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TMI Blog2019 (4) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... und. In K. P. Verghese v. ITO [1981 (9) TMI 1 - SUPREME COURT] read down section 52(2) (since omitted) deeming the fmv as the full value of the consideration on the shortfall in the latter exceeding 15% by holding that the same shall not impinge on a honest and bona fide transaction. The parties in that case were related, and the asset, personal. In the instant case, though the parties are related, the assets are business assets. Also firms are separate persons under the Act, so that there could be no question of the emotions having influenced the transaction, which is commercial in nature. The said decision should, in my view, be regarded as final arbiter in the matter. That is, only on the bonafides being impugned, as where there is a tax avoidance coupled with no reasonable explanation with regard to the stated consideration, that the same could be disturbed. And, further, only consistent with the irresistible inferential findings - assessee’s and the Revenue’s appeal is allowed for statistical purposes - I.T.A. No. 119/Asr/2017, I.T.A. No. 169/Asr/2017 - - - Dated:- 28-2-2019 - Sh. Sanjay Arora, Accountant Member For the Appellant : Sh. J. S. Bhasin (Adv.) F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l value of the consideration , so that notwithstanding the determination of fmv by the VO, and even as the same is also disputed, it would be of no consequence. There is no doubt expressed on the genuineness of the transaction; the assessee having in fact brought forward claims of ₹ 73.81 lacs, so that it is not a case of claim of loss to set off income to avoid tax. Rather, the sister concern (HP), the buyer, would stand to gain if the assets were indeed sold at a higher price by being entitled to claim depreciation at a higher value. Reliance was placed on the decision in Pr. CIT v. Quark Media House Pvt. Ltd. [2017] 391 ITR 145 (P H) and CIT v. Nilofer I. Singh [2009] 309 ITR 233 (Del). Further, there was in fact lack of opportunity before the VO in framing his report, which therefore cannot be relied upon. The determination of the sale consideration at 50% by the ld. CIT(A) was, in any case, ad hoc . 3.2 The ld. Departmental Representative (DR), Sh. Charan Dass, would submit that the very fact of the assets being sold at a fraction of fmv is itself a clear indication of the transaction being not genuine. No circumstance for the same has been explained, much les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lead to an inferential finding of the asset/s under reference having been sold at market value. This, stands, in fact, abundantly clarified by the Hon ble Court in Quark Media House Pvt. Ltd . (supra), reproducing the decision in George Henderson Co. Ltd . (supra) with special reference to the observations by the Tribunal in-as-much as a finding as to the stated value being not the actual consideration is essentially a question of fact. In the facts of that case as well, the transaction was at a fraction of the market price - not disputed, with no explanation for the same, so that the tribunal upheld the market value as the full value of the consideration. The Apex Court, after clarifying the law in the matter, restored the matter back to the tribunal, as it found the language used by the tribunal in recording the actual price paid as obscure, with a direction to record a clear finding of fact, i.e., as to the actual price. The observations by the Hon ble High Court in the matter, which represent its understanding of the said decision, referred before it, are as under: 15. The judgment undoubtedly holds that the expression full value of the consideration cannot be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase the onus clearly shifts upon the assessee. If the assessee is unable to offer an explanation, the Department must be taken to have discharged the burden . The judgment certainly does not hold that the price mentioned in the document is sacrosanct and that the same must be considered to be the price bargained between the parties to the transaction. That would indeed result in an absurdity for the parties could then by merely stating an incorrect price in the sale deed avoid the tax on capital gains altogether. (emphasis, supplied) Again, after reproducing the decision in Nilofer I. Singh (supra) at para 19 of its judgment, the Hon ble Court holds as under: 20. We do not read the observations in paragraph-7 to mean that the consideration referred to in the sale deed cannot be questioned at all. The judgment if read as a whole does not indicate such an absolute or blanket rule. There is nothing in the judgment to indicate that the revenue had contended that the full value of consideration received or accruing was other than what was mentioned in the sale deed. It is probably in that view of the matter that the Division Bench held that the expression full value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual consideration in the facts and circumstances of the case. The process required to be adopted for determining the full value of the consideration itself involves, as a necessary step, ascertaining the fmv, justifying the reference u/s. 55A. In the instant case, the stated consideration being much lower even than the WDV, which on account of higher depreciation rates under the Act is generally lower, the AO had sound basis to refer the matter to the VO which u/s. 55A could be for the purpose of Chapter IV of the Act. Again, the Apex Court in Pooran Mal v. DOI (Inv.) [1974] 93 ITR 505 (SC) (as well as others, viz. Dr. Pratap Singh v. DOE [1985] 155 ITR 166 (SC); Bhupendra Ratilal Thakar v. CIT [1976] 102 ITR 531 (SC) has validated the user of the material gathered by the AO even where the manner followed for the purpose the reference u/s. 55A in the instant case, is not legal. The assailing of the reference by the assessee is without merit. I may also, before proceeding further, clarify that when the ld. DR states of the transaction being not genuine, he adverts only to the stated consideration. Impugning the genuineness of the transaction per se would imply no a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame may or may not be the stated consideration. The adoption of the fmv could only be on the basis of an inference as to the stated consideration being not the actual consideration, i.e., where coupled with the inferential finding of the same being the fmv. In other words, the matter is principally one of fact, and only the value found to have been agreed to or passed between the parties fmv or any other, that shall stand to be adopted. The exception, as explained, is where the transfer is by the exchange of the capital asset/s, in which case their fmv as on the date of transfer (exchange) would be relevant. The entire case has till now proceeded on the footing of the accuracy (or otherwise) of the valuation report dated 26/11/2010, valuing the fmv at ₹ 122.16 lacs, as against the stated consideration of ₹ 6.82 lacs, i.e., at 5.6% of the fmv (as per the VO). Why, even the WDV of the relevant assets, and even as the depreciation rates under the Act exceed the normative depreciation rates, is as high as ₹ 46.13 lacs. The basis of the stated consideration which the parties being men of commerce, ought to be the fmv, has nowhere being explained by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td . (supra), wherein the Apex Court approved, in principle, the tribunals inference as to the full value of the consideration which, therefore may or may not be the stated consideration, was at 4.6 times (620/136) of the stated consideration, as against ~ 18 times in the instant case. The bona fides of the transaction as a genuine transaction, i.e., as regards the stated transaction value, become very doubtful. The onus on the Revenue is to be regarded as discharged. The assessee s explanation, where furnished which it has not, uptill now, is to be considered from a practical, business-man standpoint, and in fact only which is responsible for the Apex Court in ALA Firm (supra) holding that businessmen would ordinarily deal with each other on the basis of fmv. The productive life (capacity) of the assets as well as the demand for the output thereof are very relevant in this regard, as an asset not capable of yielding revenue is of little value in the market. The VO has in this regard correctly referred to the production data and gross profit. The matter, accordingly, vacating the findings by the assessing and the first appellate authority, is set aside to the file of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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