Income Tax Appellate Tribunal - Ahmedabad
Smt. Vasantikaben J. Dave vs Income-Tax Officer on 13 June, 1988
Equivalent citations: [1989]28ITD220(AHD)
ORDER
--Not so on the basis of material before assessing officer. Ratio:
Where Commissioner relied on additional material evidence and not made the order the basis of material before assessing officer, invocation of revisional jurisdiction was not justified.
Held:
It is a well established proposition of law that the validity and legality of an order passed by lower or subordinate authority should be judged by the revisional authority on the basis of record as it stood at the time of passing the questioned order by the lower or subordinate authority. Material or evidence collected subsequent to the passing of the impugned order by the lower authority should not be made the basis of exercise of revisional jurisdiction. In fact the Commisisoner had himself mentioned in his notice dated 19-3-1986 that `further enquiries' had informed him of the facts to the effect mentioned above. It clearly means that in the exercise of his revisional jurisdiction under section 263 the Commissioner had not confined himself to the record as it stood at the time the Income Tax Officer had passed the relevant orders. That obviously creates a foundational defect in the exercise of the revisional jurisdiction by the Commissioner and renders the orders passed by him under section 263 invalid and hence liable to be vacated.
Application:
Also to current assessment years.
Income Tax Act 1961 s.263 Words and phrases--ASSESSEE--In s. 54E.
Ratio:
In section 54E the word 'assessee' means the same person who is receipient of capital gains.
Held:
If the word 'assessee' is interpreted in a way that when the question of identifying the recipient of the capital gain on the transfer of the capital asset arises the word 'assessee' signifies a particular persons as recipient but when the question of investment or deposit of the net consideration in any specified asset by the recipient is considered the same word 'assessee' in the language of section 54E would lead to absurdity. If the late M could be regarded as recipient of the capital gains on the transfer of the agricultural land of GIDC by acquisition on the basis of the analogy adopted by the Commissioner of Income Tax, then by the same analogy, investment or deposits of the consideration of the property transferred in specified assets under section 54E, whether made by the late M or others shall have to be deemed to have been made by the said M and by ohers for or on his behalf.
Application:
Also to current assessment years.
Case Law Analysis:
Smt. Vasantikaben J. Dave v. ITO (1989) 28 ITD 220 (Ahd): (1989) 34 TTJ (Ahd) 46.
Income Tax Act 1961 s.54E Revision under s. 263--VALIDITY--Reliance placed on additional material evidence.
Ratio :
Commissioner was not justified in invoking revision on the basis of material not available to assessing officer at the time of passing the order.
Held :
It is a well established proposition of law that the validity and legality of an order passed by lower or subordinate authority should be judged by the revisional authority on the basis of record as it stood at the time of passing the questioned order by the lower or subordinate authority. Material or evidence collected subsequent to the passing of the impugned order by the lower authority should not be made the basis of exercise of revisional jurisdiction. In fact, the Commissioner had himself mentioned in his notice date 19-3-1986 that `further enquiries' had informed him of the facts to the effect mentioned above. It clearly means that in the exercise of his revisional jurisdiction under section 263 the Commissioner had not confined himself to the record as it stood at the time the Income Tax Officer had passed the relevant orders. That obviously creates a foundational defect in the exercise of the revisional jurisdiction by the Commissioner of Income Tax and renders the order passed by him under section 263 invalid and hence liable to be vacated.
Application :
Also to current assessment years.
Income Tax Act 1961 s.263 ORDER M.A.A. Khan, Judicial Member
1. Aggrieved against the commonly worded orders dated 25-3-1986, whereby the Commissioner of Income-tax, Rajkot (CIT), by exercising his powers under Section 263 of the Income-tax Act, 1961 ('the Act'), set aside the assessments, as made by the Income-tax Officer (ITO), under Section 143(3) of the Act in the individual cases of the appellants for the assessment year 1981-82 and has required him to pass fresh orders in all the cases, the assessees have come up in these appeals before us. Since not only the material facts but also the questions of law and facts in all these appeals are quite common, we decide all these matters by this common order.
