Full Judgment Text
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CASE NO.:
Appeal (civil) 1196 of 2001
PETITIONER:
Commissioner of Income Tax, Chandigarh
RESPONDENT:
M/s Pearl Mech. Engg. & Foundry Works P. Ltd.
DATE OF JUDGMENT: 16/04/2004
BENCH:
S. Rajendra Babu & G.P. Mathur
JUDGMENT:
JUDGMENT
G.P. MATHUR,J.
1. This appeal, by special leave has been preferred against the judgment
and order dated 21.7.1999 of the High Court of Punjab & Haryana by which
the appeal preferred by the appellant under Section 269H of Income Tax
Act, 1961 against the order dated 16.8.1992 of the Income Tax Appellate
Tribunal, Chandigarh, was dismissed.
2. The respondent M/s Pearl Mechanical Engineering & Foundry Works
(P) Ltd., Ludhiana executed a sale deed of plot no. 427, Industrial Area-A,
Ludhiana in favour of M/s. Oswal Woolen Mills Limited for Rs.10,05,000/-
on 5.2.1980. The Government valuer. on receipt of a reference from the
Inspecting Assistant Commissioner, estimated the fair market value of the
property at Rs.18,31,000/-. Proceedings for acquisition of the property
were then initiated in accordance with Chapter XXA of Income Tax Act,
1961 (hereinafter referred to as ’the Act’) and notice under section 269D (1)
of the Act was published in the official gazette on 15.11.1980. The notices
issued under Section 269D (2) of the Act were served upon the transferor
and the transferee on 10.10.1980. The competent authority, after hearing the
objections, passed orders for acquisition of the property. The appeals
preferred against the said order by the transferor and transferee were allowed
by the Income Tax Appellate Tribunal, Chandigarh, and the order of the
competent authority was set aside mainly on the ground that the notices
under section 269D(2) had been served prior to the publication of the notice
in the official gazette. Feeling aggrieved by the order of Tribunal the
Commissioner of Income Tax, preferred an appeal under section 269H of the
Act but the same was dismissed by the High Court on 21.7.1999. The High
Court has held that by the publication of the notice in the official gazette
proceedings for acquisition of property were initiated and the service of the
notice on the transferor and the transferee under Section 269D(2) prior to the
publication in the gazette is meaningless and an exercise in futility rendering
the entire proceedings illegal and without jurisdiction.
3. The main question which requires consideration is whether the service
of notice upon the transferor and the transferee under Section 269D(2) of the
Act prior to the publication of the notice in the official gazette in accordance
with Section 269D(1) of the Act would render the entire proceedings illegal
and without jurisdiction. Chapter XXA comprising Sections 269A to 269S
was inserted by the Taxation Laws (Amendment) Act, 1972 with effect from
15.11.1972. The Statement of Objects and Reasons shows that the
amendment was incorporated to counter evasion of tax through
understatement of the value of immovable property in sale deeds and also to
check the circulation of black money by empowering the Central
Government to acquire immovable properties and to curb the widespread
practice of benami holding of property with a view to tax evasion by
debarring the real owner from enforcing his claim to such property in a
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court of law unless he has declared the income from that property or the
property itself for purposes of income tax and wealth tax or has given notice
of his claim to the property to the income-tax authorities.
