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Smt. Jijeebai Shinde Vs. Commissioner of Gift-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberM.C.C. No. 43 of 1984
Judge
Reported in(1985)46CTR(MP)288; [1986]157ITR122(MP)
ActsGift-tax Act, 1958 - Sections 15(3) and 24(2)
AppellantSmt. Jijeebai Shinde
RespondentCommissioner of Gift-tax
Appellant AdvocateM.S. Chaudhary, Adv.
Respondent AdvocateR.C. Mukati, Adv.
Cases ReferredMohamed Sulaiman & Co. v. Dy. Commr. of Comml. Taxes
Excerpt:
.....the party ?' 6. shri chaudhary, learned counsel for the assessee, contends that the action of the commissioner of gift-tax was bad in law and without jurisdiction, as according to him, the assessment order, which was sought to be set aside by the commissioner was itself non est. it is contended by him that no order of assessment could be deemed to have been made unless the same is served on the assessee in accordance with law, as no such order or copy of the same was ever communicated to the assessee ;and that the order of the commissioner of gift-tax under section 24(2) of the act is without jurisdiction and bad in law for want of fulfilment of the condition precedent for assumption of jurisdiction. general sales tax act, 1958, wherein it has been held by this court that where the..........giving the assessee a reasonable opportunity of being heard.'4. it appears that thereafter the gift-tax commissioner, finding that the gift-tax officer had accepted the taxable gift at rs. 20,000 and rs. 3,000, respectively, although the value of the houses had been shown at rs. 22,000 and rs. 3,000, with a note that the market value was being ascertained from the valuer, issued a notice under section 24 of the act stating therein that the aforesaid house properties had been agreed to be assessed at rs. 84,855 in the wealth-tax assessment and for the purposes of estate duty assessment on the death of the donor, smt. lilabai matkar, the value of the two properties was shown at rs. 69,750. on these grounds, the commissioner of gift-tax issued a notice dated march 18, 1981, under.....
Judgment:

V.D. Gyani, J.

1. This is a reference under Section 26 of Gift-tax Act, 1958 (hereinafter referred to as 'the Act'), made by the Income-tax Appellate Tribunal, Indore, at the instance of the assessee, referring the following question of law for answer of this court:

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the CGT had jurisdiction to set aside the alleged order of assessment even though it was not served on the assessee, when the order could not be said to exist unless communicated to the party ?'

2. Facts necessary for answering this question are that late Smt. Lilabai Matkar made a gift of a house bearing municipal No. 5, Ramlaxman Bazar, Indore, to her married daughter, Smt. Jijeebai Shinde, by a registered gift deed dated April 28, 1971. The value of the property was declared at Rs. 22,000. By another gift deed dated April 28, 1971, the late Smt. Lilabai Matkar gifted a house at Sirpur to Shri Chandrakant Shinde and in the gift deed, this house was valued at Rs. 3,000.

3. On the death of Smt. Lilabai Matkar on December 27, 1971, the applicant, Smt. Jijeebai Shinde, filed gift-tax returns on May 30, 1972, and an order under Section 15(3) of the Act was passed by the Gift-tax Officer on March 30, 1979. The Commissioner reopened the same with these observations :

'Thus the impugned assessment has resulted in underassessment. The assessment made by the GTO on March 30, 1979, under Section 15(3) is, therefore, erroneous and prejudicial to the interests of the Revenue within the meaning of Section 24(2) of the G.T. Act, 1958. I, therefore, set aside the said order of assessment passed by the GTO and direct him to make a fresh assessment according to law after giving the assessee a reasonable opportunity of being heard.'

4. It appears that thereafter the Gift-tax Commissioner, finding that the Gift-tax Officer had accepted the taxable gift at Rs. 20,000 and Rs. 3,000, respectively, although the value of the houses had been shown at Rs. 22,000 and Rs. 3,000, with a note that the market value was being ascertained from the valuer, issued a notice under Section 24 of the Act stating therein that the aforesaid house properties had been agreed to be assessed at Rs. 84,855 in the wealth-tax assessment and for the purposes of estate duty assessment on the death of the donor, Smt. Lilabai Matkar, the value of the two properties was shown at Rs. 69,750. On these grounds, the Commissioner of Gift-tax issued a notice dated March 18, 1981, under Section 24(2) of the Act. This notice was served on the assessee on March 21, 1981. While the matter was fixed for hearing before the Commissioner of Gift-tax at Bhopal on March 28, 1981, a request made by the assessee's advocate for an adjournment for a fortnight was rejected and by an order passed on March 30, 1981 (annexure-A), the Commissioner of Gift-tax set aside the order of assessment passed by the Gift-tax Officer and directed him to make a fresh assessment according to law.

5. The assessee preferred an appeal before the Tribunal, which stands dismissed by order dated June 15, 1982. Thereafter, by an application, the assessee sought a reference to this court and the Tribunal has referred the following question of law for our answer :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the CGT had jurisdiction to set aside the alleged order of assessment, even though it was not served on the assessee when the order could not be said to exist unless communicated to the party ?'

