Income Tax Appellate Tribunal - Mumbai
Assistant Commissioner Of Gift-Tax vs Rustom Dubash Investment (P.) Ltd. on 1 March, 1993
Equivalent citations: [1993]47ITD265(MUM)
ORDER
R.P. Garg, Accountant Member
1. This is an appeal by the revenue against the order of the CGT(A), for the assessment year 1983-84. The ground raised in this appeal is as under :
On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in cancelling the assessment order. The CIT(A) failed to appreciate the fact that donor allowed the assessee-company to purchase the flat at a rate lower than the market rate thereby making a gift.
2. The assessee is a private limited company. It had purchased a flat on 8th floor of Firpose Co-op. Housing Society, along with garage, at Bhulabai Desai Road, Bombay-400 036. The said flat was occupied by Smt. Moti B. Dubash and the assessee opted to purchase the same at a sum of Rs. 2 lakhs. The Assessing Officer, proceeding on the basis of the valuation of the departmental valuer, estimated the value at Rs. 5,69,000 and treated the balance sum of Rs. 3,69,000 as a deemed gift to the assessee. The assessment made was on protective basis. In appeal, the CGT(A) cancelled the assessment by observing as under :
It may be mentioned here that the Assessing Officer could not produce the records of the case before me because according to him he had to receive the records from a particular ITO who had not been able to make records available to him. Therefore, the various facts mentioned in the statement of facts of the appellant could not be verified by me with reference to the records. I am, however, of the view that in the present case, it is not necessary to decide the matter on merits. There is no finding in the assessment order that the Assessing Officer used all due and reasonable diligence to find out the donor but still failed. In view of this, the primary condition of making the assessment on the donee in terms of Section 21A is not satisfied in the present case. The very service of notice therefore on the donee for filing the gift-tax return was not proper and legal and, therefore, the assessment order framed by the Assessing Officer is, therefore, cancelled. This order, however, shall not prejudice the assessment that may be made in the case of donor in any manner.
3. We have heard the learned Departmental Representative, Sri R.G. Sharma and the learned counsel for the assessee, Sri Pardiwalla and their rival submissions considered. In our opinion, the order of the CGT(A) does not call for any interference. Gift-tax is chargeable under Section 3 of the Gift-tax Act in respect of gifts, if any, made by a person during the previous year. Therefore, it is a tax on the donor and not on the donee. Section 21A of the said Act, however, provides that where an Assessing Officer, after using all due and reasonable diligence cannot find the donor who has made any taxable gifts, for the purpose of service of notice under Sub-section (2) of Section 13, or under Section 16, the Assessing Officer may make an assessment of the value of all such taxable gifts made by him 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 donor, require from the donee or donees any accounts, documents or other evidence which might, under the provisions of Section 15, have been required from the donor. Sub-section (2) of Section 21A of the Act provides that where any assessment in respect of the taxable gifts made by the donor has been made under Sub-section (1), every donee shall be liable for the gift-tax so assessed. As per Sub-section (3), the provisions of Sections 13, 14 and 16 shall apply to a donee as they apply to any person referred to in those sections. From the above, it is evident that unless a particular case falls within the mischief of Section 21Aof the Act, the Assessing Officer has no power to proceed and assess the donee on the gifts received by him. This section comes into play only when the donor cannot be found by the Assessing Officer after using all due and reasonable diligence for the purpose of service of notice under Sub-section (2), or Section 16 of the Act. When the Assessing Officer alleges that the donor could not be found, it must be shown that all attempts have been made to trace and serve at the right time and right place when and where the donor is expected to be present or available. This is what has been held by the Calcutta High Court in the case of Gopiram Agarwalla v. First Addl. ITO [1959] 37 ITR 493. It was a case where a notice of reassessment under Section 34 of the Indian Income-tax Act, 1922 was to be served on the assessee and the question was considered under Order V, Rules 15 and 17 of the Code of Civil Procedure with local amendments for Calcutta wherein also a similar language has been used. Rule 15 of C.P.C. provides that where in any suit the defendant cannot be found and has no agent empowered to accept service of the summons on his behalf, service may be made on any adult male member of the family of the defendant who is residing with him. Rule 17 of C.P.C. provides that where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgement, or where the serving officer, after using all due and reasonable diligence, cannot find the defendant ... the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides. ... In that case, the serving officer went with the notice to the address of the assessee and found that the assessee had gone out. Then he offered the notice to a person who was pointed out to him as the assessee's son and on the latter's refusal to accept the service, he affixed the notice. On these facts, Their Lordships of the Calcutta High Court held that the mere fact that the serving officer went to the address and found him absent from that address was not sufficient to establish the requirement that the defendant could not be found and that before it could be said that the defendant could not be found, it must be shown not only that the serving officer went to the place at a reasonable time when he could be expected to be present, but also that if he was not found, proper and reasonable attempts were made to find him either at that address or elsewhere. If after such reasonable attempts the position still was that the defendant was not found, the Court said, then and then only it could be said that the defendant could not be found.
4. In the present case, the Assessing Officer has merely stated that he was not aware as to whether the gift has been assessed in the case of Ms. Moti B. Dubash, who is assessed to income-tax by the 1st Income-tax Officer, Ward, Bombay and then, he states that if it was found that the gift-tax assessment has been completed by the said officer, then this assessment was to be reconsidered. This cannot be a position where it could be said that the donor could not be found. The Assessing Officer himself was not sure as to whether the donor has been assessed or not. No efforts, much less after using due and reasonable diligence, at all have been made by the Assessing Officer to trace the donee so as to assume jurisdiction under Section 21A of the Act. Nothing is brought on the record to show that for the purpose of service of notice under Section 13(2) of the Act or under Section 16 of the Act, any notice ever was served by the Assessing Officer on the donee. On the facts and circumstances of the case, it is an improper assumption of jurisdiction to make the assessment on the assessee. As aforesaid, the gift-tax is charged from the donor and not from the donee. Donee can be called upon to face the charge only when the conditions laid down in Section 21A of the Act are satisfied. These conditions are to be satisfied not by the assessee, but by the Assessing Officer, so as to assume jurisdiction. Diligence presupposes what a person with common-sense would do to trace a person at a right place at a right time. In this case, as aforesaid, no efforts at all have been made by the Assessing Officer to trace the donor, on the facts and circumstances of the case, in our opinion, the CGT(A) was perfectly justified in cancelling the assessment by observing that the primary condition for making the assessment on the donee in terms of Section 21A of the Act were not satisfied in the case and that the very service of the notice on the donee for filing the gift-tax return was not proper and legal. We, therefore, uphold the impugned order.
5. The appeal is dismissed.