TAXATION LAWS (AMENDMENT) ACT, 1972 – CIRCULAR NO. 96, DATED 25-11-1972
1. Amendment at a glance
| Section/Schedule | Particulars |
| Income-tax Act | |
| 55A, 287A | References to Valuation Officer for ascertaining the fair market value of any capital asset and appearance by registered valuers in matters of valuation 26-30 |
| 269A to 269S | Acquisition of immovable properties in certain cases of transfer to counter tax evasion 5-24 |
| 281A | Bar on institution of suits claiming ownership of property held benami 25 |
| Wealth-tax Act | |
| 2(r), 12A | Appointment of Valuation Officers, etc. 33 |
| 16A(1) | Conditions for reference to Valuation Officers 35 |
| 16A(2) to (6) | Functions of the Valuation Officer 36 |
| 23(1)(opening | Appeal to AAC 40 |
| line)/(ha),(3A) | |
| 24(6) to (8B), | Appeal to Appellate Tribunal – Omission of provisions |
| 26(3) | relating to arbitration of valuers and consequential changes 41 |
| 34AA | Appearance by registered valuers 42 |
| 34AB | Registration of valuers 43 |
| 34AC | Restriction on practice as registered valuer 44 |
| 34AD | Removal from register of names of valuers and restoration 45 |
| 35(1)(aa),(7A) | Rectification of mistakes 39 |
| 36(2B) | Prosecution of registered valuers 46 |
| 37(1), (3), | Power to take evidence on oath, etc. 38 |
| prov. | |
| 38A, 46(2)(ee) | Powers of Valuation Officer/Manner in which and conditions subject to which they may exercise their powers 37, 47 |
| 46(2)(e) | Jurisdiction of Valuation Officers/Areas within which they may exercise jurisdiction 34, 47 |
| Gift-tax Act | |
| 15(6) | Reference to Valuation Officers for ascertaining the fair market value of any property transferred by way of gift 48-51 |
| 23(6) to (8) | Omission of provisions relating to arbitration of valuers – Appearance by registered valuer in certain matters 52 |
| 43A | Appeal to Appellate Tribunal 53 |
2. Amendments to Income-tax Act
ACQUISITION OF IMMOVABLE PROPERTIES IN CERTAIN CASES OF
TRANSFER TO COUNTER EVASION OF TAX
Provisions in brief
5. The Amending Act has inserted a new Chapter XXA with a view to empowering the Central Government to acquire any immovable property having a fair market value exceeding Rs. 25,000 in cases where the consideration declared in the instrument of transfer is less than the fair market value of the property on the date of execution of the instrument of transfer. The power will be available only in cases where there is reason to believe that the consideration agreed to between the parties has not been truly stated with a view to facilitating tax evasion by the transferor or the transferee. It will, however, not be permissible to initiate proceedings for acquisition of any immovable property unless its fair market value exceeds the declared consideration by more than 15 per cent of such consideration. The power to initiate proceedings for acquisition will be vested in the Assistant Commissioner of Income-tax who, for this purpose, will be designated as the “competent authority”. Before passing the order of acquisition, however, the competent authority will obtain the approval of the Commissioner of Income-tax. Where the property is acquired, the Central Government will pay compensation in an amount equal to the consideration stated in the instrument of transfer plus 15 per cent of such consideration. An appeal against the competent authority’s order will lie to the Income-tax Appellate Tribunal. An appeal will lie to the High Court against the Appellate Tribunal’s order only on questions of law.
Property liable to acquisition
6. The provisions of Chapter XXA will apply in relation to immovable property including agricultural land, situated anywhere in India except in the State of Jammu and Kashmir. “Immovable property”, for this purpose, has been defined as any land or any building or part of a building and includes, where any land or any building or part of a building is transferred together with any machinery, plant, furniture, fittings and other things, such machinery, plant, furniture, fittings and other things also. It has been specifically provided that land, building, part of a building, machinery, plant, furniture, fittings and other things will include any rights therein. The definition is thus wide enough to cover composite sales of properties comprising land, buildings, machinery, plant, furniture, fittings or other things. In other words, where any land or building is transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, etc., will also be regarded as immovable property and will be subject to acquisition along with such land or building. Transfers of leasehold rights in land, whether or not such rights are transferred along with machinery, plant, etc., will also be covered.
[Sections 269A(e) and 269S]
Transfers covered
7. For the purpose of Chapter XXA, “transfer”, in relation to any immovable property, has been defined to mean transfer of such property by way of sale or exchange. Transfers by way of sale or exchange alone will, therefore, be covered by the new provisions. Other modes of transfer such as gifts, leases, etc., will be outside the purview of the provisions.
[Section 269A(h)]
Definitions of “apparent consideration” and “fair market value”
8. “Apparent consideration”, in relation to any immovable property transferred by way of sale, would mean the consideration of sale as specified in the instrument of transfer registered under the Registration Act, 1908. Where the immovable property is transferred by way of exchange for any thing or things, the apparent consideration would mean the price that such thing or things will ordinarily fetch on sale in the open market on the date of execution of the instrument of transfer. Where the consideration for exchange consists of a thing or things and a sum of money, the apparent consideration will mean the aggregate of the price that such thing or things would ordinarily fetch on sale in the open market on the date of execution of the instrument of transfer and such sum.
“Fair market value”, in relation to any immovable property transferred, has been defined to mean the price the immovable property would ordinarily fetch on sale in the open market on the date of execution of the instrument of transfer of such property.
[Section 269A(a) and (d)]
Competent authorities and their jurisdiction
9. The acquisition of immovable properties under the new Chapter XXA will be made by Assistant Commissioners of Income-tax especially authorised for the purpose by the Central Government. While performing their functions under the new Chapter, such Assistant Commissioners will be designated as competent authorities.
The Central Government will define the local limits of the jurisdiction of each competent authority. Where the property in question is situated within the local limits of jurisdiction of only one competent authority, that competent authority shall perform the functions in relation to that property. Where, however, the property is situated within the local limits of the jurisdiction of two or more competent authorities, the functions will be performed by the competent authority within whose jurisdiction the office of the registering officer under the Registration Act, 1908, who has registered the relevant instrument of transfer, is situated.
