IN THE ITAT CHANDIGARH BENCH-II
Smt. Jasbeer Kaur Bhatia
Assistant Commissioner of Gift-tax, Solan, HP
2007 107 ITD 111 Chd, (2007)
Vimal Gandhi, President
1. This appeal by the assessee for assessment year 1995-96 under the Gift Tax Act is directed against order of CIT (Appeals), upholding imposition of gift on the assessee.
2. The facts of the case are that during survey carried by the Revenue Under Section 133A on the business premises of Shri Kuldeep Singh Bhatia, Prop. M/s Giani Ka Dhaba at Dharampur, Smt. Jasbir Kaur in her statement is stated to have admitted that one flat at Mani Majra, Chandigarh was gifted to her by her mother Mrs Gurcharan Kaur, who expired on 20.1.1999. It was found in subsequent proceedings that flat was allotted somewhere in April, 1994 to Smt. Jasbir Kaur by Chandigarh Housing Board but some installments for consideration were paid by Smt. Gurcharan Kaur in her life time. The detail is noted in the assessment order for assessment year 1995-96. This was taken to be a case of deemed gift Under Section 4(1)(e) of the Gift Tax Act and accordingly notice Under Section 16(1) of Income-tax Act was issued to Smt. Jasbir Kaur. In response to the said notice, she filed a return of ‘nil’ gift on 10.1.2005. During the course of assessment proceedings, the assessee claimed that it was a case of inheritance and not that of gift. An oral will in favour of assessee was also pleaded. The A.O. rejected these contentions and computed total value of gift made in assessment year 1995-96 at Rs 2,40,000/-.
3. The assessment was challenged in appeal before the learned CIT (Appeals). It was claimed that order passed by GTO was defective both in law and on facts. It was not a case of gift. The notice issued Under Section 16(1) was also claimed to be issued without jurisdiction. It was alleged that notice was issued at the behest of the audit party. It was also submitted that GTO misunderstood the character of ‘transfer’ and wrongly charged the same to ‘gift’. The learned CIT (A) did not find any force in any of the contentions raised on behalf of the assessee and dismissed her appeal.
4. The assessee being aggrieved has brought the matter in appeal before the Appellate Tribunal. The assessee vide his application dated 8.1.2007, has sought to raise the following additional ground of appeal:
That the notice issued under Section 16 of the Gift Tax Act, 1958 is not a valid notice as it is issued to the appellant in the status of a donee and not as a legal heir as is required under Section 19 of the Gift Tax Act, 1958.
In support of above ground, the learned Counsel for the assessee submitted that plea relating to validity of jurisdiction was duly raised before the A.O. The additional ground is being raised to further clarify the position. The issue can be decided on the basis of material available on record and merely looking at the notice issued by the GTO Under Section 16(1) of the I.T.Act. It was, therefore, urged that above plea should be permitted to be raised. Learned Counsel for the assessee relied upon the following observation of Supreme Court in the case of Jute Corporation of India 187 ITR 688:
The observations in the case of Gurjargravures P. Ltd. (1978) 111 ITR 1 (SC) do not rule out a case for raising an additional ground before the Appellate Asstt. Commissioner, if the ground so raised could not have been raised at the stage when the return was filed or when the assessment order was made or if the ground became available on account of change or circumstances or law. There may be several factors justifying the raising of such a new plea in an appeal, and each case has to be considered on its own facts. If the AAC is satisfied, he would be acting within his jurisdiction in considering the question so raised in all its aspects. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. While permitting the assessee to raise an additional ground, the AAC should exercise his discretion in accordance with law and reasons.
5. The learned Departmental Representative vehemently opposed above submissions. It was submitted that facts relating to gift were found by revenue authorities during the course of survey and notice was issued on the basis of statement of Smt. Jasbir Kaur and affidavit of her brother. The notice issued Under Section 16(1) was valid. As above plea was not raised before the lower authorities, the same should not be permitted to be raised at this stage of proceedings.
6. We have given careful thought to the rival submissions of the parties. As seen above, the assessee has contended before the learned CIT (Appeals) that jurisdiction to issue notice Under Section 16(1) was not validly assumed by the GTO. In the additional ground, the assessee is trying to elaborate the point further. The matter can be decided on the basis of material already on record and on consideration of notice issued by the GTO. The plea sought to be raised is bonafide and would advance cause of justice if the same is permitted to be raised. Accordingly, we allow the assessee to raise this additional ground of appeal.
