TaxTMI 
TaxTMI 
1996 (3) TMI 150
X X X X Extracts X X X X
X X X X Extracts X X X X
....e facts relating to the case of Shri Yogesh N. Jogi, Shri Yogesh N. Jogi -- Proprietor of M/s. Dineshwar Textiles, Jetpur sold a textile factory situated at Navagadh to Shalimar D & P Works on 21-8-1987 for a declared consideration of Rs. 3 lakhs. The Assessing Officer made a reference under section 55A of the Income-tax Act, 1961 to the Valuation Cell on 28-9-1987. The assessee submitted a report from the Registered Valuer on 9-1-1988 in which the valuation of the said property was determined at Rs. 3,20,000. The A.V.O. estimated the value of the said property at Rs. 8,35,200 vide report dated 29-4-1988. The property was inspected by the A.V.O. on 15-1-1988. A notice under section 13(2) of the G.T. Act was issued on 9-3-1989 which was served on the assessee on 10-4-1989. The assessed submitted gift-tax return in response to notice under section 13(2) on 10-5-1989. The Assessing Officer had made income-tax assessment for the aforesaid year under section 143(3) on 9-3-1989. The G.T.O. held that the difference between the fair market value of the property sold by the assessee as determined by the A.V.O. at Rs. 8,35,200 and the apparent sale consideration of Rs. 3 lakhs shown in the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....udgment in the above referred decision reported in the case of Tandel Automobiles. The learned counsel also invited our attention towards the Board's Circular No. 96, dated 25-11-1972 reported at 91 ITR 129. This circular was shown with a view to support his contention that it is necessary on the part of G.T.O. to make a reference under section 15(6) to the Valuation Cell in case he is of the opinion that the fair market value of the property estimated by the Registered Valuer is less than the fair market value of the assets or in a case where he is of the opinion that the fair market value of the property exceeds the value of the property as returned by more than 33 1/3 % of the value returned or by more than 50,000 whichever is less. The G.T.O. cannot decide the question of valuation on his own. It was therefore necessary for the GTO to make a reference under the provisions of the Gift-tax Act. Hence reliance placed on the report obtained under section 55A of the Income-tax Act is absolutely invalid. The learned counsel also placed reliance on the decision of the ITAT in the case of L.K. Kasliwal v. GTO [1991] 38 ITD 545 (Jp.). (B) Reference made to Valuation Cell under section....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e rate adopted by the A.V.O. is too high. The A.V.O. has not properly considered the various objections submitted before him. The GTO ought to have accepted the declared consideration as true, correct and adequate. (F) Consideration is not inadequate : The learned counsel for the assessee thereafter submitted that on the facts and circumstances of the present case it cannot be said that the consideration shown in the sale deed was inadequate. The sale in question was by and large a distress sale and the transactions of sale entered by these two persons are bona fide one. There is no attempt to evade tax. Hence the provisions of section 4(1)(a) cannot be validly invoked in the present cases. He placed reliance on the judgment of the Madras High Court in the case of CGT v. Indo Traders & Agencies (Madras) (P.) Ltd. [1981] 131 ITR 313. The said decision of Madras High Court has been followed by various Benches of the Tribunal. For instance, he placed reliance on the decision of the I.T.A.T. Jaipur Bench in the case of Late H.H. Maharana Shri Bhagwat Singhji v. GTO [1992] 44 TTJ (Jp.) 311. The learned counsel also relied upon the decision of the ITAT Cochin Bench in the case of Jacob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of Godrej & Boyce Mfg. Co. (P) Ltd. v. IAC [1990] 33 ITD 355. 7. On the strength of the aforesaid arguments and documentary evidence placed on records, the learned counsel submitted that the gift-tax assessment made by the G.T.O. should be cancelled in both these cases as there was no deemed gift liable to tax in the hands of any of these two assessees. 8. Shri Manoj Misra, the learned Senior D.R. submitted arguments in rebuttal of the various arguments advanced on behalf of the assessee's counsel. The arguments submitted by him can be briefly stated as under : (A) Validity of Reference : The learned Senior DR submitted that the reference made to the Valuation Cell under section 55A could be validly used by the Assessing Officer in relation to gift tax proceedings. He placed reliance on the judgment in the case of Jindal Strips Ltd. and Daulatram and C. T. Laxmandas v. Asstt. CIT [1994] 208 ITR 859 (Mad.) to support this contention. The learned Senior DR also invited our attention towards the provisions of section 15(3) of the G.T. Act which clearly empowers the Assessing Officer to take into account all relevant materials which he has gathered for the purpose