The jurisdiction of a competent authority shall not be called in question after expiry of 30 days from the date of publication of the notice under section 269D(1) in the Gazette of India. Where the jurisdiction of the competent authority is questioned within the aforesaid period, the competent authority will examine the question and if satisfied with the correctness of the claim, will pass an order in writing determining the question accordingly. Where, however, the competent authority is not satisfied with the correctness of the claim, it will be incumbent on him to refer the question to the Board for determination.
[Sections 269A(b) and 269B and rule 48D of the Income-tax Rules]
Special rules of evidence
10. Three special rules of evidence have been laid down in the Act which will govern all proceedings under the new Chapter XXA. These rules are as under :
1. The fact that the fair market value of any immovable property exceeds its apparent consideration by more than 25 per cent of such apparent consideration shall be conclusive proof of the fact that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer. In view of this rule, the parties concerned will be debarred from leading any evidence either at the stage of proceedings before the competent authority or any subsequent stage to prove that although there is a difference of more than 25 per cent between the apparent consideration and the fair market value, the consideration has in fact been truly stated in the instrument of transfer and no other consideration has actually passed.
2. Where the property has been transferred for an apparent consideration which is less than its fair market value, it shall be presumed, unless the contrary is proved, that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with the object of facilitating tax evasion by the transferor or the transferee. The presumption under this rule will be rebuttable. In a case where the apparent consideration is less than the fair market value, it will be open to the parties concerned to lead evidence to prove that the object of understating the consideration in the instrument of transfer was not to facilitate tax evasion either by the transferor or by the transferee. For instance, the transferor will not have been liable to income-tax on the income arising from the transfer of the immovable property in question as the property in question did not constitute stock-in-trade of his real estate business nor was it in the nature of a capital asset being agricultural land situated outside the municipal limits or other adjoining areas notified under section 2(14)( iii)(b). The transferee may be able to show that entire consideration has been paid out of his disclosed income or assets. In this connection, the transferee may take the stand that the undisclosed amount of consideration has been paid out of the income of the current year which he would disclose at the time of assessment for that year. It should be borne in mind that the object of the provisions in Chapter XXA is not to acquire properties but to curb tax evasion and where the transferee has paid the consideration out of his disclosed income or assets, the Government will not be interested in acquiring the property.
3. Under section 269F(9), no objection will be entertained in any proceedings under Chapter XXA on the ground that although the apparent consideration for the property is less than the fair market value of the property on the date of execution of the instrument of transfer, the consideration as agreed to between the parties has been truly stated in the instrument of transfer because such consideration was agreed to having regard to the price that such property would have ordinarily fetched on sale in the open market on the date of the conclusion of the agreement to sell the property. This provision will, however, not apply where the agreement to sell has been registered under the Registration Act, 1908. In this connection, it may be noted that in a case where the fair market value of the property exceeds the apparent consideration by more than 25 per cent of such consideration, the parties will be debarred from leading any evidence to prove that the consideration had in fact been truly stated in the instrument of transfer [vide item (1) of this paragraph]. It, therefore, follows that the agreement to sell which has been registered under the Registration Act, 1908, will constitute relevant evidence only in cases where the difference between the fair market value and the apparent consideration does not exceed 25 per cent of such consideration.
[Sections 269C(2) and 269F(9)]
Conditions precedent to the initiation of acquisition proceedings
11. The competent authority will have the power to initiate proceedings for the acquisition of any immovable property which has been transferred by way of sale or exchange on or after 15-11-1972 only if the following three distinct conditions are fulfilled, namely :—
a. he has reason to believe that the immovable property is of a fair market value exceeding Rs. 25,000 ;
b. he has reason to believe that the fair market value of such property exceeds the apparent consideration therefor by more than 15 per cent of such apparent consideration ; and
c. he has reason to believe that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with the object of either facilitating the reduction or evasion of the liability of the transferor to tax in respect of any income (including capital gains) arising from the transfer or facilitating the concealment of any income or any moneys or other assets which have not been or which ought to be disclosed by the transferee for purposes of the Indian Income-tax Act, 1922, the Income-tax Act, 1961 or the Wealth-tax Act, 1957.
The rules of evidence set forth in the preceding paragraph will apply at the stage of initiation of proceedings also. Under one of these rules, the fact that the fair market value of any immovable property exceeds its apparent consideration by more than 25 per cent of such apparent consideration shall be conclusive proof of the fact that the consideration for such transfer, as agreed to between the parties, has not been truly stated in the instrument of transfer. It, therefore, follows that where the competent authority has reason to believe that the difference between the apparent consideration and the fair market value of the immovable property exceeds the aforesaid margin, he must proceed on the basis that the instrument of transfer does not correctly represent the consideration that has actually passed.
Under the second rule of evidence, once the competent authority has reason to believe that any immovable property has been transferred for an apparent consideration which is less than its fair market value, he shall presume, unless the contrary is proved, that (i) the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument; and (ii ) that the understatement has been made with a view to facilitating tax evasion by the transferor or the transferee. The presumptions under this rule are rebuttable. The effect, therefore, is that for the purposes of initiating proceedings for acquisition the competent authority shall, where he has reason to believe that the apparent consideration is less than the fair market value of the property ordinarily proceed on the basis that the consideration for the transfer has not been truly stated with a view to facilitating tax evasion by the transferor or the transferee. Where, however, the parties concerned have been given an opportunity of being heard before commencement of acquisition proceedings, they will be entitled to lead evidence to rebut the aforesaid presumptions subject to the rules of evidence explained in the preceding sub-paragraph. In other words, it will be open to the parties to claim that the object of understating the consideration in the instrument of transfer was not facilitation of tax evasion by the transferor or the transferee and also, where the difference between the fair market value and the apparent consideration exceeds 15 per cent but does not exceed 25 per cent of the apparent consideration, to prove that the consideration had been truly stated in the instrument, and if the competent authority is satisfied with the evidence produced, he will not initiate proceedings for acquisition of property. In this connection, it may be mentioned that it is not incumbent on the competent authority to give the parties concerned an opportunity of being heard before initiating the proceedings.
It has been specifically provided that before initiating any proceedings for the acquisition of immovable property under Chapter XXA, the competent authority must record his reasons for doing so.
