RAMANA Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THIS is a petition under Article 226/227 of the Constitution, seeking the quashing of the order of attachment dated December 29, 1978, notice dated September 3, 1992, issued under Rule 85 of the Second Schedule to the Income-tax Act, 1961 (for short, "the Act"), the show-cause notice dated April 15, 1993, sent by the Tax Recovery Officer to the petitioner that objections filed by her have been rejected and the sale proclamation issued on October 8, 1993.

(2.) THE petitioner is the grand-daughter of Smt. Tara Rani who was a partner with 30 per cent, share along with her two sons, namely, Baldev Raj and Tilak Raj, in a partnership firm. The said partnership firm had been constituted under a partnership deed to carry out certain military contracts. Smt. Tara Rani was having some income in her individual capacity as well as in the status of a partner of the said firm. A sum of Rs. 12,661 was payable by her as arrears of income-tax relating to the assessment year 1967-68 in her individual capacity. Certain arrears of tax were also recoverable from the partnership firm, Baldev Raj Tilak Raj, in which Smt. Tara Rani was a partner with her two sons. Smt. Tara Rani owned a house (No. 230, sector 21-A) at Chandigarh and also a house at Gurgaon. A gift deed was executed by Smt. Tara Rani in favour of her two grand-children on April 17, 1971. The petitioner, Smt. Ramana wife of Sunil Kohli and daughter of Baldev Raj, received half portion of the Chandigarh house by way of the above-mentioned gift from her grandmother, Smt. Tara Rani, and the remaining half portion of the house was given by the donor, Smt. Tara Rani, to Mr. Duke alias Rahul Arora, son of Tilak Raj.

(3.) SHRI Ajay Kumar Mittal, learned counsel for the assessee, has challenged the various orders, including the order of attachment and proclamation of sale, on various grounds. The first ground relates to the validity of the gift made by Smt. Tara Rani in favour of the petitioner. Shri Mittal has argued that it was a valid gift inasmuch as Smt. Tara Rani filed a gift-tax return and thereupon the property was assessed to gift-tax, vide order dated January 6, 1976. Though Smt. Tara Rani had shown the value of the taxable gift at Rs. 40,000, the Gift-tax Officer fixed the value at Rs. 80,000 on agreed basis and determined the value of taxable gift, granting exemption of Rs. 5,000, at Rs. 75,000. The assessee deposited the gift-tax on March 8, 1976. It is argued by Shri Mittal that, after the gift had been accepted under the Gift-tax Act, the petitioner became a valid owner of half portion of the property and the Income-tax Department had no powers nor any jurisdiction to proceed against her share in the property. He has also challenged the order passed by the Income-tax Officer declaring the gift to be void under Section 281 of the Act with the plea that the petitioner, being a lawful donee, was not bound by that order inasmuch as she was a minor at that time and no opportunity of hearing was given to her through her father and legal guardian, Baldev Raj. It may be mentioned here that the order passed under Section 281 of the Act had been challenged by Smt. Tara Rani in a writ petition but she did not succeed. The High Court, vide order dated April 3, 1980 (in Civil Writ Petition No. 361 of 1979--Tara Rani v. CIT [1982] 137 ITR 266 (P & H)), upheld the order passed by the Income-tax Officer declaring the gift to be void. Shri Mittal has also argued that the order of the High Court would also not affect the petitioner's right in the property because she was not impleaded as a party in that writ petition and, moreover, the gift was declared to be void only to the extent of the tax liability and the petitioner's rights remained unaffected.