building was of no value for them and it had to be demolished moment it was purchased. Therefore, competent authority states that entire sale consideration of Rs. 10 lakhs should be taken to be paid only towards land and if so, land rate works out to Rs. 400 per sq. yd. as on 8th May, 1982 itself. 8. competent authority further states same vendees under first sale instance cited on behalf of appellants have purchased another piece of land measuring 2500.10 sq. yds. with residential building under sale deed dt. 28th Oct., 1982. This property was just abutting first sale instance relied upon by appellants. consideration paid to this property was Rs. 14 lakhs. Out of total consideration Rs. 1 lakh was paid by cheque as advance on 31st March, 1982. As per valuation report submitted by vendees under this sale deed bifurcation of value of structure as well as land is shown as follows : . Rs. value of building 3,25,063 Value of land at Rs. 425 per sq. yd. for 2510 10,68,750 . 13,94,830 or 14,00,000 land value worked out to Rs. 425 per sq. yd. as on 31st March, 1982. 9 . second sale instance in above table on which appellants relied upon and which was taken up for scrutiny by competent authority was sale of property bearing D. No. 8-2-413 in Road No. 5, Banjara Hills. sale consideration is Rs. 5 lakhs. Valuation Officer, however, estimated value of property as on 13th Aug., 1982 at Rs. 6.16 lakhs. Valuation Officer valued building at Rs. 76,640. He valued land at Rs. 165 per sq. metre (Rs. 135 per sq. yd). At that rate total extent of 3292 sq. metres comes to Rs. 5,43,221 and total value of property comes to Rs. 6,15,861 or Rs 6,15,000 in round figures. competent authority states about this sale that though sale deed was registered in August 1982 agreement was entered into in October 1981 itself and advance of Rs. 4 lakhs was paid on date of agreement. He further states that when valuation cell estimated value of building at Rs. 72,640 vendees under sale deed put its value at Rs. 2 lakhs and revised land rate correspondingly. admitted land rate works out to Rs. 135 per sq. yd. in October 1981 and competent authority states that it is too low to be accepted. 1 0 . third case relied upon by appellants and taken up for consideration by competent authority was sale instance of property situated at Road No. 4, Banjara Hills bearing D. No. 8-2-316/3/12 for consideration of Rs. 3,60,000. sale deed was registered on 26th May, 1984. Valuation Officer estimated land rate at Rs. 225 per sq. yd. Though registration took place in May 1984 amount of Rs. 1,80,000 was paid as earnest money on 9th Sept., 1983 states competent authority in his impugned orders. He did not further comment in his impugned orders whether sale consideration was reasonable or high or low. 11. fourth comparable case cited by appellants and taken up for consideration by competent authority was property sold by Smt. Razia Begum wife of transferor under impugned sale deed. She sold abutting land to impugned property with building situated therein bearing D. No. 8-2-583/1 facing Road No. 8, Banjara Hills. She sold it by deed of transfer dt. 7th March, 1984. purchasers in her case was Shri Ramesh Prasad and others. amount of consideration stated in sale deed was Rs. 4 lakhs. According to recitals of said sale deed building value was shown at Rs. 2 lakhs whereas value of land of 1985 sq. yds. was shown at Rs. 2 lakhs. land rate according to recitals of sale deed only works out to Rs. 100 per sq. yd. competent authority merely mentioned in his impugned orders that this particular sale instance formed part of another subject-matter of acquisition in Reference Appeal No. 636 (Hyd) of 1985 and, therefore, he did not consider merits and demerits involved and reasonableness or otherwise of price stated in document. In his impugned orders competent of price stated in document. In his impugned orders competent authority held that in first three cases cited as comparable cases by appellants themselves, in first case land rate worked out, according to him, to Rs. 400 to Rs. 425 per sq. yd. in 1982. In second sale instance admitted to be comparable land rate worked out to Rs. 138 per sq. yd. in October 1982 and in third comparable case land rate worked out to Rs. 225 per sq. yd. as against rate of Rs. 100/75 per sq. yd. under impugned sale deed dt. 17th June, 1983. competent authority next began discussing sale of property bearing H. No. 8-2-588. sale was in pursuance of agreement dt. 26th Feb., 1984. However, registered document was executed on 22nd Aug., 1984 pursuant to agreement dt. 26th Feb., 1984. vendees under sale deed is one Shri Kishore Kumar Bhatia. Shri JPL Gwynn was Englishman who worked as member of Board of Revenue in Government of Andhra Pradesh. After his retirement he wanted to go back to England, his native country, and settle down in London. Since whole of sale consideration received was to be repatriated to foreign country reference to District Valuation Officer was made by Controller, RBI, Exchange Department, Bombay, under s. 3(1) of Foreign Exchange Regulation Act, 1947. District Valuation Officer was requested to estimate value of property sold by Shri JPL Gwynn to Shri K.K. Bhatia. stated consideration under sale deed was Rs. 10.80 lakhs. However, Valuation Officer valued property at Rs. 11.81 lakhs which yielded rate of Rs. 303 per sq. yd. District Valuation Officer valued this property as on 25th Feb., 1984. Shri K.K. Bhatia had submitted valuation report by registered valuer. In said valuation report registered valuer valued building at Rs. 4,45,873 and land at Rs, 20per sq. yd. valued at Rs. 4,48,666. Thus total value of property came to Rs. 8.95 lakhs. It was case of appellants before us that Shri K. K. Bhatia paid fancy price for said property inasmuch as he had paid extra amount of Rs. 3 lakhs as he was very much particular of purchasing property of Shri JPL Gwynn. However, this contention was negatived by competent authority and held that in said case land rate worked out to Rs. 303 per sq. yd. as on 25th Feb., 1984. 