Case: K.P. Varghese Vs. The Income Tax Officer,Ernakulam, And Another

48 which provides the mode of computation and under which the starting point of computation is the full value of the consideration received or accruing . What in fact never accrued or was never received cannot be computed as capital gains under s.48. Therefore, sub-s. (2) cannot be construed as bringing within the computation of capital gains an amount which, by no stretch of imagination, can be said to have accrued to the assessee or been received by him and it must be confined to cases where the actual consideration received for the transfer is understated and since in such cases it is very difficult, if not impossible, to determine and prove the exact quantum of the suppressed consideration, sub-s. (2) provides the statutory measure for determining the consideration actually received by the assessee and permits the revenue to take the fair market value of the capital asset as the full value of the consideration received in respect of the transfer 20. This construction which we are placing on sub-s. (2) also marches in step with the Gift-tax Act, 1958. If a capital asset is transferred for a consideration below its market value, the difference between the market value and the full value of the consideration received in respect of the transfer would amount to a gift liable to tax under the G.T. Act, 1958, but if the construction of sub-s. (2) contended for on behalf of the revenue were accepted, such difference would also be liable to be added as part of capital gains taxable under the provisions of the I.T. Act, 1961. This would be an anomalous result which could never have been contemplated by the Legislature, since the I.T. Act, 1961, and the G.T. Act, 1958, are parts of an integrated scheme of taxation and the same amount which is chargeable as gift could not be intended to be charged also as capital gains 21. Moreover, if sub-s. (2) is literally construed as applying even to cases where the full value of the consideration in respect of the transfer is correctly declared or disclosed by the assessee and there is no understatement of the consideration, it would result in an amount being taxed which has neither accrued to the assessee nor been received by him and which from no view-point can be rationally considered as capital gains or any other type of income. It is a well settled rule of interpretation that the court should as far as possible avoid that construction which attributes irrationality to the Legislature. Besides, under entry 82 in List I of the Seventh Schedule to the Constitution, which deals with Taxes on income other than agricultural income and under which the I.T. Act, 1961, has been enacted, Parliament cannot choose to tax as income an item which in no rational sense can be regarded as citizens income or even receipt. Sub-section (2) would, therefore, on the construction of the revenue, go outside the legislative power of Parliament and it would not be possible to justify it even as an incidental or ancillary provision or a provision intended to prevent evasion of tax. Sub-section (2) would also be violative of the fundamental right of the assessee under art. 19(1)(f) which fundamental right was in existence at the time when sub-s. (2) came to be enacted-since on the construction canvassed on behalf of the revenue, the effect of sub-s. (2) would be to penalise the assessee for transferring his capital asset for a consideration lesser by 15% or more than the fair market value and that would constitute unreasonable restriction on the fundamental right of the assessee to dispose of his capital asset at the price of his choice. The court must obviously prefer construction which renders the statutory provision constitutionally valid rather than that which makes it void 22. We must, therefore, hold that sub-s. (2) of s. 52 can be invoked only where the consideration for the transfer has been understated by the assessee or, in other words, the consideration actually received by the assessee is more than what is declared or disclosed by him and the burden of proving such an understatement or concealment is on the revenue. This burden may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is an understatement or concealment of the consideration in respect of the transfer. Sub-section (2) has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, and there is no concealment or suppression of the consideration. We find that in the present case, it was not the contention of the revenue that the property was sold by the assessee to his daughter-in-law and five of his children for consideration which was more than the sum of Rs. 16, 500 shown to be the consideration for the property in the instrument of transfer and there was an understatement or concealment of the consideration in respect of the transfer. It was common ground between the parties and that was a finding of fact reached by the I.T. authorities that the transfer of the property by the assessee was a perfectly honest and bona fide transaction where the full value of the consideration received by the assessee was correctly disclosed at the figure of Rs. 16, 500. Therefore, on the construction placed by us, sub-s. (2) had no application to the present case and the ITO could have no reason to believe that any part of the income of the assessee had escaped assessment so as to justify the issue of a notice under s. 148. The order of reassessment made by the ITO pursuant to the notice issued under s. 148 was accordingly without jurisdiction and the majority judges of the Full Bench were in error in refusing to quash it

