2002 (2) TMI 73 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the assumption of jurisdiction by the Inspecting Assistant Commissioner (Assessment) based on substituted service of notice.
2. Whether the assessee could challenge the validity of the assumption of jurisdiction despite an agreement.
3. Determination of whether the lands in question were agricultural lands.
4. Valuation of the gifted lands for the purpose of gift-tax assessment.

Issue-wise Detailed Analysis:

1. Validity of the Assumption of Jurisdiction by the Inspecting Assistant Commissioner (Assessment) Based on Substituted Service of Notice:
The Tribunal found that the notice under section 16(1) of the Gift-tax Act issued to the assessee on March 29, 1979, was returned unserved, and a subsequent notice on March 31, 1979, was served by affixation. The Tribunal held that the Inspecting Assistant Commissioner (Assessment) had no material to believe that the assessee was evading service. The Tribunal ruled that the service of notice by affixation was invalid, thereby invalidating the jurisdiction to make the gift-tax assessment.

2. Whether the Assessee Could Challenge the Validity of the Assumption of Jurisdiction Despite an Agreement:
The Tribunal allowed the assessee to challenge the validity of the service of notice despite an agreement dated January 23, 1981, where the assessee accepted the validity of the proceedings. The Tribunal held that issues going to the root of jurisdiction could be raised at any stage and cited judicial precedents to support this view. However, the High Court disagreed, stating that the acceptance of the findings in the agreement made the order of the Inspecting Assistant Commissioner (Assessment) final, and thus, the Tribunal's decision on this issue was erroneous.

3. Determination of Whether the Lands in Question Were Agricultural Lands:
The Tribunal examined various documents and evidence, including awards from the Land Acquisition Collector, Khasra Girdwari records, statements from Patwaris, and affidavits, to conclude that the lands were agricultural as of March 28, 1970. The Tribunal found the valuation by the assessee's approved valuer to be fair and justified, considering the agricultural nature of the land.

4. Valuation of the Gifted Lands for the Purpose of Gift-tax Assessment:
The Tribunal noted that the valuation by the Departmental Valuation Officer at Rs.27 per sq. yard was based on future potential and not on the agricultural status of the land at the time of the gift. The Tribunal held that the valuation by the assessee's approved valuer at Rs.17,000 per acre was fair and justified, given the agricultural status of the land on March 28, 1970.

High Court's Decision:
The High Court found that the Tribunal's approach to the service of notice and jurisdiction was erroneous. The High Court held that the agreement made by the assessee, which accepted the validity of the proceedings and agreed not to challenge the assessment except on valuation grounds, made the findings of fact final. Consequently, the High Court upheld the order for service by affixation and found no fault in the service of notice. The High Court answered the second question in the negative, against the assessee, and returned the first question unanswered as it was rendered infructuous. The petition regarding the valuation of the property was dismissed, as the Tribunal's findings on the agricultural nature and valuation of the land were supported by material on record and were considered findings of fact.