4. Sub-section (a) of Section 269A defines "apparent consideration" and
sub-section (b) defines "competent authority" which means an Assistant
Commissioner of Income-tax authorised by the Central Government under
Section 269B to perform the functions of competent authority under Chapter
XXA. Section 269B provides that the Central Government may, by general
or special order published in the Official Gazette, authorise as many
Assistant Commissioners of Income-tax, as it thinks fit, to perform the
functions of a competent authority under the Chapter and also define the
local limits within which the competent authorities shall perform their
functions. The relevant parts of Sections 269C, 269D and 269E, which
have a bearing on controversy in hand, are being reproduced below :
269C. (1) Where the competent authority has reason to
believe that any immovable property of a fair market value
exceeding twenty-five thousand rupees has been transferred by
a person (hereafter in this Chapter referred to as the transferor)
to another person (hereafter in this Chapter referred to as the
transferee) for an apparent consideration which is less than the
fair market value of the property and 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 \026
(a) facilitating the reduction or evasion of the liability of the
transferor to pay tax under this Act in respect of any
income arising from the transfer; or
(b) 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 the purposes
of the Indian Income-tax Act, 1922 (11 of 1922), or this
Act or the Wealth-tax Act, 1957 (27 of 1957),
the competent authority may, subject to the provisions of this
Chapter, initiate proceedings for the acquisition of such
property under this Chapter;
Provided that before initiating such proceedings, the competent
authority shall record his reasons for doing so.
Provided further \005\005\005\005\005\005\005.. (Omitted as not relevant)
(2) \005\005\005\005\005\005\005\005\005.. (Omitted as not relevant)
269D. (1) The competent authority shall initiate proceedings
for the acquisition, under this Chapter, of any immovable
property referred to in Section 269C by notice to that effect
published in the Official Gazette :
Provided that no such proceedings shall be initiated in respect
of any immovable property after the expiration of a period of
nine months from the end of the month in which the instrument
of transfer in respect of such property is registered under the
Registration Act, 1908 (16 of 1908).
Provided further \005\005\005\005\005\005. (Omitted as not relevant)
(2) The competent authority shall \026
(a) cause a notice under sub-section (1) in respect of any
immovable property to be served on the transferor, the
transferee, the person in occupation of the property, if the
transferee is not in occupation thereof, and on every
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person whom the competent authority knows to be
interested in the property ;
(b) cause such a notice to be published \026
(i) in his office by affixing a copy thereof to a conspicuous
place;
(ii) in the locality in which the immovable property to which
it relates is situate, by affixing a copy thereof to a
conspicuous part of the property and also by making
known in such manner as may be prescribed the
substance of such notice at convenient places in the said
locality.
269E. (1) Objections against the acquisition of the
immovable property in respect of which a notice has been
published in the Official Gazette under sub-section (1) or
section 269D may be made \026
(a) by the transferor or the transferee or any other person
referred to in clause (a) of sub-section (2) of that section,
within a period of forty-five days from the date of such
publication or a period of thirty days from the date of
service of notice on such person under the said clause,
whichever period expires later ;
(b) by any other person interested in such immovable
property, within forty-five days from the date of such
publication.
(2) Every objection under sub-section (1) shall be made to
the competent authority in writing.
(3) \005\005\005\005\005\005\005 (Omitted as not relevant)
5. A perusal of the aforesaid provisions shows that the proceedings for
acquisition of any immovable property under Chapter XXA have to be
initiated by publication of the notice to that effect in the official gazette.
This is the mandatory requirement of sub-section (1) of Section 269D.
