SECTION 269C – IMMOVABLE PROPERTY IN RESPECT OF WHICH PROCEEDINGS FOR ACQUISITION MAY BE TAKEN
1267. Acquisition proceedings in respect of immovable property for which the apparent consideration is Rs. 5 lakhs or less – Whether to be initiated after 1-4-1986 in view of proposed change in law
1. The Finance Bill, 1986 has proposed that no proceedings shall be initiated under section 269C in respect of a property transferred after 30-9-1986. The Bill also proposes to insert Chapter XXC providing for purchase by Central Government of immovable properties in certain cases of transfer.
2. With a view to achieve early finalisation of proceedings under the existing Chapter XX-A, the Board has decided that with effect from 1-4-1986 acquisition proceedings under section 269C will not be initiated in respect of an immovable property for which the apparent consideration is Rs. 5 lakhs or less and that where acquisition proceedings have been initiated by issue of notice under section 269D, the proceedings will be dropped if the apparent consideration of the immovable property is below Rs. 5 lakhs.
Circular : No. 455 [ F. 316/38/85-WT], dated 16-5-1986.
JUDICIAL ANALYSIS
EXPLAINED IN – Mathew M. Thomas v. CIT [1999] 102 Taxman 127/236 ITR 691 (SC) with the following observations :
“In view of the change in the legislation, the CBDT thought fit to issue Circular No. 455, obviously with an object of achieving the earlier finalisation of the proceedings under Chapter XX-A. The circular is undoubtedly a beneficial measure in order to bring an end to the uncertainty of litigious proceedings with reference to properties, the value of which does not exceed Rs. 5 lakhs. The language of the circular does not in any manner indicate that it will apply only to the proceedings pending before the competent authority. The mere fact that reference is made to the initiation of the proceedings by notice under section 269D does not limit the operation of the circular to proceedings immediately following such notice and culminating with the order of the competent authority. If proceedings are pending before the Tribunal in appeal and before the High Court on further appeal, they are also acquisition proceedings of the same nature as they are only in continuation of the proceedings initiated by the competent authority. It is well-settled that the word ‘proceedings’ shall include the proceedings at the appellate stage. Hence, the view expressed by the High Court in the judgment under appeal that the circular would apply only to the proceedings pending before the competent authority, could not be accepted.
The appeal was thereby allowed holding that Circular No. 455 dated 16-5-1986 issued by the CBDT is applicable to all the pending proceedings which have not attained finality under section 269-I as defined in the Explanation to the said section.”
EXPLAINED IN – In CIT v. Rattan Chand Sood [1987] 166 ITR 497 (Delhi), the above circular was commented upon with the following observations :
“The intention of the authorities clearly is that, after April 1, 1986, proceedings earlier initiated but subsisting should be dropped unless the apparent consideration exceeds Rs. 5 lakhs. In this case, the proceedings were initiated by the Competent Authority and finalised by him in 1976. But this was subject to orders in appeal and, as a result of the order of the Tribunal and the appeal to this court, the position is as if those proceedings are pending as on date. In this case, the apparent consideration is only the petty sum of Rs. 19,992 and it would seem, in view of the declaration by the Central Board of Direct Taxes and in view also of the various circumstances pointed out by us, that this is clearly not a case in which the proceedings should be allowed to drag on further.” (pp. 502-503)
EXPLAINED IN – In CIT v. Asha Devi Agarwal [1988] 169 ITR 400 (Cal.), the above circular was explained with the observations that “there is no reason why the circular should not be implemented in the instant case.” (p. 411)
EXPLAINED IN – The above circular was explained in Sutlej Palace & Pictures v. Competent Authority, IAC [1990] 35 ITD 184 (Asr.), with the following observations :
“The question is whether the aforesaid circular and the instruction issued by the Board can be applied to the facts of the instant case. It has to be borne in mind that in the present case, the order under section 269F (6) was passed on 2-12-1986. The Board’s circular No. 455, dated 16-5-1986 was applicable to cases where apparent consideration of any immovable properties was Rs. 5 lakhs or less. This circular is, therefore, clearly inapplicable in the instant case. Here apparent consideration for the aforesaid property was Rs. 9 lakhs. In the case of Smt. Lal Devi (supra) decided by Chandigarh Bench of the Tribunal, the apparent consideration was only Rs. 92,000. The said circular provided that acquisition proceedings would be dropped if the apparent consideration for the immovable property was below Rs. 5 lakhs. The language of the Board’s circular itself shows that it would be applicable to the pending proceedings even if they were initiated before the date of the circular. However, in the instant case, we have to see whether the assessee could avail of the benefit of instruction No. 1793, dated 11-8-1988. A copy of the instruction No. 1793 is included in the paper book filed by the assessee. In the case of Smt. Lal Devi (supra), the Tribunal was not concerned with instruction No. 1793 and, therefore, the decision in that case is of no help to the transferee in the present case.