12. competent authority in his impugned order also considered another sale deed dt. 18th July, 1985 under which H. No. 8-2-583/1/1 in Road Nos. 7 and 9 of Banjara Hills was sold for consideration of Rs. 9 lakhs to one Smt. Faizunnisa, daughter of Shri Akbar Ali Khan, extent of land was 727 sq. yds. in which there was house with plinth area of 2180 sq. ft. building was constructed in 1981 for amount of Rs. 1,96,000 but its value worked out to Rs. 2,62,168. land value comes to Rs. 6,37,832 or at Rs. 877 per sq. yd. 13. competent authority duly took into consideration search and seizure operations conducted by income-tax officials in residential premises of Dr. Zahir Ahmed, vendor under impugned sale deed on 24th March, 1984 under s. 132 of Act. competent authority also took into consideration affidavit of Dr. Zahir Ahmed dt. 11th May, 1984, copy of which is now furnished at pages 46 to 50 of paper book No. 1. competent authority also duly took into consideration alleged agreement of sale dt. 6th April, 1983 entered into between Dr. Zahir Ahmed and Shri Naresh Kumar. This agreement is written on slip of paper of writing pad and stipulations of agreement were purported to have been signed both by Dr. Zahir Ahmed as well as Shri Naresh Kumar on 6th April, 1983. first of stipulations in agreement states that sale consideration would be Rs. 12 lakhs, store- house, servants quarters, have to be built at own cost of purchaser. second stipulation was that first instalment of Rs. 7.50 lakhs will be paid on 20 th May, 1983 and last instalment of Rs. 5 lakhs will be paid at time of registration. third stipulation of agreement states that Rs. 65,000 should be paid on 15th March, 1983 towards price of chandeliers and hundies. signature of Shri Naresh Kumar was denied on said agreement and his contention was that his signature was forged and in support of his contention he filed report of one of handwriting experts Shri N.A. Phiske dt. 23rd Jan., 1986 wherein it is stated that signature on agreement was not that of Shri Naresh Kumar and it was forged. Copy of report of handwriting expert Shri Phiske is provided at pages 67-70 of paper book No. 1. competent authority held that this argument of appellants cannot be accepted for reason that when agreement was sent for examination of Government Examiner of Questioned Documents he had opined in his reports dt. 15th July, 1985 and 19th Aug., 1985 that signature of Shri Naresh Kumar on agreement is genuine and not forged. It was argued before competent authority that when raid took place on 24th March, 1984 in house of Dr. Zahir Ahmed income-tax officials in raid were not able to lay their hands on this alleged agreement and, therefore, in all probability this agreement was subsequently concocted. This argument was brushed aside by competent authority stating that after all it may not be possible for Department to lay their hands on each and every paper which may be ultimately proved to be relevant. competent authority also duly took note of fact that after renovation and remodelling building Shri Naresh Kumar disclosed market value of his one-third share in property at Rs. 7.50 lakhs as on 26th Dec., 1984 when he applied for bank loan to Andhra Bank Ltd. Accordingly, total value of property would come to Rs. 22.50 lakhs. This is possible only when cost of reconstruction/remodelling is added to fair market value of Rs. 12 lakhs but not to stated consideration of Rs. 4.50 lakhs. Therefore, competent authority in his impugned order states that even subsequent conduct of appellants would amply prove that market value of impugned property should have been Rs. 12 lakhs but not Rs. 4.50 lakhs. 1 4 . After keeping in mind all above circumstances competent authority estimated value of land as well as building as follows : He adopted land rate which serves as passage at Rs. 20per sq. yd. whereas other land was valued at Rs. 400 per sq. yd. factors like presence of mosque and irregular shape of land were held not to be depressing factors at all but only factors which have got only marginal effects on land value : . Rs. 2129.07 sq. yds. at rate of Rs. 400 per sq. 8,51,600 yd. 380 sq. yds. at rate of Rs. 20per sq. yd. 76,000 . 9,27,600 . Rs. Land 9,27,600 Building 1,86,546 . 11,14,146 or . 11,15,000 competent authority further states that he himself along with Shri B.R. Rao, Valuation Officer, visited impugned premises on 20 th Oct., 1984. While valuing building he took into consideration two reports of Valuation Officer about value of impugned property. competent authority states that in revised report of Valuation Officer value of compound wall was taken at Rs. 3,182 as against Rs. 18,389, treating compound wall as belonging to Ramesh Prasad and others. Further, in revised report of valuation cell deduction of Rs. 30,000 was given for immediate repairs. competent authority states that for structure which was remodelled/renovated at cost of Rs. 10 lakhs as seen after purchase deduction of Rs. 30,000 towards immediate repairs appear to be superfluous. Therefore, he ignored deduction of Rs. 30,000 and took value of structure at Rs. 1,86,546. While dealing with determination of land value competent authority states that Valuation Officer in his first report adopted Rs. 400 per sq. yd. whereas he revised rate to Rs. 100 to 150 per sq. yd. in his revised report. In revised report Valuation Officer states that impugned land situated in Banjara Hills is predominantly residential area except one or two star hotels and commercial pockets. He further states that Road No. 1 is more important than other roads in Banjara Hills area except that it is main road with plenty of future commercial potentialities. In fact, Road No. 12 is considered much more posh residential locality and had gained prominence over years because earliest construction activity of that area started there. competent authority further stated as follows : "Even after State Government have revised land rates as on 1st May, 1985, except Road No. 1 where rate has been increased to Rs. 600 from Rs. 150, and in Road No. 12 after house of one Shri Prasad where rate is increased to Rs. 160 from Rs. 40, rate that is fixed for all roads in Banjara Hills is only Rs. 225. This fact shows that land value in Banjara Hills is generally same, even after revision, on all roads." competent authority took into consideration District Valuation Officer s report while valuing Shri JPL Gwynn s property and arrived at land value of Rs. 303 per sq. yd. or Rs. 360 per sq. metre as on 25th Feb., 1984. competent authority states that even after giving due concession for time lag between impugned sale and sale instance in Shri Gwynn s case and even if he were to adopt rate of Rs. 250 per sq. yd. for other land and Rs. 100 per sq. yd. for passage land, total value of land would come to Rs. 5,70,267 and value of building already estimated at Rs. 1,86,546. Both put together value would be Rs. 7,56,860 and difference between stated consideration and fair market value would be Rs. 3,06,813 which is 68 per cent over admitted consideration. following four salient points were taken into consideration by competent authority to fix value of impugned property at Rs. 12 lakhs : 1. Considering sale agreement dt. 6th April, 1983 fixing consideration at Rs. 12 lakhs 2. admission by transferor that he had received Rs. 12 lakhs for sale of property. 3. value of property after renoation/remodelling admitted at Rs. 22.50 lakhs while applying for loan to Andhra Bank by Shri Naresh Kumar. 4. Coupled with admission of transferor, his wife Smt. Razia Begum gave affidavit dt. 11th May, 1984 that she received Rs. 11,75,000 toward sale of her land of 1980 sq. yds. with house in it bearing House No. 8-2-583/2 facing Road No. 9, Banjara Hills, Hyderabad as against apparent consideration at Rs. 4 lakhs recited in sale deed. copy of which is furnished at pages 73 to 80 of paper book No. 1. It is dt. 5th March, 1984. 