This is Departmental appeal and cross-objection by assessee and they relate to asst. yr. 1974-75. In this case original assessment had been made on income of Rs. 2,48,545. After completion of assessment, ITO found that assessee had not truly stated sale price of property popularly known as R. K. Machine Tools, Industrial Area , Ludhiana and had thus under-stated capital gains arising to him form sale of said property. ITO, therefore, started proceedings under s. 147(a) and issued notice under s. 148 on 15th Feb., 1979. ITO had found that total consideration in respect of land and building transferred to R. K. Machine Tools (P) Ltd. on 3rd April, 1973 was Rs. 14 lacs. consideration was paid in form of 14,000 shares of Rs. 100 each of M/s R. K. Machine Tools (P) Ltd. According to ITO, this did not represent fair market value of land and building transferred to company. ITO observed that property which was acquired for Rs. 8 lacs in 1959 and which had been assessed at Rs. 13,51,000 in asst. yr. 1967-68 could not be worth only Rs. 14 lacs, as on 31st March, 1973. Having regard to this, ITO held that assessee had under-stated sale price of this asset and object of this understatement was avoidance of tax on capital gains on transfer. ITO, therefore, proceeded to take consideration at fair market value as determined by Valuation Officer. assessee objected to him and in this connection referred to decision of Supreme Court in case of K. P. Varghese vs. ITO (1981) 24 CTR (SC) 358: (1981) 131 ITR 597 (SC). He held that assessee had understated consideration and further held that transfer was made to company which was closely connected with assessee as its shareholders were assessee and members of this family. ITO was of view that provisions of s. 52(1) were attached, as there was direct or indirect relationship between transferor and transferee and there was material to show that consideration had been understated. ITO referred to some case-laws but ultimately held that full value of consideration for transfer will have to be adopted at Rs. 32,91,000 and he proceeded to work out capital gains on that basis. When matter came before CIT(A) assessee challenged validity of reopening of assessment as well as computation of capital gains and charge of tax on capital gains. It was contended that provisions of s. 147(a) were not applicable as assessee had not held back any facts while filing his original return. it was contended that fact of transfer and amount of consideration received in form of shares had been stated at time of original return also. CIT(A) was of view that though reopening of assessment under s. 147(a) could not be upheld as there was no omission or failure on part of assessee to place any relevant material before ITO, reopening could be justified under s. 147(b) of IT Act. In this connection, CIT(A) referred to fact that assessee had filed copy of sale-deed, details of property sold and persons to whom it had been sold. He noted that assessee had given necessary facts for disclosing capital gains of Rs. 4,86,695. However, as valuation report was the, basis for reopening assessment, this report could be taken as information on basis of which action under s. 147(b) could be taken. In this connection, referred to decision of Delhi High Court in case of Ganga Saran & Sons (HUF) vs. ITO (1980) 130 ITR 212 (Del). In this case High Court in writ proceedings held that it was not obligatory on part of assessee to inform ITO that property had been sold at price which might not be commensurate with market price on date of sale. However Delhi High Court had held in case of Avtar Singh Sandhu vs. WTO (1981) 129 ITR 531 (Del) that it is possible to convert action under s. 157(a) into action under s. 147(b). reference to this was also made in case of Ganga Saran & Sons (HUF) (supra). CIT(A), therefore, held that proceedings should be considered as having been validly taken under s. 147(b). Coming to merits of case, CIT(A) considered whether provisions of s. 52(1) could be applied to facts of present case. He referred to requirements of s. 52(1) which was transfer to closely connected person and understatement of consideration for transfer. CIT(A) was of view that provisions of this section do not discourage or avoid honest or bona fide transaction made out for good reasons. In this connection, reference was made to decision in case of K. P. Verghese, (supra). He accepted plea of assessee that there was no material to (supra). He accepted plea of assessee that there was no material to show that consideration which had been stated in sale-deed was under- statement. He further pointed out that limited company to which transfer has been made is owned by family of assessee and there could not be any dispute that there was direct connection between transfer and transferee. However, question for consideration was whether transfer at Rs. 14 lacs was with object of avoidance or reduction of liability of assessee under s. 45 of Act and whether consideration declared was less than that was actually received. CIT(A) further pointed out that as far as understatement of consideration is concerned, requirement in ss. 52(1) and 52(2) were not different and it was not enough merely to show that consideration was lower than fair market value and it had further to be shown that consideration had been understated with objecting of avoiding capital gains tax. After referring in detail to decision of Supreme Court in case of K. P. Verghese (supra) he observed that there was no material to show that there was any object of avoiding capital gains tax. There was also nothing to show that transaction was not bona fide as transfer was being made to family concern and normally person who likes to transfer such property to such concern without making any exhorbitant profit. CIT(A) thus held that ITO had failed to discharge onus cast on him and there was no material before him other than report of District Valuation Officer which may establish that assessee had actually received more than Rs. 14 lacs being sale price declared in conveyance deed. CIT(A), therefore, held that provision of s. 52(1) had wrongly been invoked and addition of Rs. 15,42,250 on account of taxable long term capital gains was deleted. Whereas Department has challenged this deletion by CIT(A) assessee has filed cross-objection challenging order of CIT(A) regarding validity of reopening of assessment. We have heard ld. Counsel for assessee and Departmental Representative on factual and legal aspect of matter. Regarding reopening of assessment, ld. Counsel for assessee submitted that CIT(A) has upheld reopening of assessment under s. 147(b) on ground that Valuation Officer