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Commissioner of Income-tax Vs. C.C. Patel and I.C. Patel - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 209 of 1975
Judge
Reported in[1986]161ITR879(Bom)
ActsIncome Tax Act, 1961 - Sections 45, 52 and 52(2)
AppellantCommissioner of Income-tax
RespondentC.C. Patel and I.C. Patel
Excerpt:
- .....of consideration in place of the actual sale price declared by the assessee for computing the capital gains chargeable under section 45 of the said act ?'3. the assessee had purchased a plot of land at baroda in the previous year relevant to the assessment year 1958-59. on march 25, 1970, that is, during the previous year for the assessment year here concerned, the land was transferred to hindustan earth movers ltd. for rs. 1,49,999. each of the assessees disclosed capital gains of rs. 40,000 in the returns filed by them. the income-tax officer invoked the provisions of section 52(2) of the income-tax act, 1961, and valued the land in the sum of rs. 3,42,000. he computed capital gains accordingly. the appellate assistant commissioner confirmed the income-tax officer's action. the.....
Judgment:

Bharucha, J.

1. The first assessee had appeared in person before this court on September 10, 1984, and had waived service on behalf of himself and his co-assessee.

2. The question here concerned reads thus :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the provisions of section 52(2) of the Income-tax Act, 1961, could not be invoked to adopt the estimated fair market value of the land transferred by the assessee to Hindustan Earth Movers Ltd., in which the assessee was a major shareholder, as the full value of consideration in place of the actual sale price declared by the assessee for computing the capital gains chargeable under section 45 of the said Act ?'

3. The assessee had purchased a plot of land at Baroda in the previous year relevant to the assessment year 1958-59. On March 25, 1970, that is, during the previous year for the assessment year here concerned, the land was transferred to Hindustan Earth Movers Ltd. for Rs. 1,49,999. Each of the assessees disclosed capital gains of Rs. 40,000 in the returns filed by them. The Income-tax Officer invoked the provisions of section 52(2) of the Income-tax Act, 1961, and valued the land in the sum of Rs. 3,42,000. He computed capital gains accordingly. The Appellate Assistant Commissioner confirmed the Income-tax Officer's action. The Tribunal held that the authorities were not justified in replacing the actual value by the fair market value.

4. The Supreme Court in K. P. Varghese v. ITO : [1981]131ITR597(SC) , held that section 52(2) of the Income-tax Act, 1961, can be invoked only where the consideration for the transfer of a capital asset has been understated by the assessee. The burden of proving such understatement is on the Revenue. The sub-section has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared by him.

5. Having regard to that decision, it is, very rightly, not disputed by Mr. Dhanuka, learned counsel for the Revenue, that the question must be answered in the affirmative and in favour of the assessee.

6. The question is accordingly answered in the affirmative and in favour of the assessee.

7. There shall be no order as to costs.


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