15. competent authority also stated that inasmuch as difference between fair market value and apparent consideration cited in sale deed being more than 20 per cent of latter, presumption under sub-s. (2) of s. 269C will come into play and fact of payment of extra consideration over and above declared consideration, in absence of proof to contrary, stands conclusively proved. competent authority further stated that from material on record he was satisfied that fair market value of impugned immovable property exceeded Rs. 1 lakh, that fair market value exceeded apparent consideration by more than 15 per cent of admitted consideration ; that true consideration was not stated in registered sale deed with object of facilitating reduction or evasion of tax liability of transferor to pay and facilitating concealment of any income of transferee. Ultimately be had held that he was satisfied that this was fit case where provisions of Chapter XX-A which dealt with acquisition of immovable properties are squarely attracted and, therefore, while exercising his powers as competent authority he ordered acquisition of this impugned property under s. 269F(6). competent authority passed his impugned order on 31st March, 1986. 16. present appeals are filed against orders of acquisition passed by competent authority. contentions raised by these appellants are common and they may be stated as under : 1. initiation of acquisition proceedings themselves was bad in law as there was no material whatsoever which could have prompted competent authority to believe that fair market value of impugned property was higher than apparent consideration and that stated consideration was not true consideration. 2. Inspector s report dt. June 1983 does not form valid basis for initiating acquisition proceedings, inasmuch as, it is not sufficient material in eye of law to clothe competent authority with jurisdiction to issue notices under s. 269C. 3. presumptions under s. 269C(2) are not available at initiation of proceedings. 4. Without prejudice to above contentions competent authority went wrong in fixing fair market value at Rs. 12 lakhs. 5. competent authority went wrong in relying upon affidavits of transferor Dr. Zahir Ahmed and his wife Smt. Razia Begum. Their affidavits were self-serving statements main purpose of which is to explain cash found in their possession. 6. alleged agreement dt. 6th April, 1983 should have been held as subsequent concoction. Firstly, for reason that such important document was never found by income-tax officials when they have conducted raid upon house of Dr. Zahir Ahmed on 24th March, 1984. Secondly, no mention o f it was made under sale deed. Thirdly, it was never produced or any information was given about it in affidavit of Dr. Zahir Ahmed or his wife. 7. competent authority erred in disregarding first statement given b y Dr. Zahir Ahmed at time of search operations on 24th March, 1984 wherein he categorically affirmed that in impugned sale deed consideration for transfer had been correctly stated. 8. competent authority ought to have found that signature of Shri Naresh Kumar found on agreement dt. 6th April, 1983 was forged in view of report of Handwriting Expert Shri N. A. Phiske dt. 23rd Jan., 1986. 9. stipulations in agreement were never acted upon and it was strong circumstance to show that said document was not genuine one. 10. basic condition to discharge burden which lay upon Revenue, viz., that fair market value of impugned property was higher than apparent consideration by more than 15 per cent was not discharged by Revenue in this case. 11. details of comparable sale instances relied upon by appellants were not taken into consideration but they were brushed aside for no valid ground. 12. revised report submitted by Departmental valuer was brushed aside without any valid ground or proper reasons. 13. So also, disadvantages attached to property in question were n o t properly appreciated and therefore impugned order passed by competent authority ordering acquisition of impugned property should be set aside and appeals should be allowed. 17. We have heard Shri C. S. Aggarwal and Shri N. Laxminarayan, learned advocates appearing for appellants and Shri C. Satyanarayana, learned senior Departmental Representative. On behalf of appellants two paper books, one containing 164 pages and second containing 29 pages were filed. On behalf of Department, copy of statement of Dr. Zahir Ahmed recorded on 24th March, 1984, copy of alleged agreement of sale dt. 1st May, 1985 entered into by Jay Bee Hotels and Theatres (P) Ltd. in favour of Venkatarama Hotels Ltd., copy of inspector s report dt. June 1983, extract of order sheet of IAC (competent authority) dt. 14th Feb., 1984, extract of CIT s note file dt. 27th March, 1986 and order dt. 19th June, 1984 passed by ITO against Dr. Zahir Ahmed under s. 132(5) of Act and list of articles sold by Shri J.P.L. Gwynn for Rs. 61,000, were filed. 18. Now let us take up for consideration question whether acquisition proceedings under s. 269C were validly started. According to assessees except inspector s report of June 1983, there is no material on record on basis of which competent authority issued notice under s. 269C(1) to appellants. inspector argues that Shri C.S. Aggarwal, learned counsel for appellants, is not expert in field of valuation of immovable properties. He did not gather any sale instances of neighbouring lands or properties before adopting rate of Rs. 20per sq. yd. or adopting rate of Rs. 40 per sq. ft. for valuing house sold. In his report inspector did not state that consideration agreed to between parties is something different from stated consideration and that agreed consideration has not been truly stated in instrument of transfer with object of facilitating reduction or evasion of liability of transferor to pay tax under this Act in respect of capital gains or facilitating concealment of any income or moneys or any assets which have not been or which ought to have been disclosed by transferees either under this Act or under WT Act, 1957. It is further contended that no neighbour to impugned property or any person connected with transfer of property was examined by inspector before submitting his report. It is property was examined by inspector before submitting his report. It is further contended that competent authority must have reason to believe that fair market value of property of more than Rs. 25,000 exceeds apparent consideration stated in instrument of transfer and parties have agreed to make untrue statement with ulterior motive of tax evasion or concealment. satisfaction of competent authority for initiation of acquisition proceedings is subjective satisfaction of objective facts secured into record. reasons for formation of belief must have rational and direct connection with material coming to notice of competent authority, though question of sufficiency or adequacy of material is not open to judicial review. He relied upon following decisions for his submissions : CIT vs. Smt. Vimlaben Bhagwandas Patel (1979) 13 CTR (Guj) 27 : (1979) 118 ITR 134 (Guj) Sarabhai M. Chemicals (P) Ltd. vs. P. N. Mittal, Competent Authority, IAC (1980) 16 CTR (Guj) 315 : (1980) 126 ITR 1 (Guj), Unique Associates Co-Operative Housing Society Ltd. vs. Union of India (1985) 152 ITR 114 (Bom), Tube Mill (India) (P) Ltd. vs. IAC (1980) 122 ITR 72 (Cal), Jai Kumar Kankaria vs. Competent Authority (1981) 130 ITR 593 (Cal) and CIT vs. Madho Properties Ltd. (1981) 131 ITR 380 (Cal). 