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TMI Blog1984 (6) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... her would come within the purview of section 52(1) of the Act ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transactions with Gayatridevi, Keshardevi, Sushiladevi and Govindlal were made with the object of avoiding or reducing the liability of the assessee-firm under section 45 of the Act and that they were hit by section 52(1) of the Act ? " It is required to be stated that the assessment year is 1965-66 and the assessee is a partnership firm consisting of five partners, viz., Goverdhandas, Ghanshyamdas, Damodardas, Brijbhushandas and Satyanarayandas. The partnership firm had purchased land bearing survey Nos. 11 and 15 admeasuring about 27,000 square yards situated at Paha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, on an application, two questions came to be referred to this court by the Income-tax Appellate Tribunal. To answer question No. 2, one has only to look at s. 52(1) of the I.T. Act, which reads as under : " (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." Therefore, the real q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut facts on record. The Supreme Court in the case of Varghese v. ITO [1981] 131 ITR 597 decided that on such facts s. 52 of the I.T. Act, 1961, shall not be attracted. The facts in that case were that the assessee had purchased in 1958 a house for Rs. 16,500 and on December 25, 1965, he sold the house for the same price to his daughter-in-law and five of his children. The ITO by action taken under s. 148 of the I.T. Act estimated the fair market value of the house sold by the assessee at Rs. 65,000 and proceeded to assess the difference of Rs. 48,500 as capital gains in the hands of the assessee by invoking subs. (2) of s. 52. The assessee filed a writ petition challenging the validity of the order of reassessment in so far as it brought th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court further observed (p. 607): " The net effect of this provision is as -if a statutory best judgment assessment of the actual consideration received by the assessee is made, in the absence of reliable materials." The scope of sub-s. (1) was, however, restricted and sub-s. (2) was enacted with a view to extending its coverage to sub-s. (1) and to other cases of understatement of consideration. Sub-s. (2) is also a provision for computation of gain and not a charging provision seeking to tax what never accrued or was received. The Supreme Court also considered the two circulars issued by the Central Board of Direct Taxes: one on July 7, 1964, and another on January 14, 1974, and, thereafter, having considered everything which was p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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