It may be noted that under section 269Q, the provisions of Chapter XXA will not apply in relation to any transfer of immovable property made by a person to his relative on account of natural love and affection for a consideration which is less than its fair market value provided a recital to that effect is made in the instrument of transfer. In a case where there is no such recital in the instrument of transfer, the provisions of new Chapter will be applicable. “Relative”, in this context, will have the meaning assigned to it in section 2(41) and will, therefore, mean the husband, wife, brother or sister or any lineal ascendant or descendant of the individual concerned.
[Sections 269C and 269Q]
JUDICIAL ANALYSIS
EXPLAINED IN – In Kalavathy (Mrs.) v. IAC (Acquisition) [1988] 71 CTR (Trib.) (Mad.) 44, the Tribunal quoted the above paragraph”, and observed as follows :
“40. On behalf of the revenue, reliance was placed on the Circular of the Board No. 86 dated 25th November , 1972, the relevant extract of which we have already set out in paragraph 23 of our order. In that circular, the Board had stated that the rules of evidence set forth relating to presumptions would apply at the stage of initiation of proceedings also. When by the Finance Bill of 1986 the provisions of Chapter XXA relating to acquisition were being dropped, the memo explaining the provisions to the Finance Bill of 1986 stated as under :
“Discontinuance of the provisions relating to acquisition of immovable properties : The existing provisions of Chapter XX-A envisage acquisition by the Central Government of immovable properties, etc., on payment of the consideration shown in the instrument of transfer and 15 per cent of the said amount. Before these provisions can be invoked, it has to be proved that the consideration for transfer of an immovable property as agreed to between the parties has not been truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of the liability of the transferor or transferee to pay tax or for concealing any income or asset. These provisions have not proved effective and generated a great deal of litigation and harassment.
In view of the aforesaid, it is proposed to provide that no proceeding under section 269C of this Chapter shall be initiated in respect of the properties transferred after 30th September, 1986.
As a consequential measure, section 276AA of the Act is proposed to be omitted.
These amendments shall take effect from 1st October, 1986″.
(Emphasis italicized in print supplied)
The view stated in the aforesaid memo is that before the provisions can be invoked it has to be proved that the consideration for transfer of an immovable property as agreed to between the parties has not been truly stated in the instrument of transfer with the object of avoidance of tax etc., by the transfer or the transferee. This view is put forth in the memo explaining the provisions to the Finance Bill of 1986 whereby amendments were effected for dropping the Chapter of Acquisition w.e.f. 1st October, 1986. It is in conformity with the ratio of the decisions of the Gujarat, Calcutta, Bombay, Punjab and Haryana High Courts, extracts from the judgments of which courts, we have set out in extenso. It can, therefore, be considered that the view that the presumptions relating to avoidance do not apply at a stage anterior to the initiation of proceeding finds acceptance in the aforesaid reasons, the conclusion being that prior to the initiation it has to be proved that consideration has not been truly stated with the object of avoidance of tax, dehors (sic) the presumptions which become available only subsequent to the valid initiation. …” (pp. 57-58).
Initiation of proceedings for acquisition of property and issue of notice to parties concerned
12. The competent authority will initiate proceedings for the acquisition of immovable property under Chapter XXA by publishing a notice to that effect in the Gazette of India. The limitation for initiation of such proceedings will ordinarily be six months from the end of the month in which the relevant instrument of the transfer is registered under the Registration Act, 1908. Thus, where the instrument of transfer has been registered by the registering officer, say, on 15-12-1972, it will not ordinarily be permissible for the competent authority to initiate acquisition proceedings after 30th June, 1973. A longer limitation period will, however, be available in the following cases :
1. Where the jurisdiction of the competent authority to initiate proceedings in respect of a particular immovable property is questioned under section 269B(4) and the competent authority decides that the jurisdiction does not lie with him, the competent authority having jurisdiction will be able to initiate proceedings within the period of six months reckoned from the end of the month in which the instrument of transfer is registered or within a period of 30 days from the date on which the first-mentioned competent authority decides the question, whichever period expires later.
2. Where the jurisdiction of the competent authority is questioned under section 269B(4) and the competent authority is not satisfied about the claim and has referred the matter to the Board for determination, the limitation will be six months from the end of the month in which the instrument of transfer of such property is registered or 30 days from the determination of the question by the Board, whichever period expires later.
3. Where acquisition proceedings cannot be initiated during any period of time by reason of any injunction or order of any court prohibiting the initiation of such proceedings or preventing the examination of documents or other materials required to be examined for the purpose of determining whether such proceedings should be initiated, the time of continuance of the injunction or order, the day on which it was issued or made and the day on which it was withdrawn, will be excluded in computing the period during which such proceedings may otherwise be initiated.
Under section 269P, any person presenting a document which purports to transfer any immovable property to any other person will be required to furnish a statement in duplicate in respect of such transfer in the prescribed form along with the instrument of transfer. It has also been specifically provided that, notwithstanding anything contained in any other law, no registering officer will register any such instrument of transfer unless the instrument is accompanied by the prescribed statement. The registering officer will send the statements to the competent authority in fortnightly batches and also furnish a return in respect of such statements in the prescribed form. The statement to be furnished along with the instrument of transfer shall be in Form No. 37G and the return in respect of statements to be furnished by the registering officer to the competent authority shall be in Form No. 37H.
It may be noted that the limitation for initiation or acquisition proceedings will be reckoned from the end of the month in which the instrument of transfer is registered by the registering officer. It will, therefore, be necessary for the competent authorities to establish necessary liaison with the registering officers within the territorial jurisdiction in order to ensure that the necessary statements are received regularly and punctually.
Apart from publishing the notice for initiating acquisition proceedings in the Official Gazette, the competent authority will have to serve a copy of the notice on the transferor, the transferee, the person in occupation of the property, if the transferee is not in occupation thereof and on every person whom he knows to be interested in the property. A person will be regarded as a person interested in the property if he claims or is entitled to claim any interest in the compensation payable on account of the acquisition of that property. Although the statements required to be furnished under section 269P will give information about the persons interested in the property, it will be better if the competent authority obtains copies of instruments of transfer in respect of properties proposed to be acquired in order to ascertain the position correctly and serve a notice on all parties interested in the property. A copy of the notice should also be affixed to a conspicuous place in the office of the competent authority as also to a conspicuous part of the property itself. Under rule 48E of the Income-tax Rules, the substance of the notice should also be made known at convenient places in the locality in which the property is situated by proclamation in the language of the district by beat of drum or other customary mode.
