COMMISSIONER OF INCOME TAX versus SHIVAKAMI CO. PVT. LTD.

Citation: [1986] 1 S.C.R. 881 · Decided: 18-03-1986 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

Judgment (excerpt)

881 
cat!ISSIONER OF INCOIE TAX 
v. 
SHIVAKAMI CO. PVT. LTD. 
MARCH 18, 1986 
[R. S, PA~ AND SABYASACHI MUKHARJI, JJ. ] 
Indian Income Tax Act 1922/ Income Tax Act 1961, s.12 
B(2) first proviso/ s.52 - Capital asset - Acquisition of -
Understatement of consideration in transfer of property -
Understatement of value, a mis-statement of value - selling at 
under value to defeat revenue different from understating 
value in a document of sale. 
The 
respondent, a private COllpany under the Companies 
Act, 1956 in C.A. 1533 of 1974, had shares in two private 
companies. During the relevant period, it sold those shares 
-f 
and according to the respondent-assessee, the sales resulted 
in a loss. The shares were not quoted in stock market. 
However, the Income-tax Officer held that the break-up value 
on the date of sale of the shares in the two companies was 
Rs.1,72,800 and Rs.1,54,000 and after deducting the cost price 
of 
the aforesaid 
shares 
of 
Rs.81,201 
and 
Rs.1,00,000 
respectively from the above said break-up value, he determined 
the capital gain at Rs.91,599 and Rs.54,000 respectively under 
the first proviso to section 12-8(2) of the 1922 Act. The 
Appellate Assistant Commissioner as also the Tribunal rejected 
the appeals of the respondent-assessee and upheld the order of 
the lnco11e-t:ax Officer. 
Aggrieved by the order of the Tribunal, the respondent-
assessee went to the High Court in a reference. The High Court 
allowed the reference holding that the first proviso to sub-
section (2) of section 12-B of the Indian Income-tax Act, 1922 
was not applicable. It observed : (i) that the sale was true; 
(ii) that the consideration was not understated; and (iii) 
that the explanation given by the assessee for effecting the 
sale was not acceptable. The same question of law arose in the 
other civil appeals. 
Dismissing the appeals, 
A 
B 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
E 
F 
G 
H 
882 
SUPREME COURT REPORTS 
[1986] 1 s.c.R. 
Bl!LD : 1.1 The proviso to section 12B(l) of the Act can 
be invoked only where the consideration for the transfer of 
capital asset has been understated by the assessee. The first 
proviso to section 12B(l) of the Act provides 'full value of 
the consideration for which the sale, exchange, relinquishment 
of transfer is made' , to be taken as the basis for the compu-
tation of , the capital gains. Therefore, unless there is 
evidence that 100re than what was stated was received, no 
~ 
higher price can be taken to be the basis for computation of 
capital gains. The onus is on the Revenue - inferences might 
be drawn in certain cases but to come to a conclusion that a 
paricular higher 8""'Unt was in fact received 1111St be based on 
such material from which such an irresistible conclusion 
follows. The proviso helps or enables the depart11ent by provi-
ding a way to determine the market value. But the proviso is 
applicable only where the full value for the consideration has 
not been stated. (889 G-H] 
1.2 When a conclusion of the fact finding body is based 
on an inference from primary facts, then the findings of facts 
are not amenable to challenge but the inference drawn from the 
primary facts are open to challenge as conclusions of law. It 
is also open to challenge the same on the ground that the 
conclusion of fact drawn by the Tribunal was not supported by 
legal evidence or that the impugned conclusion drawn from the 
fact was not rationally possible. In such a case, it is neces-
sary to examine the correctness of the conclusion. (886 H; 
887 A-B] 
~sioner of ~ax 
v. Rajastban Mines, 78 I.T.R. 
45, relied upon. 
In the instant case, the facts found were that there was 
a sale. The High Court has stated that the Tribunal had found 
that the consideration was not understated. The High Court 
also notices that the explanation given by the assessee for 
effecting the sale was not acceptable. The onus was on the 
Revenue to prove that there was understatement in the doCUlllellt 
not that the goods were sold at under value. There is no 
evidence that the full consideration received by the assessee 
in the transfer of the asset involved in these cases has been 
understated. The revenue has made no attempt to establish that 
there was any under-statement though it might be that shar'"'1 
were sold at an under value. (888 B-01 
i 
C.I.T. v. SHIVAKAMI CO. (sABYASACHI MUKHARJI, J.] 
883 
LP. Verghese v. 1--Ul< Officer, Em•!nJlaw fi Am-., 
131 I.T.R. 597, followed. 
2. Understatement of v

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