Kodisetty Suryanarayana Vs. Gift Tax Officer. - Court Judgment

Excerpt:
the assessee had filed this appeal against the order of the dy. cit(a), upholding the order of the gto.2. the appellant during the previous year relevant to the assessment year under appeal sold a house site with a shed at seetaramapuram, vijayawada for a consideration of rs. 70,000. the gto noted that the registration authorities fixed the value of the property for purposes of stamp duty and registration charges at rs. 1,35,000. the gto was, therefore, of the opinion that the appellant has transferred the property otherwise than for adequate consideration and invoked the provisions of s. 4(1)(a) of the gt act, 1958 and computed the taxable gift in a sum of rs. 65,000, being market value less apparent consideration. not being satisfied the matter was taken in appeal before the learned dy. cit(a). the dy. cit(a), for the reasons discussed by him in the impugned order, confirmed the action of the gto holding that the appellant had transferred the property for inadequate consideration and the provisions of s. 4(1)(a) did get attracted. being unsuccessful with the dy. cit(a), the present appeal has been filed before us.3. it is contended by the assessees counsel that the assessing officer has not embarked upon any enquiry or investigation to find out the true market value of the property as laid down under the provisions of the gt act read with the relevant rules. the assessing officer got influenced by the adhoc market value fixed by the registration authorities for the sole purpose of levy of stamp duty and registration charges for purposes of transfer. it is further contended that the values of land and properties are fixed by the registration authorities under the registration act, on the basis of municipal ward numbers and localities and no rational or scientific basis is adopted as is being done under the provisions of the wt act or under the gt act as per s.16a and s. 15(6) of the wt act and gt act respectively. the gto, therefore, grossly erred in taking aid of the market value fixed by the registration authorities for purposes of collection of stamp duty and registration charges and the same cannot form the basis for bringing the appellant within the fold of s. 4(1)(a) of the act. it is also submitted by the assessees counsel that the value of this property as returned for 1984-85 for wealth-tax purposes has been accepted as returned under s. 16(1) of the wt act. the assessees counsel relied on the decision of the madras high court in the case of cgt vs. indo traders & agencies (madras) p. ltd. (1981) 131 itr 313 (mad) and that of the honble supreme court in the case of k. p. verghese vs. ito & anr. (1981) 131 itr 597 (sc).4. relying on the orders of the lower authorities, the learned departmental representative on the other hand submitted that it is not correct to say that the values fixed by the registration authority under the stamp and registration act for purposes of stamp duty and registration charges are arbitrarily fixed. the registrar of assurance have authority under the stamp and registration act and empowered to fix the value of the property and the market value fixed for purposes is having basis and the gto did not go wrong in invoking the provisions of s. 4(1)(a) and assessing the appellant accordingly. he also distinguished the authorities cited by the assessees counsel.5. after hearing the submissions made before us by the representatives of both the parties and perusing the material available with us and the decision cited before us, we are of the opinion that the assessee should succeed in this appeal. admittedly, the assessing officer took the aid of the provisions of s. 4(1)(a) of the gt act considering the value fixed by the registration authorities for purposes of registration of the sale deed of the property in question. the learned departmental representative has not been able to satisfy us as to the manner or basis of the fixation of the marker value of the property in question by the registration authority. no material is found on record in this regard. in the absence of such evidence, it is not easy for us to discern whether the value fixed by the authorities for purposes of registration of transferred documents is the true and fair market value. it is no doubt true that the valuation of properties when referred to the valuation officers under the relevant provisions of the wealth-tax and gift-tax laws are arrived at on a more reasonable, rational and scientific basis and more or less conform to the accepted principles of valuation.6. we have come across a recent decision of the honble high court of andhra pradesh rendered on 26th march, 1992 in the case of m. r. o. & land acquisition officer, palakonda vs. sri jagannadhaswamyvari temple, palakonda being appeal no. 1654 of 1988, arising under the land acquisition act, 1894 which is since published in part 22 of the andhra pradesh law journal 1992(1) dt. 10th june, 1992 at page 89 under the "short notes of recent cases", wherein their lordships have held as under : "the values given in the basic value register cannot be taken as guiding figures to arrive at the reasonable market rate for the land acquired. the values given in the basic value register are fixed taking into account the block wise area but not on scientific data. when the rates in the basic value register have been fixed on area wise, without any scientific data the values mentioned in the basic value register cannot be treated as comparable values of market value at the relevant time. the values given in the basic value register can at best be taken into consideration for the purpose of collection of stamp duty only at the time of registration of documents but not for any other purpose." we have also gone through the decision of the madras high court in (1981) 131 itr 313 (mad) (supra) wherein their lordships have held that before applying the provisions of s. 4(1)(a) of gt act, an investigation has to be made by the assessing officer to see whether there is an attempt at evasion of tax or whether the relevant transaction is bona fide. their lordships further held in the said case that if the consideration which passed between the parties can be considered to be reasonable or fair it cannot be considered to be inadequate because adequate consideration is not necessarily what is ultimately determined by someone else as market value. according to their lordships of the madras high court unless the price was such as to shock the conscience it would not be possible to hold that the transaction is otherwise than for adequate consideration. in the instant case apparently, no enquiry or investigation is made by the assessing officer to find out about the adequacy or inadequacy of consideration or whether or not the market value of the said property was fair or reasonable. in the absence of such a categorical finding it cannot be held that the assessee had transferred the property in question without adequate consideration. it is also noticed by us that the assessee and the transferee are not related to each other. no material has been placed before us nor we find the same being available with the assessing officer to satisfy him that the transfer was not bona fide and that it was tainted with oblique motives, particularly to evade tax. we have also taken note of the decision of the honble supreme court in the case of k. p. varghese vs. ito & anr. (supra) wherein their lordships at page 615 have observed : "it is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the revenue and... ..." in our view, therefore, the assessing officer was not justified in assessing the appellant invoking the provisions of s. 4(1)(a) of the gt act. we, therefore, vacate the orders of the authorities below and allow the appeal of the assessee.

