COMMISSIONER OF INCOME TAX Vs. MANA G SARABHAI

JUDGEMENT

(1.) THE Tribunal has referred the following questions to this Court under S. 266(1) of the IT Act, 1961 :

(2.) BOTH the questions have been referred at the instance of the Revenue as the Tribunal held that the ITO was not justified in invoking S. 52(1) of the IT Act in view of the facts and circumstances of the case. The question arose out of the claim made by the assessee in respect of the short term capital loss claimed by the assessee as allowable deduction. The Supreme Court in K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC), has held that Sub S. (2) of S. 52 of the IT Act, 1961 can be invoked only where the consideration for the transfer of a capital asset has been understated by the assessee. It has also been held that S. 52(1) does not deem income to accrue or to be received which in fact never accrued or was never received. It is also held that the onus in establishing that the conditions of taxability are fulfilled is always on the Revenue. In view of this judgment of the Supreme Court, question No. 1 will have to be answered in the negative that is against the Revenue and in favour of the assessee. Question No. 2 will have to be answered in the affirmative, that is against the Revenue and in favour of the assessee. The Reference is disposed of accordingly with no order as to costs.