1983 (1) TMI 29 - HC - Income Tax

Assessee prevails in capital gains assessment case under Income Tax Act

Commissioner Of Income-Tax Versus Smt. Ushabai S. Dhanwatay, Nagpur

Commissioner Of Income-Tax Versus Smt. Ushabai S. Dhanwatay, Nagpur - [1984] 147 ITR 455, 36 CTR 198 Issues:1. Application of sections 52(1) and 52(2) of the Income Tax Act in assessing capital gains arising from a property transaction.The judgment of the Bombay High Court in this case involved the application of sections 52(1) and 52(2) of the Income Tax Act in assessing capital gains from a property transaction. The assessee, a co-owner of a property, sold a portion of her share to her son in exchange for another property. The Income Tax Officer (ITO) valued the property and determined the market value, invoking sections 52(1) and 52(2) to assess the capital gains. The ITO concluded that the transaction fell under section 52(1) due to an alleged understatement of consideration and proceeded to determine the capital gains. However, the Appellate Assistant Commissioner (AAC) and the Income-tax Appellate Tribunal disagreed with the ITO's assessment, citing the Supreme Court's ruling in K. P. Varghese v. ITO, which highlighted the conditions for the applicability of section 52(1) and the need for understatement of consideration to reduce tax liability. The court found that the second condition under section 52(1) was not satisfied in this case, as there was no evidence of an intention to avoid or reduce tax liability. Additionally, the court determined that section 52(2) did not apply since there was no proof that the consideration received was more than what was declared. Consequently, the court upheld the decision of the AAC and the Tribunal, ruling in favor of the assessee and holding that neither section 52(1) nor section 52(2) were applicable to the facts of the case. The court answered the referred question in the affirmative, awarding costs to the assessee.