TMI Blog781/CBDT.X X X X Extracts X X X X X X X X Extracts X X X X ..... which may be made use of if in any case the vires of section 52(2) is challenged. NOTE REGARDING THE CONSTITUTIONAL VALIDITY OF SECTION 52(2) OF INCOME-TAX ACT, 1961. Section 52(2) of the I.T.Act was incorporated by the Finance Act, 1964 with a view to countering evasion of tax on capital gains through the device of understatement of the full value of the consideration received or receivable on the transfer of a capital asset. Section 52(2) was incorporated to defeat the free play of the unaccounted money as well as to counter the cheating of Government by evasion of tax by deliberately understating the full value of the consideration. The margin of difference of 15% of the declared value of the consideration for the capital assets ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consideration, the balance having been paid surreptitiously in black money. Section 52(1) has been introduced shown or received may in fact constitute the value of the consideration actually received but may not represent the full value of the consideration for the asset in question. Section 52(2) has been introduced to cover such cases with a built-in-safeguard that the ITO should obtain the concurrence of the IAC before invoking the provisions of the section. This ensures that there is no arbitrariness on the part of the assessing authorities. Even in a case where the consideration shown or received represents the value actually received, section 52(2) merely casts an obligation on the assessee that in the event of the assessee volun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act for determining such fair market value at the stage of the 2nd appeal before the Tribunal. In the interest of natural justice the assessee is given a reasonable opportunity to be heard. 4. As regards the argument that section 52(2) of the Act is unconstitutional and/or violative of the petitioner's fundamental right to acquire, hold or dispose of property guaranteed under Article 19(1)(f), it may be stated that any concealment of income (capital gains) or reduction in the quantum thereof or enhancement of loss under the head "capital gains" result in escapement of tax and loss to the exchequer and a consequential loss to the public, i.e., the community in general. It is submitted that any provision intended against such evasion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onable restriction in the interest of the general public. 5. With a view to avoiding loss to the public revenue, it was perfectly open to Parliament to enact section 52(2) in order to see that tax is properly paid on the full amount of capital gains. In any event and without prejudice to the above, a provision of the type of section 52(2) is most essential and necessary in the present day condition in India where it is well known that most transactions of transfer take place for declared as well as undeclared consideration. It is a well konown fact of our economic life that large sums of unaccounted money are in circulation endangering its very fabric. In the interest of the community it is only right that the fiscal authorities should ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a law based on a reasonable classification founded on an intelligible differentia having rational relation to the objects sought to be achieved by the law. Tax laws are aimed at dealing with complex problems of infinte variety necessitating adjustment of several disparate elements. While enacting taxing law the legislative discretion is wider in the matter of classification and the power to classify may be exercised so as to adjust the system of taxation in selecting persons, properties, transactions and objects and applying different methods and even rates of tax. Section 52(2) is based on rational classification and does not offend any provision of the Constitution. 8. Section 52(2) is neither confiscatory nor un-constitutional. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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