Law:

Section:

Section 52 of the Income-tax Act, 1961 – Capital gains – Understatement of consideration for transfer – Whether section 52(1) applies to cases of understatement and not to cases where there is no understatement by assessee, but where tax authorities are of view that property would have fetched higher price – Held, yes – Whether section 52(2) would not apply to cases of honest and genuine transactions – Held, yes - Whether in absence of difference between fair market value and full value of consideration being deemed to be capital gains received by or accruing to assessee, it would not be possible to tax assessee to capital gains under section 52(2) – Held, yes Words and phrases : Word 'declared' as occurring in section 52(2) of the Income-tax Act, 1961 FACTS The assessee-HUF returned the capital gains with reference to the sale of shares held by it. The ITO found that the sale price declared by the assessee was less than the market price ascertained by the break-up value method and, therefore, the provisions of section 52(2) were applicable. He accordingly computed the capital gains at a higher figure. The appeal filed by the assessee before the AAC failed. The Tribunal held that since section 52(2) specifically provides that the full value of the consideration for the capital asset should be taken to be its fair market value, it was obligatory on the part of the Income-tax Officer to investigate and find out the full consideration received by the assessee for the transfer of the capital asset. It also held that as the necessary ingredient for invoking section 52(2) had not been established and correct computation of the capital gains had not been made, the assessment could not be legally sustained. It, therefore, set aside the assessment order and remanded the matter back for de novo consideration. On reference : HELD There was no suggestion in the assessment order or in the order on appeal by the Appellate Assistant Commissioner that the consideration as shown by the assessee was not the correct consideration and that the assessee was in receipt of any additional amount not declared in the return. When there was no such suggestion, there was no scope for any…

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