Capital gains must be computed on actual sale consideration, not valuation alone, absent evidence of understatement.

For capital gains computation, the full value of consideration under section 48 must reflect the actual consideration received on transfer, and a Valuation Officer's estimate cannot replace it unless the Revenue produces material showing understatement of sale proceeds. A reference under section 55A may assist in determining market value, but market value alone does not establish the consideration actually received. Where the transaction is bona fide and no independent evidence of suppression exists, the earlier deeming approach under section 52 cannot be invoked merely on the basis of valuation. On that reasoning, an addition founded only on fair market value was not sustainable.

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Issues: Whether, for computing capital gains, the fair market value estimated by the Valuation Officer could be substituted for the actual sale consideration declared by the assessee in the absence of material showing understatement of consideration.

Analysis: Capital gains under section 48 of the Income-tax Act, 1961 are computed on the basis of the full value of consideration received on transfer of the capital asset. A reference under section 55A may assist in ascertaining market value, but market value by itself does not become the full consideration unless the Revenue brings material to show that the consideration actually received was understated. The earlier deeming approach under section 52, as explained in the binding precedents relied upon, could not be invoked in an honest and bona fide transaction where the Revenue failed to establish suppression of sale consideration. In the present matter, the assessment was founded substantially on the Valuation Officer's estimate, without independent evidence that the assessee had received more than what was disclosed.

Conclusion: The fair market value could not be treated as the full value of consideration, and the addition made on that basis was not sustainable.

Ratio Decidendi: In the absence of cogent evidence of understatement of sale consideration, capital gains must be computed on the actual consideration received and not on an ed fair market value obtained through valuation alone.

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