Law:

Section:

Section 52, read with Section 263 of the Income-tax Act, 1961 - Capital gains - Under statement of consideration for transfer - Assessment year 1972-73 - Whether even when assessment is completed without following requirement of section 52(2) of taking approval of IAC, assessment order passed by ITO can not be said to be prejudicial to interests of revenue, and therefore, Commissioner, has no jurisdiction to revise such assessment - Held, yes FACTS The ITO estimated fair market value of a house at Rs. 1.15 lacs as against Rs. 50 thousand shown in the sale deed. The ITO did not obtain the approval of the IAC as required under section 52(2) and taxed the assessee. The Commissioner revised the assessment order passed by the ITO on the ground that there was omission on his part to take the approval of the IAC in respect of the estimate of valuation of said houses. On appeal filed against the order of the Commissioner, the Tribunal held that the omission to take the approval of the IAC under section 52(2) did not make the order of the ITO prejudicial to the Revenue and, therefore, the Commissioner had no power of revision. On reference: HELD A reading of section 52(2) will show that if the ITO is of the opinion that the fair market value of a capital asset transferred by an assessee exceeds the full value of the consideration declared by the assessee by an amount of not less than fifteen per cent of the value so declared, the full value of the consideration of such capital asset, with the previous approval of the IAC, will be taken to be its fair market value. Now, the provision requiring the approval of the IAC to the estimate made by the ITO is, a provision for the benefit of the assessee. The object behind this provision is that if the ITO finds that the fair market value exceeds fifteen per cent of the value declared by the assessee, some higher authority should apply its mind and give approval to the estimate of the ITO before the assessee is made liable on that basis. Omission on the part of the ITO to observe this provision would cause prejudice to the assessee in that the assessment would be made against him without the safeguard of the approval of the IAC.…

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