Onus lies on assessee to prove the Amount of consideration received from the Purchaser/Partnership Firm: Madras HC [Read Judgment]

The Madras High Court held that the onus lies on the assessee to prove the amount of consideration received from the purchaser or partnership firm.

The assessee, S.K.R.Viswanathan is an individual, the respondent framed an assessment under the Act for the assessment year 1991-92 on the ground that the taxable gift exceeding Rs.12 lakhs has escaped assessment and therefore, notice under Section 16 of the Act was issued. The assessee did not file a return in response to such notice and further, notices were issued but there was no response. However, an authorized representative of the assessee appeared before the respondent and furnished a written submission stating that he was running a factory, by name, M/s.Heatex Equipments in Thiru.vi.ka Industrial Estate, Guindy was purchased by the assessee from the Tamil Nadu Small Scale Industries Development Corporation Limited for a sum of Rs.63,000/-. The said land and building have been sold to a partnership firm for a sale consideration of Rs.3 lakhs.

The Assessing Officer found that the registering authorities have collected stamp duty and registration charges under Section 41 of the Stamp Act taking the market value of the property at Rs.15,34,500/-. Therefore, it was held that the sale was effected for inadequate consideration. When the Assessing Officer proposed to levy gift tax under section 4 of the Act, the assessee submitted that he could not sell the property to any other person without the approval of the SIDCO and could not find a prospective buyer except the partnership firm and under those circumstances, he had to sell the property for a price of Rs.3 lakhs. This explanation was found to be wholly unsubstantiated and rejected by the Assessing Officer. Further, the Assessing Officer noted that as to who are the partners of the purchasing firm.

Thus, concluding that the price quoted in the sale deed was not true or in other words, the property was disposed of for an inadequate consideration falling within the mischief of Section 4 of the Act. Accordingly, assessment was completed on 31.03.1995 demanding a total amount of Rs.6,92,220/- as a gift tax and thereafter, by order dated 13.08.1996 imposed a penalty of Rs.50,000/-.

The division bench of Justice T.S.Sivangananam and Justice Sathi Kumar Sukumara Kurup observed that the valuation of the property was done in terms of the provisions of the Gift Tax Act and in the process of doing such evaluation, the Assessing Officer relied upon the registered sale deeds and the stamp duty which was paid on such instruments though the apparent sale consideration reflected in those documents were less. In any event, this being a question of fact, the burden was on the assessee to prove that what he received was only Rs.3 lakhs from the purchaser/partnership firm and not Rs.15,34,500/-.

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