Case: Commissioner of Income Tax, West Bengal, and Another Vs. George Henderson and Company Limited

it sold the shares to Giridharilal Mehta at Rs. 136 per share when the market price of the shares stood at Rs. 620 per share and also why Giridharilal Mehta again sold the shares on the same date at Rs. 100 per share at a loss of Rs. 54, 000, and then again within a few months thereafter, why Jardine Skinner & Co. sold the shares at Rs. 493-10-0 per share. In paragraph 9, the Appellate Tribunal recorded the finding that, prima facie, the transaction was not a bona fide one, and proceeded to say that, " if the assessee refuses to disclose all the facts leading to the transaction and the facts immediately after the transaction, we must hold that it will react to the prejudice of the assessee. " In paragraph 10 the Appellate Tribunal has observed that under section 12B(2) of the Income-tax Act, the Income-tax Officer has to compute the capital gains after making certain deductions from the full value of the consideration for the sale and he, therefore, has a right to know the full value. The Appellate Tribunal added" The assessee cannot shut out the Income-tax Officer from finding out what is the full value of the asset transferred by merely putting a figure on the document of transfer. The Income-tax Officer in this case took the value to be the market price of the shares. There is no dispute that the market price of the shares was Rs. 620 per share. We cannot say therefore, that in the circumstances the Income-tax Officer was in any way wrong in determining the full value of the shares. " 6. In paragraph 11, the Appellate Tribunal held that the first proviso to section 12B(2) did not apply to the case and the sale was not effected with the object of avoidance or reduction of the liability of the assessee under that section, and then observed as follows: " But the right of the Income-tax Officer to determine the full value of the assets is always there specially in a case where the assessee refuses to give all the information to the Income-tax Officer and the value of the assets given by him is so suspiciously low. We, therefore, think there is no substance in the points raised by Mr. Issac. " 7. It was contended by Mr. Asoke Sen on behalf of the respondent that there was no express finding of the Appellate Tribunal that the respondent actually sold the shares at the market price of Rs. 620 per share and that the respondent received that market price of the shares as consideration for the transfer. Reference was made to paragraph 7 of the order of the Appellate Tribunal wherein there is an express finding that the shares were transferred by the respondent to Giridharilal Mehta on April 1, 1946, at the book value of Rs. 136 per share, though the market value on that date was Rs. 620 per share. Mr. Asoke Sen further submitted that it could not be argued from paragraphs, 8 to 11 of the order of the Appellate Tribunal that there was an inferential finding that the shares were actually so at Rs. 620 per share by the respondent. On behalf of the appellants Mr. Narsaraju pointed out that in the statement of the case dated July 29, 1952, the Appellate Tribunal has said that by the previous order dated August 23, 1951, the Appellate Tribunal had come to the conclusion that the sale had been effected at Rs. 620 per share and that the market price of the shares must have been paid. It was, however, pointed out on behalf of the respondent that the statement of the case was not an agreed statement and that it was drawn up by the Appellate Tribunal whose constitution was different from that of the Appellate Tribunal which made the order dated August 23, 1951. It is true that the court is bound to proceed normally on the findings of fact which are mentioned in the statement of the case. But if the statement of the case does not correctly summarise or interpret the finding recorded in the order of the Appellate Tribunal which has been made part of the case, the court is entitled to look at the order itself in order to satisfy itself what was actually the finding of the Appellate TribunalAfter having heard counsel for both the parties and having scrutinized the order of the Appellate Tribunal dated August 23, 1961, and the statement of the case dated July 29, 1952, we have reached the conclusion that the question of law referred to the High Court cannot be answered as the language used by the Appellate Tribunal in recording its finding as to the actual contract price paid to the respondent by Giridharilal Mehta for the sale of 1, 500 shares is obscure and its import cannot be determined. In these circumstances we consider that the best course is for the Appellate Tribunal to rehear the appeal and record a clear finding after hearing the parties and after giving an opportunity to the respondent to explain the unusual nature of the transaction and the conduct of the parties concerned therein. After recording a clear finding as to what was the actual price received by the respondent for the sale of shares to Giridharilal Mehta the Appellate Tribunal will finally dispose of the appeal. On behalf of the respondent Mr. Asoke Sen said that his client will give a proper explanation of the transactions and of the conduct of the parties involved before the Appellate Tribunal at the time of the further hearing of the appeal. If the assessee gives explanation of the transaction the Tribunal will be entitled to call upon it to produce documentary or other evidence in support of the explanation. The Tribunal will also be entitled to call for elucidation of the explanation or the evidence. The appellants will be entitled to give evidence in rebuttal

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

Explanation:
1[ds]We are unable to accept this contention as correct. It is manifest that the consideration for the transfer of capital asset is what the transferor receives in lieu of the asset he parts with, namely, money or moneys worth and, therefore, the very asset transferred orh cannot be the consideration for the transfer. It follows that the expression "full consideration" in the main part of section 12B(2) cannot be construed as having a reference to the market value of the asset transferred but the expression only means the full value of the thing received by the transferor in exchange for the capital asset transferred by him. The consideration for the transfer is the thing received by the transferor in exchange for the asset transferred and it is not right to say that the asset transferred and parted with is itself the consideration for the transferThe view that we have expressed as to the interpretation of the main part of section 12B(2) is borne out by the fact that in the first proviso to section 12B(2) the expression " full value of the consideration " is used in contradistinction with " fair market value of the capital asset " and there is an express power granted to thex Officer to " take the air market value of the capital asset transferred " as " the full value of the consideration " in specified circumstances. It is evident that the legislature itself has made a distinction between the two expressions " full value of the consideration " and " fair market value of the capital asset transferred " and it is provided that if certain conditions are satisfied as mentioned in the first proviso to section 12B(2), the market value of the asset transferred, though not equivalent to the full value of the consideration for the transfer, may be deemed to be the full value of the consideration.It is true that the court is bound to proceed normally on the findings of fact which are mentioned in the statement of the case. But if the statement of the case does not correctly summarise or interpret the finding recorded in the order of the Appellate Tribunal which has been made part of the case, the court is entitled to look at the order itself in order to satisfy itself what was actually the finding of the Appellate TribunalAfter having heard counsel for both the parties and having scrutinized the order of the Appellate Tribunal dated August 23, 1961, and the statement of the case dated July 29, 1952, we have reached the conclusion that the question of law referred to the High Court cannot be answered as the language used by the Appellate Tribunal in recording its finding as to the actual contract price paid to the respondent by Giridharilal Mehta for the sale of 1, 500 shares is obscure and its import cannot be determined. In these circumstances we consider that the best course is for the Appellate Tribunal to rehear the appeal and record a clear finding after hearing the parties and after giving an opportunity to the respondent to explain the unusual nature of the transaction and the conduct of the parties concerned therein. After recording a clear finding as to what was the actual price received by the respondent for the sale of shares to Giridharilal Mehta the Appellate Tribunal will finally dispose of the appeal. On behalf of the respondent Mr. Asoke Sen said that his client will give a proper explanation of the transactions and of the conduct of the parties involved before the Appellate Tribunal at the time of the further hearing of the appeal. If the assessee gives explanation of the transaction the Tribunal will be entitled to call upon it to produce documentary or other evidence in support of the explanation. The Tribunal will also be entitled to call for elucidation of the explanation or the evidence. The appellants will be entitled to give evidence in rebuttal