BRIJMONI DEVI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court :

(2.) The assessee was one Shri Laxmandas Agarwalla and was dead and the assessment was made upon the legal heirs, Smt. Brijmoni Devi and others. This reference relates to the assessment year 1965-66 for which the previous year ended on the Dewali 2021. The assessee stated before the ITO that the property at No 7, Jatindra Mohan Avenue, Calcutta, has been sold for Rs. 3 lakhs to Prayag Devi Trust, a trust created by Shri Laxmandas Agarwalla in which he and his wife, Smt. Brijmoni Devi, were trustees. The building was a five-storeyed brick-built building constructed on 10 cottahs-7 sq. ft. of land. The property was mortgaged to M/s. Allahabad Bank Ltd. to cover up the security for overdraft arrangement along with the other shares, etc. On the 30th June, 1960, the building was released by payment of Rs. 3 lakhs to the bank. According to the assessee the valuation as on the 1st January, 1954, should be substituted in place of the original cost, which could not be furnished. After considering the valuation report made by M/s. Ballardie Thompson & Mathews of No. 7, Wellesley Place, Calcutta, the ITO held that when the consent of this hon'ble court was obtained on the 20th August, 1957, and when the sale was effected OH the 20th November, 1963, there was no liability cast upon the vendor to sell the property at the price approved by the court even if the price went up substantially when the property was actually transferred. He also found that the assessee intended to transfer the property to the trust in which the assessee was a trustee at a value and after finding the valuation made by the approved valuer, M/s. Ballardie Thompson & Mathews at Rs. 3 lakhs 50 thousand, it could not be accepted, according to the ITO, that the value of the property would be less than the value in 1957 by Rs. 50,000. He also found that no details about the basis of the valuation report adopted by M/s Ballardie Thompson & Mathews had even been submitted by the assessee. He thus concluded that in the absence of any data available and considering the rise in prices of land and building in cities particularly in Calcutta, it would be fair and reasonable to estimate the value of the property at Rs. 4 lakhs. He thus included Rs. 1 lakh as capital gains in the total income of the assessee which included the income from property, income from business and income from dividend.

(3.) When the assessee went up in appeal before the AAC, he held that the ITO's view was rather liberal when the ITO estimated the fair market value of the property at Rs. 4 lakhs six years later and after considering the provisions of Sections 43 and 52(2) of the Act he held that the transfer was effected with the object of avoidance or reduction of the liability as provided in the Act. The assessee went up in appeal before the Tribunal.