BURAGADDA SATYANARAYANA MURTHI Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner and his sons constituted a Hindu undivided family. THEre was a partition between the members of the family on April 19, 1952. In that partition, a site measuring about 2,000 square yards together with sheds thereon fell to the share of the petitioner. Subsequently, he constructed certain godowns and shops during the years 1961 to 1963. THE total cost of the site together with structures and buildings came to Rs. 64,042; for the construction of the building the petitioner borrowed Rs. 50,502.49 from his divided sons and other amounts from others. For the discharge of the debts due to the sons, the petitioner sold the site and structures for a total consideration of Rs. 80,000 in favour of his sons under a sale deed dated April 15, 1963. For the assessment year 1964-65, the petitioner filed a revised return of income on February 10, 1967, including therein the amount of Rs. 10,958 as capital gains in respect of this transaction. This amount was arrived at by deducting the cost of the capital asset, namely, Rs. 64,042 from the sale consideration of Rs. 80,000 and making other permissible deductions. THE Income-tax Officer, B-Ward, Tenali, issued a pre-assessment notice dated June 24, 1968, estimating the value of the building and site sold at Rs. 1,30,586, and called upon the petitioner to file his objections, if any, against the proposed valuation. THE petitioner submitted that the value of the building and the site would come to Rs. 86,380 and as he had sold it for a lump sum of Rs. 80,000 the variation is very small and as he was disposing of the property as a whole, the value for which the property was sold was reasonable and fair priced. He stated that the proposed estimate of the building at Rs. 1,30,586 was uncalled for and unwarranted. THE Income-tax Officer finalised the assessment of the petitioner for the year 1964-65 on the 28th September, 1968. While making the assessment he estimated the fair market value of the properties at Rs. 1,14,000 and fixed the capital gains at Rs. 44,960 after allowing initial exemption of Rs. 5,000 and levied a tax of Rs. 6,905 and super-tax on capital gains; In the assessment order he observed that as the purchasers are the assessee's sons he had reason to believe that the transfer of the property was effected with the object of avoidance of tax liability and, therefore, under Section 45 read with Section 52 of the Income-tax Act, the capital gains was fixed as the difference between Rs. 1,14,000 which was the fair market value and Rs. 64,042 which is the cost of the asset.

(2.) SUBSEQUENTLY, as there was mistake in the method of computation of other income, the Income-tax Officer by his order dated January 31, 1969, rectified the mistake and the tax on capital gains was fixed at Rs. 5,244.

(3.) THE petitioner has filed this writ petition for the issue of a writ of certiorari quashing the order of assessment dated September 28, 1968, as amended on February 24, 1970, and for a direction to refund the amount of the capital gains tax collected from the petitioner for the assessment year 1964-65.