Section 52(2) of the Income-tax Act, 1961, applies only to cases of understatement of consideration and not to cases where there is no understatement by the assessee, but where the tax authorities are of the view that the property would have fetched a higher price.

SETHURAMAN J.

These three references have been made by the Income-tax Appellate Tribunal at the instance of Additional Commissioner of Income-tax, referring the following two questions, which are common to all the three references :

"1. Whether the Tribunal was right in its construction of section 52(2) of the Income-tax Act, 1961, and in holding on the basis of that construction that the Income-tax Officer was not justified in computing the capital gains in this case on this basis of the market value of the shares as on the date of transfer ?

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in directing the Income-tax Officer to determine the full value of consideration received by the assessee for computation of capital gains under section 52(2) of the Income-tax Act, 1961. by setting aside the assessment ?" *

The facts in T.C. No. 278 of 1972, which gave rise to the above questions, are as follows

"The assessee, a Hindu undivided family, held 20 equity shares in M/s. Premier Transports (Private) Ltd. These shares had been acquired at a cost of Rs. 2, 000 and were sold in the financial year 1967-68 for Rs. 15, 000. The assessee returned the capital gains of Rs. 13, 000 with reference to the sale of these shares. Taking into account the balance-sheet of the company at or about the time of the transaction, the Income-tax Officer found that the break-up value of the said shares would be Rs. 2, 079 per share. He, therefore, considered that since the sale price declared by the assessee was less than the market price ascertained by the break-up value method, the provisions of section 52(2) of the Income-tax Act, 1961, were applicable and after obtaining the approval of the Inspecting Assistant Commissioner as required by the said provisions, he computed the capital gains to be Rs. 39, 580 as against Rs. 13, 000 returned by the assessee. The appeal filed by the assessee before Appellate Assistant Commissioner was unsuccessful and when the matter came before the Tribunal the instance of the assessee, the assessee contended that the computation of the capital gains should be based on the actual consideration arising to the assessee from the transfer of the shares in question, and not on the basis of its fair market value and that section 5(2) of the Act had no application to the facts. The Tribunal held that the necessary ingredient for invoking section 52(2) had not been established. It, however, set aside the assessment, observing that the correct computation of the capital gains had not been made by the Income-tax Officer.In T.C. No. 282 of 1972, the assessee, another undivided family, held 20 shares in M/s Trichy Town Transport Private Ltd. Karur, which were disposed of during the relevant accounting year ending on 31st March 1968, for a sum of Rs. 20, 000. Deducting the cost of the said shares of Rs. 2, 000, the assessee returned the capital gains of Rs. 18, 000. The Income-tax Officer applied the provisions of section 52(2) of the Act, arrived at the market value of the shares at Rs. 45, 520 by applying the break-up value method and determined the capital gains to be Rs. 45, 520 which he brought to tax. The appeal before the Appellate Assistant Commissioner was unsuccessful. On further appeal, the Tribunal passed the same order as it did in T.C. No. 278 of 1972.

In T.C. No. 283 of 1972, the assessee held 30 equity shares in M/s. Trichy Town Transport (Private) Ltd., Karur, which were disposed of in the accounting year ending on 31st March, 1968, for Rs. 30, 000. Deducting the cost of Rs. 3, 000 the assessee returned Rs. 27, 000 as the capital gains assessable on the scale on the sale of the said shares. The Income-tax Officer invoked the provisions of section 52(2) of the Act, arrived at the market price of the said shares at Rs. 68, 280 and determined the capital gains to be Rs. 65, 280 which he brought to tax; the assessee's appeal to the Appellate Assistant Commis