1982 (7) TMI 149 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of Section 52(2) of the IT Act for computing capital gain.
2. Applicability of Sections 147(a) and 147(b) for reopening the assessment and the consequent annulment of the assessment order.

Detailed Analysis:

1. Applicability of Section 52(2) of the IT Act for Computing Capital Gain:
The revenue contended that the provisions of Section 52(2) of the IT Act were applicable for computing the capital gain arising from the transfer of property No. 55, Golf Links by the assessee company to one of its directors, Smt. Bimla Devi, at a consideration of Rs. 2,36,000, while the property was valued at Rs. 5,80,858 by the Valuation Officer. The difference of Rs. 3,45,000 was alleged to be taxable as capital gain that had escaped assessment.

The assessee argued that the transfer details were fully disclosed during the original assessment and that the reopening of the assessment was without jurisdiction and contrary to law. The assessee cited several case laws, including Bankipur Club Ltd. vs. CIT and Indian & Eastern Newspapers Society vs. CIT, to support its contention.

The Tribunal agreed with the CIT (A) that the provisions of Section 52(2) were not applicable as there was no intention on the part of the assessee to avoid tax or reduce its liability. The Tribunal further supported its conclusion by referring to the Supreme Court judgment in K.P. Verghese vs. ITO, which held that Section 52(2) can only be invoked where the consideration for the transfer is understated by the assessee, and the burden of proving such understatement is on the revenue. The Tribunal found no material evidence to suggest that the consideration declared by the assessee was understated.

2. Applicability of Sections 147(a) and 147(b) for Reopening the Assessment:
The revenue argued that the assessment was reopened under Section 147 due to the difference in the declared and market value of the property, which indicated escaped income.

The assessee contended that all relevant facts were disclosed during the original assessment, and the reopening of the assessment was merely based on a change of opinion, which is not permissible under Sections 147(a) and 147(b). The assessee cited the Delhi High Court's decision in Sham Narain & Anr. vs. ITO, which held that an assessment cannot be reopened on a change of opinion if all material facts were originally disclosed.

The Tribunal found that all necessary facts, including the transfer of the property and its consideration, were available to the ITO during the original assessment. There was no new material or evidence suggesting that the income had escaped assessment. The Tribunal upheld the CIT (A)'s order, which annulled the assessment on the grounds that the reopening was not justified under Sections 147(a) or 147(b).

Conclusion:
The Tribunal dismissed the revenue's appeal, holding that:
- Section 52(2) of the IT Act was not applicable as there was no evidence of understatement of consideration by the assessee.
- The reopening of the assessment under Sections 147(a) and 147(b) was not justified as all material facts were disclosed during the original assessment, and there was no new information to warrant the reopening.

The Tribunal emphasized the importance of not engaging in futile litigation and wasting public resources, quoting the Supreme Court's observation in The State of Maharashtra vs. Narayan Vyankatesh Deshpande.

Result:
The appeal by the revenue was dismissed.