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]This argument was based on a strictly literal relief s. 52, subs. (2), but we do not think such a construction can be accepted. It ignores several vital considerations which must always be borne in mind when we are interpreting a statutory provision. The task of interpretation of statutory enactment is not a mechanical task. It is more than a mere reading of mathematical formulae because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the Legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for the expression of human thought and, as pointed out by Lord Denning, it would be idle to expect every statutory provision to bedrafted with divine prescience and perfect clarity .e must not adopt a strictly literal interpretation of s. 52, sub-s. (2), but we must construe its language having regard to the object and purpose which the Legislature had in view in enacting that provision and in the context of the setting in which it occurs. We cannot ignore the context and the collocation of the provisions in which s. 52, sub-s. (2), appears, because, as pointed out by judge Learned Hand in the most felicitous language.. ...... the meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create7. The primary objection against the literal construction of s. 52, subs. (2), is that it leads to manifestly unreasonable and absurd. It is true that the consequences of a suggested construction cannot alter the meaning of a statutory provision but it can certainly help to fix its meaning. It is a well-recognised rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. There are many situations Where the construction suggested on behalf of the revenue would lead to a wholly unreasonable result which could never have been intended by the Legislature. Take, for example, a case where A agrees to sell his property to B for a certain price and before the sale is completed pursuant to the agreement-and it is quite well known that sometimes the completion of the sale may take place even a couple of years after the date of the agreement-the market price shoots up with the result that the market price prevailing on the date of the sale exceeds the agreed price, at which the property is sold, by more than 15% of such agreed price. This is not at all an uncommon case in an economy of rising prices and in fact we would find in a large number of cases where the sale is completed more than a year or two after the date of the agreement that the market price prevailing on the date of the sale is very much more than the price at which the property is sold under the agreement.would indeed be most harsh and inequitable to tax the assessee on income which has neither arisen to him nor is received by him, merely because he has carried out the contractual obligation undertaken by him. It is difficult to conceive of any rational reason why the Legislature should have thought it fit to impose liability to tax on an assessee who is bound by law to carry out his contractual obligation to sell the property at the agreed price and honestly carries out such a contractual obligation. It would indeed be strange if obedience to the law should attract the levy of tax on income which has neither arisen to the assessee nor has been received by him. If we may take another illustration, let us consider a case where sells his property to B with a stipulation that after some time which may be a couple of years or more, he shall re-sell the property to A for the same price. Could it be contended in such a case that when B transfers the property to A for the same price at which he originally purchased it, he should be liable to pay tax on the basis as if he has received the market value of the property as on the date of re-sale, if, in the meanwhile, the market price has shot up and exceeds the agreed price by more than 15%. Many other similar situations can be contemplated where it would be absurd and unreasonable to apply s. 52, sub-s. (2), according to its strict literal construction. We must, therefore, eschew literalness in the interpretation of s. 52, sub-s. (2), and try to arrive at an interpretation which avoids this absurdity and mischief and makes the provision rational and sensible, unless of course, our hands are tied and we cannot find any escape from the tyranny of the literal interpretation. It is now a well-settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the Legislature, the court may modify the language used by the Legislature or evento it, so as to achieve the obvious intention of the Legislature and produce a rational construction: VideLuke v. IRC [1963] AC 557; [1964] 54 ITR. The court may also in such a case read into the statutory provision a condition which, though not expressed, is implicit as constituting the basic assumption underlying the statutory provision. We think that, having regard to this well-recognised rule of interpretation, a fair and reasonable construction of s. 52, sub-s. (2), would be to read into it a condition that it would apply only where the consideration for the transfer is understated or, in other words, the assessee has actually received a larger consideration for the transfer than what is declared in the instrument of transfer and it would have no application in the case of a bona fide transaction where the full value of the consideration for the transfer is correctly declared by the assessee. There are several important considerations which incline us to accept this construction of s. 52, sub-s. (2)8. The first consideration to which we must refer is the object and purpose of the enactment of s. 52, sub-s. (2).Now, it is necessary to bear in mind that when capital gains are computed by invoking sub-s. (1) it is not any fictional accrual or receipt of income which is brought to tax. Sub-section (1) does not deem income to accrue or to be received which in fact never accrued or was never received. It seeks to bring within the net of taxation only that income which has accrued or is received by the assessee as a result of the transfer of the capital asset. But since the actual consideration received by the assessee is not declared or disclosed and in most of the cases, if not all, it would not be possible for the ITO to determine precisely what is the actual consideration received by the assessee or in other words how much more consideration is received by the assessee than that declared