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TMI Blog1996 (3) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... V. Jogi. 3. We will therefore first of all deal with the facts relating to the case of Shri Yogesh N. Jogi, Shri Yogesh N. Jogi -- Proprietor of M/s. Dineshwar Textiles, Jetpur sold a textile factory situated at Navagadh to Shalimar D P Works on 21-8-1987 for a declared consideration of Rs. 3 lakhs. The Assessing Officer made a reference under section 55A of the Income-tax Act, 1961 to the Valuation Cell on 28-9-1987. The assessee submitted a report from the Registered Valuer on 9-1-1988 in which the valuation of the said property was determined at Rs. 3,20,000. The A.V.O. estimated the value of the said property at Rs. 8,35,200 vide report dated 29-4-1988. The property was inspected by the A.V.O. on 15-1-1988. A notice under section 13(2) of the G.T. Act was issued on 9-3-1989 which was served on the assessee on 10-4-1989. The assessed submitted gift-tax return in response to notice under section 13(2) on 10-5-1989. The Assessing Officer had made income-tax assessment for the aforesaid year under section 143(3) on 9-3-1989. The G.T.O. held that the difference between the fair market value of the property sold by the assessee as determined by the A.V.O. at Rs. 8,35,200 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has preferred not to follow the Andhra Pradesh High Court judgment in the above referred decision reported in the case of Tandel Automobiles. The learned counsel also invited our attention towards the Board's Circular No. 96, dated 25-11-1972 reported at 91 ITR 129. This circular was shown with a view to support his contention that it is necessary on the part of G.T.O. to make a reference under section 15(6) to the Valuation Cell in case he is of the opinion that the fair market value of the property estimated by the Registered Valuer is less than the fair market value of the assets or in a case where he is of the opinion that the fair market value of the property exceeds the value of the property as returned by more than 33 1/3 % of the value returned or by more than 50,000 whichever is less. The G.T.O. cannot decide the question of valuation on his own. It was therefore necessary for the GTO to make a reference under the provisions of the Gift-tax Act. Hence reliance placed on the report obtained under section 55A of the Income-tax Act is absolutely invalid. The learned counsel also placed reliance on the decision of the ITAT in the case of L.K. Kasliwal v. GTO [1991] 38 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constructed portion should be proportionately less. He submitted that the rate adopted by the A.V.O. is too high. The A.V.O. has not properly considered the various objections submitted before him. The GTO ought to have accepted the declared consideration as true, correct and adequate. (F) Consideration is not inadequate : The learned counsel for the assessee thereafter submitted that on the facts and circumstances of the present case it cannot be said that the consideration shown in the sale deed was inadequate. The sale in question was by and large a distress sale and the transactions of sale entered by these two persons are bona fide one. There is no attempt to evade tax. Hence the provisions of section 4(1)(a) cannot be validly invoked in the present cases. He placed reliance on the judgment of the Madras High Court in the case of CGT v. Indo Traders Agencies (Madras) (P.) Ltd. [1981] 131 ITR 313. The said decision of Madras High Court has been followed by various Benches of the Tribunal. For instance, he placed reliance on the decision of the I.T.A.T. Jaipur Bench in the case of Late H.H. Maharana Shri Bhagwat Singhji v. GTO [1992] 44 TTJ (Jp.) 311. The learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso placed reliance on the decision of the I.T.A.T. Bombay Bench in the case of Godrej Boyce Mfg. Co. (P) Ltd. v. IAC [1990] 33 ITD 355. 7. On the strength of the aforesaid arguments and documentary evidence placed on records, the learned counsel submitted that the gift-tax assessment made by the G.T.O. should be cancelled in both these cases as there was no deemed gift liable to tax in the hands of any of these two assessees. 8. Shri Manoj Misra, the learned Senior D.R. submitted arguments in rebuttal of the various arguments advanced on behalf of the assessee's counsel. The arguments submitted by him can be briefly stated as under : (A) Validity of Reference : The learned Senior DR submitted that the reference made to the Valuation Cell under section 55A could be validly used by the Assessing Officer in relation to gift tax proceedings. He placed reliance on the judgment in the case of Jindal Strips Ltd. and Daulatram and C. T. Laxmandas v. Asstt. CIT [1994] 208 ITR 859 (Mad.) to support this contention. The learned Senior DR also invited our attention towards the provisions of section 15(3) of the G.T. Act which clearly empowers the Assessing Officer to take into acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions operate are clearly different. Section 4(1)(a) will apply in cases where the consideration stated in the sale deeds is inadequate as compared to the fair market value of the property in question. However, in income-tax proceedings, section 52(2) cannot be invoked unless it is proved by the department that the real consideration received by the seller was more than the apparent consideration stated in the sale deed. It is therefore obvious that the two provisions governed entirely different situations. (E) Regarding the report not proper : The learned Senior DR submitted that the