THE COMMISSIONER OF INCOME TAX vs. MAHENDRA MILLS LTD,

C/FA/1459/1979 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/FIRST APPEAL NO. 1459 of 1979 With R/FIRST APPEAL NO. 1460 of 1979 With R/FIRST APPEAL NO. 1461 of 1979 With R/FIRST APPEAL NO. 1462 of 1979 With R/FIRST APPEAL NO. 1463 of 1979 With R/FIRST APPEAL NO. 1464 of 1979 With R/FIRST APPEAL NO. 1465 of 1979 With R/FIRST APPEAL NO. 1466 of 1979

FOR APPROVAL AND SIGNATURE:

HONOURABLE MS.JUSTICE HARSHA DEVANI Sd/- and HONOURABLE MR.JUSTICE A.S. SUPEHIA Sd/- ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No/- 2 To be referred to the Reporter or not ? No/- 3 Whether their Lordships wish to see the fair copy of the judgment ? No/- 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? No/- ========================================================== THE COMMISSIONER OF INCOME TAX Versus MAHENDRA MILLS LTD, ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 ========================================================== Page 1 of 10

C/FA/1459/1979 JUDGMENT CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE A.S. SUPEHIA

Date : 02/08/2018

COMMON ORAL JUDGMENT

(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. The   appellant   Commissioner   of   Income   Tax   has challenged the order dated 31.07.1979, made by the Income­Tax Appellate Tribunal, Ahmedabad, Bench 'B', Ahmedabad,   in   Income   Tax   (Acquisition)   Appeal Nos.1(Ahd)/79,   2(Ahd)/79,   3(Ahd)/79,   4(Ahd)/79, 6(Ahd)/79,   5(Ahd)/79,   7(Ahd)/79,   8(Ahd)/79   under section   269(H)   of   the   Income   Tax   Act,   1961 (hereinafter referred to as the "Act") by proposing the   following   questions   stated   to   be   substantial questions of law: "(a) "Whether, on the facts in the circumstances of the case, the Income­Tax Appellate Tribunal erred in law in quashing and setting aside the order of the Competent Authority  acquiring the property in question? (b)   Whether,   the   Appellate   Tribunal   when accepted   that   apparent   consideration   would   not be   Rs.98,000/­   as   stated   in   the   document   of transfer, was justified in law in holding that the fair market value of the property would come to Rs.1,11,110/­? (c)   Whether,   the   finding   of   the   Appellate Tribunal that no work was done by Shree Ambica Construction  Company  either  at the instance  of Page 2 of 10

C/FA/1459/1979 JUDGMENT the vendor or at the instance of the purchaser and   that   simply   because   the   purchaser   made payment   of   Rs.30,163/­   to   the   said   Ambica Construction Company, it cannot be said that the said   Company   did   construction   work   for   the purchaser at the instance of the vendor and that therefore, the said payment should form part of consideration is correct in law? (d)   Whether,   the   valuation   as   adopted   by   the Income Tax Appellate Tribunal for the purpose of arriving at fair market value of the property in question at Rs,1,11,110/­ is correct in law and sustainable from the material on record? (e)   Whether,   the   conclusion   reached   by   the Income   Tax   Appellate   Tribunal   in   quashing   and setting   aside   the   order   of   the   Competent Authority   in   acquiring   the   property   under   the provisions   of   Chapter   XXA   of   the   Act   is erroneous   in   law   and   not   sustainable   from   the material on record?" 2. All these appeals arise out of the common order dated 30.07.1979, passed by the Income­Tax Appellate Tribunal,   Ahmedabad,   Bench   'B',   Ahmedabad   (herein after referred to as the "Tribunal") and hence, the same were taken up for hearing together and decided by this common judgment.

C/FA/1459/1979 JUDGMENT Limited,   Ahmedabad   viz.the   purchaser,   and   the partners of M/s. Parshwanath Land Organizers. 4. At   the   outset,   it   may   be   noted   that   these appeals of 1979 are still pending for adjudication before this court. However, there is no appearance on behalf of the respondents. The court has therefore, examined the merits of the case to ascertain as to whether the presence of the respondents is necessary. 5. Considering the view that the court is inclined to take the matters, after having gone through the record  of the case as well as the common impugned order, the court finds that, it is not necessary to wait for the respondents to enter appearance. 6. These appeals came to be admitted by order dated 03.12.1979, however, no questions of law have been formulated at the relevant time. 7. The facts giving rise to the present appeals are as follow:­ 7.1   The   Mahendra   Mills   Ltd.   Ahmedabad,   agreed   to purchase   from   M/s.   Parshwanath   Land   Organizers ownership   premises   admeasuring   about   1500   square feet on the second floor in Parshwanath Chambers, Near Harsiddh Chambers, Ashram Road, Ahmedabad. No written   agreement   to   sell   these   premises   was executed. On 9th August, 1973, the purchaser sent a cheque for Rs.66,000/­ to the vendor stating that it was towards 75% payment on account of purchase Page 4 of 10

