Law:

Section:

Section 52 of the Income-tax Act, 1961 - Capital gains - Understatement of consideration for transfer - Assessment year 1972-73 - Whether in order to attract applicability of section 52(2), it is not enough for revenue to show that fair market value of property, as on date of transfer, exceeds full value of consideration declared by assessee in respect of transfer by not less than 15 per cent of value so declared but it is also necessary to show that consideration has been understated and assessee has actually received more than what is declared by him - Held, yes - Whether where in absence of finding recorded by ITO that sale of property in question had been made with view to avoid or reduce liability arising under section 45, Tribunal confirmed assessment under section 52(2), order of Tribunal was erroneous - Held, yes FACTS The assessee sold the house property to his sister by a registered sale deed dated 30-11-1971 for an amount of Rs. 44,425. In the original return, the assessee did not disclose any capital gains arising from the sale of above property. The assessment was re-opened under section 147(b) and the assessee filed the return. The ITO took the view that the fair market value of the property on the date of sale was Rs. 84,600. He invoked section 52(1) and computed the capital gains on the sale of the property at Rs. 39,800. The AAC confirmed the said assessment. The Tribunal fixed the fair market value of the property, on the date of sale, at Rs. 67,000 instead of Rs. 84,600 adopted by the assessing authority and thus computed the capital gains at Rs. 22,200. In its opinion, section 52(2) was applicable and, in the light of the decision of the Kerala High Court in CIT v. N.S. and North Malabar Public Conveyance (P.) Ltd. [1976]102 ITR 36 , the assessment made was valid. The Tribunal rejected that the plea of the assessee that since the ITO invoked section 52(1) and had not recorded the finding that the transfer had been made with a view to avoiding or reducing the tax liability under section 45, the computation of capital gains was not properly done. On reference: HELD It is evident from the decision of the Supreme Court in the case of K.P.…

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