1 9 . Shri C. Satyanarayana, learned Departmental Representative strongly contended firstly that inspector who had submitted his inquiry report in June 1983, is well experienced officer and his estimation of immovable properties should be given due credit and cannot be brushed aside easily. Further, he contended that inquiry report is supplemented by valuer s report, affidavit of Dr. Zahir Ahmed agreement dt. 6th April, 1983 and affidavit of Smt. Razia Begum dt. 11th May, 1984 which all go to prove that initiation of proceedings under s. 269C(1) is quite valid and cannot be questioned. He admits no doubt that all material is subsequent to initiation of proceedings but still all said material can be relied upon. Shri C. S. Aggarwal strongly opposed this contention and submitted that no fresh material which was not existing at time of initiation of proceedings but which was later secured into record can be looked into for purposes of determining whether initiation of proceedings in first instance is justifiable on part of competent authority or not and in support of his contention he invited our attention to Calcutta High Court decision in East Coast Commercial Co. Ltd. vs. ITO (1981) 128 ITR 326 (Cal). 2 0 . first of cases cited before us is Sint, Vimlaben Bhagwandas Patel s case (supra) following is held by their Lordships of Gujarat High Court : ". . . In process of prima facie determining fair market value of property, it is implicit in very nature of process that he has to obtain relevant and cogent material of comparable properties and unless he his got statements of persons who may be owners, lessees or occupants of such properties, or report of Valuation Officer opining about excess of fair market value by prescribed margin, or any other reliable relevant material such as in nature of sale deed, lease deed, etc., he cannot prima facie satisfy himself about first condition precedent for initiation of proceedings...." However, in this case inspector did not try to obtain any sort of information contemplated by Hon ble Gujarat High Court adverted to above as essential to be gathered before initiation of proceedings except ipso dixit of IT inspector s information about valuation of house as well as land there is no material before competent authority to initiate proceedings. Gujarat High Court in first of two cases held that acquisition proceedings under Chapter XX-A are quasi-criminal proceedings and principles of natural justice should always be complied with. What are principles of natural justice cannot be listed out and they depend upon facts and circumstances of each case, Smt, Vimlaben Bhagwandas Patel s case (supra) essential requisites for initiation of proceedings are stated to be as under : "The legislature has adopted known and recognised phraseology for describing condition precedent for initiating acquisition proceedings under s. 269C. competent authority must have reason to believe that fair market value of property of more than Rs. 25,000 exceeds apparent consideration stated in instrument of transfer and parties have agreed to make untrue statement with ulterior motive of tax evasion or concealment of income. satisfaction of competent authority for initiation of acquisition proceedings is subjective satisfaction of objective facts stated above. reasons for formation of belief must have rational and direct connection with material coming to notice of competent authority, though question of sufficiency or adequacy of material is not open to judicial review." Even assuming for while that inspector who visited place was competent to say about estimated value of impugned property still he did not say even one word about intention of parties or motive of parties in making untrue statements about sale consideration in deed of sale. However, from order sheet of competent authority he stated as follows : "I have reason to believe that there is understatement of sale consideration in sale deed and that such understatement has been prompted by object of facilitating reduction or evasion of tax liability of vendor or facilitating concealment of income or wealth of vendee for purpose of their IT or WT assessments. It is also worth noting that estimated fair market value of Rs. 5,89,800 exceeds total apparent consideration of Rs. 4,50,000 by margin of more than 31 per cent of latter. In view of this, statutory presumptions under s. 269C(2) r/w s. 269C(1)(a) and (b) of IT Act, 1961, are squarely attracted." 21. Firstly, we have to state that inspector who had submitted his report in June 1983 is not qualified engineer. We do not know how much experience he had put up and what is his educational qualification. We also do not know how Revenue can credit him with sufficient knowledge in estimating values of immovable properties. In absence of any evidence in this regard we have to hold that his valuation of immovable properties is more subjective that objective material spoken of as essential by Gujarat High Court in Smt. Vimlaben Bhagwandas Patel s case (supra). Further, not even one of essential objective material which is listed by Gujarat High Court has been secured so as to uphold initiation of proceedings under s. 269C. Further there is no objective material whatsoever present before competent authority to come to conclusion that understatement of consideration was prompted by object of facilitating reduction or evasion of tax liability of vendor or facilitating concealment of income or wealth of vendee for purposes of their income-tax or wealth-tax assessments. Copy of notice under s. 269D(1) was issued on 14th Feb., 1984 itself. Even gazette notification was made on 24th March, 1984. competent authority sent letter to valuation cell to value impugned property only on 15th Oct., 1984 which is long after initiation of proceedings. raid on Dr. Zahir Ahmed s house was on 24th March, 1984. affidavits of Dr. Zahir Ahmed and Smt. Razia Begum were dt. 11th May, 1984. Thus it can be seen that by date of initiation of proceedings except inspector s report there was no other material available for competent authority which serve as objective fact for formation of his subjective belief about initiation of acquisition proceedings. We feel that there is no objective material at all to initiate acquisition proceedings. 