C/FA/1459/1979 JUDGMENT of the said premises. The purchaser agreed to make the   balance   payment   of   25%   at   the   time   of possession   and/or   final   deed   of   purchase   of   the premises.   Before   the   cheque   for   the   balance   was sent the purchaser was given to understand that the premises   would   be   ready   within   one   month. Permission for use of the building was given by the Municipal Corporation on 17.10.1973. On 07.12.1973, the purchaser sent a cheque of Rs.30,000/­ to the vendor towards price of the premises in question. While sending the said cheque the purchaser stated that the balance amount will be paid at the time of final execution of documents. The purchaser paid to the   vendor   Rs.2,000/­   on   19.03.1974   and   to   Shri Ambica   Construction   Company   Rs.30,163.40/­   which was   received   by   that   Company   on   28.03.1974.   The purchaser   received   from   the   vendor   a   bill   dated 26.03.1974 for Rs.1700/­ for brick partition. The purchaser took possession and occupied the premises from March, 1974. By a letter dated 15.05.1974, the purchaser   informed   the   vendor   that   the   purchaser had made full payment of Rs.1,26,163.40/­ for the premises   to   the   vendor   and   that   the   vendor   had already given the possession of the premises. Final documents duly executed in favour of the purchaser were   therefore   called   for.   Sale­deed   of   the premises was executed in favour of the purchaser in consideration   of   Rs.98,000/­.   In   terms   of   the recitals contained in the document the construction work started before 1st July, 1972. 7.2 The   Sub­Registrar,   Ahmedabad   reported   in   his Page 5 of 10

C/FA/1459/1979 JUDGMENT fortnightly   report   for   the   fortnight   ended 15.09.1974   that   the   property   in   question   was transferred   by   Parshwanath   Land   Organizers   to Mahendra   Mills   Ltd.   by   a   sale­deed   registered   on 05.09.1974   for   an   apparent   consideration   of Rs.98,000/­. 7.3 The   Inspecting   Assistant   Commissioner   of Income­Tax who is the Competent Authority under the Act thereupon referred the matter to the Assistant Valuation Officer, Income­Tax Department, Ahmedabad for determination of the fair market value of the property in question as on the date of transfer. The   said   Valuation   Officer   submitted   his   report estimating the fair market value of the property in question   at   Rs.1,37,700/­The   Competent   Authority, therefore,   formed   a   prima­facie   opinion   that   the provisions   of   section   269­C   were   attracted   and commenced   proceedings   for   acquisition   of   the property in question under Chapter XXA of the Act. Requisite   notices   under   section   269­D   of   the   Act were   published   and   served   upon   the   parties concerned. The vendor filed objections by a letter dated 14.08.1975 and stated that the premises were sold   at   Rs.98,000/­   without   any   addition   to   the construction   and   that   Ambica   Construction   Company had undertaken certain work of extra construction and alterations etc. and that for the said work, the   purchaser   had   paid   to   the   said   company   an amount of Rs.30,163/­. Thus, the premises were sold for Rs.98,000/­ and the purchaser had directly paid M/s.   Ambica   Construction   Company   an   amount   of Page 6 of 10

C/FA/1459/1979 JUDGMENT Rs.30,163/­ for the work done. The purchaser filed written   objections   on   24.12.1975.   Along   with   the said written objections, a letter dated 19.08.1975 from   Shri   Ambica   Construction   Company   was   also filed. 7.4 The   vendor   and   the   purchaser   contended   that the   property   was   acquired   for   office   use   for Rs.1,28,163/­   and   not   for   Rs.98,000/­.   The Competent Authority took the view that the value of the property on rental method taking net rent at Rs.1.15   per   square   foot   would   work   out   at Rs.2,27,500/­   allowing   8%   return.   The   Competent Authority   examined   Shri   D.M.   Patel,   a   partner   of the   vendor.   He   also   examined   a   partner   of   Shri Ambica   Construction   Company.   The   Competent Authority   was   satisfied   that   in   addition   to   the sale   price   of   Rs.98,000/­   as   per   the   deed,   the purchaser   had   paid   Rs.30,163/­   to   Shri   Ambica Construction   Company.   The   Competent   Authority   on the basis of rental method adopted the fair market value of the property in question at Rs.1,37,700/­. He   came   to   the   conclusion   that   the   fair   market value   of   the   property   in   question   exceeded   the apparent   consideration   by   more   than   15%   of   the apparent   consideration   and   that   the   consideration for   the   transfer   was   not   truly   stated   in   the instrument of transfer with the object referred to in clause (a) and clause (b) of sub­section (1) of section   269­C   of   the   Act,   and   passed   an   order accordingly. Page 7 of 10