Under sub-section (2) of the same section, the notice has also to be served
upon the transferor, transferee, the person in occupation of the property, if
the transferee is not in occupation thereof, and also on every person whom
the competent authority knows to be interested in the property. In view of
clause (b) of sub-section (2), the notice has to be published in the office by
affixing a copy thereof to a conspicuous place and in the locality in which
the immovable property to which it relates is situate. Section 269E enables
the transferor or the transferee or any person referred to in clause (a) of sub-
section (2) of Section 269D to file an objection in writing against the
acquisition of the immovable property in respect of which a notice has been
published in the official gazette before the competent authority. In view of
the express language used, the proceedings for acquisition of property can be
initiated only by publication of the notice in the official gazette and until the
publication is so made, the proceedings cannot be deemed to have been
initiated. The first proviso to sub-section (1) of Section 269D lays down a
period of limitation for initiation of such proceedings which is nine months
from the end of the month in which the instrument of transfer in respect of
such property is registered under the Registration Act. Therefore, in view
of this provision the notice in the official gazette must be published within a
period of 9 months from the end of the month in which the acquisition and
transfers were registered. Sub-section (2) of Section 269D provides for
service of notice (which has been referred to in sub-section (1) of Section
269D) upon the transferor, the transferee and certain other persons. It
further provides for affixing a copy of the notice in the office of the
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competent authority and also in the locality. The language used in sub-
section (2) of Section 269D does not expressly state that the service of notice
upon the transferor or the transferee can be effected only after publication of
the notice in the official gazette as contemplated by sub-section (1). A
period of limitation for filing objections has been provided under Section
269E, and it gives 45 days from the date of publication of notice in the
gazette and 30 days from the date of service of notice on such person
(transferor or transferee), whichever period expires later. In view of this
provision, the service of notice under sub-section (2) of Section 269D upon
the transferor or transferee prior to the publication of the notice in the
official gazette cannot cause any prejudice to them as even in such a case
they will get 45 days to file objections from the date of publication in the
gazette. In fact, the prior service of notice will be to their advantage as they
will get additional time to file objection. It is true that in sub-section (1) of
Section 269D, the expression used is "shall initiate proceedings" which can
also be interpreted to mean that other steps including personal service of
notice can be taken only after publication in the gazette but the analysis of
the relevant provisions and also the scheme of Chapter XXA does not lead to
an inference that the personal service of notice upon the transferor or the
transferee under sub-section (2) prior to the publication of notice in the
official gazette in sub-section (1) of Section 269D would render the whole
proceedings illegal and without jurisdiction.
6. Undoubtedly, the publication of the notice in the official gazette under
sub-section (1) of Section 269D is the very foundation for initiation of
proceedings for acquisition of immovable property under Chapter XXA and
the period of limitation for initiation of proceedings has to be reckoned with
reference to the said date. The competent authority gets the jurisdiction to
make an order for acquisition of property only after publication of the notice
in the official gazette. The word "jurisdiction" implies the Court or Tribunal
with judicial power to hear and determine a cause, and such Tribunal cannot
exist except by authority of law. Jurisdiction always emanates directly and
immediately from the law; it is a power which nobody on whom the law has
not conferred it can exercise. In other words, "jurisdiction" has reference to
the power of the Court or Tribunal over the subject matter, over the res or
property in contest, and to the authority of the court to render the judgment
or decree it assumes to make. It is in this sense that the publication of the
notice in the official gazette confers jurisdiction on the competent authority
to take proceedings for acquisition of immovable properties under Chapter
XXA of the Act. The service of notice under sub-section (2) of Section
269D upon the transferor and transferee meets the requirement of natural
justice so that they may file objections in writing against the action which is
proposed to be taken, namely for acquisition of property. Any error or
mistake committed in the service of the notice does not in any manner affect
the jurisdiction conferred upon the competent authority to take proceedings
for acquisition of property. The service of notice prior to the publication in
the official gazette is merely an irregularity committed during the course of
the proceedings and cannot have the effect of nullifying the entire
proceedings which are validly commenced by publication in the official
gazette. In fact, no prejudice is occasioned to the transferor or transferee by
service upon them of the notice prior to the publication of the gazette. We
are, therefore, of the opinion that prior service of notice under sub-section
(2) of Section 269D is at best an irregularity but it cannot have the effect of
rendering the proceedings either illegal or without jurisdiction.