2 2 . Now let us consider whether subsequent material which was gathered by competent authority after initiation of proceedings can be made use of in order to validate otherwise defective proceedings. appellants contention is that no such subsequent material can be looked into and relied upon Calcutta High Court decision in East Coast Commercial Co. Ltd. s case (supra). In said decision following is held : ". . . Thus, if any additional reasons were disclosed by ITO in his affidavit before Court in support of his action in reopening assessment on which Court might be satisfied as to validity of proceedings, that would not, in our opinion, validate proceedings, if reasons recorded under cl. (iii) of first proviso to s. 34(1) of old Act or s. 148(2) of new Act were not sufficient for initiation of proceedings or for grant of sanction by Board or CIT, as case might be. . . ." Therefore, in view of above, we hold that subsequent material gathered by competent authority to justify acquisition cannot be made use of for initiating acquisition proceedings themselves. 2 3 . Now let us come to next contention whether presumptions under s. 269C(2) can be availed of at time of initiation of proceedings. There is catena of decisions stating that it is not permissible. Gujarat High Court in Smt. Vimlaben Bhagwandas Patel s case (supra) held that presumptions prescribed in cl. (a) of sub-s. (2) of s. 269C are clearly rebuttable presumptions. competent authority can initiate proceedings for acquisition on conditions precedent being satisfied only by appropriate notice in Official Gazette to that effect. It follows that till appropriate notice in Official Gazette is published proceedings for acquisition are not initiated. Therefore, presumptions prescribed in cls. (a) and (b) of s. 269C would not operate at any stage prior to decision of competent authority for initiation of proceedings. Therefore, in view of above decision which was mostly followed by same High Court as well as other High Courts there is no need for us to deal with same topic at any great length. It is enough if we hold that presumptions under cls. (a) and (b) of sub-s. (2) of s. 269C are not available before initiation of proceedings or for purposes of initiation of proceedings. 24. Shri Aggarwal also argued that even principles of natural justice were not complied with in this case inasmuch as before inspector visited place he had not given any notice to appellants and his valuation more or less depended upon theoretical considerations. Determination of market value on basis of adopting theoretical calculations is illegal in view of Delhi High Court decision in CIT vs. Arun Mehra (1985) 49 CTR (Del) 119 : (1986) 157 ITR 308(Del). In said decision Delhi High Court held as follows : "Another important aspect in this matter is fact that when initiation proceedings depend on market value of plot, such initiation should not depend on theoretical calculation. market value is not determined by theoretical considerations. What has to be seen is value in market and not value calculated in abstract manner by applying multiplier to some unknown sale in July 1981. Neither nature of sale nor nature of property is mentioned in either of valuation reports. It is also not clear as to why any multiplier at all has been applied to said valuation of Rs. 2,500 per sq. yard. basis of calculation is, therefore, not apparent at all." As is clear from above, at least, Valuation Officer in that case had cited one sale instance, applied multiplier in order to arrive at fair market cited one sale instance, applied multiplier in order to arrive at fair market value of impugned property in that case. However, as can be seen from inspector s report of June 1983, there is not even one sale instance cited and, therefore, value arrived at by inspector in his report should be stated to be based upon theoretical considerations, if we are permitted to use language of Delhi High Court decision. Therefore, that is another additional reason to hold that there is no objective material available with competent authority before starting acquisition proceedings. 25. Now let us consider merits of case. Whether there are any valid ground on which agreed consideration was Rs. 12 lakhs but not stated consideration of Rs. 4.50 lakhs. In order to substantiate this contention first piece of evidence relied upon by Department was agreement dt. 6th April, 1983. This agreement was found to have been written on writing pad. Copy of agreement is provided at pages 44-45 of paper book. Though it was stated to be dt. 6th April, 1983 it was said to have been filed before competent authority on 2nd Sept., 1985 almost one year and seven months after initiation of proceedings. There are strong indications to show that this agreement must have been false. In first instance, if said agreement is true it ought to have been mentioned in sale deed dt. 17th June, 1983 or at least it ought to have been mentioned in sale deed that sale was in pursuance of agreement oral or written reached earlier between parties. Unfortunately sale deed states that sale is in pursuance of oral agreement but not written agreement. According to terms of agreement first instalment should be of Rs. 7 lakhs and it should be paid by 20 th May, 1983. However, fact remains that only Rs. 1 lakh was paid on 6th May, 1983. According to another term Rs. 5 lakhs should be paid at time of registration. However, according to recitals of sale deed amount of Rs. 3.50 lakhs was paid to Dr. Zahir Ahmed not in cash but by demand draft drawn on Central Bank of India, Charminar Branch. Therefore, stipulations of agreement did not appear to have been acted upon and there is no believable evidence to show that stipulations were acted upon. statement of Dr. Zahir Ahmed on date of raid, i.e., 24th March, 1984, is that he had sold his house for Rs. 4.50 lakhs to Shri Naresh Kumar about four or five months back and said recital is correct in fact, if agreement was in existence then officials who raided house of Dr. Zahir Ahmed would certainly seize so-called agreement. But they did not do so. Dr. Zahir Ahmed himself would have handed over agreement at time of search. Dr. Zahir Ahmed came with story that he was under shock when income-tax raid took place in his house. But on 11th May, 1984 when he filed affidavit certainly he was not under shock. If agreement is true then certainly he would have made mention of it in his affidavit. But we read his affidavit dt. 11th May, 1984 in vain and we do not find any mention of agreement. If really consideration was Rs. 12 lakhs instead of Rs. 4.50 lakhs Dr. Zahir Ahmed would have invested something more than Rs. 3 lakhs in National Rural Development Bonds or would have intimated IT Department about construction of new house with sale consideration received by him from sale of his residential house in order to get exemption from income-tax. But no reason is forthcoming when Dr. Zahir Ahmed s version was that excess of Rs. 7.50 lakhs went into construction of his house what prompted him to state false figure of consideration in sale deed. Had he constructed house or purchased rural bonds with same consideration, in either case he would have got exemption from income-tax. On 15th June, 1983 Dr. Zahir Ahmed filed