COMMISSIONER OF INCOME TAX Vs. HEPTULLA A A

JUDGEMENT

(1.) THE questions of law raised in this reference at the instance of the Revenue are :

(2.) BRIEFLY stated, the relevant facts are that the assessee is an individual and the proceedings relate to the asst. year 1965 66. The assessee sold a plot of land admeasuring 3.125 sq. yards and a structure thereon during the previous year for a sum of Rs. 3,90,625. He computed the capital gain on this transaction at Rs. 1,36,946 by estimating the market value of the property as on 1st Jan., 1954, at Rs. 2,16,250. This was on the basis of a valuer's report. There was no dispute that the assessee had incurred expenditure of Rs. 37,429 in connection with the sale. The ITO did not accept the assessee's estimate of valuation of the property as on 1st Jan., 1954. According to him, the value of the property as on 1st Jan., 1954, could be reasonably estimated at Rs. 1,13,125 only. This he did by valuing the land at the rate of Rs. 17 per sq. yard as against Rs. 50 per sq. yard by the assessee's valuer. In this manner, the ITO computed the capital gain at Rs. 2,40,071 in place of Rs. 1,36,946 declared by the assessee.

(3.) THE Department filed an appeal before the Tribunal. It was argued that the AAC was not justified in treating the sale of the property for a consideration of Rs. 45,000 in March, 1957 as a gift and, consequently, he was equally unjustified in holding that the fair market value of the property was required to be estimated as on 1st Jan., 1954, for the purpose of computing the capital gain. However, the Tribunal was impressed with the assessee's submission that the property having been purchased at a distress sale in 1946, the sale of it for a paltry sum of Rs. 45,000 in March, 1957 could not be genuine, particularly, as the seller was none else than the assessee's father who died within 20 days of the execution of the deed of sale. Having regard to the fact that a sum of Rs. 45,000 was, in fact, paid by the assessee to his father, the Tribunal considered it reasonable to assume that 2/3rds of the property was a gift and the remaining 1/3rd was a sale for Rs. 45,000. The Tribunal then estimated the fair market value of the 2/3rds of the property at Rs. 74,682 as on 1st Jan., 1954, on the basis of the ITO's own estimate and the cost of the entire property at Rs. 1,13,125 by adding Rs. 45,000 as the value of the 1/3rd of the property purchased in 1957 and reduced the computation of the capital gain from Rs. 2,40,071 to Rs. 2,35,514, thereby giving a relief of Rs. 4,557 to the assessee in the Departmental appeal.