[Sections 269A(g), 269D and 269P and rules 48E, 48G and 48H of the Income-tax Rules]
Objections against acquisition and hearing by the competent authority
13. The transferor, the transferee, the person in occupation of the property if the transferee is not in occupation thereof and every other person on whom the competent authority has served a notice under section 269B(2) may prefer objections against acquisition of immovable property. Besides, any other person who is interested in the immovable property will have the right to prefer objections against the acquisition. The objections will have to be in writing. The limitation for making objections will ordinarily be 45 days from the date of publication of the notice of acquisition in the Official Gazette. However, in the case of transferor, the transferee, the person in occupation of the property and any other person on whom the competent authority has served a notice under section 269D(2), an alternative limitation period of 30 days from the date on which the notice of acquisition is served on him will be available if the period of 45 days referred to above expires earlier.
For the removal of doubts, it has been specifically provided that it will be open to the appellant to contend that the rule of evidence in section 269C(2)(a) has no application as the fair market value of the property does not exceed the apparent consideration by more than 25 per cent of such consideration. In other words an appellant would be entitled to lead evidence as to the fair market value of the property, but once it is established that such value exceeds the apparent consideration by the specified margin, he shall be debarred from claiming that the consideration for the transfer has been truly stated in the instrument of transfer. Where, however, the difference between the fair market value and the apparent consideration does not exceed the specified margin, the presumption that the consideration for the transfer has not been truly stated will be rebuttable and the appellant would be entitled to lead evidence to displace the presumption.
The competent authority will fix a day and place for the hearing of objections and give notice of the same to every person who has preferred objections to the proposed acquisition. The notice of hearing will be served on the transferee even if he has not preferred any objection. The competent authority will have the power to make such enquiries as he may deem fit. For this purpose, the competent authority should, inter alia, obtain necessary information about the property in question from the relevant income-tax and wealth-tax records. After taking into account the objections made and all other relevant material on record, the competent authority will give his decision in writing in respect of the objections and state the reasons for the decision with respect to each objection. If the competent authority is satisfied as to the fulfilment of each of the three requirements set forth below, he will make an order for acquisition of the property after obtaining the prior approval of the Commissioner of Income-tax. The three requirements in this behalf are the following, namely :
a. the immovable property in question is of a fair market value exceeding Rs. 25,000 ;
b. the fair market value of such property exceeds the apparent consideration therefor by more than 15 per cent of such apparent consideration; and
c. the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with the object of either facilitating the reduction or evasion of the liability of the transferor to tax in respect of any income (including capital gains) arising from the transfer, or facilitating the concealment of any income or any moneys or other assets which have not been or which ought to be disclosed by the transferee for purposes of the Indian Income-tax Act, 1922, the Income-tax Act, 1961 or the Wealth-tax Act, 1957.
The Commissioner of Income-tax whose approval is necessary for the purpose will be the Commissioner who may be specifically specified by the Board, by general or special order in writing, in this behalf.
Where the competent authority is not satisfied that all the requirements as set out above are fulfilled, he will be required to pass an order in writing that the property will not be acquired under Chapter XXA. A copy of the order of acquisition or declaring that the property will not be acquired under Chapter XXA will be served on the transferor, the transferee and every other person who has preferred objections before the competent authority.
It should be borne in mind that the three rules of evidence mentioned in paragraph 10 will apply in relation to the proceedings before the competent authority.
[Sections 269E and 269F]
Appeal against the order for acquisition
14. An appeal against the competent authority’s order will lie to the Income-tax Appellate Tribunal. The transferor, the transferee and every person who has preferred objections against the acquisition before the competent authority will have the right of appeal. Further, any person who claims or is entitled to claim an interest in the compensation payable on account of acquisition of the property will also have the right of appeal, notwithstanding that he had not preferred objections against the acquisition before the competent authority. The limitation for presenting an appeal will ordinarily be 45 days from the date of the competent authority’s order. Where, however, a copy of the competent authority’s order has been served on any person, such person would be entitled to avail of an alternative limitation period of 30 days from the date of service of such copy on him, if this is beneficial to him. The Appellate Tribunal will have the power to extend the time allowed for presenting the appeal in cases where it is satisfied that the person concerned has sufficient cause for not being able to present the appeal within the prescribed time. This power will, however, be available to the Appellate Tribunal only in cases where an application for extension of time is made within the time prescribed for presenting the appeal.
An appeal to the Appellate Tribunal must be filed in Form No. 37F prescribed under rule 48F of the Income-tax Rules and must be accompanied by a fee of Rs. 125. [In this connection, it may be noted that Form No. 37F mentions that the Appellate Tribunal will not accept cheques, drafts, hundies etc., and that the requisite fee should be credited in the Treasury or a branch of the State Bank of India or a branch of the Reserve Bank of India and the triplicate challan sent to the Appellate Tribunal along with the memorandum of appeal.] An appeal against the competent authority’s order will be heard by a two-member bench of the Appellate Tribunal consisting of one judicial member and one accountant member.
The Appellate Tribunal will have the power to rectify any mistake apparent from the record at any time within 30 days from the date of the order. No order of rectification will, however, be made unless the person who is likely to be prejudicially affected by the proposed order has been given a reasonable opportunity of being heard.
The Tribunal will serve a copy of any order passed in appeal or by way of rectification to the appellant as well as to the Commissioner. Since time is of the essence in acquisition proceedings, it has been specifically provided that the Appellate Tribunal shall dispose of every appeal as expeditiously as possible and make an endeavour to dispose of such appeal within 90 days from the date on which it is presented.
The Appellate Tribunal’s order will be final on questions of fact.