affidavit before IT Department stating that real consideration was only Rs. 4.50 lakhs for obtaining clearance certificate under s. 213A of Act. order passed against Dr. Zahir Ahmed under s. 132(5) dt. 19th June, 1984 was filed before us. As can be seen from said order that by 11th May, 1984, i.e., date of his affidavit 132 proceedings were pending before ITO and ITO himself found that for purposes of getting clearance certificate under s. 213A Dr. Zahir Ahmed filed another affidavit dt. 15th June, 1983 and he found direct conflict between affidavits dt. 15th June, 1983 and 11th May, 1984. Shri Naresh Kumar, one of appellants before us was also examined in proceedings under s. 132 before ITO. He denied having paid any on money . ITO held as follows : "Denial of vendee about payment of on money coupled with failure of assessee to disclose advance in wealth-tax return for asst. yr. 1983-84 proves that cash found in house and locker cannot be tagged on to sale transaction. cash of Rs. 3,35,000 found in residence and locker of Dr. Zahir Ahmed is unexplained money and as such has to be assessed under s. 69A for asst. yr. 1984-85." Therefore, it is clear that affidavit of Dr. Zahir Ahmed dt. 11th May, 1984 is self-serving document intended to protect his interest to maximum extent in proceedings under s. 132 started against him. 26. There is another angle wherefrom we can look at facts of case in order to come to conclusion that in all probability affidavit of Dr. Zahir Ahmed dt. 11th May, 1984 is self-serving document. In raid that took place in residential premises of Dr. Zahir Ahmed on 24th March, 1984 there arose necessity to him to explain source of income for following amounts : . Rs. Investment in Rural Development Bonds 3,00,000 Construction of house, out-house and garage in same premises (This amount represents cash and 3,60,000 cheque paid to one Shri Anjiah, contractor for above construction) Deposits in banks 2,50,000 Cash found at residence 3,35,000 . 12,45,000 If Dr. Zahir Ahmed admits Rs. 12 lakhs as consideration received from sale of his house to appellants herein and if his version is believed by Department then he would be obliged to pay tax on long-term capital gains involved in transaction. Exemption under s. 80T of Act would also be available on almost whole amount for which he was to account for. But suppose, he does not raise any such plea and does not prove it to satisfaction of Revenue then whole of amount for which he is to account for has to be dealt with under s. 132(5) and whole of amount seized, value of assets seized, etc., would be deemed to be income of assessee of that financial year and he is obliged to pay tax on whole income. Thus, we can very easily see benefit involved to Dr. Zahir Ahmed in putting forward plea that real consideration was Rs. 12 lakhs under impugned sale transaction. story put forward in his affidavit that he was in psychological shock, that he made statement before Department while he was in state of shock and he still did not recollect what he actually stated before Department appears to be mere make-believe statement and devoid of truth. Dr. Zahir Ahmed was examined as well as cross-examined and particulars of his examination and cross-examinations were furnished at pages 55 to 66 of paper book No. 1. From answers given to questions in cross- examination made on behalf of appellants herein he himself admitted that he was Secretary to Government of Nizam in Home Department before Police Action in 1948. Later he worked as Development CIT in 1952 and he retired in 1957. Questioned, whether he held post of High CIT in UK on behalf of Government of India, he answered that he was deputed as Special Officer on behalf of Government of Hyderabad after Police Action and he was also Ambassador of Government of India in Saudi Arabia. He also worked in United Nations Organisation. For person who held such high posts for very long time in his career we fail to understand how presence of income-tax officials for search and seizure would almost produce psychological shock in him. We can understand such psychological shock having been produced in ordinary businessman who does not hold any official position. But for person who worked as Ambassador to Saudi Arabia it is our understanding that there was no occasion to create psychological shock so as to disturb his mind, make him man out of gears and prompt him to make statement in utter shock. If his version that he was shocked and dazed by presence of income-tax officials is correct then in our opinion all positions he held both under Nizam and Government of India as well as in UNO would make him bold enough to say that he was under shock and he is not in fit condition to make statement on date of search and seizure, i.e., 24th March, 1984. However, no such statement is found in his sworn statement recorded on 24th March, 1984. Further person who was in shock would give statement incoherently and unintelligibly. However, sworn statement given by Dr. Zahir Ahmed on 24th March, 1984 does not appear to be given by person under state of shock as none of his statements were found to be false. In his sworn statement Dr. Zahir Ahmed stated that he was retired civil servant, he retired as Indian Ambassador to Saudi Arabia in 1975, that he is getting pension of Rs. 1, 20per month, that he is also getting Rs. 1,800 per month from Nizam s Miscellaneous Trust to which he was trustee that he does not remember how much he was getting towards retirement benefit from UNO, that he was author of books on rural developments, etc., that he has got only one immovable property at Road No. 9, Banjara Hills, that he does not have any other immovable property, that he was having bank accounts in various banks as per list given by him, that he had locker in Central Bank of India, Bank Street, Hyderabad, that he will not be able to tell how much cash will be available with him by date of search, i.e., 24th March, 1984, that he sold house for Rs. 4.50 lakhs to Shri Naresh Kumar about four or five months back, that during course of search authorised officer found cash of Rs. 90,000 in his almirah, that this belongs to him, that he had old furniture, lamps, equipments, chandeliers, etc., that he sold chandeliers and lamps (hundies) for Rs. 75,000 about two or three months ago to Shri Naresh Kumar, that he was paid in cash only when he had sold furniture, etc., to tune of Rs. 30,000 and vendees of furniture paid him in cash and that all cash was kept in one place that he did not have any other cash except what he stated above and what authorised officers found in his almirah. Therefore, it is seen that cash of Rs. 90,000 found in his almirah, according to his earliest version, was traceable to sale of gold ornaments, chandeliers and hundis as well as to sale of furniture. In cross- examination of Dr. Zahir Ahmed he stated that price declared in Form No. 34A was Rs. 4.50 lakhs. specific question was asked to Dr. Zahir Ahmed and answer to said question is as follows : Question : sale deed was executed by you on 17th June, 1983 and raid was conducted on 24th March, 1984 and during this 9 months period why did you not approach taxation authorities to make it clear that you have received sum of Rs. 12 lakhs and not Rs. 4.5 lakhs ? Why did you keep quiet for 9 months ? Answer : Shri Naresh Kumar has stated that he has accounted only Rs. 4.50 lakhs and requested me to wait for due date for filing of return before which time he would allow me to deposit moneys in my bank. before which time he would allow me to deposit moneys in my bank. It may be noted from particulars that he had deposited Rs. 2.50 lakhs in Central Bank and Canara Bank before raid took place and also invested Rs. 3 lakhs in National Rural Development Bonds apart from amount spent for construction of his house. In answer to another question Dr. Zahir Ahmed stated that money paid by Shri Naresh Kumar in excess of what was declared in sale deed of Rs. 7.50 lakhs was used in completion of construction. According to him construction started in second half of 1982 and went on till first half of 1983 during which time Shri Naresh Kumar came to him for purchase of his property. He also admitted that house of his daughter at Bombay was also searched simultaneously and Rs. 1,50,000 were found in her possession unexplained. He said that money found in possession of his daughter has nothing to do with sale consideration. He had received order under s. 132(5) but he had filed appeal against same under s. 132(11). If story of Dr. Zahir Ahmed is correct or if real consideration of Rs. 12 lakhs is to be believed then instead of Rs. 3.50 lakhs he would have purchased National Rural Development Bonds for Rs. 7.50 lakhs also as said amount would have earned him exemption from capital gains under s. 54E of Act. very fact that no such purchase of bonds was made by Dr. Zahir Ahmed would go against his version that real consideration was Rs. 12 lakhs. 2 7 . Further, no doubt, provisions of Indian Evidence Act, 1872 cannot be strictly applied to income-tax proceedings. But, in our opinion, they can be applied as rules of justice, equity and good conscience. Sec. 92 of Indian Evidence Act states as under : "When terms of any such contract, grant or other disposition of property, or any matter required by law to be reduced to form of document, have been proved according to last section, no evidence of any oral agreement or statement shall be admitted, as between parties to any such instrument or their representatives in interest, for purpose of contradicting, varying, adding to, or subtracting from, its term :" In Sarkar on Evidence at p. 840 under authority of famous Madras case i n Adityam Ayer vs. Rama Krishna Ayer AIR 1915 Mad. 868, K.S. Narasimhachari vs. Indo Commercial Bank Ltd. AIR 1965 Mad. 147, followed in Lala Singh vs. Basdeo Singh AIR 1923 All 429 as well as Calcutta High Court decisions in Annada vs. Hargobinda 27 CWN 495, etc., law is stated as under : "Evidence cannot be admitted to vary provisions of sale and as to amount fixed as consideration, e.g. where price as fixed in deed is Rs. 35,000 evidence of oral contract that amount was really Rs. 36,000 cannot be given. Though want of consideration or failure of consideration or difference in kind of consideration may be proved, evidence to vary amount of consideration in registered sale deed is inadmissible." In view of above, we hold that affidavit version of Dr. Zahir Ahmed dt. 11th May, 1984 is not believable or permissible version inasmuch as there was no reason to hold that his earlier version on date of raid, i.e., 24th March, 1984 was vitiated for allegedly giving statement in confused state of mind. Further, we also hold that later version of Dr. Zahir Ahmed was self- serving statement and it is statement which secures him more profit when believed. Further his version was never believed in proceedings under s. 132(5) and lastly stated consideration in registered sale deed cannot be allowed to be varied under s. 92. 28. Now let us examine whether sale instance under which Shri JPL Gwynn sold his property is comparable sale with impugned sale and if so, whether resultant price of land under that sale instance can be made applicable to land under impugned sale. We have already given particulars of sale under which Shri Gwynn sold his property to Shri K.K. Bhatia for recorded consideration of Rs. 10.80 lakhs, which was revalued by valuation cell at Rs. 11.81 lakhs which gave land rate of Rs. 360 per sq. metre and Rs. 303 per sq. yd. From impugned order it is not known on which Road No. in Banjara Hills Shri Gwynn s property is situated. But at page 26 of paper book No. 1 it is seen that this property is situated at Road No. 8 whereas impugned property is situated at Road No. 7. total area of land which Shri Gwynn sold was 2243 sq. yds. Admittedly, there was building in Shri Gwynn s property. However, value of building is not known. plinth area of building, type of construction of building is also not known. Whether disadvantages which are present with impugned property are present or not with comparable sale of Shri Gwynn are also not known. Further, Shri K.K. Bhatia was examined in case of Shri Ramesh Prasad. While completing assessment for asst. yr. 1984-85 in case of Shri Ramesh Prasad ITO had occasion to consider allegation of Smt. Razia Begum in her affidavit dt. 11th May, 1984 that consideration for sale which she had executed in favour of Shri Ramesh Prasad was Rs, 11.75 lakhs but not only Rs. 4 lakhs mentioned in sale deed. Shri K.K. Bhatia was examined on 14th Feb., 1985. He stated that he wanted to acquire house property in Banjara Hills. He had paid advance of Rs. 50,000 to Muslim lady for purchase of house in that area. Later on other persons claimed ownership of property. Hence, he could not get house property and to recover advance money he had to go to Court spending lot of money. Then he was scared of purchasing from Muslim people. He came to know that house property of Shri Gwynn, ex-ICS officer was available for purchase from GPA Shri Krishnaswamy, IAS. He agreed to purchase house property for Rs. 10.80 lakhs in March 1984. He knew that he was paying excess price of Rs. 2-3 lakhs. But in view of his earlier unhappy experience in purchase of house property in Banjara Hills area and in view of urgency to purchase property for residential purpose with clear title and good location (being corner plot and large area of 2,243 sq. yds). He purchased property though by paying higher price of Rs. 2.50 lakhs when compared to similar property. Shri Bhatia filed valuation report by valuer Shri T.K. Mohan Rao who valued property at instance of Shri Gwynn. valuer estimated property as on 25th Feb., 1984 as follows : . Rs. Value of building 4,45,873 Value of land of 2,243.33 sq. yds. 4,48,666 . 8,94,539 . or . 