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TMI Blog1984 (7) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... was justified in holding that section 52(2) of the Incometax Act, 1961, is attracted to the assessee's case ?" The facts are these: The assessee was a contractor. In 1967, he was allotted site No. 328, Palace Upper Orchards, Bangalore, by the City Improvement Trust Board, Bangalore, for Rs. 19,274. In 1968, he started construction of a building and when it was nearing completion, he sold it to Mr. and Mrs. Mehta, for Rs. 2,51,101. The purchasers then spent about Rs. 52,720, on improvement and finishing touch up. The assessee did not offer any capital gains for tax. Before the assessing officer, there were at least two valuation re ports, one at the instance of the assessee and another at the instance of the Department. After examining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty is situated in a good locality in Bangalore. It appears that it was argued for the assessee that the sale was a distress sale, because a firm of which the assessee was a partner owed money to Syndicate Bank. But the Tribunal found that there was no such acceptable evidence in proof of the distress sale. The Tribunal also observed that in the normal course, the contractor could not have forgone the benefit of the increase in the price of land and increase in the cost of construction and personal supervision effected by him, for no reason whatsoever. On these circumstances, the Tribunal came to the conclusion that there was understatement of consideration and a part of the consideration must have been paid under the table. At the outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed obviously without proper understanding of the true scope of section 52(2) of the Income-tax Act. We can understand the difficulty of these authorities. The Tribunal rendered the decision on December 31 , 1976. Till then, there was no authoritative pronouncement on the scope of section 52(2) of the Income-tax Act either of this court or of the Supreme Court. The Supreme Court delivered the judgment in K P. Varghese v. ITO [1981] 131 ITR 597 on September 4, 1981, and this court in Sanjiv V Kudva v. CIT [1981] 127 ITR 354, delivered judgment on August 7, 1980. In Varghese's case [1981] 131 ITR 597, the Supreme Court has observed (at pp. 614 & 615) : "If, therefore, the Revenue seeks to bring a case within sub-section (2), it must show not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first condition is satisfied, no inference can necessarily follow that the second condition is also fulfilled." The court then went on to state (at p. 618) : "We must, therefore, hold that sub-section (2) of section 52 can be invoked only where the consideration for the transfer has been understated by the assessee or, in other words, the consideration actually received by the assessee is more than what is declared or disclosed by him and the burden of proving such an understatement or concealment is on the Revenue. This burden may be discharged by the Revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him ..... X X X X Extracts X X X X X X X X Extracts X X X X
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