[Section 269G and rule 48F of the Income-tax Rules]
Appeal to High Court
15. An appeal from the Appellate Tribunal’s order under section 269G will lie to the High Court on a question of law. The Commissioner as also a person aggrieved by the Appellate Tribunal’s order will have the right to prefer an appeal to the High Court on any question of law. The appeal to the High Court will ordinarily be presented within 60 days of the date on which the appellant is served with the notice of the order appealed against. The High Court may, however, on an application made in this behalf before the expiry of the said period of sixty days, permit delayed filing of the appeal if it is satisfied that the appellant had sufficient cause for not being able to present the appeal within the prescribed time. An appeal against the Appellate Tribunal’s order will be heard by a Bench of not less than two judges of the High Court and all the provisions of section 259 shall apply in relation to such appeal as they apply in relation to a case referred to the High Court under section 256. The cost of appeal shall be at the discretion of the High Court.
It should be noted that the provisions of Chapter XXC relating to references to High Court do not apply in relation to the proceedings under the new Chapter XXA and a direct appeal against the Appellate Tribunal’s order would lie to the High Court on any question of law.
[Section 269H]
Vesting of the property in the Central Government
16. Where no appeal is preferred to the Appellate Tribunal against the order for acquisition made by the competent authority, such order will become final upon the expiry of the period during which an appeal may be presented under section 269G. Where the order for acquisition is made the subject of appeal to the Appellate Tribunal, the date of finality of the order will depend upon whether or not any further appeal has been preferred before the High Court against the Appellate Tribunal’s order. If the order for acquisition is confirmed by the Appellate Tribunal and no appeal is preferred to the High Court, the order will become final after the expiry of the period during which an appeal may be presented to the High Court under section 269H. If the order of the Appellate Tribunal is made the subject of an appeal to the High Court, the order for acquisition will become final on confirmation by the High Court. After the acquisition order has become final, the competent authority may serve a notice in writing to any person who is in possession of the immovable property to surrender or deliver possession thereof to the competent authority, or to any other person authorised by him in writing in this behalf, within 30 days of the date of service of the notice. If the person concerned refuses or fails to surrender or deliver possession of the property, the competent authority or the person authorised by him may take possession of the immovable property and use such force for that purpose as may be necessary. For the purpose of taking possession of the property, the competent authority may requisition the services of any police officer to assist him. It has also been specifically provided that where a requisition is made by the competent authority, it shall be the duty of the police officer concerned to assist him in taking possession of the property. When the possession of the immovable property is taken by the competent authority, the property shall vest absolutely in the Central Government free from all encumbrances. It has been specifically provided that, notwithstanding that the property vests in the Central Government free from all encumbrances, the liability of the transferee or any other person will remain unaffected in respect of such encumbrances and such liability may be enforced against the transferee or such other person by a suit for damages.
[Section 269-I]
Quantum of compensation
17. The amount of compensation payable in respect of immovable property will ordinarily be in a sum equal to the consideration declared in the instrument of transfer plus 15 per cent thereof. The compensation will, however, be subject to adjustment on account of the damage caused to the property, otherwise than as a result of normal wear and tear, during the interregnum between the transfer of property to the transferee and vesting of the property in the Central Government or improvements made to the property after the transfer thereof to the transferee but before the date of publication of the notice of acquisition in the Official Gazette. It should be noted that no adjustment will be permissible with reference to any improvements made to the property after the issue of notice of acquisition in the Official Gazette up to the date of the vesting of the property in the Central Government.
In the case of damage to the property, the compensation will be reduced by such amount as may be agreed to between the competent authority and the persons entitled to the compensation within 15 days of the vesting of the property in the Central Government. Where no agreement is reached within the said period of 15 days, the competent authority or any person duly authorised by him for the purpose will refer the matter to the court for determining the amount that may have to be expended for restoring the property to the condition in which it was at the time of transfer to the transferee. Likewise, where any improvements have been made to the property, the competent authority and the persons entitled to compensation may agree within 15 days of the vesting of the property in the Central Government on the amount by which the compensation should be increased . Where, however, no agreement is reached within the specified period, the competent authority or any person duly authorised by him will be required to make a reference to the court and the court shall, thereupon determine the amount spent for making such improvements.
A reference to the court for determining the amount by which the compensation should be reduced or enhanced will ordinarily be made by the competent authority or the person authorised by him for the purpose within 30 days of the vesting of the property in the Central Government. Where a delay is likely to occur in making the reference, the competent authority will have to apply to the court before the expiry of the aforesaid period of 30 days for allowing him to make a belated reference and if the court is satisfied that there was sufficient cause for doing so, it may allow extension for such time as it may deem fit. The reference application should clearly state the compensation payable under section 269J(1) and the amount by which, in competent authority’s estimate, such compensation should be reduced or increased.
The court to whom the question of determining the reduction or increase in the compensation may be referred will ordinarily be the principal civil court of original jurisdiction. The Central Government has, however, been empowered under section 269A(c) to appoint any special judicial officer within any specified local limits to perform the functions of the court for purposes of Chapter XXA and after such appointments are made in respect of any area the principal civil court of original jurisdiction will cease to have jurisdiction in respect of cases under Chapter XXA in respect of that area.
[Sections 269A(c) and 269J(1), (2) and (3)]
Bar on imposition of penalties under the Income-tax Act and the Wealth-tax Act
18. Under the Land Acquisition Act, 1894, the Government is required to pay compensation in respect of properties acquired under that Act in an amount equal to the fair market value plus 15 per cent of such value as solatium. In respect of the immovable property acquired under Chapter XXA, the compensation payable will be determined with reference to the apparent consideration (i.e., the consideration as stated in the instrument of transfer) plus a solatium of 15 per cent. Since the provisions of Chapter XXA will be attracted only in a case where the fair market value of the property exceeds the apparent consideration, it follows that the compensation payable thereunder will be less than the compensation that would have been payable had the property been acquired under the Land Acquisition Act, 1894. Section 269J(4) specifically provides that the amount by which the compensation payable under Chapter XXA falls short of the amount which would have been payable if the property had been acquired under the Land Acquisition Act, 1894, shall be deemed to have been realised by the Central Government by way of penalty from the transferee for being a party to a transfer the object whereof is facilitation of tax evasion by the transferor or the transferee.