7. The question posed here has been considered by various High Courts
and the decisions rendered therein may be briefly noticed. In CIT v. Amrit
Sports Industries 144 ITC 113 a Full Bench of the Punjab & Haryana High
Court, after analysis of the provisions of the Act, held that sub-section (1) of
Section 269D of the Act is the primary and the main provison for the
initiation of acquisition proceedings and sub-section (2) which obviously
follows is in a way a subsidiary and a supplementary provision to the
aforesaid sub-section (1). It was further held that the initiation of the
proceedings for acquisition and the consequent assumption of jurisdiction by
the competent authority is complete by the publication of the notice in the
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official gazette under Section 269D(1) of the Act and consequently a
procedural defect of compliance with sub-section (2) would not affect the
jurisdiction of the competent authority and does not vitiate the whole
proceedings under the said sub-section. In Smt. Pritpal Kaur v. Inspecting
Asstt. CIT 145 ITR 19, a Division Bench of Allahabad High Court held that
Section 269D(1) of the Act, requiring the publication of a notice for
initiation of acquisition proceedings in the official gazette, is mandatory but
the notice to be served on the transferor and the transferee of the property
need not be after the publication of the notice in the official gazette. In
Prem Chand v. IAC 153 ITR 774 a Division Bench of Karnataka High Court
has held that the jurisdiction to initiate proceedings for acquisition of
immovable property is conferred on the IAC by Chapter XXA of the Act and
the orders made by the Government appointing him as the authority to
decide the cause. Every error committed by the IAC in the exercise of his
own jurisdiction cannot be treated as outside his own jurisdiction and they
are all errors in but not of jurisdiction. Accordingly, the errors, if any,
committee by the IAC in issuing notices under Section 269D(2)(a) before
the publication of the notice in the gazette was an error within his own
undoubted jurisdiction and was not a case of assumption of jurisdiction and
the Tribunal in holding otherwise and invalidating the proceedings on that
ground was clearly in error. In All India Reporter v. Competent Authority
162 ITR 697, the Bombay High Court held that the giving of individual
notices and locality notice are not jurisdictional requirements, non-
compliance of which must result in invalidating of initiation of acquisition
proceedings. It was further held that the manner of service of this notice is
only directory and not mandatory nor is it a jurisdictional fact so as to
deprive the competent authority of jurisdiction to hold or initiate the
proceedings. Similar view has been taken by Patna High Court in Smt.
Lalita Todi v. CIT 123 ITR 40 and it has been held that the provisions of
Section 269D (2) must be deemed to be merely directory. We are in
agreement with the view expressed in these decisions.
8. A contrary view has been taken by a Division Bench of the Punjab
and Haryana High Court in CIT v. Des Raj 220 ITR 7 and in its opinion the
Full Bench decision of the same Court in CIT v. Amrit Sports Industries 144
ITR 113 did not hold that even where the notice is served under sub-section
(2) prior to its publication under sub-section (1), the error committed by the
competent authority is only procedural and not jurisdictional. On this
assumption it was held that such a defect is one of jurisdiction and the
competent authority cannot proceed to make an order acquiring the property.
CIT v. Vinod Gupta 221 ITR 213 is a short judgment by the same learned
Judges wherein they followed their earlier decision in CIT v. Des Raj
(supra). In our opinion, the view taken in these two decisions does not lay
down the correct law as the ratio of the Full Bench decision in CIT v. Amrit
Sports Industries (supra) was not correctly applied. Satya Narain Prakash
Punj v. Union of India 160 ITR 693 is a decision by a learned Single Judge
of Delhi High Court wherein notice under sub-section (2) of Section 269D
served prior to the publication of the notice in the official gazette was
quashed. For doing so, the Court relied upon the dictum of the Privy
Council in Nazir Ahmed v. King Emperor AIR 1936 PC 253 that when a
statute requires a thing to be done in a particular manner, it must be done in
that manner or not at all. As already discussed, the language of Section
269D does now show that the service of notice upon the transferor or
transferee, as contemplated by sub-section (2), must necessarily be effected
only after publication of the notice in the official gazette.
9. For the reasons mentioned above, we are of the opinion that the view
taken by the High Court and also by the Income Tax Appellate Tribunal,
Chandigarh, to the effect that service of notice upon the transferor and the
transferee under Section 269D(2)(a) prior to the publication of the notice in
the official gazette rendered the whole proceedings illegal and without
jurisdiction, is clearly unsustainable in law. The appeal is accordingly
allowed and the judgment and order dated 21.7.1999 of the Punjab and
Haryana High Court and also the order dated 16.8.1992 of the Income Tax
Appellate Tribunal are set aside.
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