Section 269C — Immovable Property in Respect of Which Proceedings for Acquisition May Be Taken

CHAPTER XX-A — ACQUISITION OF IMMOVABLE PROPERTIES IN CERTAIN CASES OF TRANSFER TO COUNTERACT EVASION OF TAX

Section 269C — Immovable property in respect of which proceedings for acquisition may be taken

Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise

Status: Historic / spent. Chapter XX-A was inserted by the Taxation Laws (Amendment) Act, 1972, with effect from 15 November 1972, and does not apply to transfers of immovable property made after 30 September 1986 (section 269RR). It stands superseded by Chapter XX-C (pre-emptive purchase) and, for current transactions, by section 50C / section 56(2)(x).

Finance Act, 2026: No amendment. The Finance Act, 2026 does not touch any provision of Chapter XX-A.

Mechanism: The pivotal provision. It empowers the competent authority, on 'reason to believe' that property of fair market value exceeding the threshold has been transferred for an apparent consideration less than fair market value with the object of tax evasion or concealment, to initiate acquisition; and it lays down the statutory presumptions in sub-section (2).

Litigation profile: The most heavily litigated section of the Chapter — 'reason to believe', the twin conditions, recording of reasons, the scope of the section 269C(2) presumptions, and burden of proof.

A. COMMENTARY

The charging architecture

Section 269C is the heart of Chapter XX-A. Sub-section (1) authorises initiation only where the competent authority has 'reason to believe' that (a) immovable property exceeding the value threshold has been transferred for an apparent consideration less than its fair market value, and (b) the consideration has not been truly stated with the object either of reducing/evading the transferor's tax or of facilitating concealment by the transferee. The two provisos require the reasons to be recorded before initiation and require a fair-market-value-to-apparent-consideration gap exceeding the prescribed percentage.

The 'twin conditions'

Vimlaben Bhagwandas Patel is the locus classicus: both an objective element (understatement — fair market value exceeding apparent consideration) and a subjective/ulterior element (untrue statement with the proscribed object) must be present. Establishing only the value gap is not enough; the authority must also have material pointing to the tax-evasion or concealment object.

Presumptions in sub-section (2) — confined to adjudication

Sub-section (2) raises two presumptions: a value gap exceeding 25% is 'conclusive proof' that the consideration was not truly stated; and undervaluation is presumed (rebuttably) to be for the proscribed object. Bani Roy Chowdhury and Madho Properties hold firmly that these presumptions belong to the post-initiation adjudicatory stage (section 269F) and cannot be used to manufacture the 'reason to believe' at the threshold of section 269C(1).

Burden of proof

K.P. Varghese supplies the burden rule: the revenue must prove real understatement (extra consideration actually passing), not merely an arithmetical gap; and C.B. Gautam confirms that significant undervaluation raises only a rebuttable presumption of evasion. The citizen must always have the opportunity to rebut.

Validity

The constitutional validity of this acquisition power was upheld in Mahavir Metal Works, applying the same reasoning by which coercive anti-evasion powers were sustained in Pooran Mal.

B. STATUTORY TEXT (verbatim)

Reproduced verbatim from the Income-tax Act, 1961, as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no change). Page-header/footer artefacts of the source PDF have been removed; wording, clause-lettering and punctuation are unaltered.

Immovable property in respect of which proceedings for acquisition may be taken.

269C. (1) Where the competent authority has reason to believe that any immovable property of a fair market value exceeding one hundred 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—

(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 that no such proceedings shall be initiated unless the competent authority has reason to believe that the fair market value of the property exceeds the apparent consideration there for by more than fifteen per cent of such apparent consideration.

(2) In any proceedings under this Chapter in respect of any immovable property,—

(a) where the fair market value of such property exceeds the apparent consideration therefor by more than twenty-five per cent of such apparent consideration, it shall be conclusive proof that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer ;

(b) 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 such object as is referred to in clause (a) or clause (b) of sub-section (1).

C. AUTHORITIES

Reason-to-believe, twin-conditions, recording of reasons and the confinement of the section 269C(2) presumptions to the adjudication stage are the core controversies — addressed by the authorities below.