report of the Valuation Officer is based on valid material. He also submitted a copy of written submissions dated 8-2-1996 signed by A.V.O. Rajkot who also attended in person before us. It was pointed out by the D.R. that the A.V.O. has dealt with the objections submitted on behalf of the assessee in the report prepared by him. Hence there is no justification in any interference in the value estimated by the A.V.O. (F) Regarding inadequate consideration : The learned Senior DR submitted that the facts of the judgment of Madras High Court in the case of Indo Traders Agencies (Madras) (P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consideration is inadequate. The burden lies on the Assessing Officer to establish this fact by bringing positive material or evidence on records with reference to the facts and circumstances of each case. He submitted that merely because the sale consideration declared by the assessee is less than the fair market value, it cannot lead to the conclusion that the transfer was made without adequate consideration. The expression "adequate consideration" is different than the expression "fair market value". He invited our attention to the judgment of the Madras High Court reported in CGT v. R. Jawahar [1996] 217 ITR 59. The learned counsel also submitted that the judgment in the case of Khoday Eswarsa Sons relied upon the learned Senior DR in fact, instead of supporting the departments case, supports the assessee's case. 9.2 The learned counsel for the assessee also invited our attention towards the definition of "Gift" in section 2(xii) of the G.T. Act. It necessarily implies the existence of an intention on the part of the donor to give benefit to the donee. This intention should be available in the case of a deemed gift. This is implicit and implied in the definition of "gift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only after it is established that the property was transferred otherwise than for adequate consideration. The market value is relevant only for the purpose of determining the quantum of value of gift after it is found that the transaction was for inadequate consideration. If on facts it is established that the property has been transferred otherwise than for adequate consideration, then the Assessing Officer will have to take into consideration the market value of the property as on the date of the transfer and compare it with the value of the consideration as shown in the respective sale deeds or as shown by the parties. It is thus clear that the market value is not the sole criteria for testing adequacy of the consideration. If that was the intention, the provisions would have been differently worded as aptly explained in the judgment of the Madras High Court in the case of Indo Traders Agencies (Madras) (P.) Ltd. The relevant extract from the said judgment is reproduced hereunder : "The wording would then have been, 'where the property is transferred for less than its market value, then the difference between the market value and the consideration stipulated, shall be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be an intention on the part of the donor to voluntarily confer an element of bounty or benefit in favour of so-called donee. The investigation to be made under section 4(1)(a) of the G.T. Act therefore necessarily requires the Assessing Officer to inter alia find as to whether there is any attempt to evade tax or whether the relevant transaction is bona fide one. If the transaction is bona fide one, the consideration mentioned in the sale deed would ordinarily be treated to be reasonable, fair and adequate. Adequate consideration would not in all cases mean the ultimate fair market value of the property. In order to decide the adequacy of the sale consideration various factors will have to be taken into consideration. There might be several bona fide considerations which might induce a seller to sell his immovable property at less than what might be considered to be the fair market value. For example, the seller may be in immediate need of money and unable to wait till a buyer is found who is willing to pay the fair market value for the property. There might be some dispute as to title of the immovable property as a result of which it might have to be sold at a price lower t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees which fully establish that the sale made by these two assessees was in the nature of a distress sale. The sellers had to sell their properties to the buyers at the price stated in the respective sale deeds. The correctness of the consideration mentioned in the sale deed has also been accepted in the income-tax assessment made under section 143(3) for the aforesaid year. The buyers are not in any manner related to the assessees. There is also no material on records to indicate that these assessees intended to confer upon the buyers any bounty or benefit in the nature of gift. The element of voluntary act on the part of these sellers of giving any benefit to the buyers is also absent on the facts and circumstances of the present cases. 10.5 On a careful consideration of all the relevant facts and circumstances we are of the considered opinion that the transactions entered into by these two assessees for sale of their lands and factory buildings were bona fide and genuine transactions. The consideration stated in the sale deed will therefore have to be treated as adequate consideration. We therefore hold that the GTO has clearly erred in invoking the provisions of section 4(1)(a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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