TMI Blog2002 (5) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... 1987-88. On June 7, 1986, and August 5, 1986, the respondent-assessee had transferred 1,250 fully paid up shares and 5,000 partly paid up shares of Tony Electronics to his employees, dealers and close relations at Rs.100 each per fully paid up share and Rs.50 each per partly paid up share. The sale consideration was also the cost price of each share to the assessee. The Assessing Officer arrived at the conclusion that in the case of transfer of shares at the cost price the respondent-assessee had deliberately furnished inaccurate particulars and the income was underassessed. He accordingly completed the assessment on a total income of Rs.19,74,805. The respondent-assessee preferred an appeal before the Commissioner of Income-tax (Appeals) (for short "the CIT(A)"). After examining the facts, the grounds of appeal and after hearing the assessee, the Commissioner of Income-tax (Appeals) deleted the addition on account of deemed capital gains. According to the Commissioner of Income-tax (Appeals), it is not in dispute that the shares were transferred at cost price. He further observed that there is absolutely no material on record to show that the sale consideration was under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nspecting Assistant Commissioner, be taken to be the fair market value of the capital asset on the date of the transfer. (2) Without prejudice to the provisions of sub-section (1), if in the opinion of the Income-tax Officer the fair market value of a capital asset transferred by an assessee as on the date of the transfer exceeds the full value of the consideration declared by the assessee in respect of the transfer of such capital asset by an amount of not less than fifteen per cent. of the value so declared, the full value of the consideration for such capital asset shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be its fair market value on the date of its transfer: Provided that this sub-section shall not apply in any case-- (a) where the capital asset is transferred to the Government, or (b) where the full value of the consideration for the transfer of the capital asset is determined or approved by the Central Government or the Reserve Bank of India." This section came up for consideration before their Lordships of the Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597. While interpreting section 52(1) their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis." The court further observed that: "To introduce any further condition such as understatement of consideration in respect of the transfer would be to read into the statutory provision something which is not there; indeed, it would amount to re-writing the section." Their Lordships observed in the said case that the argument was based on a strictly literal reading of section 52, sub-section (2), but the court observed that: "... we do not think such a construction can be accepted. It ignores several vital considerations which must always be borne in mind when we are interpreting a statutory provision." The court observed that the task of interpretation of a statutory enactment is not a mechanical task. It is more than a mere reading of mathematical formulae because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the Legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument of the expression of human thought and, as pointed out by Lord Denning, it would be idle to expect every statutory provision to be "drafted with divine prescience and perfect clarity". In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uple of years after the date of the agreement--the market price shoots up with the result that the market price prevailing on the date of the sale exceeds the agreed price, at which the property is sold, by more than 15 per cent. of such agreed price. This is not at all an uncommon case in an economy of rising prices and in fact we would find in a large number of cases where the sale is completed more than a year or two after the date of the agreement that the market price prevailing on the date of the sale is very much more than the price at which the property is sold under the agreement. Can it be contended with any degree of fairness and justice that in such cases, where there is clearly no understatement of consideration in respect of the transfer and the transaction is perfectly honest and bona fide and, in fact, in fulfilment of a contractual obligation, the assessee, who has sold the property, should be liable to pay tax on capital gains which have not accrued or arisen to him? It would indeed be most harsh and inequitable to tax the assessee on income which has neither arisen to him nor is received by him, merely because he has carried out the contractual obligation underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own at a lesser figure than that actually received. The onus to prove that the assessee has not declared the actual consideration and that the consideration declared in respect of the transfer is shown at a lesser figure rests upon the Revenue. It may be pertinent to mention that it is extremely difficult, if not impossible, for the Revenue to discharge the onus placed by the Legislature. Perhaps this reason and the other reasons incorporated in K.P. Varghese's case [1981] 131 ITR 597 (SC), led to deletion of section 52 from the Act with effect from April 1, 1988. The Tribunal observed that in the present case the Revenue has not made out a case that any consideration was concealed or not declared by the assessee. The learned Commissioner of Income-tax (Appeals) has given a finding in his order dated January 10, 1996, that "there is no material on record to show that the sale consideration was understated or that the appellant received anything directly or indirectly over and above the declared value of shares. In fact, this is not the case of the Assessing Officer." The findings of the Commissioner of Income-tax (Appeals) have been upheld by the learned Tribunal. We have carefu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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