17. Instruction No. 1793 partially modified Board’s circular No. 455, dated 16-5-1986. The effect of the modification introduced by instruction No. 1793 was that limit of Rs. 5 lakhs envisaged in circular No. 455 was raised to Rs. 10 lakhs. Para 2 of the said instruction contained the guidelines including the one which raised the limit of Rs. 5 lakhs to Rs. 10 lakhs. Para 3 of the said instruction is very important. It says that the above guidelines, i.e., the guidelines mentioned in para 2 would be effective from the date of issue of instruction. So the guidelines contained in instruction No. 1793 were effective only from 11-8-1988 which is the date of the said instruction. Thus, in view of the express provision contained in the aforesaid instruction, it was effective only from 11-8-1988. The result is that even though the present appeal is continuation of original acquisition proceedings the aforesaid instruction which was effective from 11-8-1988 cannot be applied in the present case since the aforesaid circular of the Board stood modified only on 11-8-1988. In our opinion, the benefit of the aforesaid instruction cannot be extended to the transferee. For this reason also the appeal is bound to fail.” (p. 190)
EXPLAINED IN – CIT v. Govind Ram [1996] 221 ITR 892 (Punj. & Har.) it was held that circular would be applicable to the proceedings at the initial stage as well as the proceedings which were pending before the Tribunal/High Court in appeal. The word “proceedings” occurring in the circular is not qualified by the word “initial”.
EXPLAINED IN – CIT v. Export India Corpn. (P.) Ltd. [1998] 219 ITR 461 (Punj. & Har.) it was observed as under :
“The Central Board of Direct Taxes issued Circular No. 455 on May 16, 1986. It was decided by the Central Board of Direct Taxes that where the acquisition proceedings had been initiated by issue of notice under section 269D, the proceedings would be dropped if the apparent consideration of the immovable property was below Rs. 5 lakhs. The circular did not use any expression limiting its applicability with reference to any date of transfer of property. It was decided that with effect from April 1, 1986, no acquisition proceedings would be initiated under section 269C of the Act. Regarding the proceedings which had already been initiated by issue of notification under section 269D, the Board decided that the proceedings would be dropped if the apparent consideration of the immovable property was below Rs. 5 lakhs. Simply by using the word “by issue of notice under section 269D”, the Board did not mean to limit the applicability of the circular to the proceedings pending at the initial stage only. The word “proceedings” occurring in the circular is not qualified by the word “initial”. Therefore, the word “proceedings” shall include the proceedings at the appeal stage as well. Every officer and person employed in the execution of the Act shall observe and follow the orders, instructions and directions of the Board. The circulars issued by the Board would, thus, be generally binding on the authorities and other persons employed in the execution of the provisions of the Act and these authorities and officers shall follow those orders, instructions and directions issued by the Board. A benevolent circular, such as circular No. 455 dated May 16, 1986, would be binding on the authorities.
Circular No. 455 dated May 16, 1986, would be applicable to the proceedings pending at the appeal stage as well if the apparent consideration of the immovable property is below Rs. 5 lakhs”.
