COMMISSIONER OF INCOME TAX V. JASBIR KAUR BHATIA

WTA/1/2008

AI Insights

The case involves appeals by the Commissioner of Income Tax against Smt. Jasbir Kaur Bhatia concerning the assessment of a gift under the Gift-tax Act. The primary legal issue was whether the assessment proceedings were valid without issuing notice to all legal heirs of the deceased donor. The assessee claimed that the property was inherited and not a gift, while the tax authorities treated it as a deemed gift. The Income Tax Appellate Tribunal had allowed the appeal on procedural grounds due to the absence of notice to all legal heirs, which was contested by the Commissioner in the High Court.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 720007 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 12-08-2011
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-Tax vs. Hukam Singh and others, Commissioner of Income-Tax vs. Jai Prakash Singh
• Laws Referred To: Gift-tax Act, Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAMAKANT SHARMA
• Assessee Lawyers: VANDANA KUTHIALA
• Keywords: Deemed gift; Jurisdiction; Legal heirs; Notice defect; Gift assessment
• Section: 133A; 16(1); 19; 4; 15(3)

Judgement Text

" IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA ITA No.51 of 2007 Along with WTA No. 1 of 2008 Judgment reserved on: 5.8.2011 Date of decision: 12.08.2011 ------------------------------------------------------------------------------------------------------------ Commissioner of Income Tax (in both cases) ….Appellants -versus- Smt.Jasbir Kaur Bhatia ( in both cases) ….Respondents Coram The Hon’ble Mr. Justice Deepak Gupta, Judge. The Hon’ble Mr. Justice Sanjay Karol, Judge. Whether approved for reporting?1 No For the Appellant(s).: Mrs. Vandana Kuthiala, Advocate. For the Respondents: Mr.Ramakant Sharma, Advocate. Deepak Gupta, J. 1. These appeals are being disposed of by a single judgment since identical questions of fact and law are involved in the same. For decision of these cases, reference may be made to the substantial question of law framed in ITA No.51 of 2007 which reads as follows: “Whether on the facts and in the circumstances of the case, the ITAT was correct in cancelling the assessment of gift made u/s 15(3) read with Section 16(1) of the Gift-tax Act on the ground that the notice issued u/s 16(1) of the Act had not been issued to all the legal heirs of the assessee and was not in conformity with section 19 of the Act, and was therefore defective, illegal and without jurisdiction?” 1 Whether the reporters of the local papers may be allowed to see the Judgment? yes 2 2. Briefly stated the facts of the case are that a survey under Section 133A of the Income Tax Act was carried out in the business premises known as M/s.Giani Ka Dhaba, Dharampur owned by Kuldeep Singh Bhatia husband of the assessee Smt.Jasbir Kaur Bhatia. During the course of this survey it was found that the assessee owned a residential flat at Mani Majra and she claimed that it was gifted to her by her mother Smt.Gurcharan Kaur who had expired on 20.1.1999. The case set up is that the flat was purchased in the year 1994 by the mother in the name of the assessee from the Chandigarh Housing Board. It was also alleged that the entire sale consideration of the flat was paid by the mother during the period 1994- 1999. 3. The Assessing Officer considered this to be a case of deemed gift under Section 4 of the Gift-tax Act and issued notice under Section 16(1) of the Act to the assessee since the donor i.e. mother of the assessee had already expired. Surprisingly, the notice did not specify that it was addressed to the assessee in the capacity of her being the legal heir of the owner. The assessee filed return on 10.1.2005 and declared nil gift. It would also be pertinent to mention that during the assessment proceedings the assessee claimed that this property had been inherited by her and was 3 not a gift. The Assessing Officer rejected these contentions and held that the amount of Rs.2,40,000/- paid by the assessee’s mother to the Chandigarh Housing Board after the allotment of the flat represented a taxable gift and accordingly passed the assessment order. 4. The assessee filed an appeal before the Commissioner Income Tax who confirmed the order of the Assessing Officer. Thereafter, the assessee filed appeal before the Income Tax Appellate Tribunal and this appeal has been allowed only on one ground that the entire proceedings are vitiated since valid notice was not issued to all the legal heirs. Admittedly, the assessee Jasbir Kaur has a brother and no notice was issued to him. 5. The only question which arises is whether it is necessary to issue notice to all the legal heirs and in case notice is not issued to the legal heirs, are the entire assessment proceedings vitiated or not. 6. Before deciding this question, it would be appropriate to mention that it has not been disputed before us that as per the law if the donor dies then the tax payable by the donor cannot be recovered from the gifted property but can only be recovered from the estate inherited by the legal heirs from the donor. Even if, the gift is to one of the legal heirs then also the gift not being an 4 inheritance the tax on this count cannot be recovered from the donated property. 7. A large number of judgments have been cited before us but it is not necessary to refer to all those judgments. A Division Bench of the Punjab and Haryana High Court in Commissioner of Income-Tax vs. Hukam Singh and others (2005) 276 ITR 347, decided a similar question by holding that if notice of re-assessment proceedings is served on some of the legal heirs, these legal heirs have no locus standi to question the order of re-assessment on the ground of lack of notice to some of the other legal heirs. Non- issuance of notice to some of the legal heirs of the deceased is merely an irregularity and does not affect the validity of re-assessment of the notice. This judgment is based on the judgment of the Apex court reported in Commissioner of Income-Tax vs. Jai Prakash Singh, (1996) 219 ITR 737 and various other judgments which need not be referred to. 8. The legal position is clear that the legal heir to whom notice has been issued cannot challenge the validity of the re-assessment proceedings on the ground that notice has not been issued to all the legal hairs. Therefore, the order of the Tribunal is set-aside and it is held that the assessee is liable to the extent of the estate inherited by her from her mother to pay the amount of tax, interest etc. assessed as being payable 5 by her mother. It is made clear that she will be liable to pay this amount only out of the estate inherited from her mother and not out of the gifted property. As far as the other legal heirs are concerned we may make it clear that this order does not bind them and the revenue can initiate appropriate proceedings in accordance with law if so permissible at this stage to recover the amount. 9. The question is answered accordingly and both the Appeals are disposed of. No costs. ( Deepak Gupta ), J. August 12, 2011. ( Sanjay Karol ), J. PV "