C/FA/1459/1979 JUDGMENT 8. The order of the competent authority came to be challenged by both, the vendor and the purchaser, by way of appeals before the Tribunal. By the impugned order, the Tribunal has set aside the order of the competent authority and has held that the fair market value of the property in question would not exceed the   apparent   consideration   by   more   than   15%,   as claimed by the appellant. 9. Mrs. Mauna Bhatt, learned Senior Standing Counsel for the appellant assailed the impugned order passed by   the   Tribunal   by   submitting   that   the   Tribunal, after having accepted that the apparent consideration of the property in question would not be Rs.98,000/­, as   stated   in   the   document   of   transfer   was   not justified in holding that the fair market value of the   property   would   come   to   Rs.1,11,110/­.   It   was submitted that the method of valuation adopted by the Tribunal   for   the   purpose   of   arriving   at   the   fair market   value   of   the   property   in   question   of Rs.1,11.110/­   is   erroneous   and   cannot   be   sustained from   the   material   on   record.   It   was,   accordingly, urged that the appeals deserve to be allowed and the questions as proposed are required to be answered in favour of the appellant ­ revenue. 10. A perusal of the impugned order reveals that the Tribunal   has,   after   appreciating   the   evidence   on record, found that the actual area of the property in question   was   less   than   the   area   taken   by   the competent authority for the purpose of computing the valuation of  the  property in question. The Tribunal Page 8 of 10

C/FA/1459/1979 JUDGMENT has   further   noted   that   the   valuation   of   similar property   ranged   from   Rs.270/­   per   square   yard   to Rs.300/­   per   square   yard;   however,   the   competent authority   had   adopted   the   rate   of   Rs.300/­.   The Tribunal, after appreciating the evidence on record, has   not   believed   the   case   of   the   vendor   and   the vendee,   as   regards   the   amount   of   Rs.30,163.40/­ stated to have been paid to Shree Ambica Construction Limited for construction done during the subsistence of the agreement to sell. However, upon independently appreciating the material on record, the Tribunal has found that the fair market valuation of the property would   come   to   Rs.1,11,110/­   and   has   accordingly, found   that   the   fair   market   value   of   the   property would not exceed the apparent consideration even if it   is   taken   at   Rs.98,000/­   by   more   than   15%   and hence, the provisions of section 269(C) of the Act would not be attracted. 11. On a plain reading of the impugned order, it is evident   that   the   Tribunal,   after   duly   appreciating the evidence on record, has recorded findings of fact and has come to the conclusion that the fair market price value of the property in question would come to Rs.1,11,110/­.   On   behalf   of   the   appellant,   the learned counsel is not in a position to point  out that   the   Tribunal   has   placed   reliance   upon   any irrelevant material or that any relevant material has been ignored, nor has anything been brought to the notice of this court so as to dislodge the findings of fact arrived at by the Tribunal after appreciating the material on record. Page 9 of 10

C/FA/1459/1979 JUDGMENT 12.   Under   these   circumstances,   the   Tribunal   having taken into account all the facts and circumstances relating   to   the   questions   of   valuation   and   having arrived on its own conclusion as regards valuation of the property, it cannot be said that the decision of the   Tribunal   is   perverse   or   based   on   irrelevant material. The conclusion arrived at by the Tribunal, being based upon the findings of facts recorded after appreciating   the   material   on   record,   therefore,   do not give rise to any question of law so as to warrant interference by this court in exercise of its powers under section 269H of the Act. 13. The appeals, therefore, fail and are accordingly, dismissed. 14. Registry   is   directed   by   place   a   copy   of   this judgment in each of the appeals. Sd/- (HARSHA DEVANI, J) Sd/- (A. S. SUPEHIA, J) GIRISH Page 10 of 10