s report was information on basis of which ITO could form belief that income has escaped assessment. He submitted that though as decided by Delhi High Court, it is open for appellate authority to consider assessment reopened under s. 147(a) under t h e provisions of under s. 147(b) position has changed regarding inference to be drawn from report of Valuation Officer. In this connection, reference was made to decision in case of Ganga Saran & Sons (HUF) vs. ITO (1980) 130 ITR 212 (Del). In this case also capital gains derived by assessee on sale of house property were computed on basis of sale deed and considerations stated therein. Thereafter ITO got information such as valuation report and sale of comparable properties to effect that market value of property on date of sale was very much more than what was stated in deed. On this information ITO issued notice under s. 148 of Act for reopening of assessment. On these facts, High Court held that action could not have been taken under s. 147(a) but it was open to Department to sustain majority of notice by reference to cl. (b) of s. 147 notwithstanding fact that clause had not been specifically pleaded by Department. However, High Court further held that since fair market value of capital asset was not considered by ITO at time of original assessment and, ITO had computed capital gains on basis of sale-price disclosed by assessee and later on information was received regarding market value of asset at time of sale, he had reason to believe capital gains had escaped assessment and thus provisions of s. 147(b) were applicable. Their Lordships further observed that s. 52 was specified provision which enables ITO to ignore sale price and adopt market value of property but primary facts for imposing this special provision had to be gathered by ITO. ld. counsel for assessee contended that this decision of Delhi High Court upholding validity of action under s. 147(b) was no more applicable in view of later decision of Supreme Court in case of K. P. Varghese vs. ITO (1981) 24 CTR (SC) 358: (1981) 131 ITR 597 (SC). In this case it had bee held that sub-s. (2) of s. 52 of IT Act, 1961 can be invoked only where consideration for transfer of capital asset has been understated by assessee or in other words, full value of consideration in respect of transfer is shown at lesser figure then that actually received by assessee and burden of proving such understatement or concealment is on Revenue. Their Lordships further held that this section has no appellation in case of honest or bona fide transaction where consideration received by assessee has been correctly declared or disclosed by him. Their Lordships further held that s. 52(1) does not deem income to accrued or to be received which infact never accrued or was never received. This sub-section seeks to bring within net of taxation only that income which has accrued or is received by assessee as result of transfer of capital asset. Their Lordships further held that onus of establishing that conditions of taxability are fulfilled is always on Revenue. ld. Counsel submitted that in view of above decision of Supreme Court market value itself is not relevant information for coming to t h e conclusion that any income by way of capital gains has escaped assessment. ITO should have atleast Prima facie belief while reopening assessment that assessee had infact received some consideration over and above what is stated in deed of transfer. He further contended that in present case this was not position and, therefore, assessment cannot be upheld under s. 147(b). On merits, Department has relied on order of ITO and learned Counsel for assessee has submitted that there was no material with ITO to show that actual consideration was anything over and above what is stated in sale-deed. Departmental Representative also tried to say that value of shares received by assessee would be more than its face value and on basis of intrinsic value of shares consideration could be determined. learned Counsel for assessee, on other hand, submitted that this was never case of ITO and he had merely proceeded on basis of market value of land building transferred. He also submitted that company had come into existence only last year and its intrinsic value should not have gone up during short period. We have considered facts of case and rival arguments. As regards validity of reopening of assessment, CIT(A) has mainly relied on decision of Delhi High Court in case of Ganga Saran & Sons (HUF) (supra). It was on this basis that he held that though reassessment proceedings could not be taken under s. 147(a), it could certainly justify under s. 147(b). For this purpose valuation report giving market value of assets transferred was taken as information . We, however, find force in submission of ld. counsel for assessee that after decision of Supreme Court in case of K. P. Verghese (supra), legal position has chanced and requirement of law as interpreted by Supreme Court is that there should be some material or basis for coming to conclusion that consideration actually received was more than what is stated in sale-deed. market value itself has relevance for purpose of computing capital gains but condition precedent even for reason to be believe that income has escaped assessment is some prima facie material to show that there has been n understatement of consideration. There is no nexus between market value of assets transferred with reason to believe that capital gains has escaped assessment. decision of Delhi High Court was pronounced before decision of Supreme Court and it was in that situation that observation were made about relevance of market value. Relevance of market value as given by Supreme Court is that it enables ITO to have reasonable basis for computing quantum of capital gains and it provides basis for best judgement assessment for actual consideration received by assessee. However, first requirement is that there should be understatement of sale consideration. We would, therefore, uphold objection of learned Counsel for assessee that reopening of assessment under s. 147(b) cannot be upheld. We also agree with ld. Counsel for assessee that s. 147(a) was not at all applicable. reopening of assessment was, therefore, invalid. Coming to merits of case, we need not go into details at all and we entirely agree wit ld. CIT(A) that having regard to ratio of Supreme Court decision in case of K. P. Verghese (supra) addition in respect of capital gains must be deleted. In result, Departmental appeal is dismissed and cross-objection In result, Departmental appeal is dismissed and cross-objection is allowed. *** INCOME TAX OFFICER v. RAJ KUMAR SONI