by him, sub-s. (1) provides that the fair market value of the property as on the date of the transfer shall be taken to be the full value of the consideration for the transfer which has accrued to or is received by the assessee. Once it is found that the consideration in respect of the transfer is under-stated and the conditions specified in sub-s. (1) are fulfilled, the ITO will not be called upon to prove the precise extent of the under-valuation or, in other words, the actual extent of the concealment and the full value of the consideration received for the transfer shall be computed in the manner provided in sub-s. (1). The net effect of this provision is as if a statutory best judgment assessment of the actual consideration received by the assessee is made, in the absence of reliable materials9. But the scope of sub-s. (1) of s. 52 is extremely restricted because it applies only where the transferee is a person directly or indirectly connected with the assessee and the object of the under-statement is to avoid or reduce the income-tax liability of the assessee to tax on capital gains. There may be cases where the consideration for the transfer is shown at a lesser figure than that actually received by the assessee but the transferee is not a person directly or indirectly connected with the assessee or the object of under-statement of the consideration is unconnected with tax on capital gains. Such cases would not be within the reach of sub-s. (1) and the assessee, though dishonest, would escape the rigour of the provision enacted in that sub-section. Parliament, therefore, enacted sub-s. (2) with a view to extending the coverage of the provision in sub-s. (1) to other cases of under-statement of consideration.This becomes clear if we have regard to the object and purpose of the introduction of sub-s. (2) as appearing from travaux preparatoire relating to the enactment of that provision. It is a sound rule of construction of a statute firmly established in England as far back as 158410. This rule being a rule of construction has been repeatedly applied in India in interpreting statutory provisions. It would therefore, be legitimate in interpreting sub-s. (2) to consider what was the mischief and defect for which s. 52 as it then stood did not provide and which was sought to be remedied by the enactment of sub-s. (2) or, in other words, what was the object and purpose of enacting that sub-section.. Now, it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning everything which is logically relevant should be admissible.Now, in this connection the speech made by the Finance Minister while moving the amendment introducing sub-s, (2) is extremely relevant, as it throws considerable light on the object and purpose of the enactment of sub-s. (2).speech made by the Finance Minister while moving the amendment introducing sub-s. (2) clearly states what were the circumstances in which sub-s. (2) came to be passed, what was the mischief for which s. 52 as it then stood did not provide and which was son lit to be remedied by the enactment of sub-s. (2) and why the enactment of sub-s. (2) was found necessary. It is apparent from the speech of the Finance Minister that sub-s. (2) was enacted for the purpose of reaching those cases where there was under-statement of consideration in respect of the transfer or to put it differently the actual consideration received for the transfer was considerably more than that declared or shown by the assessee, but which were not covered by sub-s. (1) because the transferee was not directly or indirectly connected with the assessee . The object and purpose of sub-s. (2), as explicated from the speech of the Finance Minister, was not to strike at honest and bona fide transactions where the consideration for the transfer was correctly disclosed by the assessee but to bring within the net of taxation those transactions where the consideration in respect of the transfer was shown at a lesser figure than that actually received by the assessee, so that they do not escape the charge of tax on capital gains by understatement of the consideration. This was the real object and purpose of the enactment of sub-s. (2) and the interpretation of this sub-section must fall in line with the advancement of that object and purpose. We must, therefore, accept as the underlying assumption of sub-s. (2) that there is an under-statement of consideration in respect of the transfer and sub-s. (2) applies only where the actual consideration received by the assessee is not disclosed and the consideration declared in respect of the transfer is shown at a lesser figure than that actually received12. This interpretation of sub-s. (2) is strongly supported by the marginal note to s. 52It is undoubtedly true that the marginal note to a section cannot be referred to for the purpose of construing the section but it can certainly be relied upon as indicating the drift of the section or, to use the words of Collins M.R. inBushel v. Hammond [1904] 2 KB 563to show what the section is dealing with. It cannot control the interpretation of the words of a section particularly when the language of the section is clear and unambiguous but, being part of the statute, it prima facie furnishes some clue as to the meaning and purpose of the section: vide Bengal Immunity Co. Ltd. v. State of Bihar [1955] 2 SCR 603  ; [1955] 6 STC 446.   