RATTAN CHAND OSWAL Vs. GIFT TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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J.P. Bengra, Judicial Member -
(1.) THESE are appeals by assessee against the orders of CIT/GT(Appeals), Ludhiana, pertaining to assessment year 1980-81. Since issues involved in both these appeals are common, therefore, for the sake of convenience, these appeals are being disposed of by a consolidated order.
(2.) During the year under consideration, the assessee had sold 4,000 equity shares of M/s Oswal Woollen Mills Ltd. as legal heir of Smt. Banarso Devi Oswal and 3,100 equity shares of the same company in other case @ Rs. 12 per share. The GTO invoked the provisions of Section 4(1)(a) of the Gift-tax Act, 1958 and calculated the deemed gift at Rs. 5,43,000 and at Rs. 4,19,700 respectively in the two cases being the break-up value of shares under Rule 1D. Despite the fact that the assessee had pleaded that the declared sale value was market value as trustees of Banarso Devi Oswal Charitable Trust had sold the shares at the same price in open market through advertisements. The GTO was not satisfied with the argument of the assessee. Therefore, relying on the decision of JTO v. Buragadda Satyanarayana  106 ITR 333 (AP) and decision of Punjab & Haryana High Court in the case of Sardarni Ahilya Raghbir Singh Raja Sansi v. CIT  97 ITR 425 and also the decision of the Tribunal in the case of Neelam Kumar Oswal [GT Appeal Nos. 21 to 23 (Chd.) of 1984 dated 27-10-1986] for assessment year 1976-77 held that Rule 1D was mandatory and in the absence of any such Rule in the Gift-tax Act, the same Rule should be followed.
When the matters came before the CGT (Appeals), the assessee had pleaded that orders of the GTO were not sustainable because he had not given any specific finding as to the inadequacy of the consideration which is a pre-requisite for invoking the provisions of Section 4(1)(a) of the Gift-tax Act. Further, there is no finding that the transaction of sale was not bona fide. In the absence of these two findings, the GTO's orders cannot be sustained. Reliance was placed on the decision of Allahabad High Court in the case of CGT v. Sardar Wazir Singh  99 ITR 104 at page 107 and decision of Madras High Court in the case of CGT v. Indo Traders & Agencies (Madras) (P.) Ltd.  131 ITR 313. The Ld. counsel for the assessee also distinguished the facts of Andhra Pradesh and Punjab and Haryana High Courts and the decision of the Tribunal. It was mentioned that the case of Neelam Kumar Oswal (supra) was under the provisions of Section 6 of the Gift-tax Act whereas in the case of the assessee, Section 4(1) had been focused. Alternatively, it was pleaded that if at all valuation was required, this had to be done under yield method in view of the decision of the Supreme Court in the case of CWT v. Mahadeo Jalan  86 ITR 621, CGTv. Smt. Kusumben D. Mahadeuia  122 ITR 38 and CGT v. Executors & Trustees of the Estate of Late Shri Ambalal Sarabhai  170 ITR 144. How ever, the CGT (Appeals) was not satisfied with the arguments of the assessee. He confirmed the orders of the GTO deriving support from the case of Madras High Court in the case of Addl. CGT v. S.V.R. Cycle Mart  110 ITR 429. The assessee is aggrieved.
(3.) THE learned counsel for the assessee very vehemently argued that the provisions of Section 4(1)(a) were applicable where there was a specific finding as to the inadequacy of the consideration which was a prerequisite. Our attention was invited to the provisions and it was submitted that the GTO had further to establish that the transaction of sale was not bona fide. THE provision of deemed gift cannot be applied merely in a case where the GTO feels that the consideration does not reflect the market price. It was emphasised that in Section 4(1)(a) of the Gift-tax Act, the words "where property is transferred otherwise than for adequate consideration", are appearing which mean onus to establish that the transfer is for inadequate consideration lies on the department. It is pointed out that Smt. Banarso Devi Oswal Public Charitable Trust also sold 1250 equity shares of M/s Oswal Woollen Mills Ltd. @ Rs. 12 and Rs. 12.50 per share by public advertisement which was supported with a documentary evidence enclosed with the paper book. This evidence is a direct proof of market price. Banarso Devi had declared capital gains of Rs. 26,325 in her return. THE ITO proposed to value these shares by applying Rule 1D. Later on, when the evidence was filed, the Assessing Officer accepted the returned capital gains on the basis of actual sale price transacted by the said Trust. It is submitted that the revenue authorities had invoked provisions of Section 4(1)(a) merely on suspicion that the market value is higher than what had been declared without bringing any proof of the same. It is submitted that the cases relied on the Assessing Officer are distinguishable on facts itself. In the case before the Andhra Pradesh High Court in Buragadda Satyanarayana"s case [supra). THE issue was regarding computation of capital gain and the ITO, applying the provisions of Section 52 of the Act estimated the capital gains. Application of Section 4(1)(a) was never before the Hon'ble Andhra Pradesh High Court. Similarly, in the case of Sardarni Ahilya Raghbir Singh Raja Sansi (supra), the assessee had transferred 100 shares at the face value of Rs. 1000 each. THE question before the Hon'ble Pb. & Hr. High Court was about the applicability of Section 52 of the Income-tax Act where they have held that transfer is covered under Section 52 of the Income-tax Act. In both these cases, applicability of Section 4(1)(a) was never considered. In the case of Neelam Kumar Oswal (supra), the question before the GTO was about the valuation of shares under Section 6(1) of the Gift-tax Act. THE words "where...otherwise than for adequate consideration" are absent in Section 6(1) of the Gift-tax Act which was considered by the Tribunal. Whereas in Section 4(1)(a), these words appear and lay emphasis which was not considered while giving the decision. THE assessee filed a chart showing position in respect of there cases of this group and relevant orders were also filed before us :
Other cases of the group, assessment, appeal, position.
It is further pointed out that the assessee had filed following proof to show that the shares were sold at Rs. 12 to Rs. 12.50 per share:
1. Details of sale of shares of Oswal Woollen Mills Ltd. registered by the company in Sept. 1979 transacted between third parties at Rs. 12 per share.
2. Copy of the ITO, Distt. 1(4), letter dated 6-8-1979 addressed to Smt. Banarso Devi Oswal Public Charitable Trust knowing whether the Trust had sold the shares of Oswal Woollen Mills Ltd.
3. Copy of advertisement given by the Trust for sale of shares appearing in Daily Tribune dated 2-8-1979.
4. Copy of the letter dated 23-11-1979 received from Advertising Manager of Tribune that no offer was received by them.;
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