1970 (7) TMI 24 - HC - Income Tax

Summary

Issues Involved:
1. Validity and legal basis for the Tribunal's conclusion on capital gains.
2. Valuation of the property at 221, Russa Road, Calcutta.
3. Rejection of the valuation report by Messrs. Talbot & Co.
4. Application of "global valuation" in Wealth-tax Act, 1957.
5. Judicial notice of the rise in land values between 1954 and 1961.
6. Consideration of expert opinion under Section 45 of the Indian Evidence Act.

Detailed Analysis:

1. Validity and Legal Basis for the Tribunal's Conclusion on Capital Gains:
The primary issue was whether there was a valid and legal basis for the Tribunal's conclusion that the capital gain arising out of the sale of the property at 221, Russa Road, Calcutta, would be Rs. 75,000 instead of a loss of Rs. 6,000 as claimed by the assessee. The Tribunal's conclusion was based on the assumption that the property's valuation as on January 1, 1954, could not be more than 75% of its sale price in 1961. The Tribunal found that the valuation report from Talbot & Co. was not necessarily correct and that there was a considerable increase in land values between 1954 and 1961.

2. Valuation of the Property at 221, Russa Road, Calcutta:
The Tribunal questioned the valuation report of Talbot & Co., which estimated the value of the property at Rs. 3,06,000 as on January 1, 1954. The Tribunal noted that the valuation report was based on certain assumptions and estimates rather than verifiable data. It highlighted that the property sold for Rs. 3,00,000 in 1961, which was less than the estimated value in 1954, and found this inherently improbable given the general rise in property values during that period.

3. Rejection of the Valuation Report by Messrs. Talbot & Co.:
The Income-tax Officer rejected the valuation report by Messrs. Talbot & Co. because it was not based on verifiable data but on certain estimates. The Appellate Assistant Commissioner accepted the report, but the Tribunal found it flawed due to its assumptions about future realizations and lack of immediate return on investment. The Tribunal also noted that the report did not consider comparable properties and relied on outdated and non-comparable sales data.

4. Application of "Global Valuation" in Wealth-tax Act, 1957:
The Appellate Assistant Commissioner was under a misapprehension regarding "global valuation" under the Wealth-tax Act, 1957. The Tribunal clarified that "global valuation" involves determining the net value of the assets of the business as a whole, which was not the case here. The individual net values of the properties were declared separately by the assessee and accepted by the Wealth-tax Officer, thus the global valuation basis was incorrect.

5. Judicial Notice of the Rise in Land Values Between 1954 and 1961:
The Tribunal took judicial notice of the fact that there was a considerable increase in land values between 1954 and 1961. The court supported this by referencing various authorities and decisions, concluding that such a rise in land values is a notorious fact that can be judicially noticed. The court cited cases and legal principles to affirm that judicial notice of notorious facts is permissible and applicable in this context.

6. Consideration of Expert Opinion Under Section 45 of the Indian Evidence Act:
The court discussed whether a valuer's opinion could be considered as expert evidence under Section 45 of the Indian Evidence Act. It was debated whether valuation is a science or art. The court noted that even if a valuer is considered an expert, his opinion is not binding but merely a piece of evidence. The court emphasized that the weight and probative value of a valuer's report depend on the reasons given and the ability to withstand cross-examination, which was not applicable in this case as the valuer's report was not subject to cross-examination.

Conclusion:
The court concluded that there was a valid and legal basis for the Tribunal's conclusion that the capital gain arising out of the sale of the property at 221, Russa Road, Calcutta, would be Rs. 75,000 instead of a loss of Rs. 6,000 as claimed by the assessee. The Tribunal's findings were based on substantial evidence, including the rise in land values and the flaws in the valuation report by Talbot & Co. The court affirmed the Tribunal's decision and ruled in favor of the revenue, awarding costs to the Commissioner.