ORDER
L.N. Aggarwal, Judicial Member
1. It is an appeal filed by the assessee against the order of the learned CIT(A) dated 18-10-1989 for the assessment year 1980-81. The following grounds of appeal have been taken up:-
1. The learned Commissioner of Income-tax (Appeals), Kanpur, has erred on fact and in law in upholding the estimated sale value of jewellery at Rs. 2,60,000 as against actual sale value of Rs. 72,000 realised by the assessee-appellant in the present case.
2. While holding that there is enough evidence on record to prove that the market value of jewellery at the relevant time was much higher than the value shown by the appellant, the Commissioner of Income-tax (Appeals) has failed to appreciate and consider that in the wealth-tax, the concept of market value is hypothetical one while for the purpose of Section 52 one has to consider the sale price actually fetched on the transfer of the capital assets.
3. The view taken and reasonings relied on by the learned Commissioner of Income-tax (Appeals) for upholding the applicability of Section 52(2) are erroneous, unsound and unwarranted by the facts and material on record.
4. On the facts, circumstances, evidence and material on record both the conditions as envisaged by 52(2) are lacking insofar as there is nothing to show much less to prove that the market value of items sold were much more than selling price obtained and secondly there was any under hand dealing between the parties and the assessee has actually received much more money than shown by way of selling price, the action of learned Commissioner of Income-tax (Appeals) in upholding the applicability of Section 52(2) is erroneous, misconceived and untenable in law.
5. For upholding the applicability of Section 52(2), the reliance placed by the learned Commissioner of Income-tax (Appeals) on the order of the CIT(A) in the case of Shri Rampati Singhania by presuming that the facts of that case are similar to the instant case, is mistaken and a self-contradiction after himself noticing the fact that the purchaser in that case is different; payment was not made by cheque; and that Supreme Court judgment etc., was not considered in that case.
6. That averment made by the learned CIT(A) that “I see no reason to distinguish the findings of CIT(A)…is misconceived, arbitrary and based on mere surmises and conjectures since he has himself admitted in the earlier part that the CIT(A) order in the case of Shri Rampati Singhania was not before him.
7. The findings of the learned C1T(A) that the revenue has discharged the onus within the meaning of Section 52(2) is erroneous mistaken and contrary to the facts and settled legal position as per the Supreme Court decision rendered in the case of Shri K.P. Verghese 131 ITR 597.
8. The learned CIT(A) was also not justified in rejecting and brushing aside the contention that after the Supreme Court decision in Shri KT. Verghese case Section 52 as a whole become an otiose and on workable insofar as by Finance Act, 1988 the said section was deleted from the statute book.
9. The purchaser Shri Bharat M.D. Lal of Bombay having confirmed on oath the selling price and payment thereof by A/c Payee Cheque which was duly accounted for in the accounts maintained and there being no suggestion by revenue much less to prove any under hand dealing, the learned CIT(A) was not justified and had erred in upholding the action of the ITO in the present case.
10. The order of the learned CIT(A) is erroneous, contrary to the facts and circumstances of the present case.
11. The appellant craves leave to add, alter or amend any of the above grounds.
2. Although the grounds have been split up into 11, but the basic issue involved is invoking of provisions of Section 52(2) of the Income-tax Act and estimation of sale value of the jewellery at Rs. 2,60,000 against the value declared at Rs. 72,000.
3. The brief facts are that the assessee had inherited the following items of jewellery from his mother:-
(i) Diamond & ruby studded ornaments: Weight(Tolas)
1. Necklace 7 15 0
2. Rings 2 4 0
3. Broach 1 12 0
(ii) Diamond and Pearl Studded ornaments :
1. Necklace 3 Lines with pennant 7 10 0
2. Ear Rings one pair 1 8 0
(iii) Diamond and Emarald Studded ornaments :
1. Necklace 5 0 0
2. PairKundan 3 8 0
3. MangTika 1 4 0
(iv) Diamond Studded ornaments :
4. Bangles 4 0 0
The value of the jewellery was estimated at Rs. 1,50,000 in the wealth-tax assessment for the assessment year 1977-78 by the learned CWT(A) in the appeal filed by the assessee. Most of the jewellery was sold in August, 1979 for Rs. 72,000. Four items of the said jewellery were not mentioned in the alleged sale bill. They were as follows:-