2. Briefly stated, the relevant facts common to all these appeals are that on examining the record of proceedings in the cases of the appellants for assessment year 1981-82, the learned CIT observed that in their returns of income the appellants had stated that a sum of Rs. 1,54,974 received by each of the appellants from Gujarat Industrial Development Corporation (G.I.D.C.) as compensation for acquisition of their agricultural lands was invested in National Rural Development Bonds within six months of the receipt of compensation amount by them as required under Section 54E of the Act. The appellants had claimed exemption of their respective invested amounts and the ITO while accepting their claims had charged no capital gains tax from any of them. In the opinion of the learned CIT the orders passed by the ITO in the cases of the appellants were erroneous and prejudicial to the interests of revenue inasmuch as that 'further enquiries' had revealed that the entire capital gain, arising out of the acquisition of the agricultural land, which, though stood recorded in the names of the appellants and some others, was not their ancestral property but was the separate and exclusive property of one Sri V.O. Mehta, the deceased assessee-appellant, accrued to the said deceased appellant only and should have been brought to tax in the case of the said deceased assessee in his individual capacity. Being of that opinion in each of the cases of present appellants the learned CIT invoked his revisional jurisdiction under Section 263 of the Act and called upon the appellants to show cause as to why the assessments made in their respective cases be not set aside on the ground mentioned above and the ITO be not directed to pass fresh assessment orders considering the entire capital gains arising out of the land acquired by the G.I.D.C. in the case of late Sri V.O. Mehta in his individual capacity and not in different names as had been done by him. Though through their written submissions the appellants tried to convince the learned CIT that the action proposed to be taken by him in their cases under consideration would be legally bad mainly for the reasons that in majority of the cases the assessment orders passed by the ITO were never communicated to the concerned assessees and for that reason there could be no valid exercise of revisional powers by him in their cases, that the notices issued were bad for ambiguity and want of necessary details, that revisional powers could not be exercised by him on the basis of certain new material gathered by him on 'further enquiries' and that investment of the entire amount of compensation in National Rural Development Bonds within six months as required under Section 54E of the Act could not result in levy of capital gains tax on any of the appellants, yet the learned CIT rejected all these objections thus giving thereby rise to these appeals by the assessees.
3. Declaring the appeal of late Sri V.O. Mehta (ITA No. 1200/Ahd./1986) as the leading appeal representing the common grievance of all the appellants ? in their respective appeals, Mr. K.H. Kaji, the learned counsel for the assessee-appellants in all the appeals, urged that at least in the cases of late Sri V.O. Mehta and Smt. Nirmalaben V. Mehta, appellants, no assessment order was ever communicated to them and for that reason the action of the learned CIT in exercising his jurisdiction under Section 263 in their cases was quite invalid and ineffective. Mr. Kaji relied upon the Madhya Pradesh High Court decision in the case of Smt. Jeejibhai Shinde v. CGT154 ITR 122 (sic) and of the Calcutta High Court in the case of CIT v. Badri Prasad Bianwalla in support of this argument. No doubt Mr. A.K. Hajela, the learned Departmental Representative submitted that the assessment orders in the cases of the persons named by Mr. Kaji were passed u/s. 143(3) as back as on 7-3-1984 yet he could not say with authority whether the same had ever been communicated to them.
4. Section 263 confers jurisdiction upon a Commissioner of Income-tax to revise such orders only as are considered by him to be erroneous and prejudicial to the interests of revenue. Only an enforceable and effective order may be, it is erroneous, can have the characteristic of causing prejudice to a party. An order is ineffective qua the person concerned, unless it has been communicated to him. Pronouncement of an order is simply a form of its communication to others. It follows, therefore, that the effectiveness, enforceability and validity of an order very much depends upon its having been communicated to the person concerned. Communication of an order of assessment to the assessee concerned is thus an essential requirement for the effectiveness and validity of such an order. This view, we think, is supported by the cases cited by Mr. Kaji which appear to have been decided in the light of the pronouncement made by the Supreme Court on the point in the case of CIT v. Oriental Rubber Works [1984] 145 ITR 477.
5. In the instant case not only that Mr. Hajela could not find himself in a position to make a statement at Bar refuting the contention of Mr. Kaji but also the conduct of the appellants as expressed in their letters dated 21-12-1985, 21-3-1986 and 30-5-1986 addressed to the IAC, Rajkot, Commissioner of Income-tax, Rajkot and the Asstt. Registrar of the Tribunal respectively corroborate the version given by the appellants in this behalf. In the said letters the appellants had clearly mentioned and communicated to the authorities named therein that the relevant assessment orders were never communicated to some of the appellants, as named by Mr. Kaji. That means there were no valid and effective orders in their cases to be revised by the CIT. That position vitiates the action of the CIT in the cases of late Sri V.O. Mehta and Smt. Naliniben V: Mehta and the order under appeal in their cases cannot be sustained on this very ground.