The marginal note to s. 52, as it now stands, was originally marginal note only to what is presently sub-s. (1), and significantly enough, this marginal note remains unchanged even after the introduction of subs. (2), suggesting clearly that it was meant by Parliament to apply to both sub-sections of s. 52 and it must, therefore, be taken as indicating that, like sub-s. (1), sub-s. (2) is also intended to deal with cases where there is an understatement of the consideration in respect of the transfer13. But apart from these considerations, the placement of sub-s. (2) in s. 52 does indicate in some small measure that Parliament intended that sub-section to apply only to cases where the consideration in respect of the transfer is understated by the assessee. It is not altogether without significance that the provision in sub-s. (2) was enacted by Parliament not as a separate section, but as part of s. 52 which, as it originally stood, dealt only with cases of under-statement of consideration. If Parliament intended sub-s. (2) to cover all cases where the condition of 15% difference is satisfied, irrespective of whether there is understatement of consideration or not, it is reasonable to assume that Parliament would have enacted that provision as a separate section and not pitchforked it into s. 52 with a total stranger under an inappropriate marginal note. Moreover, there is inherent evidence in sub-s. (2) which suggests that the thrust of that subsection is directed against cases of understatement of consideration. The crucial and important words in sub-s. (2) are:the full value of the consideration declared by the assesseeis very eloquent and revealing. It clearly indicates that the focus of sub-s. (2) is on the consideration declared or disclosed by the assessee as distinguished from the consideration actually received by him and it contemplates case where the consideration received by the assessee in respect of the transfer is not truly declared or disclosed by him but is shown at a different figure. This of course is a very small factor and by itself is of little consequence but along with the other factors which we have discussed above, it assumes same significance as throwing light on the true intent of sub-s. (2)There is also one other circumstance which strongly reinforces the view we are taking in regard to the construction of sub-s. (2). Soon after the introduction of sub-s. (2), the CBDT, in exercise of the power conferred under s. 119 of the Act, issued a circular dated 7th July, 1964, explaining the scope and object of sub-s. (2)14. The circular also drew the attention of the I.T. authorities to the assurance given by the Finance Minister in his speech that sub-s. (2) was not aimed at perfectly honest and bona fide transactions where the consideration in respect of the transfer was correctly disclosed or declared by the assessee, but was intended to deal only with cases-where the consideration for the transfer was understated by the assessee and was shown at a lesser figure than that actually received by him. It appears that despite this circular, the I.T. authorities in several cases levied tax by invoking the provision in sub-s. (2) even in cases where the transaction was perfectly honest and bona fide and there was no understatement of the consideration. This was quite contrary to the instructions issued in the circular which was binding on the tax department and the CBDT was, therefore, constrained to issue another circular on 14th January, 1974,These two circulars of the CBDT are, as we shall presently point out, binding on the tax department in administering or executing the provision enacted in sub-s. (2), but quite apart from their binding character, they are clearly in the nature of contemporanea expositio furnishing legitimate aid in the construction of sub-s. (2). The rule of construction by reference to contemporanea expositio is a well-established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguousis clear from these two circulars that the CBDT, which is the highest authority entrusted with the execution of the provisions of the Act, understood sub-s. (2) as limited to cases where the consideration for the transfer has been understated by the assessee and this must be regarded as a strong circumstance supporting the construction which we are placing on that sub-sectionThis rule has been succinctly and felicitously expressed in Crawford on Statutory Construction, 1940 Edn., where it is stated in paragraph 219 that:administrative construction (i.e., contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive.15. But the construction which is commending itself to us does not rest merely on the principle of contemporanea expositio. The two circulars of the CBDT to which we have just referred are legally binding on the revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of subs. (2) and they depart or deviate from such construction. It is now well settled as a result of two decisions of this court, one in Navnit Lal C. Javeri v. K. K. Sen, AAC [1965] 56 ITR 198     and the other in Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913     that circulars issued by the CBDT under s. 119 of the Act are binding on all officers and persons employed in the execution of the Act even if they deviate from the provisions of the Act.16. The two circulars of the CBDT, referred to above, must, therefore, be held to be binding on the revenue in the administration or implementation of sub-s. (2) and this sub-section must be read as applicable only to cases where there is understatement of the consideration in respect of the transfer17. Thus, it is not enough to attract the applicability of sub-s. (2), that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared in respect of the transfer by not less than 15% of the value so declared, but it is furthermore necessary that the full value of the consideration in respect of the transfer is understated or, in other words, shown at a lesser figure than that actually received by the assessee. Sub-section (2) has no application in the case of an honest and bona fide transaction where the consideration in respect of the transfer has been correctly declared or disclosed by the assessee, even if the condition of 15% difference between the fair market value of the capital asset as on the date of the transfer andthe full value of the consideration declared by the assesseeis satisfied. If, therefore, the revenue seeks to bring a case within sub-s. (2), it must show not only that the fair market value of the capital asset as on the date of the transfer exceedsthe full value of the consideration declared by the assesseeby