TMI Blog1980 (5) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... h January, 1956, and the cost of additions and improvements as well as brokerage, a capital gain of Rs. 7,50,709 was arrived at by the ITO in respect of the sale of the property. A deduction of Rs. 4,70,119 was given under s. 54 of the Act and the balance of Rs. 2,80,590 was processed for assessment under s. 80T of the Act. It may be mentioned that there were, successively, appeals to the AAC and then to the Tribunal from the order of assessment. The point in dispute was whether in the computation of the capital gain, the assessee was entitled to a deduction of Rs. 14,222 claimed by it. On this point, the assessee was successful before the AAC and the Tribunal dismissed the appeal filed by the department on 23rd July, 1973. On 17th February, 1975, the ITO issued a notice under s. 148 of the Act which is annex. " A " to the writ petition. The notice does not mention whether it is being issued under cl. (a) or cl. (b) of s. 147 of the I.T. Act, 1961. The assessee wrote to the officer repeatedly seeking to know why the proceedings had been initiated but apart from stating that the notice had been issued under cl. (a) of s. 147, no further information was given to the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following facts: (i) the Keeling Road area has been converted into a commercial area under a Government notification during 1964-65 ; (ii) the assessee-family had applied to the N.D. M.C., for the construction of a multi-storeyed commercial building on the plot; (iii) a check of the records of the land and Development Office, New Delhi, revealed that the value of such commercial area was being estimated at Rs. 600 per square yard in 1969; and (iv) as against the price of Rs. 9,50,000 the assessee family's own architect had estimated the value of the land at 11, Keeling Road, at Rs. 425 per square yard on 1st June, 1968. The above are the allegations made in the counter-affidavit but the reasons recorded by the ITO on the 17th February, 1975, just before the issue of the notice in question, were as follows: " Information has come into possession that the assessee got highly understated the consideration in relation to sale of his property No. 11, Tolstoy Marg, New Delhi (old No. 11, Keeling Road, New Delhi), while executing the sale document in favour of Gee Vee Construction Co. Pvt. Ltd., New Delhi, in July, 1969. The market worth of this property at the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the vendee. In the present case, the assessee had placed before the ITO the sale deed of the property. He had given full details of the vendee as well as the consideration for which the sale was effected. There is no material which the assessee should have disclosed in this connection but had failed to. Shri Verma laid emphasis on the assessee's failure to disclose the facts pertaining to the market value of the property which were in its possession. We do not think that this is one of the primary material facts which an assessee should disclose. The assessable capital gains on the sale of a property comprise of the difference between the sale consideration received and the original cost. Section 52 is a special provision which enables the ITO to ignore the sale price and adopt the market value of the property but the primary facts for invoking this special provision have to be gathered by the ITO. It will be impractical and unreasonable to interpret the relevant provisions as requiring an assessee, even in the absence of any queries from the ITO, to inform the officer of any information he may possess in regard to the market value of the property, to draw the attention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the affirmative. After the completion of the original assessment the officer came to know that the market value of the property on the date of sale was much higher than the alleged sale price. The disparity between the market value as estimated in connection with the loan transaction with the New Bank of India in 1968 and the alleged sale consideration is so wide that the ITO, on the strength of the information, could have reason to believe that the capital gains on the transaction had been underassessed. In this connection it is necessary also to advert to the provisions of s. 52(2) of the Act. Section 52(2) authorises the ITO, without prejudice to the provisions of s. 52(1), to take the market value of the property as the full value of the consideration for which the property has been sold, if the fair market value of the property on the date of transfer exceeds the full value of the consideration declared by the assessee. In the present case the fair market value of the capital assets was not at all considered by the ITO at the time of original assessment. He had before him merely the figure of the sale price disclosed by the assessee and computed the capital gains on that b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... storeyed building on the plot of land in question. He states that the assessee had made an application to the municipal authorities for permission to put up multi-storeyed building on the plot. This application was rejected on 10th July, 1969. According to the learned counsel, therefore, the valuation reports which were prepared in 1968 had been prepared on the assumption that the land was of immense value in view of the proposal for developing the plots in question. The sale, however, was effected in July, 1969, after the proposal for putting up the multi-storeyed building had been rejected by the municipal committee. It is, therefore, submitted by the learned counsel that the ITO could not validly act upon these valuation reports of 1968 for drawing the inference that the sale price of 1969 was inadequate and that capital gains had escaped assessment. Here again, we think, the argument touches the merits of the reassessment rather than the question of jurisdiction. We do not express any opinion at this stage as to how far the valuation reports referred to by the ITO can constitute a basis for arriving at the conclusion regarding the understatement of sale proceeds in the sale dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question whether, where a notice has been issued under s. 147(a), its validity could be supported by reference to cl. (b) came up for consideration recently before, a Bench (of which one of us was a member) in the case of Avtar Singh Sandhu v. WTO (C.W. No. 1264 to 1270 of 1975) [1981] 129 ITR 531 (Delhi) in the context of the corresponding provision contained in s. 17 of the W.T. Act. We have held there, after referring to the decision of the Calcutta High Court in the case of Smt. Nirmala Birla v. WTO [1976] 105 ITR 483 [FB], that it is possible for the WTO entertain on the same of facts alternate beliefs under cl. (a) or cl. (b) and that there is nothing to prevent the ITO or the WTO from seeking to support the validity of a notice by reference to the appropriate provision in the statute. We may mention that the Calcutta High Court has consistently taken this view: Vide Mriganka Mohan Sur v. CIT [1974] 95 ITR 503 reiterated in ITO v. Eastern Coal Co. Ltd. [1975] 101 ITR 477 and then reaffirmed in Smt. Nirmala Birla v. WTO [1976] 105 ITR 483 [FB]. This is a contrary view expressed by the Allahabad High Court (Vide Raghubar Dayal Ram Kishan v. CIT [1967] 63 ITR 572), but we agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve addressed ourselves only to a very short question as to whether, on the material placed on record, the ITO had the jurisdiction to initiate proceedings under s. 147. In answering this question in the affirmative, we are basing ourselves only on the ground that the valuation reports filed by the assessee and prepared by the bank constituted information before the ITO that the market value of the property on the date of sale was considerably in excess of the consideration shown in the sale deed and that this information was sufficient to give the officer reason to believe that the capital gains assessable under the Act had escaped assessment. Counsel for the petitioner, Mr. Randhawa, stated that in the case of the vendee, Gee Vee Construction Pvt. Ltd., the assessment made by the ITO, on the basis of the sale consideration of Rs. 9,50,000, had been set aside by the Commissioner by the issue of a notice under s. 263 of the I.T. Act, 1961. The validity of that notice was upheld by this court in decision which is reported as Gee Vee Enterprises v. Addl. CIT[1975] 99 ITR 375. The learned counsel stated that subsequent to the order of this court the Tribunal had set aside the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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