BISHWANATH SINGH SHARMA Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) This is an application under Section 66(3), Income-tax Act, by one Bishwanath Singh Sharma, and the question which arises upon this application has been formulated in these words: Whether under the circumstances of the case there was any evidence before the income tax department to show that the market value of the properties in question was higher than the price bid for them by the petitioner at the public sale.

(2.) The properties referred to in this question are three sets of properties which were purchased by the petitioner assessee during the year of assessment in execution of his mortgage decree against three of his debtors named Gopal Singh, Palto Rai and Nemo Rai. The assessee though a money-lender did not mention these purchases in his return, but the income-tax officer came to know about them, and he at once proceeded to inquire what effect they would have upon his assessment. During the inquiry the assessee claimed that as a result of these purchases he had sustained losses of Rs. 9212, Rs. 3922 and Rs. 6794 respectively, these sums representing, according to him, the difference between the decretal amounts and the amount fetched by the properties at the sale. The income-tax officer however dismissed the claim of the assessee in these words: The claim for loss is obviously frivolous, since the amounts for which these properties are shown to have been purchased are much in excess of the principal involved in each case; and that no portion of these amounts were even taxed in the past.

(3.) The income-tax officer then addressed himself to the question as to what was the amount of interest realized by the assessee by means of the purchases, and after referring to certain matters he came to the conclusion that the assessee must be taken to have realized the full amount of the decree by purchasing these properties, and therefore the total amount of interest which he realized by means of purchasing these properties was Rs. 28,297 and the assessee was liable to pay tax upon this sum along with other sums. The assessee then appealed to the Assistant Commissioner of Income-tax, and one of the questions which was-raised before him was whether in computation of assessable profit the value of the- properties purchased should be taken to bathe value at which the properties were purchased by the assessee at the auction sale or whether it wag permissible for the income-tax department to make an inquiry as to the real value of the properties acquired. The Assistant Commissioner of Income-tax after referring to the decision of the Privy Coun. oil in Raja Raghnandan Prasad V/s. Commissioner of Income-tax, B. & O came to the conclusion that it was open to him to inquire into the real value of the property. He, then, taking the case of the three debtors individually, upheld the order of the income-tax officer with certain modifications. The assessee then went up to the Commissioner, who made certain further modifications but the assessee not being satisfied with them, has come? up to this Court under Section 66(8), Income-tar Act. Now, for the purpose of answering the question which arises in this case, it will be necessary to take up the case of each of the three debtors separately. I will first take up the case of Nemo Rai. It appears from the petition filed by the assessee in this Court that the total amount of decretal dues for which the property of this debtor was advertised for sale was Rs. 11,222. The property which was advertised for sale was. valued by the Court at Rs. 4085, and it was purchased by the assessee at Rs. 7300. The Income-tax Commissioner has held that the property was worth at least Rs. 10,000, and in doing so he has relied upon an admission made by the assessee himself that the lands which were purchased, by him were worth Rs. 225 to Rs. 300 a bigha. The Assistant. Commissioner of Income-tax also relying upon this admission, has stated in his order that the value of the land can be safely estimated to be Rs. 250 per bigha. As the land belonging to Nemo Rai was 44 bighas 15 kathas, the Assistant Commissioner valued it at Rs. 10,000. In my opinion the admission made by the assessee was a relevant piece of evidence which the Assistant Commissioner of Income-tax was justified in taking into, consideration in valuing the land and so far as the property of this debtor is concerned the question before us must be answered in favour of the income-tax department.