not less than 15% of the value so declared, but also that the consideration has been understated and the assessee has actually received more than what is declared by him. There are two distinct conditions which have to be satisfied before sub-s. (2) can be invoked by the revenue and the burden of showing that these two conditions are satisfied rests on the revenue. It is for the revenue to show that each of these two conditions is satisfied and the revenue cannot claim to have discharged this burden which lies upon it, by merely establishing that the fair market value of the capital asset as on the date of the transfer exceeds by 15% or more the full value of the consideration declared in respect of the transfer and the first condition is, therefore, satisfied. The revenue must go further and prove that the second condition is also satisfied. Merely by showing that the first condition is satisfied, the revenue cannot ask the court to presume that the second condition too is fulfilled, because even in a case where the first condition of 15% difference is satisfied, the transaction may be a perfectly honest and bona fide transaction and there may be no understatement of the consideration. The fulfilment of the second condition has, therefore, to be established independently of the first condition and merely because the first condition is satisfied, no inference can necessarily follow that the second condition is also fulfilled. Each condition has got to be viewed and established independently before sub-s. (2) can be invoked and the burden of doing so is clearly on the revenue. It is well-settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the revenue and the second condition being as much a condition of taxability as the first, the burden lies on the revenue to show that there is an understatement of the consideration and the second condition is fulfilled. Moreover, to throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible burden upon him to establish a negative, namely, that he did not receive any consideration beyond that declared by himis a well-known fact borne out by practical experience that the determination of fair market value of a capital asset is generally a matter of estimate based to some extent on guess work and despite the utmost bona fides, the estimate of the fair market value is bound to vary from individual to individual. It is obvious that if the restrictive condition of a difference of 15% or more between the fair market value of the capital asset as on the date of the transfer and the consideration declared in respect of the transfer were not provided in sub-s. (2), many marginal cases would, having regard to the possibility of difference of opinion in subjective assessment of the fair market value, fall within the mischief of that sub-section and the statutory measure enacted in that sub-section for determining the consideration actually received by the assessee would be applicable in all its rigour in such cases. This condition of 15% or more difference is merely intended to be a safeguard against the undue hardship which would be occasioned to the assessee if the inflexible rule of thumb enacted in sub-s. (2) were applied in marginal cases and it has nothing to do with the question of burden of proof, for, the burden of establishing that there is an understatement of the consideration in respect of the transfer always rests on the revenue. The postulate underlying subs. (2) is that the difference between one honest valuation and another may range up to 15% and that constitutes the class of marginal cases which are taken out of the purview of sub-s. (2) in order to avoid hardship to the assessee19. It is, therefore, clear that sub-s. (2) cannot be invoked by the revenue unless there is understatement of the consideration in respect of the transfer and the burden of showing that there is such understatement is on the revenue. Once it is established by the revenue that the consideration for the transfer has been understated or, to put it differently, the consideration actually received by the assessee is more than what is declared or disclosed by him, sub-s. (2) is immediately attracted, subject of course to the fulfilment of the condition of 15% or more difference, and the revenue is then not required to show what is the precise extent of the understatement or in other words, what is the consideration actually received by the assessee. That would in most cases be difficult, if not impossible, to show and hence sub-s. (2) relieves the revenue of all burden of proof regarding the extent of understatement or concealment and provides a statutory measure of the consideration received in respect of the transfer. It does not create any fictional receipt. It does not deem as receipt something which is not in fact received. It merely provides a statutory best judgment assessment of the consideration actually received by the assessee and brings to tax capital gains on the footing that the fair market value of the capital asset represents the actual consideration received by the assessee as against the consideration untruly declared or disclosed by him. This approach in the construction of sub-s. (2) falls in line with the scheme of the provisions relating to tax on capital gains. It may be noted that s. 52 is not a charging section but is a computation section. It has to be read along with s. 48 which provides the mode of computation and under which the starting point of computation isthe full value of the consideration received or accruing . What in fact never accrued or was never received cannot be computed as capital gains under s.48. Therefore, sub-s. (2) cannot be construed as bringing within the computation of capital gains an amount which, by no stretch of imagination, can be said to have accrued to the assessee or been received by him and it must be confined to cases where the actual consideration received for the transfer is understated and since in such cases it is very difficult, if not impossible, to determine