In support of this additional ground, the assessee has contended that notice issued Under Section 16(1) of the G.T Act does not specify as to in what status the said notice was issued. It is addressed as under:
Smt. Jasbir Kaur Bhatia,
VPO Dharampur, Teh Kasauli,
He contended that notice should have been issued Under Section 19 of the Gift Tax Act.
7. It is further not made clear in the notice whether the A.O. wished to assess the mother Smt. Gurcharan Kaur through the assessee or the assessee as alleged donee. The learned Counsel further argued that it was part of record that Smt. Gurcharan Kaur deceased on her death left two legal heirs i.e. assessee and her brother but nothing was made clear in the notice. Such notice without mention of status was invalid. Notice being without jurisdiction, the entire assessment was vitiated. In support of his contention, the learned Counsel relied upon decision of Hon’ble Andhra Pradesh High Court in the case of Rangapalli Basamma v. GTO 81 ITR 391. It was accordingly contended that the entire proceedings be held to be without jurisdiction.
8. The Departmental Representative opposed above submissions. He said that provisions of Section 292B of Income-tax Act were clearly attracted in this case as technical mistake in the notice did not affect the validity of the proceedings which otherwise in substance and in effect were carried in conformity with the purpose of the Gift-tax Act. Notice to assessee was issued after statement of the assessee was recorded that she had received property in gift from her mother. The brother of the assessee had also given an affidavit that property belonged to assessee only. The assessee never raised any objection in the assessment proceedings or before learned CIT (Appeals) that notice issued was invalid. The learned Counsel further argued that even if notice was issued to one legal heir who participated in the proceedings without objection, the proceedings would be treated as valid. There is no need to issue notice to all the legal heirs in such circumstances. The learned Counsel relied upon decision of Punjab & Haryana High Court in the case of CIT v. Hukam Singh and Ors. 276 ITR 347 and some other decisions talcing the same view.
9. We have heard both the parties. We are confining our decision to the additional ground raised before us as in our opinion, on the decision of the said ground, the entire appeal can be disposed of. We are, therefore, not recording or touching upon other arguments of the parties.
10. It is an admitted position that “deemed gift” was made by Smt. Gurcharan Kaur who died on 20.1.1999. The notice issued Under Section 16(1) was issued after her death, to tax the gift alleged made by her in her life time. The notice issued Under Section 16(1) is as under:
NOTICE UNDER SECTION 16 OF THE GIFT TAX ACT, 1958 (No. 18 OF 1958) G.I. No. Office of the Asstt.Colmmissioner of Gift-
Smt. Jasbir Kaur Bhatia,
The Kasauli Distt. Solan.
I have reason to believe that gift chargeable to tax for the Asstt.Year 1995-96 has escaped assessment within the meaning of Section 16 of the Gift-tax Act.
I, therefore, propose to assess the said gift that has so escaped assessment.
I hereby request you to deliver to me not later than— or within 30 days of the receipt of this notice, a return in the attached form of gift chargeable to tax, alongwith such other particulars as are required to complete the form for the said Asstt. Year.
This notice is being issued after obtaining the necessary satisfaction of the Joint Commissioner of Income-tax, Solan Range, Solan.
Asstt. Commissioner of Gift Tax
10. The aforesaid notice is not valid in law. On consideration of relevant provision of Gift-tax Act, it will be clear that notice Under Section 16(1) can be issued by the A.O. where he has reason to believe that for any assessment year, there has been no assessment of gift or under-assessment of gift.
11. It is a general provision which is applicable in case of all assessees where gift-tax had escaped assessment for the reasons stated in the section. It is applicable in cases where the donor is dead by the time proceedings under the gift tax are taken against the deceased subject to Section 19 of Gift-tax Act. In case of death of the donor, the proceedings are to be initiated Under Section 19 of the Gift Tax Act, which provides as under:
19. (1) Where a person dies, his executor, administrator or other legal representative shall be liable to pay out of the estate of the deceased person, to the extent to which the estate is capable of meeting the charge, the gift-tax determined as payable by such person, or any sum which would have been payable by him under this Act if he had not died.
