1. In this reference, the following question has been referred to us at the instance of the assessee :
'Whether, on the facts and in the circumstances of the case, the provisional assessment for the assessment year 1960-61 is an assessment within the meaning of the second proviso to section 2(XX) of the Gift-tax Act, 1958 ?'
2. At the time when the application was made by the assessee to the Appellate Tribunal to refer certain questions arising out of the Tribunal's order to the High Court for the opinion of the High Court, the assessee had demanded that three questions as prayed for by him should be referred to the High Court. Out of those three questions, the Tribunal referred only one question and, thereafter, the assessee has filed Gift-tax Application No. 1 of 1971, praying that the Tribunal should be asked to refer the remaining two questions also to the High Court for its opinion. In that gift-tax application, on November 2, 1971, this court directed that rule should be issued and it further directed that the rule should be heard along with the reference, and hence, we have heard both the matters together and we will dispose of both these matters by this common judgment.
3. The relevant assessment year under consideration is 1961-62 for the purposes of gift-tax. The original assessee-donor died during the pendency of the proceedings and is represented by his legal heirs and representatives.
4. The deceased-donor had made two gifts, the first on December 2, 1959, and the second on June 2, 1960. By these two gifts he has given two parts of a building know as Taj Building situated at Ahmedabad. The Gift-tax Officer assessed the two gifts by clubbing them together for the assessment year 1961-62, by adopting Samvat year as the previous year for the purpose of gift-tax. The assessee preferred an appeal to the Appellate Assistant Commissioner who accepted the contention of the assessee and held that the previous year should be the financial year. The Appellate Assistant Commissioner adopted the financial year as the previous year under the Gift-tax Act and accordingly the appeal was allowed and the Gift-tax Officer was directed to accept the value of the gifts in respect of the second gift dated June 2, 1960, only for the purposes of assessment year 1961-62. Thus, according to the order of the Appellate Assistant Commissioner, the clubbing of the two gifts together was directed to be undone. Against the order of the Appellate Assistant Commissioner, the matter was taken in appeal by the revenue before the Tribunal.
5. On behalf of the revenue it was urged before the Tribunal that in income-tax proceedings a direction had been given by the Income-tax Appellate Tribunal to the Income-tax Officer to treat the Samvat year as the previous year of the assessee for income-tax purposes and, in pursuance of the directions of the Tribunal, the Income-tax Officer has written a letter to the assessee permitting the assessee to change the previous year from Samvat year to financial year, but on certain conditions, which he imposed in that letter. However, these conditions were not acceptable to the assessee and, thereafter, for income-tax purposes, the Samvat year was taken to be treated as the previous year. The decision regarding Samvat year to be adopted as the previous year was in connection with the assessment year 1960-61 and since that decision had been arrived at for subsequent years 1961-62, 1962-63 and 1963-64 also the Samvat year was adopted by the Income-tax Officer as the previous year for the assessee. The contention on behalf of the assessee before of the assessee before the Appellate Tribunal was that the assessment under the Gift-tax Act for the assessment year 1960-61 was made treating the financial year as the previous year and, therefore, in view of the second proviso to clause (XX) of section 2 of the Gift-tax Act, the financial year should be continued as the previous year for subsequent assessment years also so far as the Gift-tax Act was concerned. However, on behalf of the revenue it was contended that the assessment order, though it purported to have been made on the footing of the financial year as the previous year of the assessee, in fact was a provisional assessment order and not the final one. An office note beneath the order passed by the Gift-tax Officer was relied upon by the revenue to indicate that the assessment was not final. That note was as follows :
'The assessee has gifted property bearing No. 546/1 & 2 & 546/3/4/5. The gift is made on December 2, 1959. The assessee has also made gift of the second property on January 2, 1960. The assessee has claimed the year as financial year whereas actually as per the Appellate Assistant Commissioner's order in income-tax assessment order these two gifts fall in period S.Y. 2016. Therefore, this assessment is made on provisional basis and if necessary the case will be submitted to the Commissioner of Income-tax for revision after the assessment for 61-62 wherein the gift is being taxed is confirmed in appeal. For the time being no tax collection will be made.'
6. In its order, the Tribunal observed that no doubt the assessment appears to have been made on the basis that the financial year was the previous year, so far as assessment year 1960-61 was concerned. But it held that since the Gift-tax Officer had made that order as a provisional order, there was no determination of the question of previous year by the Gift- tax Officer finally within the meaning of the 2nd proviso to clause (XX) of section 2 and there was no final assessment for 1960-61, and hence, the contention on behalf of the assessee in the light of the 2nd proviso to clause (XX) of section 2 must fail. Thereafter, at the instance of the assessee, the question set out hereinabove has been referred to us for our opinion.
7. A perusal of the order of the Tribunal clearly shows that the Tribunal based its decision entirely on the footing that the order passed by the Gift-tax Officer on March 26, 1965, in connection with the assessment year 1960-61 was a provisional order and was not a final order. It is obvious on the facts, which we have narrated above, that it was only if the Samvat year was treated as the previous year for purposes of gift-tax that two gifts could be clubbed together by the Gift-tax Officer. It may be pointed out that Samvat year 2015 commenced on November 13, 1958, and ended on October 31, 1959, whereas Samvat year 2016 commenced on November 1, 1959, and ended on October 20, 1960. If the financial year were to be then as the previous year for the purpose of gift-tax then the first gift of December 2, 1959, would fall within the financial year 1959-60 and that would be the relevant previous year for the assessment year 1960-61 and the second gift on June 2, 1960, would fall within the financial year 1960-61, and the relevant assessment year in that case would be 1961-62.
