COMMISSIONER OF GIFT-TAX Vs. B. INDIRA DEVI

JUDGEMENT

(1.) HEARD senior counsel Sri. P.K.R. Menon, appearing for the appellant and Sri. Arun Raj, counsel appearing for the respondent. Even though counsel for the respondent submitted that another counsel from Madras is to argue the case, we do not propose to adjourn the case because having regard to the nature of order passed by the Tribunal, there is no scope for deciding the matter on merits by this Court. We therefore proceed to dispose of the case after preliminary hearing of both sides.

(2.) THESE appeals are filed by the revenue against the remand order issued by the Tribunal which is common for all the assessment years 1991 -92 to 1998 -99. The assessee's share in a building complex is leased out to a company, beneficiaries of which are her relatives, on a rent which is less than market rates or fair rent. Therefore in the Income -tax assessment the Assessing Officer estimated annual value and assessed the same as income under Section 23(1)(a) of the Income -tax Act. The differential amount between the estimated annual value and the actual rent provided in the agreement was assessed as deemed gift under Section 4(1)(a) of the Gift -tax Act. The CIT (Appeals), though allowed the appeals in part, remanded the matter to the Assessing Officer, against which appeals and cross -appeals were filed by the department and assessee before the Tribunal. Before the Tribunal, the assessee raised a contention that the very same amount cannot be assessed both as deemed income and as deemed gift under two statutes. The decision of the Supreme Court in K.P. Varghese v. ITO : [1981] 131 ITR 597 : 7 Taxman 13, was relied on by the assessee and the Tribunal while remanding the issue stated that the concept of mutual exclusion may apply here also because the department after assessing the differential rent as income from house property may not be entitled to assess differential amount as deemed gift under Section 4(1)(a) of the Gift -tax Act. The appeals by the revenue is essentially against this observation of the Tribunal. We do not think any suggestion from Tribunal is required for the CIT (Appeals) to consider the scope of decision of the Supreme Court. In any case when a matter is remanded for considering the real issue, that too based on the decision of the Supreme Court, we feel there is no necessity for the Tribunal to make any observation about the principle to be followed. We do not know why the issue was not taken up when the proposal was made by the Assessing Officer to make gift tax assessment. Since Assessing Officer is the first authority who after making Income -tax assessment initiated and completed gift tax assessment, it is for him to justify his action. We therefore feel that the Tribunal should have referred for decision by the very same authority for justifying his order. We therefore dispose of all these appeals by setting aside the orders of all the lower authorities including the gift tax assessment, and remanding the matter back to the Assessing Officer to consider whether assessment is possible under the Gift -tax Act and if so to issue notice to the assessee; hear their objections and pass orders. The Officer and assessee are free to rely on any other decision of the Supreme Court or High Court in the matter.