Commissioner of Income Tax vs Rattan Chand Oswal

D.K. Jain, CJ.

By this petition u/s 26(3) of the Gift-tax Act, 1958, (for short the Act) the revenue seeks a direction to the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short the Tribunal) to state the case and refer the following question, stated to be one of law, arising out of G.T.A. No. 30/Chandi/82 pertaining to the assessment year 1974-75:

"Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in directing the Gift Tax Officer to adopt the value of the gifted shares as declared by the assessee ?"

Briefly stated, the material facts relevant for the purpose of this petition are as follows:

During the course of proceedings under the Income Tax for the relevant assessment year, the Income Tax Officer noticed that the assessee had sold 776 shares of M/s. Oswal Spinning and Weaving Mills Limited at the face value of Rs. 100 per share. He referred the matter of valuation of these shares to the Valuation Officer u/s 55A of the Income Tax Act, 1961, who evaluated the shares at Rs. 358.50 per share. Adopting the said value he computed the capital gains of the shares transferred in the hands of the assessee. Simultaneously, as Gift Tax Officer he treated the difference between the declared sale consideration and the value of the shares as determined by the Valuation Officer as deemed gift and subjected an amount of Rs. 2,00,596 to gift tax.

Aggrieved, the assessee preferred appeal to the Appellate Assistant Commissioner of Income Tax, who set aside the assessment, inter alia, on the ground that the method of valuation adopted by the Valuation Officer was not correct, in view of the decision of the Apex court in Commissioner of Wealth Tax Vs. Mahadeo Jalan and Mahabir Prasad Jalan and Others etc., .

Being aggrieved by the said order, the revenue as well as the assessee took the matter in further appeal to the Tribunal, Vide order dated 10-5-1983, the Tribunal has come to the conclusion that in view of the fact the action of the Income Tax Officer in enhancing the capital gains on the basis of the valuation report, had been set aside by the First Appellate Authority and the said decision had been accepted by the revenue, as the capital gains have been computed by the assessing officer on the basis of the sale consideration declared by the assessee, on the same analogy for the purpose of gift-tax, the value of the share had to be taken at the rate declared by the assessee. While coming to the conclusion that there has been no understatement of value of shares declared by the assessee, the Tribunal has relied on the decision of the Supreme Court in K.P. Varghese Vs. Income Tax Officer, Ernakulam and Another, .

Revenue''s application u/s 26(1) of the Act having been dismissed, the present petition has been filed.

Having heard learned counsel for the parties, we are of the view that no question of law arises from the order of the Tribunal. The only material before the Gift Tax Officer to reject the value of shares declared by the assessee was the valuation report obtained by the Income Tax Officer for computing the capital gains. This report having been rejected by the appellate authority, the whole foundation for bringing the aforementioned amount to tax as deemed gift was automatically knocked off.

in the absence of any other material with the Gift Tax Officer to prove that the value of shares declared by the assessee was not correct, the declared value had to be accepted. No fault can be found with the view taken by the Tribunal accepting the value of the share declared by the assessee.

Consequently, the application, being bereft of any merit, is dismissed.