EXPLAINED IN – The above circular was explained in CIT v. Sivan Soap Factory [1997] 227 ITR 126 (Mad.), with the following observations :
“The Punjab and Haryana High Court in CIT v. Export India Corporation (P.) Ltd. [1996] 219 ITR 461, held that the word “proceedings” occurring in the circular is not qualified by the word “initial”. Therefore, the word “proceedings” shall include proceedings at the appeal stage as well. Every officer and person employed in the execution of the Act shall observe and follow the orders, instructions and directions of the Board. The circulars issued by the Board would, thus, be generally binding on the authorities and other persons employed in the execution of the provisions of the Act and these authorities and officers shall follow those orders, instructions and directions issued by the Board. A benevolent circular, such as Circular No. 455, dated May 16, 1986, would be binding on all the authorities. Circular No. 455, dated May 16, 1986, would be applicable to the proceedings pending at the appeal stage as well if the apparent consideration of the immovable property is below rupees five lakhs. In this decision, the Punjab and Haryana High Court also considered the Full Bench decision of the Kerala High Court in CIT v. Mathew M. Thomas [1993] 201 ITR 494 and the decision of the Delhi High Court in CIT v. Rattan Chand Sood [1987] 166 ITR 497. Considering the reasons given by the Delhi and Punjab and Haryana High Courts, we are in entire agreement with those decisions than placing reliance upon the decision of the Kerala High Court in CIT v. Mathew M. Thomas [1993] 201 ITR 494 (FB) on this aspect.” (p. 139)
APPLIED IN – The above circular was applied in CIT v. United Farms [1998] 96 Taxman 211 (Punj. & Har.). The court observed :
“Without going into the merits of the dispute and the findings recorded by the Tribunal regarding as to whether the share of each of the transferors and the transferees has to be taken individually for determining the apparent consideration, this appeal deserves to be dismissed in view of Circular No. 455 dated 16-5-1986 issued by the Board providing therein that the acquisition proceedings under section 269C will not be initiated in respect of any immovable property for which the apparent consideration was Rs. 5 lakhs or less and that where acquisition proceedings have been initiated by issue of a notice under section 269D of the Act, the proceedings will be dropped if the apparent consideration of the property is below Rs. 5 lakhs.
4. In this case, admittedly, the apparent consideration was Rs. 5 lakhs. Proceedings for acquisition of the property were to be dropped if the apparent consideration was less than Rs. 5 lakhs. Circular issued by the Board is binding on the department. Contention of the revenue that the circular issued by the Board would not apply to the properties regarding which acquisition proceedings had already been initiated, cannot be accepted in view of the judgment of this Court in CIT v. Export India Corpn. (P.) Ltd. [1986] 219 ITR 461. It was held that the Board did not mean to limit the applicability of the circular to the proceedings pending at the initial stage only. The word ‘proceedings’ occurring in the circular was not qualified by the word ‘initial’ and, therefore, the word ‘proceedings’ shall include the proceedings at the appeal stage as well. The circular did not use any expression limiting its applicability with reference to any date of transferee of the property. No proceedings were to be initiated after the date of issuance of the circular and if any proceedings had been initiated by issue of notice under section 269D, the same were to be dropped, if the apparent consideration of the immovable property was below Rs. 5 lakhs.
Following the dictum of this Court in Export India Corpn.’s case (supra), it is held that in view of Circular No. 455 dated 16-5-1986 issued by the Board, acquisition proceedings against the assessee are liable to be dropped.” (pp. 214-215)
EXPLAINED IN : CIT v. Hazari Lal [1999] 235 ITR 500 (Punj. & Har.), in following words :
“Where the proceedings had been initiated by issue of notice under section 269D, the same should be dropped if the apparent consideration of the immovable property was below Rs. five lakhs.” (p. 501)
“The circular would be applicable to the proceedings pending at the appellate stage as well, if the apparent consideration of the immovable property is below Rs. five lakhs.” (p. 501)
EXPLAINED IN : CIT v. Sivan Soap Factory [2000] 113 Taxman 281 (Mad.) in following words :
“The Circular No. 455, dated 16-5-1986, contemplates that the proceedings initiated in pursuance of notice under section 269D should be pending” (p. 293)
