TMI Blog2002 (2) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... see's three sons filed a declaratory suit No. 181 of 1970 in the court of Senior Sub-judge, Hisar, for a declaration that they were entitled as co-owners to the extent of 3/4ths area therein. The parties appointed Shri Daulat Ram Jain, advocate, as the sole arbitrator who, vide his award dated March 18, 1970, accepted the claim of the assessee's sons. The said award was made a rule of the court vide order dated March 28, 1970 by the Senior Sub-judge, Hisar. The area of the land in which 3/4ths share-of the sons thus got recognised was about 11 acres (exact area 52,515 sq. yards). The Inspecting Assistant Commissioner (Assessment) of Gift-tax (for short "the IAC(A)") was of the view that in terms of the aforesaid order dated March 28, 1970, there was a gift by the assessee to his three sons which attracted gift-tax. Accordingly, he initiated gift-tax assessment proceedings against the assessee by issuing a notice dated March 29, 1979, under section 16(1) of the Gift-tax Act, 1958 (for short 'the Act"). This notice could not be served as according to the report of the process server, the assessee had gone to Delhi. The Inspecting Assistant Commissioner (Assessment) vide order dated M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Satinder Kumar, sons of Shri Shanti Parshad Jain for Rs.18,000. If the Department changes its aforesaid stand in income-tax, wealth-tax and gift-tax proceedings and accepts that 3/4ths of the lands mentioned in Sl. Nos. (i) and (ii) above became the property of the sons of Sh. Shanti Parshad Jain after the court decree dated February 28, 1970, in a declaratory suit, and that the land at sl. No. (iv) above was acquired by the sons of Sh. Shanti Parshad Jain with the sums of Rs.18,500 received by them as gift from M.P. Jain and was as such their property right from the date of purchase, the assessee, i.e., Shri Shanti Parshad Jain, would agree to the following: (a) That the gift-tax proceedings in his case for the assessment year 1970-71 were validly initiated. (b) That the transfer of the lands by Sh. Shanti Parshad Jain to his three sons through court decree dated March 28, 1970, in a declaratory suit constituted a gift of the lands on March 28, 1970, by Sh. Shanti Parshad Jain to his sons assessable to gift-tax in the assessment year 1970-71. (c) That gift-tax as per the provisions of the Gift-tax Act is leviable on the gift of the lands by Sh. Shanti Parshad to his sons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed penalty proceedings for late filing of the return. The assessees filed an appeal before the Commissioner of Gift-tax (Appeals), Chandigarh, raising as many as 13 grounds of appeal. However, during the course of arguments, he only raised the dispute about the valuation of the gifted land. The Commissioner of Gift-tax (Appeals) dismissed the appeal as according to him the valuation adopted by the Inspecting Assistant Commissioner (Assessment) was reasonable. The assessee filed further appeal before the Tribunal. The Tribunal vide its order dated May 17, 1983, quashed the assessment proceedings on the ground that the service of notice under section 16, which is a condition precedent for the assumption of jurisdiction to make an assessment was invalid. While deciding this appeal, the Tribunal did not take into account the settlement which had been offered by the assessee and accepted by the Department. Thus, the Department moved a miscellaneous application pointing out this error. That application was allowed vide order dated November 21, 1983, and the appellate order passed on May 17, 1983, was recalled. The appeal was accordingly reheard by the Tribunal. The assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king for not initiating penalty proceedings for the late filing of the return. The Tribunal duly noticed that as per clause (a) of the settlement, the validity of the gift-tax proceedings had been accepted by the assessee. It further noticed that as per clause (e) the assessee had agreed not to challenge the gift-tax assessment on any ground except on the question of valuation of the gifted land. However, the Tribunal was of the view that the question whether the requirements of Order V, rule 20 of the Civil Procedure Code, were satisfied or not so as to permit substituted service by affixation was one on which the valid assumption of jurisdiction by the Inspecting Assistant Commissioner (Assessment) depended. It was, therefore, held that such an objection which went to the very root of the Inspecting Assistant Commissioner (Assessment)'s power to make the assessment could be raised before it for the first time. Accordingly, by relying on the following judicial pronouncement, the Tribunal held that the principles of acquiescence or waiver did not come in the way of the assessee in challenging the validity of the assumption of jurisdiction by the Inspecting Assistant Commissioner (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice by affixation on March 31, 1979, was invalid and, therefore, the Inspecting Assistant Commissioner (Assessment) could not be said to have assumed a valid jurisdiction to make the gift-tax assessment in question as contemplated under section 16 of the Act. In view of this finding, the question of affixation at the correct house was held to be immaterial. Still after examining the facts, the Appellate Tribunal found that the objection of the assessee that the notice had been affixed at the wrong address was not sustainable. Even though the question of valuation did not remain material in view of quashing of the assessment order on the ground of want of proper service, the Tribunal noticed that the assessee had a good case on the merits in that regard also. The Departmental Valuation Officer had valued the land in question at Rs.27 per sq. yard. In doing so, he did not rely on the report of the assessee's valuer on the ground that the land in question had been approved for cornmercial/residential use under a scheme approved by the Municipal Committee. The Tribunal also noticed that the Departmental Valuation Officer was not an expert for valuing agricultural land, whereas the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Procedure Code, were not satisfied and the asses see could not waive the objection regarding assumption of jurisdiction by the Inspecting Assistant Commissioner (Assessment) on the basis of service by affixture? 2. Whether, on the facts and in the circumstances of the case and having regard to clause (a) of the agreement dated January 23, 1981, between the assessee and the Inspecting Assistant Commissioner (Assessment) the Tribunal was right in law in holding that the service of notice under section 16(1) of the Gift-tax Act was not valid and the Inspecting Assistant Commissioner (Assessment) did not assume a valid jurisdiction to make the gift-tax assessment? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the lands, which were the subject-matter of gift, were agricultural lands and valuation of Rs.1,89,975 declared by the assessee on the basis of the report of approved valuer for agricultural land was justified as against value of Rs.11,02,500 assessed by the Inspecting Assistant Commissioner (Assessment) on the basis of report of the Departmental valuer?" The Tribunal vide its order dated March, 1987, has referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings on any grounds except on the question of valuation. He further contended that the offer made by the assessee had been accepted by the Revenue and the Revenue on its part had fulfilled all its obligations. It had modified its stand in the income-tax, wealth-tax and gift-tax proceedings. It had also not initiated penalty proceedings for concealment nor had launched any prosecution against the assessee. He further contended that since the assessee had given up the challenge to the order directing service by affixation, no further evidence was required to be led to prove that the assessee was trying to evade service. He also relied on the judgment of the Madras High Court in A.K.M. Govindaswamy Chettiar (Decd.) v. ITO [2000] 244 ITR 559 to contend that once the assessee had acted upon the notice and filed the return in pursuance thereof, the objection regarding validity of service loses its significance. On the other hand, Mr. R.K. Jain, appearing on behalf of the assessee, supported the findings of the Tribunal. At the outset, we would like to mention that the purpose of notice is to inform the assessee. The mode is a matter of procedure. In the present case, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or during the arguments before the Commissioner (Appeals). These findings of fact having become final on the basis of the agreement by the assessee himself, the Tribunal was not justified in holding that there was no material to support the satisfaction recorded by the Inspecting Assistant Commissioner (Assessment) vide order dated March 31, 1979, under Order V, rule 20 of the Civil Procedure Code. Once this order is held to be justified, no fault can be found in the service of notice by affixation. This being the only ground on which the assessment proceedings have been quashed, the order of the Tribunal on this issue cannot be sustained. In this view of the matter, question No. 2 is answered in the negative, i.e., against the assessee and in favour of the Revenue. Since we have upheld the order dated March 31, 1979, ordering service of notice by affixation, there is no question of waiver of service of a valid notice by the assessee. Accordingly, question No. 1 has been rendered infructuous and is returned unanswered. We shall now deal with G.T.C. No. 2 of 1987 which is a petition filed by the Revenue under section 26(2) of the Act seeking a direction to the Tribunal to refe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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