Where it is proved that the transferee had paid an amount in excess of the consideration stated in the instrument of transfer, it may be possible, if sufficient evidence is available, to include the excess in his total income for a particular assessment year. Even in such a case, no penalty under section 271(1)(iii) will be levied on the transferee for concealing the particulars or furnishing inaccurate particulars of income utilised by him towards payment of undeclared amount of consideration. Similarly, no penalty will be levied on the transferee under section 18(1)(iii ) of the Wealth-tax Act for concealment of such assets as are utilised by him for paying the excess amount to the transferor, notwithstanding that such assets are included in his net wealth.
It should be noted that the waiver of penalties for concealment of income or assets is applicable only in the case of the transferee. The transferor will, however, be liable to penalties under section 271(1)(iii) of the Income-tax Act or section 18(1)(iii) of the Wealth-tax Act if a case can be made out against him.
[Section 269J(4)]
Payment or deposit of compensation
19. The competent authority will ordinarily tender the compensation to the person or persons entitled thereto as soon as may be after the property becomes vested in the Central Government. In a case where the compensation payable under section 269J(1) is to be reduced or increased on account of damage caused to the property or improvements made thereto and the matter has been referred to the court for determination, the amount of compensation as reduced or increased by the amount estimated by the competent authority will be payable as aforesaid. Where there is a dispute as to the apportionment of the compensation amongst persons entitled thereto or the persons entitled to compensation do not consent to receive it or if there is no person competent to alienate the immovable property or if there is any dispute in regard to title to receive the compensation, the Central Government will deposit the amount of compensation with the court and refer the matter for the decision of the court.
If any person who is not lawfully entitled to receive the whole or any part of the compensation for the property acquired under Chapter XXA in fact receives such amount, he will be liable to pay the same to the person lawfully entitled thereto.
In case of failure on the part of the Central Government to tender the whole or any part of the compensation to the person or persons entitled thereto, within 30 days of the vesting of the property in the Central Government or where there is dispute as to the apportionment of the compensation, etc., to deposit in the court the whole or part of such compensation within the aforesaid period of 30 days, the Central Government will be liable to pay simple interest at the rate of 12 per cent per annum for the period falling after 30 days aforesaid.
Where the compensation and interest, if any, has been deposited in the court, the court may invest the amount in such Government or other securities as it may think proper. It may also direct that the interest or other proceeds of such investment to be accumulated and paid in such manner as will, in its opinion, give the interested parties the same benefit therefrom as they might have from the immovable property.
[Section 269K]
Assistance by Valuation Officer
20. The competent authority has been empowered to require a Valuation Officer to determine the fair market value of any property or the amount by which the compensation should be reduced or enhanced on account of damage caused to the property or improvements made thereto. A request for determination of fair market value of immovable property may be made before the competent authority initiates proceedings for acquisition or after such proceedings are started and before the order of acquisition is made.
The Valuation Officer to whom a reference has been made by the competent authority will, for the purpose of dealing with the reference, have all the powers conferred on him under section 38A of the Wealth-tax Act, 1957.
Where an appeal against the competent authority’s order is preferred to the Appellate Tribunal, the competent authority may request the Tribunal to give an opportunity of being heard to any Valuation Officer nominated by him for the purpose and where such a request is made, the Tribunal will be bound to give such an opportunity.
[Section 269L]
Powers of competent authority
21. The competent authority has been given all the powers which the Commissioner of Income-tax has under section 131 of the Income-tax Act. In other words, the competent authority will have the powers of a court under the Code of Civil Procedure when trying a suit for the purpose of (a) discovery and inspection, (b) enforcing the attendance of any person including any officer of a banking company and examining him on oath, (c) compelling the production of books of account and other documents, and (d) issuing commissions. He will also have the power to impose a fine up to Rs. 500 on a person who intentionally omits to attend or fails to produce books of account or documents in response to summons issued by him. Where the competent authority imposes a fine, he will send a copy of the order to the Income-tax Officer having jurisdiction over the persons concerned and the Income-tax Officer will then proceed to recover the amount in the manner provided in Chapter XVIID. The competent authority will also have the power to impound the books of account and other documents produced before him.
[Section 269M]
Rectification of mistakes
22. The competent authority will have the power to rectify a mistake apparent from the record at any time before the expiry of the limitation for presenting an appeal against the order sought to be rectified. Where the order is likely to affect any person prejudicially, the competent authority will, however, give the person concerned a reasonable opportunity of being heard before passing the order of rectification.
[Section 269N]
Appearance by authorised representatives or registered valuers
23. Any person who is entitled or required to attend before the competent authority or the Appellate Tribunal in connection with any proceeding under Chapter XXA may be represented by an authorised representative as defined in section 288. Whether the matter before the competent authority or the Appellate Tribunal relates to the valuation of any immovable property or the estimation of the amount by which the compensation should be reduced or enhanced on account of damage caused to the property or improvements made thereto, the person concerned may, in connection with that matter, be represented by a registered valuer as defined in section 2(oaa) of the Wealth-tax Act.
The right to appear through an authorised representative or a registered valuer does not extend to cases where the person concerned is required to attend personally for examination on oath or affirmation.
[Section 269-O]
24. It has been specifically provided that no immovable property referred to in section 269C shall be acquired for purposes of the Union under the Land Acquisition Act, 1894 or any corresponding law unless the time for initiation of proceedings for acquisition of such property under the new Chapter XXA has expired or unless the competent authority has declared that the property will not be acquired under that Chapter. This provision will apply notwithstanding anything contained in the Land Acquisition Act, 1894 or any corresponding law for the time being in force.