Constitutional validity of the acquisition power

Mahavir Metal Works (P.) Ltd. v. Union of India — [1974] 95 ITR 197 (Delhi)

Held Constitutional validity of Chapter XX-A upheld. Compulsory acquisition of undervalued property, on payment of compensation equal to the apparent consideration plus the statutory solatium, is a reasonable restriction in the interest of countering tax evasion and does not offend Articles 14, 19(1)(f) or 31 of the Constitution.

Why The in-built safeguards — recorded reason to believe, Gazette notice, individual notice, objections, hearing and appeals — rescue the scheme from arbitrariness.

Pooran Mal v. Director of Inspection (Investigation) — [1974] 93 ITR 505 (SC)

Cognate Decided on section 132 (search and seizure). The coercive anti-evasion machinery of the Act is constitutionally valid and a reasonable restriction; the State's interest in unearthing concealed income justifies stringent powers, subject to procedural safeguards — the same validity rationale on which the Chapter XX-A acquisition power was sustained.

'Reason to believe' and the twin conditions

CIT v. Smt. Vimlaben Bhagwandas Patel and Smt. Kamlaben Kanjibhai Patel — [1979] 118 ITR 134 (Gujarat) (decided 25 January 1979)

Facts Notice under section 269D(1) initiating acquisition of two industrial sheds transferred below the competent authority's estimate of fair market value; the transferee challenged initiation.

Held The leading judgment on Chapter XX-A. The acquisition machinery is expropriatory and penal in character and must be construed strictly. Initiation under section 269C(1) requires the competent authority to entertain reason to believe BOTH limbs of the 'twin conditions' — (i) that the fair market value exceeds the apparent consideration (understatement), and (ii) that the consideration was not truly stated with the ulterior object in clause (a) or (b) (reduction/evasion of the transferor's tax or concealment by the transferee). The statutory presumptions in section 269C(2) belong to the post-initiation adjudicatory stage (section 269F) and cannot supply the reason to believe at the threshold.

Also Where the authority records more than one ground, the initiation is not vitiated merely because one ground is later found defective, so long as a valid ground survives. Reasons must have a rational nexus with the material.

Smt. Bani Roy Chowdhury v. Competent Authority, Inspecting Assistant Commissioner of Income-tax, Acquisition Range II — [1978] 112 ITR 111 (Calcutta); per Ramendra Mohan Datta J (decided 18 June 1976)

Held The presumptions in section 269C(2) operate only at the stage of adjudication of objections and cannot be pressed into service to form the 'reason to believe' for initiation under section 269C(1); at that threshold the authority must possess material independent of the statutory presumptions.

Also Simultaneously anchoring the belief to both clauses (a) and (b) of section 269C(1) betrayed non-application of mind; the authority had wrongly treated a confirming party (Hindusthan Building Society Ltd.) as a transferor, and had relied on irrelevant advertisements/comparables for fair market value.

Result The section 269D(1) notice was quashed — an early and influential statement of the procedural discipline governing Chapter XX-A.

Section 269C(2) presumptions — confined to adjudication, not initiation

Smt. Bani Roy Chowdhury v. Competent Authority, Inspecting Assistant Commissioner of Income-tax, Acquisition Range II — [1978] 112 ITR 111 (Calcutta); per Ramendra Mohan Datta J (decided 18 June 1976)

Held The presumptions in section 269C(2) operate only at the stage of adjudication of objections and cannot be pressed into service to form the 'reason to believe' for initiation under section 269C(1); at that threshold the authority must possess material independent of the statutory presumptions.

Also Simultaneously anchoring the belief to both clauses (a) and (b) of section 269C(1) betrayed non-application of mind; the authority had wrongly treated a confirming party (Hindusthan Building Society Ltd.) as a transferor, and had relied on irrelevant advertisements/comparables for fair market value.

Result The section 269D(1) notice was quashed — an early and influential statement of the procedural discipline governing Chapter XX-A.

CIT, West Bengal-II v. Madho Properties Ltd. — Calcutta High Court, per Dipak Kumar Sen & C.K. Banerji JJ (decided 12 September 1980)

Held The 'belting method' of valuing urban land (the front belt valued highest and successive rear belts at a discount by distance from the road) is a scientific and acceptable mode of arriving at fair market value when supported by data; it was approved following Mathura Prosad Rajgharia v. State of West Bengal (SC) and Smt. Tribeni Devi v. Collector, Ranchi (SC).