6. It was next urged by Mr. Kaji that the impugned orders suffer from one more jurisdictional infirmity. It was submitted by him that the jurisdiction of a Commissioner of Income-tax to revise an assessment order under Section 263 was confined to record as it stood when the ITO had passed his order. Material or evidence collected or brought on record subsequently cannot be the basis for revisional proceedings. Mr. Kaji further submitted that in the instant case there was no material before the learned CIT to form the opinion that the land acquired was not the property of the HUF of the present appellants and others and that the same was the exclusive property of the late Sri V.O. Mehta, appellant. It was pointed out that since in the exercise of his revisional jurisdiction the learned CIT did not confine himself to the record as it stood at the time the orders were passed by the ITO and relied upon information or evidence gathered on 'further enquiries' the orders under appeals stand vitiated and deserve to be vacated. In support of these arguments, Mr. Kaji relied upon the cases of Ganga Properties v. ITO [1979] 118 ITR 447 (Cal.); CIT v. Shriram Development Co. [1986] 159 ITR 812 (MP); State of Gujarat v. Chelabhai Bhanabhai Prajapati [1974] 33 STC 147 (Guj.) and Jagatjit Distilling & Allied Industries Ltd. v. State [1971] 28 STC 709 (Punj. & Har.).
7. In reply Mr. Hajela referred to the statement of late Shri V.O. Mehta as contained in the note appended below the computation of total income in the statement of income submitted by the said assessee and urged that from the words "being my share in ancestral agricultural land" as used in the said note the CIT had come to know of the true facts about the ownership of the land acquired and the real recipient of the compensation awarded by Land Acquisition Officer. Mr. Hajela thus submitted that the CIT had kept himself confined to the record as it stood at the time the ITO passed his orders and, therefore, the principles enunciated in the cases relied upon by Mr. Kaji were not attracted.
8. It is a well established proposition of law that the validity and legality of an order passed by lower or subordinate authority should be judged by the revisional authority on the record as stood at the time of passing the questioned order by the lower authority. Material or evidence collected subsequent to the passing of the impugned order by the lower authority should not be made the basis of exercise of revisional jurisdiction. That in substance is also the ratio of the decisions in the case of Ganga Properties (supra) and other cases relied upon by Mr. Kaji and referred to a above,
9. In the instant case we find that the mere version by Mr. V.O. Mehta in the statement of income and which was to the effect "being my share in ancestral agricultural land" was not sufficient to inform the CIT that the land acquired was not the ancestral property of the appellants and that that was the separate or self-acquired property of Mr. V.O. Mehta, deceased. In fact the CIT had himself mentioned in his notice dated 19-3-1986 that 'further enquiries' had informed him of the facts to the effect mentioned above. It clearly means that in the exercise of his revisional jurisdiction under Section 263 the CIT had not confined himself to the record as it stood at the time the ITO had passed the relevant orders! That obviously creates a foundational defect in the exercise of the revisional jurisdiction by the CIT and renders the orders passed toy him under Section 263 invalid and hence liable to be vacated. This objection too of Mr. Kaji succeeds and is hereby accepted.
10. Coming to the merits of the case, Mr. Kaji submitted that the orders under appeal would not stand even on merits. The learned counsel took us through several pages of the paper book and highlighted the fact that it was well-established on record that the agricultural land in respect of whose acquisition the appellants received equal amounts of compensation during the year under consideration was the property of a joint Hindu family consisting of seven persons including the appellants and, therefore, the entire amount of compensation could not be, by any stretch of imagination, deemed to have been received by the. late Sri V.O. Mehta, appellant so as to give rise to any capital gains in his hands. In answer Mr. Hajela supported the orders under appeal and mainly contended that the learned CIT has found it as a fact that in reality the land in question was the exclusive property of the late Sri V.O. Mehta, appellant only and that sometime before acquisition thereof or during acquisition proceedings the said deceased appellant had fictitiously and with a view to defeat the possible liability of the charge to capital gains tax on its acquisition, managed to get the same recorded in the Record of Right of Revenue Department, in the names of other persons, including the appellants before us. Mr. Hajela submitted that such a fictitious transaction could not be allowed to frustrate the just and legal claim of Revenue for taxes and, therefore, on such facts, no fault could be found with the action taken by the learned CIT. We find it difficult to accept the contention of Mr. Hajela on the fact and circumstances of the present cases.