1. One diamond and ruby studded Broach.
2. Diamond & Emarald studded one pair of Kundan.
3. Diamond & Emarald studded one Mang Tika.
4. Diamond studded four bangles.
It was alleged by the assessee vide his letter dated 5th September, 1983, addressed to the IAC (Central) Range-II, Bombay (copy of which has been filed in the compilation at pages 4 and 5) that the said four items could not be located by the assessee when he was called upon to produce the same before the Government Valuation Officer in 1981. He was also unable to locate the said four items even till 5th September, 1983, i.e., the date of the application. The IAC proceeded on the valuation as determined in the assessment year 1977-78 at Rs. 1,50,000 and was of the opinion that the fair market value of the impugned jewellery was much higher than stated in the sale bill at Rs. 72,000. Consequently, after taking the approval of the IAC Range-II(C), Bombay, the fair market value was determined at Rs. 2,60,000. The assessing officer thereafter came to the conclusion that there is gross under-statement in the said value of jewellery as declared and the under-statement is in excess of 15% of the declared amount, and the statement had been made with a view to reduce tax liability. Consequently, he applied the provisions of Section 52(2) and computed the capital gain at Rs. 2,25,000 after taking the cost at Rs. 35,000 as on 1-1-1964. It was also observed that the entire jewellery was sold except a pair of Kundan set on the basis of a letter written by the assessee to him on 16-10-1981. The said order of treating Rs. 2,25,000 as capital gain was also confirmed by the learned CIT(A) in an appeal filed by the assessee. The assessee, being aggrieved, has come up in appeal before the Tribunal.
4. The learned counsel for the assessee has very vehemently argued out that in this case, Section 52(2) of the Income-tax Act, 1961 could not be invoked as there was not an iota of evidence to prove or establish that the assessee had realised more amount from the sale than declared. He has further pointed out that the sale was made through a broker and the sale price was received through a crossed cheque which was duly credited in the account of the assessee. He has also pointed out that the broker and the purchaser both have confirmed the sale when their statements were recorded before the ITO under Section 131 of the Income-tax Act, 1961, copies of which have been filed in the compilation at pages 8,9 and 10. He has further relied upon the decision of the Hon’ble Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597 in which their Lordships had held that Sub-section (2) of Section 52 of the Income-tax Act, 1961, can be invoked only when the consideration for the transfer of a capital asset has been under-stated by the assessee, or, in other words, the full value of the consideration in respect of the transfer is shown at lesser figure than that actually received by the assessee, and the burden of proving such under-statement of concealment is on the revenue. The sub-section has no application in case of an honest and bonafide transaction where the consideration received by the assessee has been correctly declared or disclosed by him.
5. It has been further argued by the learned counsel for the assessee that in this case no effort has been made by the Revenue to discharge the said onus. The only circumstances shown by the Department is. that these ornaments were valued at Rs. 1,50,000 as back as in 1977-78 in the wealth-tax assessment of the assessee and thus normally it must have been of higher value in 1980-81. The other circumstance taken is that in the case of the brother of the assessee, who had received and other 50% of the jewellery from his mother, the finding of capital gains tax was upheld by the learned CIT(A). He has tried to distinguish both the facts, firstly, regarding the valuation in wealth-tax. He has stated that the said value, in generally an estimate and not the actual valuation and, secondly, the sale was not of the entire ornaments but the four items mentioned above were not sold which, in fact, were not traceable because of the sudden demise of the father of the assessee and the assessee being minor could not locate them. As regards the assessment of his brother, it has been pointed out that the amount of sale price was received in cash, and, secondly, in that case the decision of the Hon’ble Supreme Court in the case of K.P. Varghese (supra) was not considered.