and prove the exact quantum of the suppressed consideration, sub-s. (2) provides the statutory measure for determining the consideration actually received by the assessee and permits the revenue to take the fair market value of the capital asset as the full value of the consideration received in respect of the transfer20. This construction which we are placing on sub-s. (2) also marches in step with the Gift-tax Act, 1958. If a capital asset is transferred for a consideration below its market value, the difference between the market value and the full value of the consideration received in respect of the transfer would amount to a gift liable to tax under the G.T. Act, 1958, but if the construction of sub-s. (2) contended for on behalf of the revenue were accepted, such difference would also be liable to be added as part of capital gains taxable under the provisions of the I.T. Act, 1961. This would be an anomalous result which could never have been contemplated by the Legislature, since the I.T. Act, 1961, and the G.T. Act, 1958, are parts of an integrated scheme of taxation and the same amount which is chargeable as gift could not be intended to be charged also as capital gains21. Moreover, if sub-s. (2) is literally construed as applying even to cases where the full value of the consideration in respect of the transfer is correctly declared or disclosed by the assessee and there is no understatement of the consideration, it would result in an amount being taxed which has neither accrued to the assessee nor been received by him and which from no view-point can be rationally considered as capital gains or any other type of income. It is a well settled rule of interpretation that the court should as far as possible avoid that construction which attributes irrationality to the Legislature. Besides, under entry 82 in List I of the Seventh Schedule to the Constitution, which deals with Taxes on income other than agricultural income and under which the I.T. Act, 1961, has been enacted, Parliament cannot choose to tax as income an item which in no rational sense can be regarded as citizens income or even receipt. Sub-section (2) would, therefore, on the construction of the revenue, go outside the legislative power of Parliament and it would not be possible to justify it even as an incidental or ancillary provision or a provision intended to prevent evasion of tax. Sub-section (2) would also be violative of the fundamental right of the assessee under art. 19(1)(f) which fundamental right was in existence at the time when sub-s. (2) came to be enacted-since on the construction canvassed on behalf of the revenue, the effect of sub-s. (2) would be to penalise the assessee for transferring his capital asset for a consideration lesser by 15% or more than the fair market value and that would constitute unreasonable restriction on the fundamental right of the assessee to dispose of his capital asset at the price of his choice. The court must obviously prefer construction which renders the statutory provision constitutionally valid rather than that which makes it voidThe argument of the revenue was, and this argument found favour with the majority judges of the Full Bench, that on a plain and natural construction of the language of s. 52, sub-s. (2), the only condition for attracting the applicability of that provision was that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceededthe full value of the consideration declared by the assesseein respect of the transfer by an amount of not less than 15% of the value so declared. Once the ITO is satisfied that this condition exists, he can proceed to invoke the provision in s. 52, sub-s. (2), and take the fair market value of the capital asset transferred by the assessee as on the date of the transfer as representing the full value of the consideration for the transfer of the capital asset and compute the capital gains on that basis. No more is necessary to be proved, contended the revenue. To introduce any further condition such as under-statement of consideration in respect of the transfer would be to read into the statutory provision something which is not there; indeed, it would amount to re-writing the section.order of reassessment made by the ITO pursuant to the notice issued under s. 148 was accordingly without jurisdiction and the majority judges of the Full Bench were in error in refusing to quash it22. We must, therefore, hold that sub-s. (2) of s. 52 can be invoked only where the consideration for the transfer has been understated by the assessee or, in other words, the consideration actually received by the assessee is more than what is declared or disclosed by him and the burden of proving such an understatement or concealment is on the revenue. This burden may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is an understatement or concealment of the consideration in respect of the transfer. Sub-section (2) has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, and there is no concealment or suppression of the consideration. We find that in the present case, it was not the contention of the revenue that the property was sold by the assessee to his daughter-in-law and five of his children for consideration which was more than the sum of Rs. 16, 500 shown to be the consideration for the property in the instrument of transfer and there was an understatement or concealment of the consideration in respect of the transfer. It was common ground between the parties and that was a finding of fact reached by the I.T. authorities that the transfer of the property by the assessee was a perfectly honest and bona fide transaction where the full value of the consideration received by the assessee was correctly disclosed at the figure of Rs. 16, 500. Therefore, on the construction placed by us, sub-s. (2) had no application to the present case and the ITO could have no reason to believe that any part of the income of the assessee had escaped assessment so as to justify the issue of a notice under s. 148.