2002 (2) TMI 29 - HC - Income Tax

Gift Tax Act, 1958 - The present petition is directed against the notice received by the petitioner purported to be issued under section 16(1) of the Gift-tax Act, alleging therein that the first respondent had reason to believe that the gifts made by the petitioner-company in the assessment year 1976-77 had escaped assessment within the meaning of section 16 of the Act. By the said notice, the first respondent called upon the petitioner-company to file its return under the said Act. - In the instant case, no material is placed before us to justify the impugned action. Faced with the aforesaid situation, we are left with no option but to quash and set aside the impugned notice.

Summary

Issues involved:
Challenge to notice under section 16 of the Gift-tax Act, 1958 for alleged escape of assessment in the assessment year 1976-77.

Analysis:

The petitioner received a notice dated November 23, 1982, under section 16(1) of the Gift-tax Act, 1958, alleging that gifts made by the petitioner-company in the assessment year 1976-77 had escaped assessment. The petitioner replied to the notice challenging it on various grounds, assuming that the matter was resolved as no response was received from the first respondent. However, on February 20, 1987, the petitioner was served with another notice to appear in the proceedings initiated in 1982. The petitioner objected to this notice and approached the court under article 226 of the Constitution of India, claiming the proceedings were illegal and unjustified.

Despite the passage of over 14 years, the respondents failed to file a return or affidavit in reply to support the reasons for issuing the impugned notice. The petitioner argued that the Gift-tax Officer lacked material to believe that the gifts had escaped assessment. Citing the Supreme Court's judgment in Madhya Pradesh Industries Ltd. v. ITO, the petitioner contended that in the absence of a counter-affidavit, the court should accept the allegations made in the petition and quash the notice. The petitioner also relied on judgments from the Bombay High Court in similar cases.

The court granted multiple adjournments to the respondents to file a reply and present supporting documents, but no affidavit was filed to justify the notice issued under section 16 of the Act. The law requires the authority to satisfy the court about the existence of conditions precedent by filing an affidavit and relevant documents when challenged by the assessee. As no material was presented by the Revenue to support the notice, the court had no choice but to quash and set aside the impugned notice dated November 23, 1982.

Based on the absence of supporting material from the Revenue, the court allowed the petition, quashing and setting aside the impugned notice issued under section 16 of the Act. The court referred to previous judgments where notices under similar circumstances were quashed, emphasizing the lack of justification for the action taken in the present case. The court made the rule absolute with no order as to costs.