6. On the other hand, the learned Departmental Representative has relied upon the order of the learned CIT(A), who has discussed the whole issue in detail in para 5 of his order. He has highlighted both the facts, i.e., the valuation of the ornaments in the wealth-tax assessment and that of the assessment of the brother of the assessee.
7. We have heard the parties at length and we are not convinced with the arguments and the reasoning given out of the learned CIT(A) in his order. The fact that the valuation of the ornaments in assessment year 1977-78 in wealth-tax assessment had been estimated at Rs. 1,50,000 is not, in our opinion, enough to conclude and prove a fact that the valuation and the sale price now in question has been under-stated. Secondly, it were not all the ornaments which are alleged to have been sold. The assessee has given out the details in his application dated 5th September, 1983 (copy filed at pages 4 and 5), the ornaments received as a share and the ornaments which were sold and the ornaments which were not traceable. Four items, which did not form part of the sale and which are not traceable, they too cannot be said to be of minor value. Jewellery sold constituted 3 Necklaces, 4 rings and one ear-ring pair, while the jewellery not traceable constituted of diamond studded 4 bangles, one diamond studded mang Tika, one diamond and Ruby studded Broach and one diamond studded pair of Kundan, and in our opinion, they must be of a fairly good value. As these, ornaments not included in the sale are not available for verification, thus the actual value of the same cannot be ascertained and to say that they might be worth Rs. 4,000 or so is only a conjecture and, in our opinion, that conjecture cannot be taken to be a sufficient piece of evidence to conclude that the sale price was under-stated. It is an admitted fact that the assessee was a minor at the time of sale. The jewellery received by him was received on the death of her mother. It is also admitted that all of a sudden his father died soon after the sale. The sale was also effected by the father of the assessee. In Indian Hindu families it is not very uncommon that when father is alive, it is he who manages the whole show and if all of a sudden he dies, then it becomes very difficult for the minor sons to know, control and manage the whole show of the family including that of the jewellery. Thus, as a natural corollary, it cannot be said to be unnatural or improbable that some ornaments might have been misplaced somewhere and the statement of the assessee on that score cannot be completely disbelieved. Hence, from this very fact of the wealth-tax assessment, a positive inference cannot be drawn that the sale price has been understated.
8. As regards the second point that in the case of the assessee’s brother, assessment of capital gains was framed and the same was confirmed by the learned CIT(A). That too, in our opinion, does not much help the revenue or goes against the assessee. Facts of each case are independent and cannot lead to conclude the same inference as that of the other. Admittedly, the payment in the case of his brother was received in cash and the entire jewellery was sold, while in the present case four important ornaments were not sold, as they are alleged to have been misplaced and are not being located by the assessee. Here in this case, it is only the sale of the ornaments mentioned in the sale list with which we are concerned and we have not to give a finding regarding the valuation of the entire jewellery received by the assessee on the death of her mother. In the case as mentioned above, it was the entire jewellery which was in question. Hence, we feel that too cannot lead us to conclude positively that the sale price has been understated.
