Commissioner Of Gift-Tax vs Charanjeet Singh. on 26 October, 1989

Rajasthan High Court

Equivalent citations: 1990 185 ITR 496 Raj

JUDGMENT

This reference application has been moved by the Revenue under section 26(3) of the Gift-tax Act, for a direction to the Income-tax Appellate Tribunal to refer the following two questions which are said to arise out of the order dated June 5, 1986, passed by the Tribunal.

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the order of the Commissioner of Gift-tax (Appeals), that the notice issued under section 13(2) of the Gift-tax Act, was beyond time and, therefore, all proceedings are invalid in law ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in treating the notice under section 16 as a notice under section 13(2) ignoring the provisions of section 41C and without appreciating the fact that notice under section 16 is not of statutory series notice ?"

The facts briefly stated are that one Jaswant Singh (hereinafter referred to as "the assessee") was running a hotel known as "Hotel Imperial" in his individual capacity and has showed the value of the building at Rs. 7,90,800. In the previous year relevant to the assessment year 1976-77, the assessee had taken his two sons, namely, Shri Charanjit Singh and Shri Gurdeep Singh, as partners in the firm constituted under the name of M/s. Imperial Hotel and the property which was his absolute property was considered as having been transferred to the firm and each of the partners has 1/3rd share in the same. The Gift-tax Officer issued a notice on September 29, 1983 to the assessee on the view that property to the extent of Rs. 5,27,200 had been gifted by the assessee to his two sons who had been taken as partners in that firm and after allowing the exemption of Rs. 5,000, gift-tax was levied on the sum of Rs. 5,22,200. The said order of the Gift-tax Officer was set aside by the Commissioner of Income-tax (Appeals) on the view that no reasons were recorded by the ft-tax Officer for invoking the provisions of section 17(1)(a) of the Gift-tax Act and that the notice was issued under section 13(2) of the said Act after the expiry of one year from the assessment year 1976-77 and the assessment was, therefore, barred by limitation. The Income-tax Appellate Tribunal, on further appeal, held that the notice which was issued by the Gift-tax Officer was under section 13(2) of the Act and the Commissioner of Gift-tax was right in holding that it was issued beyond time. The Tribunal also went into the merits and held that, in view of the decision of the Supreme Court in the case of Sunil Siddharthbhai and Kartikeya v. Sarabhai [1985] 156 ITR 509, no gift-tax liability could be imposed on the assessee. The Revenue moved an application to the Tribunal for referring the aforesaid questions for the consideration of this court. The Tribunal rejected the said application and held that since the matter had been examined by the Tribunal on merits also and the matter was covered by the decision of the Supreme court in Sunil Siddharthbhais case [1985]156 ITR 509, the questions raised by the Revenue on the legal aspect of the matter were purely of academic nature. Thereafter the Revenue has moved this application.

Notice was issued to the respondents to show cause as to why the application be not allowed. The respondents, however, have not chosen to appear even though they have been duly served.

Shri Singhal, learned counsel for the Revenue, has submitted that the Tribunal was in error in holding that the present matter is covered by the decision of the Supreme Court in Sunil Siddharthbhais case [1985]156 ITR 509. Shri Singhal has pointed out that the said decision related to the assessment of income-tax and the question was regarding capital gain and that the said decision did not deal with assessment to gift-tax. On the matter of gift-tax, Shri Singhal has invited our attention to the decisions of the Supreme Court in CGT v. Chhotalal Mohanlal [1987] 166 ITR 124 and CGT v. Dr. George Kuruvilla [1970]77 ITR 746. Shri Singhal also has placed reliance on the decision of this court in D.B. Gift-tax Reference No. 35 of 1981, decided on July 19, 1989 (CGT v. Kishan Chand [1990]184 ITR 31). Having considered the aforesaid decisions, we are of the view that the questions raised in the reference application which arise from the order of the Tribunal dated June 5, 1989, require the consideration of this court. The Tribunal is, therefore, directed to draw up the statement of case and refer the following questions for the consideration of this court :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal; was right in upholding the order of the Commissioner of Gift-tax (Appeals) that the notice was issued under section 13(2) of the Gift-tax Act was beyond time and that, therefore, all proceedings are invalid in law ?

No order as to costs.