ORDER
SATISH CHANDRA, A. M. :
This appeal by the Revenue is directed against the order dt. 27th Dec., 1993 of the CGT(A), Bhopal, and pertains to the asst. yr. 1987-88.
2. The facts in brief are that the assessee had sold two properties during the financial year relevant to the asst. yr. 1987-88. The properties were sold at a price of Rs. 8.40 lacs. It came to the notice of the Assessing Officer (AO) that on reference by the IAC(Acquisition), Bhopal, these properties had been valued by the Government Valuer at Rs. 16,04,200. On the basis of this information, the AO issued notice dt. 10th Sept., 1991 under s. 16(1) of the GT Act, 1958 (for short the Act) to bring to tax the deemed gift. In response thereto, the assessee submitted a return of gift-tax on 29th Jan., 1992 declaring taxable gift at nil.
3. During the course of assessment proceedings the AO discussed the issue of deemed gift with the authorised representative of the assessee. It was stated before him that none of the provisions of the GT Act were applicable to the facts of the assessees case and, therefore, the GT proceedings may be dropped. The AO did not agree with the submissions of the authorised representative of the assessee. He brought to tax the deemed gift of Rs. 8,04,200 representing the difference between the actual sale price and the value adopted by the Government Valuer under s. 4(1)(a) of the Act. The assessee preferred an appeal before the CGT(A).
4. Before the CGT(A) it was submitted that the AO initiated GT proceedings on the basis of audit objection. The audit had suggested action under the IT Act for taxing the extra income as capital gains. The audit had also recommended initiation of proceedings under the WT Act. It was brought to the notice of the CGT(A) that the AO did not initiate any action either under the IT Act or the WT Act. However, he initiated action under the GT Act. It was argued before the CGT(A) that the AO did not establish that the sale consideration was either inadequate or the same was not bona fide. It was also argued before him that the transferee was not related to the assessee transferor and, therefore, there was no question of taxing the assessee on deemed capital gains. It was also pointed out that the AO had accepted the sale price declared by the assessee in respect of these properties in the IT proceedings and no addition was made to the income of the assessee with regard to charging of capital gains tax. It was also brought to the notice of the CGT(A) that the IAC(Acquisition) had dropped the acquisition proceedings and filed copies of the order of the IAC(Acquisition) in support thereof. The submissions of the assessee found favour with the CGT(A). He cancelled the assessment order dt. 31st March, 1992 with the following observations :
“I have gone through the order of the AO and he has nowhere in the order given the basis for holding that the consideration received by the appellant was inadequate which was much less than the market price prevailing in the market. He has, as I have said above, relied on the valuation report of the Government Valuer. Based on this report acquisition proceedings were initiated which were later on dropped. Since the AO has not brought any other material on record which show that the sale consideration was inadequate, proceedings under the GT Act cannot be sustained and accordingly the assessment under consideration is cancelled.”
The Revenue is aggrieved by the above decision of the CGT(A) and is in appeal before the Tribunal.
5. Shri Jagdeo, the learned Departmental Representative, vehemently argued that the AO had initiated the GT proceedings on the basis of fair market value estimated by the Government valuer. The Government Valuer had estimated the fair market value of the properties in question at a much higher figure than the sale consideration declared by the assessee. Since the action of the AO was based on the opinion of an expert and there being no other valuation report on the record, the AO was justified to bring to tax the deemed gift which represented the difference between the disclosed sale consideration and the fair market value estimated by the Government Valuer. Opposing the stand of the learned Senior Departmental Representative, Shri Rinwa, the learned counsel for the assessee, invited our attention to the written submissions filed before the CGT(A) during appellate proceedings a copy of which appears at pages 1-2 of the compilation. He strongly defended the order of the CGT(A). He highlighted the point that the transaction for sale was bona fide as the transferees were not relatives or otherwise related to the assessee transferor. According to him, the very basis on which the AO had initiated the proceedings under the GT Act does not subsist inasmuch as the acquisition proceedings initiated by the then IAC(Acquisition), Range, Bhopal stand dropped by him vide his order dt. 31st Oct., 1988. He vehemently argued that the AO had not even followed the principles of natural justice as despite his request to prove the valuation report of the Government Valuer which formed the basis of initiation of the GT proceedings, the AO did not provide a copy of the said valuation report. Shri Rinwa vehemently argued that on perusal of the assessment order it would be revealed that the AO has not established that the transaction was for inadequate consideration or that the transfer was not bona fide. In the absence of such a finding, the AO was not justified in taxing the deemed gift as he did which has rightly been cancelled by the CGT(A).
6. We have considered the rival submissions and perused the material placed before us. It is now well settled that in order to invoke the provisions of s. 4(1)(a) of the Act it is necessary for the AO to show that the property has been transferred otherwise than for adequate consideration. A finding as to the inadequacy of consideration is essential. It has been held in the case of CGT vs. Indo Traders & Agencies (Madras) Ltd. (1981) 131 ITR 313 (Mad) that the investigation contemplated under s. 4(1)(a) of the Act is to see whether there is any attempt at evasion of tax or whether the relevant transaction is bona fide. If the consideration which passed between the parties can be considered to be reasonable or fair, it cannot be considered to be inadequate. Adequate consideration is not necessarily what is ultimately determined by some one else as the market value. Unless the price was such as to shock the conscience of the Court, it would not be possible to hold that the transaction is otherwise than for adequate consideration. In the instant case, it is not disputed that the assessee had sold the properties at a price of Rs. 8.40 lacs and had returned the income from capital gains which has been accepted by the AO in the income-tax proceedings. The AO has initiated the GT proceedings on the basis of the information that the fair market value of the properties were substantially higher than the sale consideration declared by the assessee. However, the AO has not recorded any independent finding that the sale consideration of the properties, in question, was inadequate. He has simply relied on the valuation report of the Government Valuer which was submitted by him before the IAC (Acquisition). In case the AO wanted to rely on the said valuation report of the Government Valuer for the purposes of GT proceedings before him, he should have supplied a copy of the report to the assessee to make the effective representation before him. It is not forthcoming from the assessment order that the AO had supplied a copy of the Government Valuers report to the assessee, he had also not recorded any reason as to why he considered the fair market value as reflected in the said report as correct. The Revenue has also not been able to controvert the stand of the assessee that there was no relationship between the assessee transferor and the transferees. No material has also been brought on record to give an inkling that the transaction was not bona fide and/or there was any attempt to evade taxes. For these reasons, we are unable to take a view different from that of the CGT(A). Accordingly, we reject the Revenues appeal.
7. In the result, the appeal is dismissed.