Commissioner of Income Tax vs Charanjit Singh

N.K. Sodhi, J. 1. Tarlok Chand, son of Dewan Chand, sold shop No. WP 156-A, G. T. Road, Jullundur, to Tarlochan Singh some time in April, 1975, for a sum of Rs. 36,500. The shop covers an area of 28'' x 28'' and is situate in a commercial area. It was in the occupation of Kishan Lal and Dhanpat Ram on a monthly rent of Rs. 500 since May, 1974, for a period of five years. By adopting the rent capitalisation method, the competent authority computed the fair market value of the property at Rs. 70,000. After recording its satisfaction u/s 269C of the Income Tax Act, 1961 (for short, "the Act"), the competent authority decided to acquire the property in question. Accordingly, proceedings for its acquisition were initiated by a notice that was published in the Official Gazette on January 3, 1976. A copy of that notice was served on the transferor as well but the case of the transferee is that no notice was served on him. It is the common case of the parties that the transferor filed his objections on January 20, 1976, whereas the transferee filed them on January 17, 1976. After hearing the parties and disposing of their objections, the competent authority decided to acquire the property. Accordingly, approval of the Commissioner was obtained and an order dated March 11, 1980, passed u/s 269F(6) of the Act for its acquisition. Being aggrieved by the order of acquisition, the transferee filed an appeal before the Income Tax Appellate Tribunal. The order was challenged before the Tribunal on the merits, it being contended that the competent authority did not have sufficient material before it to form an opinion that the property in question ought to be acquired and that the requirements of Section 269C of the Act which were a condition precedent for acquiring the property were not satisfied. It was also urged before the Tribunal that the order of acquisition was liable to be set aside on the ground that the mandatory provisions of Section 269D(2) of the Act had not been complied with inasmuch as the transferee had not been issued/served with any notice under that provision. On a consideration of the submissions made before it, the Tribunal held that the proceedings of acquisition were illegal and could not lead to the passing of a valid order of acquisition without the transferee having been served with a proper notice u/s 269D{2) of the Act within the prescribed time. After referring to the commentary of Chaturvedi and Pithisaria in their book Income Tax Law, the Tribunal recorded its finding in the following words :

"Following with respect the said decision we hold that the proceedings for acquisition of property at 156-A, G. T. Road, Jullundur, without the transferee having been served with a proper notice u/s 269D(2) within the prescribed time is bad and cannot lead to a valid order of acquisition. The order passed on March 11, 1980, as a consequence of the illegal proceeding to acquire the property is quashed."

In view of the aforesaid finding, the Tribunal gave no decision on any other grounds of appeal raised by the appellant before it and the order of acquisition was set aside. It is this order of the Tribunal that has now been challenged by the Revenue in the present appeal filed by it u/s 269H of the Act.

We have heard counsel for the parties. On behalf of the Department, it was forcefully argued by Mr. R.P. Sawhney, senior advocate, that the Tribunal erred in law in setting aside the order of acquisition merely because the transferee had not been properly served with a notice u/s 269D(2) of the Act. There is merit in this contention. Admittedly, the transferee filed his objections before the competent authority on January 17, 1976, within 14 days of the publication of the notice in the Official Gazette u/s 269D(1) of the Act. This being so, the transferee having appeared before the authority on its own there was no occasion for it to have sent a notice to him. The purpose of issuing a notice u/s 269D(2) is to secure the presence of the transferee to enable him to file his objections, if any, to the proposed acquisition. The purpose of the notice was fully served when the transferee appeared on his own and filed his objections. He had thus proper notice of the proceedings that were initiated by the competent authority and cannot make a grievance of not having been formally served with a notice. In our opinion, the Tribunal was not justified in setting aside the order impugned before it on the ground that the transferee had not been properly served. The finding recorded by the Tribunal in this regard cannot, therefore, be sustained. Since the Tribunal had not decided the merits of the other contentions raised before it by the transferee, the case is remanded to it for decision on other grounds that remained undecided.

In the result, the appeal is allowed, the impugned order of the Tribunal set aside and the case remanded as aforesaid. There is no order as to costs.