11. The material placed before us brings out appellants' version a bout the ownership of the land in question like this, Oghadbhai Mehta, the father of the deceased appellant Sri V.O. Mehta, constituted his HUF consisting, inter alia, of himself and his three sons, viz., Veni Ram (late V.O. Mehta), Bhanu Shahkar and Ravi Shankar. Ravi Shankar had separated from the family and he or Ms descendants, allegedly, have no concern with the land in question. The joint Hindu Family of the rest of the two brothers and their father is stated to have purchased the lands bearing S. Nos. 207/4, 207/1 part and 216 from the erstwhile Ruler of Rajkot. S. No. 216 was subsequently exchanged for S. No. 207/1 part. Another part of S. No. 207/1 was purchased in the year 1950 from Kanbi Patel Nagji Parbat. The Joint Hindu Family of the two brothers was thus possessed of Acres 33 and Gunthas 35 of agricultural land. 25 Gunthas of this land was, however, acquired for the purpose of Aji-Dam Pipe Line.
12. After the death of Oghadbhai, Veni Ram and Bhanu Shankar are stated to have divided their Joint Hindu Family properties. In this partition, lands bearing S. Nos. 207/4 and 207/3 admeasuring Acres. 13-05 Gs. and Acres 3-21 Gs. respectively, fell to the lot of Veni Ram and his branch. It was this land which was subsequently acquired by the State of Gujarat for establishing an Industrial Estate by G.I.D.C. by issuing notification dated 3-8-1970 u/s. 4 of the Land Acquisition Act.
13. It was on the basis of above facts, as are available from the Special Civil Application No. 3517 of 1979 filed by the present appellants before the High Court for Gujarat on 5-7-1979 that the appellants had based their contention of the property acquired being ancestral. The facts stated in the said application appear to be getting satisfactory corroboration from other material on record. The partnership deed executed between the deceased appellant Sri V.O. Mehta and his brother Bhanu Shankar on 14-2-1963 the application to Mamlatdar for getting the said partition recorded in Revenue Record and the entries of separate names of the deceased appellant and his said brother in Village Form No. 1 go a long way to lend support to appellants' version that the land acquired was in fact ancestral property.
14. When the version advanced on behalf of the appellants is read in the light of the facts disclosed in the documents mentioned above it leaves one in no doubt that irrespective of the fact whether at one or the other point of time the name of the late appellant Sri V.O. Mehta alone had found place in Village Form No. 6 and Form No. 1 under Land Ceiling Act and that it was later on that the names of all the appellants were entered in the Village Form 7/12, the land under consideration was certainly the ancestral property of the late appellant Sri V.O. Mehta. The opinion of the learned CIT that it was only to save himself from the possible levy of capital gains tax on the acquisition of the land by the State Government that the late Sri V.O. Mehta appellant had managed to get the names of other appellants entered into revenue record (7/12 Village Form) even if be correct and is accepted would not change the established position that the land acquired was having the basic character of ancestral property. Once a property bears that character the absence of mention in the relevant record of rights of the names of one or the other member of the HUF, owning that property, can hardly affect its basic character as an ancestral property and the missing of the name of one or the other coparcener in the HUF from the record of rights maintained in respect of such property can hardly result in depriving such a coparcener of his share of right to and title in that property.
15. Assuming without holding that the land acquired was the separate or self-acquired property of the late appellant Sri V.O. Mehta, the same conclusion cannot be avoided. Undisputedly Sri Mehta was the karta of his HUF also consisting of other appellants besides some others. As a member of a HUF he had every right to throw his self-acquired or separate property in the common hotchpotch and make other members share it with him. There was nothing bad in that. It was legally permissible for him to do that, may be to save himself from the high tax effect. It cannot be lost sight of that interests of even married daughters were created in the land in question obviously on the basis of a statement of Mr. V.O. Mehta in respect to the real claimants of the property under consideration. This all was done much before the accounting period relevant to the assessment year under consideration. The agreement entered into by the appellant and others with the G.I.D.C. and the document of delivery of possession came into existence only subsequent to the ascertainment and acceptance of their right in and title to the ancestral agricultural land. An admission made by a person against his own interest carries weight and deserves to be accepted.