9. On the other hand, no attempt has been made by the Revenue to meet the findings given by the Hon’ble Supreme Court in the case of K.P. Varghese (supra). The facts of that case were that the assessee was the owner of a house situated in Ernakulam which he had purchased in 1958 for the price of Rs. 16,500. On 25th December, 1965, the assessee sold the house for the same price of Rs. 16,500 to his daughter-in-law and five of his children. The assessment of the assessee for the assessment year 1966-67, for which the relevant accounting year was the calendar year 1965, was thereafter completed in the normal course and in this assessment, no amount was included by way of capital gains in respect of the transfer of the house since the house was sold by the assessee at the same price at which it was purchased and no capital gains accrued or arose to him as a result of the transfer. On 4th April, 1968, however, the ITO, issued a notice under Section 148 of the Act, seeking to reopen the assessment of the assessee for the assessment year 1966-67 and requiring the assessee to submit a return of income within 30 days of the service of the notice. The ITO intimated to the assessee that it proposed to keep the fair market value of the house sold by the assessee on 25th December, 1965, at Rs. 65,000 as against the consideration of Rs. 16,500 for which the house was sold and assessed the difference of Rs. 48,500 as capital gain in the hands of the assessee. The objections raised by the assessee were over-ruled and an order of re-assessment was passed including a sum of Rs. 48,500 as capital gains and bringing it to tax invoking the aid of Section 52(1). The Hon’ble High Court had also dismissed the writ petition filed by the assessee and sustained the re-assessment. In special appeal, filed by the assessee, the Hon’ble Supreme Court held that Sub-section (2) of Section 52 can be invoked only where the consideration for the transfer has been under-stated 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 can be discharged by the revenue by establishing the facts and circumstances from which the reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is an under-statement or concealment of the consideration in respect of the transfer. Sub-section (2) has no application in the case of an honest and bonafide transaction where the consideration received by the assessee has been correctly declared or disclosed by him and there is no concealment or suppression of the consideration. Consequently, the Hon’ble Supreme Court set aside the assessment order holding that in their opinion there was no evidence in the said case that the assessee had received more amount than the amount of consideration shown and declared by him.
10. In this case also, the facts and circumstances of the case eloquently and positively prove that there is no evidence regarding the concealment or getting more consideration than what has been shown and declared. The sale was conducted through a broker Shri Chandra Kant Somaiya who has stated on oath before the learned ITO on 10-1-1983 in his statement recorded under Section 131 that he had arranged for the sale of the jewellery on being asked by Shri Gopal Krishna Singhania to Shri Sharad Kumar, a Dalai, and the amount was paid through a crossed cheque in the name of Shri Nidhipat Singhania Shri M.D. Lal too in his statement under Section 131 on oath before the ITO on 9-12-1982 had stated that he had purchased the jewellery and paid the price through crossed cheque. He had also stated that he did not know the Singhania family from before nor was in any other way connected with the said family. It was only through Shri Chandra Kant Somaiya that he had purchased the jewellery. As the jewellery had been broken and converted to the purchasers convenience, now it cannot be proved and established as to what could otherwise be the valuation. In fact, the valuation would be ordinarily is not sufficient to invoke the provisions of Sub-section (2) of Section 52 of the Income-tax Act, 1961 as expounded by the Hon’ble Supreme Court in the case of K.P. Varghese (supra). The burden was on the revenue to prove and establish the under-statement of the consideration or the concealment of the consideration received over and above the consideration declared. As discussed above, there is not an iota of evidence to prove or substantiate the said contention. The mere circumstances that the jewellery was valued in 1977-78 at Rs. 1,50,000, in our opinion, stands rebutted by the fact that the entire jewellery was not sold. Likewise, the fact of (he assessment of assessee’s brother regarding capital gains also does not much militate against the cause of the assessee as in that case the amount was received in cash and, secondly, the decision of the Hon’ble Supreme Court on the point was not available or discussed. In view of the Hon’ble Supreme Court’s decision, we are left with no doubt that in absence of any direct or indirect evidence to prove or suggest that the consideration has been understated, we have no option but to hold that what appears to be on paper is correct. No doubt, it is rather difficult to prove any evidence regarding the consideration received over and above the consideration shown in the paper, yet after the above decision of the Hon’ble Supreme Court, we are helpless as we have to interprete the Saw as it stands. It may be possible that even the legislature in its wisdom might have thought likewise and thereafter might have deleted this very provision by amendment in 1988. Anyhow, as the facts and the law stands, we hold that there was no evidence on record to prove that there was any under-statesnent of the consideration received by sale of alleged jewellery and in absence of that evidence, we have to observe that the revenue has failed to discharge the onus of burden which lay on it to invoke the provisions of Section 52(2) of the Income-tax Act, 1961. Hence, we decide the issue in favour of the assessee and set aside the order passed by the learned CIT(A).
11. As a result, the appeal, is allowed.