8. In order to appreciate the controversy before us, it is necessary to refer to a few provisions of the Gift-tax Act. Section 3 is the charging section and it provides :
'Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the 1st day of April, 1958, a tax (hereinafter referred to as 'gift-tax') in respect of the gifts, if any, made by a person during the previous year (other than gifts made before the 1st day of April, 1957), at the rate or rates specified in the Schedule.'
9. Section 2, sub-section (XX), defines the 'previous year' in relation to any assessment year and under clause (c) of sub-section (XX), in the case of this particular assessee it would be the previous year as defined in section 3 of the Gift-tax Act, if the assessment is made under that Act for that year. The 2nd proviso to section 2(XX) is in these terms :
'Provided further that where an assessment has been made under this Act for any assessment year in respect of gifts by an assessee during any previous year, the meaning of the expression 'previous year' as then applicable to him shall continue to apply for any subsequent assessment year unless the assessee is allowed to vary it with the consent of the Gift-tax Officer who may, in allowing any such variation, impose such conditions as he may think fit.'
10. Thus, it is obvious that if in fact an assessment had been made under the Gift-tax Act for any assessment year in respect of gifts made by this assessee during any particular previous year, then for the purposes of the Gift-tax Act for all subsequent years that previous year has to be adopted by the Gift-tax Officer until a change in the previous year is allowed to be made at the instance of the assessee. On behalf of the assessee, Mr. Patel has pointed out that for the assessment year 1960-61 an order was passed by the Gift-tax Officer on March 26, 1965, in respect of the gift made on December 2, 1959. In column No. 5 of the order form instead of mentioning the previous year, the valuation date is mentioned. But it is obvious that a wrong form has been used instead of using an appropriate form. Against this previous year two years are mentioned, namely, Samvat year 2015 and April 1, 1959, to March 31, 1960. It is obvious that Samvat year 2015 was not the previous year. The previous year not only was S.Y. 2016 but in that case the other year which was the financial year April 1, 1959, to March 31, 1960, could never have been then mentioned. It was only if S.Y. 2016 was taken as a previous year that the two gifts could have been clubbed together. It is clear that the first gift of December 2, 1959, was not made in S.Y. 2015 since that Samvat year ended on October 31, 1959. When, therefore, the assessment order made by the Gift-tax Officer on March 26, 1965, mentioned two previous years viz., 2015 and financial year 1959-60, since S.Y. 2015 was not applicable at all to the facts of the case, it must be presumed that he proceeded on the footing that the financial year was the previous year in the case of this assessee. The assessment order in terms mentions that the assessee had filed the gift-tax return declaring gift at Rs. 42,000 and the return was accepted. Thereafter, a calculation is made regarding the exemption and ascertaining the final value of gift and final words in the order are, 'assessed under section 14(3). Issue D. N. and Chalan'. Under these circumstances it is clear that, so far as the assessment year 1960-61 is concerned, by this order of March 26, 1965, the Gift-tax Officer treated the financial year 1959-60, i.e., April 1, 1959, to March 31, 1960, as the previous year for the purposes of the Gift-tax Act. The office note which has been relied upon by the Tribunal proceeds on the footing that this order passed on March 26, 1965, was a provisional order. Now, one peculiar feature of the Gift-tax Act is the unlike the Income-tax Acts of 1922 and of 1961, there is no provision anywhere in the Gift-tax Act for a provisional order of assessment. The Gift-tax Officer under the scheme of the Gift-tax Act can only make a final order of assessment. Even though the office note purported to treat the order passed on March 26, 1965, as a provisional order since the Gift-tax Act nowhere provides for any such provisional order of assessment to gift-tax being made by the Gift-tax Officer, the order must be treated as a valid order under the Gift-tax Act and as a final order. Hence, for the purposes of the second proviso to clause (XX) of section 2, we must proceed on the footing that for the assessment year 1960-61, the previous year was treated as the financial year by the Gift-tax Officer himself and, in view of that conclusion, it necessarily follows that it was not open to the Gift-tax Officer in any subsequent year to change the financial year as previous year for the relevant assessment years. Under these circumstances, it is obvious that the Tribunal was not right in holding that there was no determination of the question of the previous year by the Gift-tax Officer finally within the second proviso to clause (XX) of section 2. When an assessment order is passed by the Gift-tax Officer in respect of any particular assessment year treating a particular previous year as the previous year for that particular assessment year, the 2nd proviso to clause (XX) of section 2 comes into operation and for all subsequent assessment years the previous year, thus fixed, will continue to operate and govern the subsequent assessment years for gift-tax purposes. In view of our above conclusion, we answer the question referred to us by stating that there was no provisional assessment but only final assessment for the assessment year 1960-61 and that the assessment was an assessment within the meaning of the 2nd proviso to section 2(XX) of the Gift-tax Act, 1958. The question is thus answered in favour of the assessee. The Commissioner of Gift-tax will pay costs of this reference to the assessee.
11. There will be no order in Gift-tax Application No. 1 of 1971 in view of our conclusion in the reference. Rule is, therefore, discharged. There will be no order as to costs in the gift-tax application.