Skip to content


Commissioner of Income-tax Vs. Smt. Chandra Prabha Pateria - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 357 of 1979
Judge
Reported in[1984]145ITR578(MP)
ActsIncome Tax Act, 1961 - Sections 52(2)
AppellantCommissioner of Income-tax
RespondentSmt. Chandra Prabha Pateria
Appellant AdvocateB.K. Rawat, Adv.
Respondent AdvocateB.L. Nema, Adv.
Excerpt:
.....of the case, the appellate tribunal was justified in law in holding that the assessment order passed by the income-tax officer was not prejudicial to the interest of the revenue ?' 2. the facts briefly stated are that for the assessment year 1972-73, the ito computed the capital gains earned by the assessee on sales of three houses. omission on the part of the ito to observe this provision would cause prejudice to the asses-see in that the assessment would be made against him without the safe-guard of the approval of the iac......sold for rs. 20,000 and rs. 30,000. the third house was sold for rs. 48,000. the ito estimated the fair market value of the first two houses at rs. 1,15,000 as against rs. 50,000 shown in the sale deeds. the fair market value of the third house was estimated at rs. 1,86,000. the ito did not obtain the approval of the iac as required by section 52(2) in respect of the first two houses for which the fair market value was estimated at rs. 1,15,000. the ito obtained the approval of the iac in respect of the fair market value of the third house. the ito completed the assessment and taxed the assessee tinder section 52(2). the commissioner by order dated 17th december, 1977, revised the assessment order passed by the ito on the ground that there was omission on his part to take the approval of.....
Judgment:

G.P. Singh, C.J.

1. This is a reference made by the Income-tax Appellate Tribunal referring for our answer the following questions of law :

'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the Commissioner of Income-tax is not competent to set aside the assessment order in a case where the Income-tax Officer failed to comply with the provisions of Section 52(2) of the Income-tax Act, 1961?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the assessment order passed by the Income-tax Officer was not prejudicial to the interest of the Revenue ?'

2. The facts briefly stated are that for the assessment year 1972-73, the ITO computed the capital gains earned by the assessee on sales of three houses. Two houses were sold for Rs. 20,000 and Rs. 30,000. The third house was sold for Rs. 48,000. The ITO estimated the fair market value of the first two houses at Rs. 1,15,000 as against Rs. 50,000 shown in the sale deeds. The fair market value of the third house was estimated at Rs. 1,86,000. The ITO did not obtain the approval of the IAC as required by Section 52(2) in respect of the first two houses for which the fair market value was estimated at Rs. 1,15,000. The ITO obtained the approval of the IAC in respect of the fair market value of the third house. The ITO completed the assessment and taxed the assessee tinder Section 52(2). The Commissioner by order dated 17th December, 1977, revised the assessment order passed by the ITO on the ground that there was omission on his part to take the approval of the IAC in respect of the estimate of valuation of two houses. In appeal filed by the assessee against the order of the Commissioner, the Tribunal held that the omission to take the approval of the IAC under Section 52(2) did not make the order of the ITO prejudicial to the Revenue and, therefore, the Commissioner had no power of revision.

3. Section 52(2) of the I.T. Act reads as follows :

'(2) Without prejudice to the provisions of Sub-section (1), if in the opinion of the Income-tax Officer the fair market value of a capital asset transferred by an assessee as on the date of the transfer exceeds the full value of the consideration declared by the assessee in respect of the transfer of such capital asset by an amount of not less than fifteen per cent. of the value so declared, the full value of the consideration for such capital asset shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be its fair market value on the date of its transfer :

Provided that this sub-section shall not apply in any case-

(a) where the capital asset is transferred to the Government, or

(b) where the full value of the consideration for the transfer of the capital asset is determined or approved by the Central Government or the Reserve Bank of India and the adequacy of the full value of the consideration so determined or approved is not questioned by the assessee.'

4. A reading of Section 52(2) will show that if the ITO is of the opinion that the fair market value of a capital asset transferred by an assessee exceeds the full value of the consideration declared by the assessee by an amount of not less than fifteen per cent. of the value so declared, the full value of the consideration of such capital asset, with the previous approval of the IAC, will be taken to be its fair market value. Now, the provision requiring the approval of the IAC to the estimate made by the ITO is, in our opinion, a provision for the benefit of the assessee. The object behind this provision is that if the ITO finds that the fair market value exceeds fifteen per cent. of the value declared by the assessee, some higher authority should apply its mind and give approval to the estimate of the ITO before the assessee is made liable on that basis. Omission on the part of the ITO to observe this provision would cause prejudice to the asses-see in that the assessment would be made against him without the safe-guard of the approval of the IAC. The learned standing counsel, however, submitted that because of this omission, the order of assessment would be set aside in the assessee's appeal and, therefore the omission would also be prejudicial to the Revenue. After an assessment is made without following the requirement of Section 52(2) of taking the approval of the IAC, the assessee may accept the assessment. If that is the position, obviously no prejudice to the Revenue is occasioned. Further, if the assessee files an appeal and does not dispute the order of assessment on the ground of non-compliance of the requirement of Section 52(2), again no question of prejudice to the Revenue arises. Now, even in an appeal where the point is taken that the omission of the approval by the IAC made the order of assessment invalid, the appellate authority will not merely set aside the assessment order but would remand the case to the ITO for taking approval of the IAC, i.e., for complying with the requirement of Section 52(2). In other words, the appellate authority would do the same thing which the Commissioner can do in revision. Thus, the Revenue's interest is safeguarded in alt eventualities and it cannot be said that the omission to follow the procedure of obtaining the approval of the IAC as required by Section 52(2) would result in prejudice to the Revenue. Examining the position from all these angles we agree with the Tribunal that the Commissioner had no power of revision, for, the omission to take the approval of the IAC did not make the assessment order passed by the ITO prejudicial to the interest of the Revenue.

5. For the reasons given above, we answer both the questions in the affirmative, in favour of the assessee and against the Department. There will be no order as to costs of this reference.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //