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Issues Involved:
1. Applicability of Section 52(2) of the Income-tax Act, 1961. 2. Determination of the value of the properties in question. Issue-wise Detailed Analysis: 1. Applicability of Section 52(2) of the Income-tax Act, 1961: The primary issue was whether Section 52(2) of the Income-tax Act, 1961, applied to the case where the sale price of certain properties was less than their market value. The Income-tax Officer (ITO) had invoked Section 52(2) based on the difference between the sale price and the market value exceeding 15%, suggesting an understatement of the sale price to avoid capital gains tax. The assessee contended that there was no understatement of the sale price and that the total sale value of all properties exceeded their market value as of March 31, 1964. The court examined the relevant provisions of the Act, particularly Section 52(2), which allows the ITO to consider the fair market value as the sale consideration if it exceeds the declared sale price by 15% or more. The court referenced its earlier decision in Addl. CIT v. M. Ranga Pai [1975] 100 ITR 413, which held that Section 52(2) applies only when there is evidence of understatement of the sale price with the intention to avoid tax. The court reaffirmed that mere difference in value is not sufficient; there must be evidence of actual receipt of a higher amount than declared. The court also considered the legislative intent, noting that Section 52(2) was meant to address cases of understatement and not bona fide transactions. The court emphasized that the term "declared" in Section 52(2) implies that there is an undeclared higher value received, which was not the case here. The court concluded that Section 52(2) does not apply to sales for inadequate consideration without evidence of understatement. 2. Determination of the value of the properties in question: The second issue was whether the determination of the value of the properties by the ITO was correct. The ITO had capitalized the rental income to ascertain the market value and found that the sale prices of two properties were less than their market values. The Appellate Assistant Commissioner (AAC) and the Income-tax Appellate Tribunal (ITAT) upheld the ITO's findings, with the ITAT slightly modifying the market value of one property. The court reviewed the method used by the ITO for valuation, which involved capitalizing rental income and considering sale statistics and evidence from an estate agent. The court noted that while the valuation method was sound, the application of Section 52(2) was not justified without evidence of understatement. Given the court's conclusion on the first issue, it deemed it unnecessary to address the correctness of the valuation further. Conclusion: The court held that Section 52(2) of the Income-tax Act, 1961, applies only to cases where there is evidence of understatement of the sale price with the intention to avoid capital gains tax. The mere difference between the sale price and the market value is not sufficient to invoke Section 52(2). Consequently, the court answered the first question in the negative, against the revenue and in favor of the assessee, and found it unnecessary to answer the second question on the valuation of the properties.
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