Judgment:
The assessee had filed this appeal against the order of the Dy. CIT(A), upholding the order of the GTO.2. The appellant during the previous year relevant to the assessment year under appeal sold a house site with a shed at Seetaramapuram, Vijayawada for a consideration of Rs. 70,000. The GTO noted that the registration authorities fixed the value of the property for purposes of stamp duty and registration charges at Rs. 1,35,000. The GTO was, therefore, of the opinion that the appellant has transferred the property otherwise than for adequate consideration and invoked the provisions of S. 4(1)(a) of the GT Act, 1958 and computed the taxable gift in a sum of Rs. 65,000, being market value less apparent consideration. Not being satisfied the matter was taken in appeal before the learned Dy. CIT(A). The Dy. CIT(A), for the reasons discussed by him in the impugned order, confirmed the action of the GTO holding that the appellant had transferred the property for inadequate consideration and the provisions of S. 4(1)(a) did get attracted. Being unsuccessful with the Dy. CIT(A), the present appeal has been filed before us.

3. It is contended by the assessees counsel that the Assessing Officer has not embarked upon any enquiry or investigation to find out the true market value of the property as laid down under the provisions of the GT Act read with the relevant rules. The Assessing Officer got influenced by the adhoc market value fixed by the registration authorities for the sole purpose of levy of stamp duty and registration charges for purposes of transfer. It is further contended that the values of land and properties are fixed by the registration authorities under the Registration Act, on the basis of municipal ward numbers and localities and no rational or scientific basis is adopted as is being done under the provisions of the WT Act or under the GT Act as per S.16A and S. 15(6) of the WT Act and GT Act respectively. The GTO, therefore, grossly erred in taking aid of the market value fixed by the registration authorities for purposes of collection of stamp duty and registration charges and the same cannot form the basis for bringing the appellant within the fold of S. 4(1)(a) of the Act. It is also submitted by the assessees counsel that the value of this property as returned for 1984-85 for wealth-tax purposes has been accepted as returned under S. 16(1) of the WT Act. The assessees counsel relied on the decision of the Madras High Court in the case of CGT vs. Indo Traders & Agencies (Madras) P. Ltd. (1981) 131 ITR 313 (Mad) and that of the Honble Supreme Court in the case of K. P. Verghese vs. ITO & Anr. (1981) 131 ITR 597 (SC).

4. Relying on the orders of the lower authorities, the learned Departmental Representative on the other hand submitted that it is not correct to say that the values fixed by the registration authority under the Stamp and Registration Act for purposes of stamp duty and registration charges are arbitrarily fixed. The Registrar of Assurance have authority under the Stamp and Registration Act and empowered to fix the value of the property and the market value fixed for purposes is having basis and the GTO did not go wrong in invoking the provisions of S. 4(1)(a) and assessing the appellant accordingly. He also distinguished the authorities cited by the assessees counsel.

5. After hearing the submissions made before us by the representatives of both the parties and perusing the material available with us and the decision cited before us, we are of the opinion that the assessee should succeed in this appeal. Admittedly, the Assessing Officer took the aid of the provisions of S. 4(1)(a) of the GT Act considering the value fixed by the registration authorities for purposes of registration of the sale deed of the property in question. The learned Departmental Representative has not been able to satisfy us as to the manner or basis of the fixation of the marker value of the property in question by the registration authority. No material is found on record in this regard. In the absence of such evidence, it is not easy for us to discern whether the value fixed by the authorities for purposes of registration of transferred documents is the true and fair market value. It is no doubt true that the valuation of properties when referred to the valuation officers under the relevant provisions of the Wealth-tax and Gift-tax Laws are arrived at on a more reasonable, rational and scientific basis and more or less conform to the accepted principles of valuation.

6. We have come across a recent decision of the Honble High Court of Andhra Pradesh rendered on 26th March, 1992 in the case of M. R. O. & Land Acquisition Officer, Palakonda vs. Sri Jagannadhaswamyvari Temple, Palakonda being Appeal No. 1654 of 1988, arising under the Land Acquisition Act, 1894 which is since published in Part 22 of the Andhra Pradesh Law Journal 1992(1) dt. 10th June, 1992 at page 89 under the "Short Notes of Recent Cases", wherein their Lordships have held as under : "The values given in the Basic Value Register cannot be taken as guiding figures to arrive at the reasonable market rate for the land acquired. The values given in the Basic Value Register are fixed taking into account the block wise area but not on scientific data. When the rates in the Basic Value Register have been fixed on area wise, without any scientific data the values mentioned in the Basic Value Register cannot be treated as comparable values of market value at the relevant time. The values given in the Basic Value Register can at best be taken into consideration for the purpose of collection of stamp duty only at the time of registration of documents but not for any other purpose." We have also gone through the decision of the Madras High Court in (1981) 131 ITR 313 (Mad) (supra) wherein their Lordships have held that before applying the provisions of S. 4(1)(a) of GT Act, an investigation has to be made by the Assessing Officer to see whether there is an attempt at evasion of tax or whether the relevant transaction is bona fide. Their Lordships further held in the said case that if the consideration which passed between the parties can be considered to be reasonable or fair it cannot be considered to be inadequate because adequate consideration is not necessarily what is ultimately determined by someone else as market value. According to their Lordships of the Madras High Court unless the price was such as to shock the conscience it would not be possible to hold that the transaction is otherwise than for adequate consideration. In the instant case apparently, no enquiry or investigation is made by the Assessing Officer to find out about the adequacy or inadequacy of consideration or whether or not the market value of the said property was fair or reasonable. In the absence of such a categorical finding it cannot be held that the assessee had transferred the property in question without adequate consideration. It is also noticed by us that the assessee and the transferee are not related to each other. No material has been placed before us nor we find the same being available with the Assessing Officer to satisfy him that the transfer was not bona fide and that it was tainted with oblique motives, particularly to evade tax. We have also taken note of the decision of the Honble Supreme Court in the case of K. P. Varghese vs. ITO & Anr. (supra) wherein their Lordships at page 615 have observed : "It is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the Revenue and... ..." In our view, therefore, the Assessing Officer was not justified in assessing the appellant invoking the provisions of S. 4(1)(a) of the GT Act. We, therefore, vacate the orders of the authorities below and allow the appeal of the assessee.