2021 (9) TMI 300 - HC - Income Tax

Valuation of Gift - Whether the guideline value for the purpose of the valuation of stamp duty and registration can be taken the basis for the purpose of determining the value of gift as against the value as per Schedule II of Gift Tax Act? - Penalty - HELD THAT - The valuation of the property was done in terms of the provisions of the Gift Tax Act and in the process of doing such evaluation, the Assessing Officer relied upon the registered sale deeds and the stamp duty which was paid on such instruments though the apparent sale consideration reflected in those documents were less. In any event, this being a question of fact, the burden was on the assessee to prove that what he receive was only ₹ 3 lakhs from the purchaser/partnership firm and not ₹ 15,34,500/-. This aspect of the matter having not been established by the assessee, we find that the Tribunal rightly affirmed the orders passed by the authorities below. Thus, adequate relief has been granted to the assessee by the Tribunal and there is nothing to interfere with such order - the substantial question of law is answered against the assessee - appeal dismissed.

Issues:
1. Valuation of property for gift tax purposes based on guideline value vs. Schedule II value.
2. Adequacy of sale consideration and assessment of gift tax.
3. Applicability and relevance of guideline value in property valuation.
4. Interpretation of Gift Tax Act provisions pre and post amendment.

Issue 1: Valuation of Property for Gift Tax Purposes
The case involved an appeal under Section 260A of the Gift Tax Act against orders passed by the Income Tax Appellate Tribunal for the assessment year 1991-92. The primary question raised was whether the guideline value for stamp duty and registration could be the basis for determining the value of a gift, as opposed to the value as per Schedule II of the Gift Tax Act. The assessee contended that the property was sold for an inadequate consideration, leading to the imposition of gift tax and penalty. The Assessing Officer rejected the assessee's explanation, finding the sale consideration to be unreasonably low. The Commissioner of Gift Tax Appeals and the Tribunal affirmed these findings, leading to the dismissal of the appeal against the assessment order.

Issue 2: Adequacy of Sale Consideration and Assessment of Gift Tax
The Assessing Officer determined that the sale consideration of ?3 lakhs was inadequate, considering the stamp duty valuation of ?15,34,500. The assessee's argument of ignorance and innocence was not accepted by the authorities, who found the sale consideration unreasonably low. The Tribunal upheld this factual finding, emphasizing that the burden was on the assessee to prove the actual consideration received. The Tribunal partially allowed the appeal against the penalty, reducing it from ?50,000 to ?10,000. Ultimately, the court confirmed the findings of the authorities regarding the adequacy of the sale consideration and the imposition of gift tax.

Issue 3: Applicability of Guideline Value in Property Valuation
The appellant raised concerns regarding the use of guideline value for property valuation, arguing that it should not be the sole basis for determining property value for gift tax purposes. The court acknowledged that while guideline value is not the only factor, it can be considered in property valuation. The appellant submitted additional evidence to support the downward trend in industrial growth affecting property values in the area. The court noted that the appellant actively participated in the valuation process, indicating an understanding of the factors involved. The court rejected the argument that valuation should have been based solely on Schedule II of the Gift Tax Act, as the Assessing Officer had considered various factors, including registered sale deeds and stamp duty paid.

Issue 4: Interpretation of Gift Tax Act Provisions
The appellant contended that the valuation should have been based on the provisions of the Gift Tax Act pre-amendment, rather than the guideline value. The court rejected this argument, stating that the valuation was done in accordance with the Act's provisions. The appellant's failure to establish the actual consideration received led the court to affirm the Tribunal's decision. Regarding the penalty appeal, the court found no grounds for interference, upholding the relief granted by the Tribunal. Consequently, the court dismissed the appeals against the assessment and penalty orders, answering the substantial question of law against the assessee.

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