8,94,000 It is no doubt true that this property was valued under s. 131(1) of Foreign Exchange Regulation Act, 1947 and Valuation Officer valued it at Rs. 11.81 lakhs. Therefore, it could easily be seen that there is excess price of 2- 3 lakhs involved in this purchase from Shri Gwynn. Further Urban Land Ceiling clearance was also available with Shri Gwynn. Even according to purchaser plot is nice plot, being corner plot adjoining two roads. Therefore, having regard to all these particulars in respect of this property it cannot be said that it is comparable to impugned property before us. 29. Now let us consider whether rate of Rs. 150 per sq. yd. for 2,129 sq. yds. and rate of Rs. 100 per sq. yd. for 380 sq. yds. which is being used as passage represents fair market value as on date of sale. Firstly, there are several disadvantages to this property. There is mosque in front of property. approach to this plot is from road through passage of 380 sq. yds. which cannot be developed in any other way except being used as passage. land is irregular in shape. land was sloping from centre to road and centre to other end. It is purely residential locality. building is situated in corner. Except 100 ft. length of wall other boundary walls belonged to others. When first valuation was done by Departmental valuer whose copy is furnished at pages 24 to 29 no notice was issued to transferees or transferor to be present at time of inspection and thus principles of natural justice were not complied with and, therefore, first valuation report, inter alia, suffered for want of non-compliance of principles of natural justice. Perhaps, realising this fatal mistake competent authority might have invited objections from appellants to first report and he might have forwarded first report along with objections of appellants again to Valuation Officer and asked his comments on them. Valuation Officer instead of merely sending comments sent revised valuation report dt. 12th July, 1985 in which fair market value of property was estimated at Rs. 5.14 lakhs. In our view, it is revised valuation report dt. 12th July, 1985 which should be considered as valid report which can withstand scrutiny under provisions of law. If so, difference between stated consideration and fair market value as on date of sale does not exceed 15 per cent of stated consideration and hence even initiation of acquisition proceedings would become bad. requirements of s. 69F(6) are also not fulfilled. 30. Smt. Razia Begum s property was situated just adjacent to property in question. Copy of sale deed is dt. 5th March, 1984. It is 1,980 sq. yds. of land with house bearing Municipal No. 8-2-583/2. stated consideration of that sale was Rs. 4 lakhs. said sale almost took place one year after sale under consideration before us. It is no doubt true that sale of Smt. Razia Begum s property also is subject-matter of acquisition. According to Smt. Razia Begum and her affidavit dt. 11th May, 1984 sale consideration was Rs. 11.75 lakhs but not Rs. 4 lakhs as stated in sale deed. For asst. yr. 1984-85 ITO in case of Shri Ramesh Prasad, one of vendees from Smt. Razia Begum thoroughly gone into question whether stated consideration was true consideration and whether there was any necessity to add difference between Rs. 11.5 lakhs and Rs. 4 lakhs as unexplained income of Shri Ramesh Prasad and others. In that connection affidavit of Smt. Razia Begum, statement given by her at time of search of her premises and lot of other evidence were examined. As already stated assessment order is provided from pages 93 to 157. At page 154 he held that for reasons discussed above fair market value of property sold by Smt. Razia Begum to Shri Ramesh Prasad does not exceed Rs. 4.56 lakhs as on 5th March, 1984. Thus allegation that there was extra consideration of Rs. 7.75 lakhs in transaction was negatived by ITO. This is strong piece of evidence which goes to prove that in impugned sale also real consideration only was stated and no extra consideration was involved in it. Further Dr. Zahir Ahmed in his sworn statement on 24th March, 1984 admitted that sale consideration received by him from appellants was only Rs. 4.50 lakhs. We have already given our decision that his first statement was not vitiated by any confused or agitated mind. Therefore, version given on that day should be taken to be true. If that were taken to be true then consideration stated under sale deed is correct consideration. question whether we have got right and jurisdiction to appraise same material which competent authority already appraised on which he ordered acquisition of property is answered by recent decision of Karnataka High Court in IAC vs. N. Vajram Setty (1986) 56 CTR (Kar) 154, as follows : "The jurisdiction of Tribunal is co-extensive with that of IAC and, therefore, it was open to Tribunal to reappreciate very evidence on which IAC had decided question of fair market value and came to different conclusion. But in so doing, it must do so as appellate authority is required to do." Having regard to all above we hold that stated consideration in sale deed must have been real consideration or represented fair market value of property on date of sale. 31. learned counsel for appellants also raised question that while giving approval for initiation of acquisition proceedings learned CIT did not exercise his mind but was simply led away by office note put before him and, therefore, on that ground also acquisition proceedings are vitiated. In support of this contention he relied upon decision in Smt. Vimlaben Bhagwandas Patel s case (supra) at p. 199 and Chhugamal Rajpal vs. S.P. Chaliha (1971) 79 ITR 603 (SC) at p. 608. extract from order sheet of CIT s note file dt. 27th March, 1986 is as follows : IAC s draft order under s. 269F(6) is received and put up for kind perusal. property in question is transferred on 23rd June, 1983 for apparent consideration of Rs. 4,50,000 and Gazette publication under s. 269D was made on 24th March, 1984, i.e. within statutory time limit. case was referred to valuation cell and value was reported at Rs. 12,34,000 by Valuation Officer vide his letter dt. 20 th Nov., 1984. Objections have been called for from transferees and they have all been met in draft order. In course of search and seizure, it came to light that real consideration for transfer of property in question was Rs. 12,00,000. secret sale agreement, dt. 6th April, 1983 to this effect has also come to light. IAC has also worked out fair market value on basis of comparable cases and arrived at fair market value at Rs. 11,15,000. As fair market value is far more than 15 per cent of apparent consideration proceedings initiated by IAC are in order. Approval may therefore be accorded under s. 269F(6). For orders... Sd/ ITO Hqrs. I Approval accorded under s. 269F(6) Sd/ P.R. Rao, CIT, 27th March, 1986. In view of what we have held on main issue which is question of fact we feel it is unnecessary to give any decision on this point. 32. In result, we set aside impugned orders and cancel acquisition proceedings. appeals are allowed. *** RAJENDRA PRASAD v. INSPECTING ASSISTANT COMMISSIONER
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