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TMI Blog2006 (4) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... of assesssee - - - - - Dated:- 19-4-2006 - Judge(s) : ADARSH KUMAR GOEL, RAJESH BINDAL. JUDGMENT In compliance with the order of this court in I. T. C. No. 69 of 1981 dated August 23, 1988, the following question of law was referred to this court for its opinion by the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated September 26, 1980, in I.T.A. No.278 of 1979, for the assessment year 1975-76: "Whether, in the absence of any evidence on record to prove that the consideration of the impugned plot had been understated by the assessee with the object of avoidance or reduction of his tax liability, the Tribunal erred in law in holding that the provisions of section 52(2) were applicable to the case of the assessee?" The assessee-firm purchased a plot measuring 1239 sq. yards in Sarabha Nagar, Ludhiana on October 8, 1969, for Rs. 44,337. This plot was sold to Sh. Devinder Singh, son of Sh. Sadhu Singh for a sum of Rs. 55,755 on June 10, 1974, at a sale price of Rs. 45 per sq. yard. Resultantly, the assessee had declared a profit of Rs. 11,418 out of this transaction. Enquiries made on the basis of sale deeds registered in the area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is no case for an interference in the order of the Commissioner of Income-tax at the instance of the assessee in so far as the question of capital gains in concerned. We, therefore, dismiss the appeal of the assessee." We have heard Sh. Akshay Bhan, advocate for the petitioner-assessee and Sh. D. S. Patwalia, advocate for the respondent-Revenue. The relevant provisions of section 52 of the Act are reproduced hereunder: "(1) Where the person who acquires a capital asset from an assessee is directly or indirectly connected with the assessee and the Income-tax Officer has reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under section 45, the full value of the consideration for the transfer shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be the fair market value of the capital asset on the date of the transfer. (2) Without prejudice to the provisions of sub-section (1), if in the opinion of the Income-tax Officer the fair market value of a capital asset transferred by an assessee as on the date of the transfer exceeds the full value of the consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot claim to have discharged this burden which lies upon it, by merely establishing that the fair market value of the capital asset as on the date of the transfer exceeds by 15 per cent. or more the full value of the consideration declared in respect of the transfer and the first condition is, therefore, satisfied. The Revenue must go further and prove that the second condition is also satisfied. Merely by showing that the first condition is satisfied, the Revenue cannot ask the court to presume that the second condition too is fulfilled, because even in a case where the first condition of 15 percent. difference is satisfied, the transaction may be a perfectly honest and bona fide transaction and there may be no understatement of the consideration. The fulfilment of the second condition has, therefore, to be established independently of the first condition and merely because the first condition is satisfied, no inference can necessarily follow that the second condition is also fulfilled. Each condition has got to be viewed and established independently before sub-section (2) can be invoked and the burden of doing so is clearly on the Revenue. It is a well-settled rule of law that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of 15 per cent. or more difference is merely intended to be a safeguard against the undue hardship which would be occasioned to the assessee if the inflexible rule of thumb enacted in sub-section (2) were applied in marginal cases and it has nothing to do with the question of burden of proof, for, the burden of establishing that there is an understatement of the consideration in respect of the transfer always rests on the Revenue. The postulate underlying sub-section (2) is that the difference between one honest valuation and another may range up to 15 per cent. and that constitutes the class of marginal cases which are taken out of the purview of sub-section (2) in order to avoid hardship to the assessee. It is, therefore, clear that sub-section (2) cannot be invoked by the Revenue unless there is understatement of the consideration. in respect of the transfer and the burden of showing that there is such understatement is on the Revenue. Once it is established by the Revenue that the consideration for the transfer has been understated or, to put it differently, the consideration actually received by the assessee is more than what is declared or disclosed by him, sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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