(2) Where a person dies without having furnished a return under Section 13, or after having furnished a return which the Assessing Officer has reason to believe to be incorrect or incomplete, the Assessing Officer may make an assessment of the value of the taxable gifts made by such person and determine the gift-tax payable by him, and for this purpose may, by the issue of the appropriate notice which would have had to be served upon the deceased person if he had survived, require from the executor, administrator, or other legal representative of the deceased person any accounts, documents or other evidence which might, under the provisions of Section 15, have been required from the deceased person.
(3) The provisions of Sections 13, 14 and 16 shall apply to an executor, administrator or other legal representative as they apply to any person referred to in those sections.
(underlined to emphasise)
It is evident from above that where a person dies without furnishing a return or dies after furnishing incorrect or incomplete return, then GTO is to issue appropriate notice and serve it in the same manner as if the deceased person had not died. It is to be served on his or her executors, administrators or other representative(s) of the deceased person. It is further clear from Sub-section (1) of Section 19 that legal representative (including executors, administrators) are liable to pay the gift-tax, “to the extent to which the estate is capable of meeting the charge”. Thus gift-tax in case of deceased donor is to be recovered from the estate of the deceased. Thus on reading of entire Section 19, it is abundantly clear that notice to assess gift by a deceased person has to be served on all legal representatives of the deceased unless there is material that one individual represents the entire estate. It cannot be served on any one, may be the donee, as gift-tax payable on the gift is to be recovered from the estate of the deceased. When estate of the deceased is involved, all the legal representatives interested in such an estate are required to be served the notice. Recovery from estate cannot be made without serving notice to all the persons interested in the estate. The aforesaid proposition is also supported by decision of Andhra Pradesh High Court in the case of Rangapalli Basamma v. GTO 81 ITR 391, wherein it is observed as under:
Section 19(3) makes Sections 13 and 16 applicable to legal representatives. One of the results of the applicability of Sections 13 and 16 to a legal representative is the necessity to give notices to all the legal representatives if action is proposed to be taken under Section 16 on the ground that the gifts made by a deceased person have escaped assessment. There was no bona fide attempt by the GTO to ascertain the legal representatives of S. The petitioner was not a universal legatee under the will. She was given but a life estate, in some items of property. The will and the proceedings of the Astt. CED apportioning the estate duty showed that there was also a daughter living. The petitioner was, therefore, not the sole residuary heir either. Viewed from any angle the petitioner was not the sole legal representative and that should have been patent even to the GTO. The GTO is, therefore, prohibited by a writ of mandamus from taking further proceedings in pursuance of impugned notice. – ITO v. Muramreddy Sulochanamma (1967) 64 ITR 106 (AP) Applied; Addl. ITO v. Suseela Sadanandan explained and
In the case of Tirtha Lal v. Bhusan Moyee Dasi AIR 1949 FC 195, it was held that if there are two or more legal representatives of the deceased person, all must be impleaded to make the representation of the Estate complete. The same principles were applied under the Income-tax Act and to co-executors in the case of Muniyammal v. Addl. ITO 38 ITR 664.
12. In the present case, as is evident from admitted facts, the notice was Under Section 16(1). It is a general notice on the assessee as if she made a gift which had escaped assessment. There is no reference or mention to alleged deemed gift made by her mother Smt. Gurcharan Kaur which the G.T.O. wished to assess. It is also not stated that notice is being served on her as legal representative of Smt. Gurcharan Kaur in terms of Section 19 of G.T.Act. It is further defective as it is not served on all the legal heirs although gift tax, if any, was to be recovered from the estate in which the son of Smt. Gurcharan Kaur deceased was equally interested and was a necessary party. He has also succeeded to the estate of the deceased. Smt. Jasbir Kaur could not represent the entire estate. The tax could not be recovered from the amounts gifted by lady in her life but from estate left by her. This being a jurisdictional notice, the entire proceedings are vitiated and are held to be so.
13. The reliance of learned Departmental Representative on provision of Section 292B is of no avail. It cannot be said that notice issued Under Section 16(1) was issued in conformity with provisions of the Statute. Requirements were not satisfied have been discussed above. Other decisions were given on peculiar facts and circumstances involved in those cases and are not applicable. Provisions under the Income-tax Act are not similar to the one contained in Section 19 of the Gift-tax Act. For the reasons given above, we hold that notice issued by the GTO was defective, illegal and without jurisdiction. Consequently assessment made there-under is cancelled. The appeal of the assessee is allowed.
Pronounced in Open Court on 15.06.2007.