Agreed share sale consideration cannot be replaced by book value absent evidence of higher real consideration; penalty falls with deleted addition.

For capital gains computation, the agreed sale consideration of shares cannot be replaced by market value or book value unless there is material showing that higher real consideration was received; on the facts, banking-channel sale and completed transfer formalities supported the assessee's declared consideration, so the long-term capital loss was allowed. A penalty under section 271(1)(c) founded solely on the same unsustained quantum addition cannot survive once the addition is deleted; accordingly, the penalty was also liable to be deleted and the assessee's relief was maintained in full.

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Issues: (i) Whether the Assessing Officer could substitute the agreed sale consideration of shares with market value or book value while computing long-term capital loss under the Income-tax Act, 1961. (ii) Whether penalty under section 271(1)(c) could survive after deletion of the quantum addition.

Issue (i): Whether the Assessing Officer could substitute the agreed sale consideration of shares with market value or book value while computing long-term capital loss under the Income-tax Act, 1961.

Analysis: The loss claim arose from sale of shares through banking channels and transfer formalities were completed. The computation of capital gains or loss under section 48 is based on the full value of consideration received or accruing, and that expression does not authorise substitution of the agreed consideration with market value in the absence of material showing receipt of additional consideration or a colourable transaction. The record did not establish any collusion or concealment beyond the Assessing Officer's inference from book value.

Conclusion: The agreed consideration could not be replaced by an estimated market or book value, and the assessee's long-term capital loss was rightly allowed.

Issue (ii): Whether penalty under section 271(1)(c) could survive after deletion of the quantum addition.

Analysis: The penalty was founded on the same disallowance that formed the subject matter of the quantum appeal. Once the addition was not sustained, the foundation for penalty ceased to exist.

Conclusion: The penalty did not survive and was liable to be deleted.

Final Conclusion: The Revenue's challenges to both the quantum addition and the penalty failed, and the assessees' relief was maintained in full.

Ratio Decidendi: For capital gains computation, the agreed sale consideration cannot be substituted by market value or book value unless there is material to show a higher real consideration, and a penalty based solely on an unsustained quantum addition cannot stand.

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