1991 (9) TMI 354 - AT - Income Tax

Summary

Issues Involved:
1. Invocation of provisions of section 52(2) of the Income-tax Act.
2. Estimation of sale value of jewellery at Rs. 2,60,000 against the declared value of Rs. 72,000.

Detailed Analysis:

1. Invocation of Provisions of Section 52(2) of the Income-tax Act:
The primary issue in the appeal is whether the provisions of section 52(2) of the Income-tax Act, 1961, were rightly invoked by the assessing officer. The assessee argued that there was no evidence to prove that the sale consideration declared was understated. The sale was conducted through a broker, and the payment was received via a crossed cheque, which was duly credited to the assessee's account. Both the broker and the purchaser confirmed the sale in their statements recorded under section 131 of the Income-tax Act.

The Tribunal relied on the Supreme Court's decision in K.P. Varghese v. ITO [1981] 131 ITR 597, which held that section 52(2) can only be invoked if there is evidence that 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 Tribunal found that the revenue did not discharge this burden, as there was no evidence to suggest that the assessee received more than the declared consideration.

2. Estimation of Sale Value of Jewellery:
The assessee had inherited jewellery valued at Rs. 1,50,000 in the wealth-tax assessment for the assessment year 1977-78. Most of the jewellery was sold in August 1979 for Rs. 72,000. The assessing officer estimated the fair market value of the jewellery at Rs. 2,60,000, leading to a computed capital gain of Rs. 2,25,000 after considering the cost at Rs. 35,000 as on 1-1-1964.

The Tribunal noted that the valuation in the wealth-tax assessment was an estimate and not the actual sale value. It also observed that four items of jewellery were not sold and were not traceable. The Tribunal found that the revenue's reliance on the wealth-tax valuation and the assessment of the assessee's brother (who received cash for the sale of his share of jewellery) was insufficient to prove that the sale price was understated.

The Tribunal concluded that the circumstances did not support the revenue's contention that the sale price was understated. The sale was conducted through a broker, and the payment was made by a crossed cheque, which was accounted for in the assessee's records. The Tribunal held that the revenue failed to provide direct or indirect evidence of understatement of consideration and thus could not invoke section 52(2).

Conclusion:
The Tribunal found in favor of the assessee, holding that there was no evidence to prove that the sale consideration was understated. The order of the Commissioner of Income-tax (Appeals) was set aside, and the appeal was allowed.