1986 PLP 619 (PTD)

G.P SINGH, C.J.‑‑ This is a reference made by the Income‑tax Appellate Tribunal referring for our answer the following questions of law: ‑ (1) Whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in law in holding that the Commissioner of Income‑tax is trot competent to set aside the assessment order in a case where the income‑tax Officer failed to comply with the provisions of section 52 (2) of the Income‑tax Act, 1961? (2) Whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in law in holding that the assessment order passed by the I.‑T.O. was not prejudicial to the interest of Revenue?

2. The facts briefly stated are that for the assessment year 1972‑73 the Income‑tax Officer computed capital gains earned by the assessee on sales of three houses. Two houses were sold for Rs. 20,000 and Rs. 30,

000. The third house was sold for Rs.48,

000. The I.‑T.0 estimated the fair market value of the first two houses at Rs.1,15,000 as against Rs.50,000 shown in the sale‑deeds. The fair market value of the third house was estimated at Rs.1,86,

000. The I.‑T.O. did not obtain the approval of the Inspecting Assistant Commissioner as required by section 52 (2) in respect of the first two houses for which fair market value was estimated at Rs.1,15,000: The Income‑tax Officer obtained the approval of the Inspecting Assistant Commissioner in respect of the fair market value of the third house. The I.‑T.O. completed the assessment and taxed the assessee under section 52 (2). The Commissioner of Income‑tax by order dated 17th December,1977 revised the assessment order passed by the Income‑tax Officer on the ground that there was omission on his part to take the approval of the Inspecting Assistant Commissioner in respect of the estimate of valuation of two houses. In appeal filed by the assessee against the order of the Commissioner, the Tribunal held that the omission to take the approval of the Inspecting Assistant Commissioner under section 52 (2) did not make the order of the I.‑T.O. prejudicial to the revenue and, therefore, the Commissioner had no power of revisions.

3. Section 52(2) of the I.‑T. Act reads as follows:‑ "(2) Without prejudice to the provisions of subsection (1) if in the opinion of the I.‑T.O. the fair market value of a capital asset transferred by an assessee as on the date of the transfer exceeds the full value of the consideration declared by the assessee in respect of the transfer of such capital asset 1:y an amount of not less than fifteen pet cent of the value so declared, the full value of the consideration for such capital asset shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be its fail market value on the date of its transfer: Provided that this subsection shall not apply in any case‑‑ (a) Where the capital asset is transferred to the Government, or (b) Where the full value of the consideration for the transfer of the capital asset is determined or approved by the Central Government or the Reserve Bank of India and the adequacy of the full value of the consideration so determined or approved is not questioned by the assessee."

4. A reading of section 52 (2) will show that if the I.‑T.O. is of the opinion that the fair market value of a capital asset transferred by an assessee exceeds the full value of the consideration declared by the assessee by an amount of not less than fifteen per cent of the value so declared, the full value of the consideration of such capital asset with the previous approval of the Inspecting Assistant Commissioner will be taken to be its fair market value. Now the provision, requiring the approval of the Inspecting Assistant Commissioner to the estimate mad by the I.‑T.O. is in our opinion, a provision for the benefit, of the assessee. The object behind this provision is that if the I.‑T.O. finds that the fair market value exceeds fifteen per cent of the value declared by the assessee some higher authority should apply its mind and give approval to the estimate of the I.‑T.O. before the assessee is made liable on that basis. Omission on the part of the I.‑T.O. to observe this provision would cause prejudice to the assessee in that the assessment would be made against him without the safeguard of the approval of the Inspecting Assistant Commissioner. The learned Standing Counsel, however, submitted that because of this omission the order of assessment would be set aside in. assessee's appeal and, therefore, the omission would also be prejudicial to the revenue. After an assessment is made without following the requirement of section 52 (2) of taking the approval of the Inspecting Assistant Commissioner, the assessee may accept the assessment, if that is the position, obviously no prejudice to the revenue is occasioned. Further, if the assessee files an appeal and does not dispute the order of assessment on the ground of non‑compliance of the requirement of section 52 (2) again no question of prejudice to the revenue arises. Now even in an appeal where the point is taken that the omission of to approval by the Inspecting Assistant Commissioner made the order of assessment invalid, the appellate authority will not merely set aside the assessment order but would remand the case to the Income‑tax Officer for taking approval of the Inspecting Assistant Commissioner, i.e. for complying with the requirement of section 52 (2). In other words, the appellate authority would do the same thing which the Commissioner can do in revision. Thus the revenue's interest is safeguarded in all eventualities and it cannot be said that the omission to follow the procedure of obtaining the approval of the Inspecting Assistant Commissioner as required by section 52 (2) would result in prejudice to the revenue. Examining the position from all these angles we agree with the Tribunal that the Commissioner had no power of revision for the omission to take the approval of the Inspecting Assistant Commissioner did not make the assessment order passed by the Income‑tax Officer prejudicial to the interest of the revenue.

5. For the reasons given above, we answer both the questions in the affirmative in favour of the assessee and against the Department. There will be no order as to costs of this reference. M. B . A . Reference answered in affirmative.