Also Reaffirmed that the section 269C(2) presumptions cannot be invoked at the initiation stage; the Tribunal's adoption of the belting method was upheld and the Revenue's appeal dismissed.

CIT v. Smt. Vimlaben Bhagwandas Patel and Smt. Kamlaben Kanjibhai Patel — [1979] 118 ITR 134 (Gujarat) (decided 25 January 1979)

Facts Notice under section 269D(1) initiating acquisition of two industrial sheds transferred below the competent authority's estimate of fair market value; the transferee challenged initiation.

Held The leading judgment on Chapter XX-A. The acquisition machinery is expropriatory and penal in character and must be construed strictly. Initiation under section 269C(1) requires the competent authority to entertain reason to believe BOTH limbs of the 'twin conditions' — (i) that the fair market value exceeds the apparent consideration (understatement), and (ii) that the consideration was not truly stated with the ulterior object in clause (a) or (b) (reduction/evasion of the transferor's tax or concealment by the transferee). The statutory presumptions in section 269C(2) belong to the post-initiation adjudicatory stage (section 269F) and cannot supply the reason to believe at the threshold.

Also Where the authority records more than one ground, the initiation is not vitiated merely because one ground is later found defective, so long as a valid ground survives. Reasons must have a rational nexus with the material.

Burden of proof and rebuttable presumption of evasion

K.P. Varghese v. ITO, Ernakulam — [1981] 131 ITR 597 (SC)

Cognate Decided on section 52(2), but its burden-of-proof rule is the doctrinal backbone of Chapter XX-A litigation. The revenue cannot proceed on understatement merely by showing that the fair market value exceeds the declared consideration by the statutory margin; the burden lies on the revenue to prove that the assessee actually received more than what was disclosed.

Application Carried into section 269C: a mere arithmetical gap between fair market value and apparent consideration is not, by itself, proof that the consideration was 'not truly stated'; understatement (extra consideration passing) must be established.

C.B. Gautam v. Union of India — [1993] 199 ITR 530 (SC)

Cognate Decided on Chapter XX-C (section 269UD pre-emptive purchase), the successor scheme. The Supreme Court held that pre-emptive purchase / acquisition for undervaluation can be resorted to only where there is 'significant undervaluation' (of the order of 15%), which raises a rebuttable presumption of an attempt to evade tax, and that the principles of natural justice — a reasonable opportunity of hearing — must be read into the provision before an order divesting a citizen of property is made, even where the statute is silent.

Relevance The Court expressly traced the lineage of the pre-emptive-purchase scheme to Chapter XX-A; its reasoning on undervaluation-as-rebuttable-presumption and on natural justice is directly transposable to sections 269C and 269F.

Fair market value — valuation method at the threshold

CIT, West Bengal-II v. Madho Properties Ltd. — Calcutta High Court, per Dipak Kumar Sen & C.K. Banerji JJ (decided 12 September 1980)

Held The 'belting method' of valuing urban land (the front belt valued highest and successive rear belts at a discount by distance from the road) is a scientific and acceptable mode of arriving at fair market value when supported by data; it was approved following Mathura Prosad Rajgharia v. State of West Bengal (SC) and Smt. Tribeni Devi v. Collector, Ranchi (SC).

Also Reaffirmed that the section 269C(2) presumptions cannot be invoked at the initiation stage; the Tribunal's adoption of the belting method was upheld and the Revenue's appeal dismissed.

Mathura Prosad Rajgharia v. State of West Bengal — Supreme Court

Cognate (valuation) Approved the belting method for valuing urban land acquired compulsorily; the method is scientific where the diminution of value with distance from the road is borne out by data. Applied in Madho Properties to fair market value under Chapter XX-A.

Smt. Tribeni Devi v. Collector, Ranchi — Supreme Court

Cognate (valuation) Fair market value must be assessed on an objective standard, taking account of the property's present condition and its reasonable potential; guidance relied upon for the 'fair market value' enquiry under sections 269A/269C/269J.