[Section 269R]
BENAMI PROPERTY
Bar on institution of suits claiming ownership of property held benami
25. A new section 281A has been inserted barring institution of suits in any court for claiming ownership over property which is held benami unless certain conditions laid down in this behalf are fulfilled. Under this provision, the real owner of any property held benami or any person acting on his behalf will be debarred from instituting any suit in any court to enforce any right in respect of any property held benami unless the income from such property or the property itself has been disclosed in any return of income or net wealth by the claimant or a notice in the prescribed form and containing the prescribed particulars in respect of the property has been given by the claimant to the Income-tax Officer. The notice will be in Form No. 53 prescribed under rule 122 of the Income-tax Rules, 1962. With a view to enabling the claimant to prove to the satisfaction of the court that the income from property or the property itself has been disclosed in the relevant return or, as the case may be, the prescribed notice has been given to the Income-tax Officer, the claimant will be entitled to obtain the relevant extracts from the return of income or wealth or a certified copy of the prescribed notice given by him. The application for obtaining the relevant extracts from the return or the copy of the prescribed notice will be made in Form No. 54 prescribed under rule 123 of the Income-tax Rules, 1962 and will be accompanied by a receipted treasury challan for Rs. 2 evidencing the payment of prescribed fees. Where such application is made, the Income-tax Officer concerned will furnish the relevant extracts or copy within 14 days of the receipt of the application. With a view to dispensing with the provisions of new section 281A in small cases, it has been specifically provided that the provisions thereof will not apply in relation to any suit of a value not exceeding Rs. 2,000 which is tried by a Court of Small Causes constituted under the Presidency Small Cause Courts Act, 1882 or the Provincial Small Cause Courts Act, 1887 or by any other court invested with the jurisdiction of a court of small causes by or under any other enactment for the time being in force.
The provisions of section 281A will bar the institution of suits for claiming ownership of properties held benami only with effect from 15-11-1972 (i.e., the date of commencement of section 5 of the Amending Act) and the suits filed before that date will remain unaffected.
[Section 281A and rules 122, 123 and 124 of the Income-tax Rules]
REFERENCES TO VALUATION OFFICER
Ascertaining the fair market value of any capital asset and appearance by registered valuers in matters of valuation
26. A new section 55A has been inserted in the Income-tax Act enabling the Income-tax Officer to refer the valuation of any capital asset to the Valuation Officer with a view to ascertaining the market value of such asset. References under this section will lie only after 31-12-1972 as the provisions of section 2 of the Amending Act will come into force with effect from 1-1-1973. Under the new provision, an Income-tax Officer may refer the valuation of any capital asset to a Valuation Officer in a case where the assessee has got the assets valued by a registered valuer and the Income-tax Officer is of opinion that the value as estimated by the registered valuer (i.e., a person registered as a valuer under section 34AB of the Wealth-tax Act) is less than the fair market value of the asset. Other cases in which a reference may be made to the Valuation Officer would be where the Income-tax Officer is of opinion that the fair market value of the asset exceeds the value of the asset as claimed by more than 15 per cent of the value claimed or by more than Rs. 25,000, whichever is less or where, having regard to the nature of the asset and other relevant circumstances, the Income-tax Officer considers it necessary to do so. It will be seen that in a case where the assessee has opted for substitution of the cost of acquisition of an asset by its fair market value as on 1-1-1954, the fair market value as claimed by him may be higher than its actual fair market value. The provisions of section 55A(a) and (b)(i ) will, therefore, not apply in such a case. It will, however, be open to the Income-tax Officer to make a reference to the Valuation Officer under section 55A(b)( ii).
27. The Central Government have appointed a large number of Valuation Officers under section 12A of the Wealth-tax Act and these Valuation Officers will exercise their functions in relation to categories of assets for which they have been appointed. The jurisdiction of the Valuation Officers has been defined in rule 3A of the Wealth-tax Rules. The Valuation Officers will exercise the same jurisdiction for income-tax purposes also. The provisions of rule 3A of the Wealth-tax Rules have been explained in paragraph 34 of this circular.
In cases covered by the provisions of clauses (a) and (b)(i ) of section 55A, it will be incumbent on the Income-tax Officer to refer the valuation of the asset in question to the Valuation Officer and it will not be open to him to decide the question of valuation on his own.
28. The Amending Act has made several provisions in the Wealth-tax Act relating to references to the Valuation Officers by the Wealth-tax Officer and appearance by registered valuers. These provisions have been referentially applied to proceedings under the Income-tax Act relating to valuation of assets for purposes of the provisions governing the taxation of capital gains. The following provisions of the Wealth-tax Act applicable in relation to a reference made by the Wealth-tax Officer under section 16A(1) of that Act will apply, mutatis mutandis, to a reference made by the Income-tax Officer under the new section 55A:
1. Sub-sections (2), (3), (4), (5) and (6) of section 16A [relating to reference to Valuation Officer].
2. Clauses (ha ) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23 [relating to appeal to the Appellate Assistant Commissioner from orders of Wealth-tax Officer].
3. Sub-section (5) of section 24 [relating to appeal to the Appellate Tribunal from orders of the Appellate Assistant Commissioner].
4. Section 34AA [relating to appearance by registered valuers].
5. Section 35 [relating to rectification of mistakes], and section 37 [relating to power to take evidence on oath, etc.].
The aforesaid provisions of the Wealth-tax Act have been explained in paragraphs 35 to 42 of this circular.
Under rule 8D of the Wealth-tax Rules, different forms of report of valuation by registered valuers have been prescribed for different classes of assets. These forms will be used by registered valuers while giving their reports for income-tax purposes also.
29. Under the existing provision in section 254(1A) where, the fair market value of a capital asset adopted under section 52 is questioned before the Appellate Tribunal, the Appellate Tribunal is empowered to refer the question of the disputed value of the arbitration of two valuers, one of whom is ordinarily nominated by the appellant and the other by the respondent. This section has been omitted under section 3 of the Amending Act. Hence, after the coming into force of section 3 of the Amending Act with effect from 1-1-1973, the Appellate Tribunal will not have the power to refer the question of disputed value of a capital asset for arbitration of two valuers and instead the procedure now laid down in the Wealth-tax Act and applied referentially to the proceedings under the Income-tax Act will be followed by the Tribunal. As a transitional measure, however, an independent provision has been made in section 25(1) of the Amending Act specifically providing that while the cases where the appellant had sought a reference of the disputed value of an asset to the arbitration of two valuers prior to the omission of section 254(1A) or such reference had been made before that date will continue to be governed by the pre-existing provisions, no new reference for arbitration will be made after the omission of section 254(1A).
30. A new section 287A has been inserted providing for appearance by registered valuers in certain matters. Under this section, any assessee who is entitled or required to attend before any income-tax authority or the Appellate Tribunal in connection with any proceeding relating to valuation of any asset may be represented by a registered valuer. The right to appear through a registered valuer does not, however, extend to cases where the assessee is required under section 131 to attend personally for examination on oath or affirmation. Since section 6 of the Amending Act under which section 287A has been inserted in the Income-tax Act will come into force with effect from 1-1-1973, registered valuers will be able to represent assessees only after 31-12-1972.
