SEN GUPTA G C Vs. COMMISSIONER OF INCOME TAX
LAWS(GAU)-1994-1-5
HIGH COURT OF GAUHATI
Decided on January 18,1994

G.C.SEN GUPTA Appellant
VERSUS
COMMISSIONER OF INCOME TAX Respondents




JUDGEMENT

MANISANA, J. - (1.)ON being moved by the assessee under s. 256(2) of the IT Act, 1961 ("the Act", for short), the Tribunal has referred to this Court the following questions :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that there was capital gains in the hands of the assessee under s. 52(2) of the IT Act, 1961, for the asst. yr. 1971-72 on the sale of the leasehold right in land and the building standing thereon in occupation of tenants ? (2) Whether, on the facts and in the circumstances of the case, and on the materials on record, the Tribunal was justified in law in holding that the consideration as shown in the sale deed for sale of the leasehold right in land and the building standing thereon in occupation of tenants was less by more than 15 per cent of the fair market value of the said property on the date of transfer and was right in law in invoking the provisions of s. 52(2) of the Act in the instant case ?"

(2.)FACTS.:--The reference relates to the asst. yr. 1971-72 and the assessee was assessed as an individual. On 1sth Oct., 1970, the assessee sold his property known as "Khalil Market" to one Ratanlal Sharma. The price declared or stated in the deed of sale was Rs. 1,81,000. The AO noticed that the Tribunal in W. T. A. No. 78/(Gau) of 1971-72, decided on 31st Oct., 1972, with regard to the assessment year 1963-64, directed to fix the value of the property at Rs. 2,61,200. Thereafter, the AO invoked his jurisdiction under s. 52(2) of the Act by holding that the fair market value of the asset transferred was Rs. 2,61,200 and that the consideration amount had been understated. Accordingly, the AO computed the net income, under his order dt. 30th March, 1974, for payment of capital gains tax. The assessee appealed before the AAC and the AAC upheld the order of the AO. On further appeal by the assessee to the Tribunal, the order of the AAC was confirmed by the Tribunal on 27th Feb., 1976, in I. T. A. No. 768/(Gau) of 1974-75.
Sec. 52(2) came up for consideration before the Supreme Court in K. P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC). The Court held that so far as material for the present purpose, sub-s. (2) of s. 52 could only be invoked only where the consideration for the transfer of a capital asset had been understated by the assessee, or, in other words, the full value of the consideration in respect of the transfer was shown at a lesser figure than that actually received by the assessee, and the burden of proving such understatement or concealment was on the Revenue. The Court further observed that the sub-section had no application in the case of an honest and bona fide transaction where the consideration received by the assessee had been correctly declared or disclosed by him. This was reiterated by the Supreme Court in CIT vs. Shivakami Co. (P) Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 71 (SC).

The effect of the decision of the Supreme Court is that the burden lies on the Revenue to prove that actual price of the asset received by the assessee was shown or declared, at a lesser figure not that the asset was sold at an inadequate consideration. Sub-s. (2) has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him. Understatement of a value is a mis-statement of value actually received and, therefore, the inadequacy of price is different from understating the value in the document of sale.

(3.)MR. P. K. Barua, learned counsel for the petitioner, has submitted that the Revenue has failed to prove that the consideration for the transfer of the capital asset had been understated by the assessee. But, the Tribunal had given a finding that there was a mis-statement of value. The question which, therefore, arises for consideration is whether the High Court can interfere with the finding of the Tribunal in a matter like the present one. In Shivakami's case (supra), the Supreme Court, at paragraph 12, stated in the following terms : "It is well-settled that when a conclusion of a fact-finding body is based on an inference from primary facts, then the findings of fact are not amenable to challenge but the inferences drawn from the primary facts are open to challenge as a conclusion of law. It is also open to challenge the same on the ground that the conclusion of fact drawn by the Tribunal was not supported by legal evidence or that the impugned conclusion drawn from the fact was not rationally possible. In such a case, it is necessary to examine the correctness of the conclusion. Reliance may be placed on the decision of this Court in CIT vs. Rajasthan Mines (1970) 78 ITR 45 (Gua); AIR 1970 SC 1560. This position is well-settled by many decisions of this Court."
In the present case, the Tribunal directed to fix the value of the property at Rs. 2,61,200 as already stated. On a perusal of the orders of the Tribunal, it appears that the Tribunal was dealing with the fair market value of the asset sold. The Tribunal also took into consideration the price rise while considering the fair market value. Fixing of fair market value is one thing and inadequacy of consideration is another. The capital gains tax is not a tax on what might have been received. The actual price received by the assessee may be less than the fair market value. There may be honest and bona fide transactions. It may also be stated here that, under Explanation 2 appended to s. 25 of the Indian Contract Act, merely because consideration is inadequate a transaction is not void. Therefore, the Revenue must lay primary facts from which inference can be drawn that full consideration, or the actual price received by the assessee for the transfer of the asset involved was understated in the deed. On a perusal of the records before us, we do not find that the AO or the Tribunal had given a finding as to the actual price received by the assessee for the transfer of the asset nor is there any evidence or material to that effect. This being the situation, the condition precedent for the exercise of jurisdiction, namely, the jurisdictional fact, is lacking in the present case, that is to say, the conclusion of the Tribunal that the consideration was understated is not supported by legal evidence or material. In that view of the matter, the finding of the Tribunal in the matter like the present one can be interfered with in view of the decision of the Supreme Court, and it is held that the Revenue has failed to prove mis-statement or understatement of value.



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