of assessing t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e consideration stated in the sale deeds is inadequate as compared to the fair market value of the property in question. However, in income-tax proceedings, section 52(2) cannot be invoked unless it is proved by the department that the real consideration received by the seller was more than the apparent consideration stated in the sale deed. It is therefore obvious that the two provisions governed entirely different situations. (E) Regarding the report not proper : The learned Senior DR submitted that the report of the Valuation Officer is based on valid material. He also submitted a copy of written submissions dated 8-2-1996 signed by A.V.O. Rajkot who also attended in person before us. It was pointed out by the D.R. that the A.V.O. has dealt with the objections submitted on behalf of the assessee in the report prepared by him. Hence there is no justification in any interference in the value estimated by the A.V.O. (F) Regarding inadequate consideration : The learned Senior DR submitted that the facts of the judgment of Madras High Court in the case of Indo Traders & Agencies (Madras) (P.) Ltd. are different. The provisions of section 4(1)(a) of the G.T. Act are different than....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct by bringing positive material or evidence on records with reference to the facts and circumstances of each case. He submitted that merely because the sale consideration declared by the assessee is less than the fair market value, it cannot lead to the conclusion that the transfer was made without adequate consideration. The expression "adequate consideration" is different than the expression "fair market value". He invited our attention to the judgment of the Madras High Court reported in CGT v. R. Jawahar [1996] 217 ITR 59. The learned counsel also submitted that the judgment in the case of Khoday Eswarsa & Sons relied upon the learned Senior DR in fact, instead of supporting the departments case, supports the assessee's case. 9.2 The learned counsel for the assessee also invited our attention towards the definition of "Gift" in section 2(xii) of the G.T. Act. It necessarily implies the existence of an intention on the part of the donor to give benefit to the donee. This intention should be available in the case of a deemed gift. This is implicit and implied in the definition of "gift" in relation to a deemed gift also. The transferor and the transferee in the case of Khoday E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion. The market value is relevant only for the purpose of determining the quantum of value of gift after it is found that the transaction was for inadequate consideration. If on facts it is established that the property has been transferred otherwise than for adequate consideration, then the Assessing Officer will have to take into consideration the market value of the property as on the date of the transfer and compare it with the value of the consideration as shown in the respective sale deeds or as shown by the parties. It is thus clear that the market value is not the sole criteria for testing adequacy of the consideration. If that was the intention, the provisions would have been differently worded as aptly explained in the judgment of the Madras High Court in the case of Indo Traders & Agencies (Madras) (P.) Ltd. The relevant extract from the said judgment is reproduced hereunder : "The wording would then have been, 'where the property is transferred for less than its market value, then the difference between the market value and the consideration stipulated, shall be deemed to be the gift made by the transferor'. Parliament not having made any such provision, it would not b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... so-called donee. The investigation to be made under section 4(1)(a) of the G.T. Act therefore necessarily requires the Assessing Officer to inter alia find as to whether there is any attempt to evade tax or whether the relevant transaction is bona fide one. If the transaction is bona fide one, the consideration mentioned in the sale deed would ordinarily be treated to be reasonable, fair and adequate. Adequate consideration would not in all cases mean the ultimate fair market value of the property. In order to decide the adequacy of the sale consideration various factors will have to be taken into consideration. There might be several bona fide considerations which might induce a seller to sell his immovable property at less than what might be considered to be the fair market value. For example, the seller may be in immediate need of money and unable to wait till a buyer is found who is willing to pay the fair market value for the property. There might be some dispute as to title of the immovable property as a result of which it might have to be sold at a price lower than the fair market value or subsisting lease in favour of the intending purchaser. There might be various other....