[Section 25(1) of the Amending Act, sections 55A and 287A and rules 111AA and 111AB of the Income-tax Rules]
3. Amendments to Wealth-tax Act
VALUATION MACHINERY
|
Form No.
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|
|
1. Immovable property (other than agricultural lands, plantations, forests, mines and quarries)
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O-1
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|
2. Agricultural lands (other than coffee, tea, rubber and cardamom plantations)
|
O-2
|
|
3. Coffee, tea, rubber or cardamom plantations
|
O-3
|
|
4. Forests
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O-4
|
|
5. Mines and quarries
|
O-5
|
|
6. Stocks, shares, debentures, securities, shares in partnership firms and business assets including goodwill but excluding those referred to in any other item
|
O-6
|
|
7. Machinery and plant
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O-7
|
|
8. Jewellery
|
O-8
|
|
9. Works of art
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O-9
|
|
10. Life interest, reversions and interest in expectancy
|
O-10
|
4. Amendments to Gift-tax Act
TAXATION LAWS (AMENDMENT)
ACT, 1972
Reference to Valuation Officers for ascertaining the fair market value of any property transferred by way of gift
48. Section 21 of the Amending Act has amended section 15 with a view to enabling the Gift-tax Officer to refer the valuation of any property transferred by way of gift to the Valuation Officer for ascertaining the market value of such property. References under the new provision will lie only after 31-12-1972 as the provision of section 21 of the Amending Act will come into force with effect from 1-1-1973.
Under the new provision, the Gift-tax Officer may refer the valuation of any property to a Valuation Officer in case where the assessee has got the property valued by a registered valuer and the Gift-tax Officer is of opinion that the value as estimated by the registered valuer (i.e., a person registered as a valuer under section 34AB of the Wealth-tax Act) is less than the fair market value of the asset. Other cases in which a reference may be made to the Valuation Officer would be where the Gift-tax Officer is of opinion that the fair market value of the property exceeds the value of the property as returned by more than 331/3 per cent of the value returned or by more than Rs. 50,000, whichever is less, or where, having regard to the nature of the property and other relevant circumstances, the Gift-tax Officer considers it necessary to do so.
TAXATION LAWS (AMENDMENT)
ACT, 1972
49. The Central Government has appointed a large number of Valuation Officers under section 12A of the Wealth-tax Act and these Valuation Officers will perform their functions in relation to categories of assets for which they have been appointed. The jurisdiction of the Valuation Officers has been defined in rule 3A of the Wealth-tax Rules. The Valuation Officers will exercise the same jurisdiction for gift-tax purposes also. The provisions of rule 3A of the Wealth-tax Rules have been explained in paragraph 34 of this circular.
In cases covered by the provisions of clauses (a) and (b)(i) of sub-section (6) of section 15 of the Gift-tax Act, it will be incumbent on the Gift-tax Officer to refer the valuation of the property in question to the Valuation Officer and it will not be open to him to decide the question of valuation on his own.
TAXATION LAWS (AMENDMENT)
ACT, 1972
50. The Amending Act has made several provisions in the Wealth-tax Act relating to references to the Valuation Officer by the Wealth-tax Officer and appearance by registered valuers. These provisions have been referentially applied to proceedings under the Gift-tax Act relating to valuation of properties transferred by way of gift. The following provisions of the Wealth-tax Act applicable in relation to reference made by the Wealth-tax Officer under section 16A(1) of that Act will apply, mutatis mutandis, to references made by the Gift-tax Officer under section 15(6) of the Gift-tax Act :
a. sub-sections (2), (3), (4), (5) and (6) of section 16A [relating to reference to Valuation Officer];
b. clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23 [relating to appeal to the AAC from orders of the Wealth-tax Officer];
c. sub-section (5) of section 24 [relating to appeal to the Appellate Tribunal from orders of the AAC];
d. section 34AA [relating to appearance by registered valuers];
e. section 35 [relating to rectification of mistakes];
f. section 37 [relating to power to take evidence on oath, etc.].
The aforesaid provisions of the Wealth-tax Act have been explained in paragraphs 35 to 42 of this circular.
TAXATION LAWS (AMENDMENT)
ACT, 1972
51. Under rule 8D of the Wealth-tax Rules, 10 forms of report of valuation of various assets by registered valuers have been prescribed for different classes of assets. These forms will be used by registered valuers while giving reports for gift-tax purposes also.
ACT, 1972
52. Under the existing provisions of sub-sections (6), (7) and (8) of section 23, where the valuation of any property is questioned before the Appellate Tribunal, the Appellate Tribunal is empowered to refer the question of the disputed value to the arbitration of two valuers, one of whom is ordinarily nominated by the appellant and the other by the respondent. These provisions have been omitted under section 22 of the Amending Act. Consequential changes have also been made in section 25 relating to appeals to the Appellate Tribunal from orders of enhancement by Commissioners. Hence, after the coming into force of sections 22 and 23 of the Amending Act, with effect from 1-1-1973, the Appellate Tribunal will not have the power to refer the question of disputed value of any property for arbitration of two valuers and instead the procedure now laid down in the Wealth-tax Act and applied referentially to proceedings under the Gift-tax Act will be followed by the Tribunal. As a transitional measure, however, an independent provision has been made in section 25(3) of the Amending Act specifically providing that while the cases where the appellant had sought a reference of the disputed value of the property to the arbitration of two valuers prior to the omission of sub-sections (6), (7) and (8) of section 23 or such reference had been made before that date will continue to be governed by the pre-existing provisions, no new reference for arbitration will be made after the omission of the aforesaid sub-sections.
[Section 25(3) of the Amending Act and sections 15(6), 23 and 25]
ACT, 1972
Appearance by registered valuer in certain matters
53. Section 24 of the Amending Act has inserted a new section 43A providing for appearance by registered valuers in certain matters. Under this section, any assessee who is entitled or required to attend before any gift-tax authority or the Appellate Tribunal in connection with any matter relating to the valuation of any asset may be represented by a registered valuer. The right to appear through a registered valuer does not, however, extend to cases where the assessee is required under the Act to attend personally.
[Section 43A]