16. Considered by whatever angle the approach of the learned CIT to the fact of the cases of the appellants was not factually and legally correct. His orders u/s, 263 stand, as found above, vitiated on merits too.
17. In the final touches of his arguments, Mr. Kaji did not fail to assail the validity of the orders under appeal from one more angle. It was urged by him that when the learned CIT was asked to consider the fact that the entire amount of compensation, as received by the seven persons including the present appellants, was invested in securities as required under Section 54E and, therefore, no question of subjecting any part of the said amount to the charge of capital gains tax arises the learned CIT rejected the contentions on the ground that Section 54B contemplated investment by 'an' assessee and not other persons for and/or on his or her behalf. Mr. Kaji vehemently urged that when the learned CIT had readily treated the accrual or receipt of the entire amount of compensation in the hands of the late Sri V.O. Mehta, appellant, though that was not a fact, he should have also regarded the investments under Section 54E by other investors as having been made. for and on behalf of the late Sri V.O. Mehta, appellant. Mr. Kaji submitted that double standards could not be applied in the matter of receipt or accrual of the amount of compensation by the recipients thereof and the investments made under Section 54E by the recipient-investors. Despite Mr. Hajela's supporting the order under appeal we fail to ignore the force and merit in the arguments of Mr. Kaji.
18. It is the fundamental rule of construction of statutes that the words used therein should be so interpreted as may give them sense and meaning intended by the Legislature to be conveyed through them. The construction made and interpretation done must fit in the message or mandate made in and intended to be conveyed by a particular provision in a statute. A letter, word, phrase or clause, used in a particular provision of a statute should not be so interpreted and construed as might make a mockery of the relevant provision. The rule of reasonable construction should normally be preferred to the rule of literal and liberal or strict interpretation particularly in the field of socio-economic legislation. The adoption of such a rule of construction of statute would help achieve the aim and object of that particular legislation and would lead to justiciable destination which is the ultimate objective of all legislations in a civilized society.
19. The message which the Legislature intend to convey to the recipients of capital gains on transfer of their capital assets through the language of Section 54B of the Act is simply this that if they, within a period of six months after the date of transfer of their capital asset bringing capital gains to them, would invest or deposit the whole or any part of the net consideration, received by them, in one or more of the assets, as specified in the section the rigours of charge of capital gains tax, as proposed by Section 45, would stand relaxed to their benefit. If in the understanding of this message the word 'assessee' is interpreted in a way that when the question of identifying the recipient of the capital gain on the transfer of the capital asset arises the word 'assessee' signifies a particular person as recipient but when the question of investment or deposit of the net consideration in any specified" asset by the recipient is considered the same word 'assessee', without any change in facts, law or circumstances, signifies another person or persons, such a construction of the word 'assessee' in the language of Section 54E would lead to absurdity. If the late Sri V.O. Mehta could be regarded recipient of the capital gains on the transfer of the agricultural land to G.I.D.C. by acquisition on the basis of the analogy adopted by the learned CIT then by the same analogy, investment or deposits of the net consideration of the property transferred, in specified assets under Section 54B, whether made by the late Sri V.O. Mehta or others shall have to be deemed to have been made by the said Mr. Mehta and by others for or on his behalf. It would make a mockery of the provisions of Section 54E if for the purposes of receipt of capital gains the late Mr. Mehta is regarded the recipient of the entire amount of compensation, though received by him jointly with six or seven others but for the purpose of investment in specified securities enumerated in Section 54E, the investments or deposits made by other six or seven - persons is ignored and be treated as having not been invested or deposited at all. On the face of it the analogy adopted by the learned CIT does not fit in the mandate contained in the language of Section 54E and, therefore, cannot be approved.
20. The net result of the above discussion is that neither in law nor on facts the learned CIT was justified in invoking his revisional jurisdiction under Section 263 of the Act. The orders rendered by him in the cases of the appellants are thus bad in law and on facts and cannot be sustained.
21. In the result, the orders passed by the CIT, Rajkot under Section 263 of the Act in all these four appeals are hereby set aside and all the appeals allowed.