COMMISSIONER OF INCOME TAX Vs. SHANTI PARSHAD JAIN

JUDGEMENT

(1.) BY this order we are disposing of Gift-tax Reference No. 1 of 1987 and Gift-tax Case No. 2 of 1987 as they relate to a common order dated July 3, 1986, passed by the Income-tax Appellate Tribunal (for short "the Tribunal"), Delhi Bench "A", New Delhi. The assessee is an individual. He has three sons, namely, Jitender Kumar, Devendra Prasad and Satendra Kumar. The assessee had purchased certain lands at Hisar from one Anand Dev under the registered sale deed dated March 28, 1954. The lands so purchased included land bearing khasra Nos. 4960 and 4962 to 4969 measuring 77 bighas, 8 biswas. Out of the total land, an area measuring 9 bighas, 11 biswas, in khasra No. 4960 and 4962 was acquired by the Municipal Committee, Hisar. The assessee was, therefore, left with 72 bighas, 17 biswas of land in khasra No. 4963 and 4969. With reference to the said area of 72 bighas, 17 biswas, the assessee'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 March 31, 1979, recorded his satisfaction that the assessee was keeping out of the way for the purpose of avoiding service of notice. Accordingly, he ordered that the notice be served on the assessee by affixation on some conspicuous part of his house as provided under Order V, rule 20 of the Code of Civil Procedure. Notice dated March 31, 1979, was, therefore, affixed by the process server on the same day on the assessee's house in Katla Ram Leela, Hisar.

(2.) THE assessee filed a nil return along with a covering letter dated December 16, 1980, in which it was stated that the return was being filed under protest as there was no valid order for service by affixation and, therefore, there was no valid service. According to the assessee there was no occasion to resort to the substituted service by affixation. He further stated that he had come to know about the gift-tax proceedings in respect of the assessment year 1970-71 from the inspection of the gift-tax file for the assessment year 1973-74. He also denied having made any gift. However, during the course of proceedings, the assessee made the following offer which was recorded by the Inspecting Assistant Commissioner (Assessment) on January 23, 1981 :

(3.) THE assessee also filed a revised return declaring the value of the taxable gift at Rs. 1,84,975 by adopting the value of the land at Rs. 3.52 per sq. yard. THE Inspecting Assistant Commissioner (Assessment) accepted the settlement offered by the assessee to put an end to the multifarious litigation that had arisen in the income-tax, wealth-tax and gift-tax cases. Since the only matter thereafter open before the Inspecting Assistant Commissioner (Assessment) was in respect of the valuation of the gifted property, he referred the question of valuation to the District Valuation Officer, who vide his report dated March 18, 1981, determined the value of the gifted land as on March 28, 1970, the date of gift at Rs. 11,02,500. For this purpose, he relied, inter alia, on the fact that in respect of the land acquired by the State Government, the District Judge had fixed the value at Rs. 27 per sq. yard. THE Inspecting Assistant Commissioner (Assessment) rejected the assessee's claim that the land was agricultural and therefore the District Valuation Officer was not competent to value it. He also held that even if the land was agricultural, it had to be valued keeping in view its future potential. Accordingly, the valuation of the taxable gift was taken by him at Rs. 11,02,500 and the assessment was completed accordingly. THE Inspecting Assistant Commissioner (Assessment) also initiated penalty proceedings for late filing of the return.