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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 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 for plots of different sizes, the Income-tax Officer found that the fair market valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of the plot. When worked on this basis, the sale consideration which has to be considered as fair market value in the context of the facts set out above gives difference of Rs. 12,390 between the sale consideration and the fair market value as worked out by the Commissioner in para. 5 of his impugned order abstracted by us supra. The provisions of section 52(2) were, therefore, attracted. 10. It is to be noted that the sale price per sq. yard of the comparable plots taken by the authorities below ranged between Rs. 62 and Rs. 67 and it is only after taking into consideration the adverse factors relating to the plot sold by the assessee that the sale price at Rs. 55 per sq. yard was taken by the Income-tax Officer and confirmed by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Inspecting Assistant Commissioner, be taken to be its fair market value on the date of its transfer." At the very outset, learned counsel for the appellant submitted that the principles applied by the authorities below to invoke the provisions of section 52(2) of the Act, run totally contrary to the law laid down by the hon'ble Supreme Court of India in the case of K. P. Varghese v. ITO [1981] 131 ITR 597. While discussing the law on the subject, the hon'ble Supreme Court of India held as under: "Thus, it is not enough to attract the applicability of sub-section (2), that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 independent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset and the consideration declared in respect of the transfer clearly is to save the assessee from the rigour of sub-section (2) in marginal cases where difference in subjective valuation by different individuals may result in an apparent disparity between the fair market value and the declared consideration. It is a well-known fact borne out by practical experience that the determination of fair market value of a capital asset is generally a matter of estimate based to some extent on guess-work and despite the utmost bona fides, the estimate of the fair market value is bound to vary from individual to individual. It is obvious that if the restrictive condition of a difference of 15 per cent. or more between the fair market value of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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-section (2) is immediately attracted, subject of course to the fulfilment of the condition of 15 per cent. or more difference, and the Revenue is then not required to show what is the precise extent of the understatement or in other words, what is the consideration actually received by the assessee." This judgment of the hon'ble the Supreme Court of India was followed in CIT v. Sundaram Industries Ltd. [1987] 166 ITR 35 (Mad). Examining the case in hand, it is found that the Assessing Officer adopted the fair market value of the plot in question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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