6. Shri Chaudhary, learned counsel for the assessee, contends that the action of the Commissioner of Gift-tax was bad in law and without jurisdiction, as according to him, the assessment order, which was sought to be set aside by the Commissioner was itself non est. It is contended by him that no order of assessment could be deemed to have been made unless the same is served on the assessee in accordance with law, as no such order or copy of the same was ever communicated to the assessee ; and that the order of the Commissioner of Gift-tax under Section 24(2) of the Act is without jurisdiction and bad in law for want of fulfilment of the condition precedent for assumption of jurisdiction. To substantiate his argument, the learned counsel has placed reliance on Raja Harish Chandra Raj Singh v. Land Acquisition Officer : [1962]1SCR676 , Mohamed Sulaiman & Co. v. Dy. Commr. of Comml. Taxes [1964] 15 STC 593 (Mad), Babulal Banwarilal v. CST [1984] 17 VKN 63 and CIT v. Oriental Rubber Works : [1984]145ITR477(SC) .

7. In the case of Raja Harish Chandra : [1962]1SCR676 , their Lordships of the Supreme Court were interpreting Sections 12 and 18 of the Land Acquisition Act. Section 12 of the Land Acquisition Act relates to making of an award by the Collector, which if accepted by the owner of the land or the person interested therein, would not necessitate any further proceedings. If, however, the award made under Section 12 of the Land Acquisition Act is not acceptable, Section 18 of the said Act gives a statutory right to the owner or the person interested in the land acquired to have the question of compensation determined by court. While dealing with these provisions, their Lordships of the Supreme Court observed that the necessary concomitant of making of the award must also involve the communication thereof to the party concerned. It was in this context that their Lordships made the following observations (p. 1503) :

'Thus considered, the date of the award cannot be determined solely by reference to the time when the award is signed by the Collector or delivered by him in his office : it must involve the consideration of the question as to when it was known to the party concerned, either actually or constructively.'

8. The case of Babulal Banwarilal deals with the suo motu power of revision under Section 39(2) of the M. P. General Sales Tax Act, 1958, wherein it has been held by this court that where the Sales Tax Officer has failed to pass any order imposing or refusing to impose penalty, it was not open to the Additional Commissioner to exercise power under Section 39(2) of suo motu revision for imposing penalty. In the case of CIT v. Oriental Rubber Works : [1984]145ITR477(SC) , their Lordships of the Supreme Court, while considering the statutory obligation of the Revenue to communicate to the assessee not merely the Commissioner's approval but also the reasons recorded by the authorised officer or the Income-tax Officer on the basis of which the approval has been obtained, particularly where books and documents of an assessee seized in a search conducted pursuant to an authorisation issued under Sub-section (1) of Section 132 of the Income-tax Act, 1961, are retained beyond the period of 180 days from the date of seizure, have held (p. 483) :

'It is true that Sub-section (8) does not in terms provide that the Commissioner's approval or the recorded reasons on which it might be based should be communicated to the concerned person but in our view since the person concerned is bound to be materially prejudiced in the enforcement of his right to have such books and documents returned to him by being kept ignorant about the factum of fulfilment of either of the conditions, it is obligatory upon the Revenue to communicate the Commissioner's approval as also the recorded reasons to the person concerned. In the absence of such communication, the Commissioner's decision according his approval will not become effective.'

9. Shri Chaudhary invited our attention to the case of CIT v. Mahabir Prasad Poddar : [1974]93ITR215(Cal) and contended that communication of the order passed by the assessing authority to the assessee is a must. In this case, their Lordships of the Calcutta High Court were considering the implication of Section 132(8) of the Income-tax Act, 1961, relating to the grant of approval for retention of account books beyond the stipulated period of 180 days and it was held that the approval order must be communicated to the assessee. Their Lordships observed as follows (head note) :

'An order made by an authority under a statutory provision does not become effective and valid until it is served upon the party affected. It is possible for the Commissioner to give his approval to a proposal for retention of books any number of times and for any length of period subject to the limitation in the proviso to Sub-section (8). Against each order of approval made by the Commissioner, the person legally entitled to the books has the statutory right under Sub-section (10) to apply to the Board for return of the books to him. This statutory right would be completely denied to the party legally entitled to the books if he is not told when the order of approval was made and for what length of time. Assuming that the person legally entitled to the books is different from the person from whose custody the books were seized, the Income-tax Department's obligation will be fully discharged if the approval of the Commissioner is communicated to the person from whose custody the books were seized.'

10. This decision has further been affirmed by their Lordships of the Supreme Court in the case of CIT v. Oriental Rubber Works : [1984]145ITR477(SC) .

11. Thus, the principle, which could be deduced from these authorities is the essential requirement of communication of an order passed by the assessing authority to the assessee concerned. It is not in dispute that the assessment order dated March 30, 1979, was not served on the assessee at least till the time the Commissioner of Gift-tax initiated proceedings under Section 24(2) of the Act.

12. It is thus clear that there was no valid assessment order communicated to the assessee in existence so as to entitle the Commissioner to invoke the jurisdiction under Section 24(2) of the Act and exercise powers of suo motu revision therein.

13. Learned counsel for the Revenue contends that on a plain reading of Section 15 of the Act, it does not provide for communication of the assessment order to the assessee. His further contention is that at any rate the assessee had, in fact, acquired knowledge of the assessment order at least when proceedings under Section 24(2) of the Act had been initiated. Therefore, the action under Section 24(2) of the Act cannot be assailed by the assessee. If this contention of the learned counsel were to be accepted, it would result in deprivation of a valuable right of appeal by the assessee. It was suggested by the learned counsel for the Revenue that the net effect of the order passed by the Commissioner of Gift-tax is nothing but reassessment. This suggestion also cannot be accepted in view of the limitations prescribed by Sub-section (2) of Section 16A of the Act.

14. In view of the foregoing discussion, our answer to the question referred is in the negative, in favour of the assessee and against the Department-There shall be no order as to costs.


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