Share sale consideration for capital gains u/s 52: no proof of understatement, so higher value substitution rejected.

Section 52 could not be invoked to substitute a higher consideration for capital gains on the transfer of shares because the onus lies on the Revenue to prove understatement of consideration and receipt of any amount over and above the declared value, as clarified by SC in K.P. Varghese. Since the appellate authority and Tribunal concurrently found no material showing that the declared sale consideration was understated or that the assessee received any additional consideration directly or indirectly, section 52 was held inapplicable; consequently, the Revenue's appeal was dismissed and no interference was warranted.

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Issues: Whether the provisions of section 52 of the Income-tax Act, 1961 apply to the transfer of shares at declared cost price where there is no material to show understatement of consideration or receipt of consideration over and above the declared value.

Analysis: Section 52(1) and (2) permit treating the fair market value as full value of consideration where transfers are between connected persons or where fair market value exceeds declared consideration by at least 15%, but the provision must be construed to avoid manifestly absurd results. Jurisprudence in K.P. Varghese v. ITO and subsequent authority establishes that subsection (2) can be invoked only where the consideration actually received exceeds the declared consideration; the Revenue bears the burden of proving understatement or concealment. Where transfers are bona fide at the declared cost and there is no material showing any undeclared receipt, section 52 does not operate to deem higher consideration. In this case the Tribunal and the Commissioner (Appeals) found no material to show understatement or receipt over and above declared value and applied the principle that the onus is on the Revenue to establish understatement.

Conclusion: Section 52 is not attracted where shares were transferred at declared cost and there is no material of understatement; the appeal by Revenue is dismissed and the additions under section 52 are deleted (decision in favour of the assessee).

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