2018 (3) TMI 478 - HC - Income Tax

Re-assessment proceedings initiated u/s 16 of the Gift Tax Act - Whether the period of 12 months or 6 months as prescribed in proviso to Section 15(2) of the Gift Tax Act, 1958, is applicable to re-assessment proceedings initiated? - Held that - It is quite evident that the assessee s return in respect of the transaction which occurred in 1983, became the subject matter of the notice by the Gift Tax officials in March, 1987, which resulted in the filing of a return on 16.4.1987. The first round of litigation resulted in finality of one aspect i.e. though, notice u/s 15(2) was issued in terms of the record, it was only served upon the assessee. Such being the case, when the ITAT rendered its findings, limitation prescribed by the amendment had come into force. Even otherwise, the ITAT order dated 13.8.98 meant, in the opinion of this Court, a direction to the GTO to assume a jurisdiction, which he never possessed in the first instance, given that the amendment had come into force. Absence of service of notice meant that, in fact, there was no notice and therefore, no valid assessment. However, proceeding to hold otherwise and sustain the findings of the GTO and the lower appellate authority, the ITAT clearly erred in law. The questions of law framed are therefore, answered in favour of the assessee

Summary

Issues:
1. Interpretation of time limits under proviso to Section 15(2) of the Gift Tax Act, 1958 for re-assessment proceedings.
2. Validity of assessment order dated 29.03.2001 in light of prescribed time limits.

Analysis:
1. The case involved a dispute regarding the applicability of time limits under the proviso to Section 15(2) of the Gift Tax Act, 1958 to re-assessment proceedings initiated under Section 16 of the Act. The appellant contended that the notice issued by the Gift Tax Officer (GTO) on 16.3.2000 was beyond the prescribed time limit of six months from the end of the financial year in which the gift tax return was filed. The appellant argued that the assessment order dated 29.03.2001 was invalid due to this time limit violation. The ITAT initially set aside the orders of the Commissioner and directed the Assessing Officer (AO) to proceed with the assessment in accordance with the law. However, the GTO issued the notice after the prescribed time limit, leading to a series of appeals and rejections by the authorities.

2. The appellant further argued that the ITAT's remand order did not grant the GTO the authority to act beyond the prescribed time limits. The appellant emphasized that the amendment to Section 15(2) mandated the GTO to issue the notice within the specified period, failing which any adverse order would be unenforceable. Additionally, the appellant highlighted that the ITAT's findings confirmed that the notice was not served upon the assessee within a reasonable time, rendering the assessment order void. The Court agreed with the appellant's contentions, emphasizing that the absence of a valid notice meant there was no valid assessment. The Court concluded that the ITAT erred in sustaining the findings of the GTO and the lower appellate authority, ruling in favor of the assessee and against the revenue.

In conclusion, the High Court held that the time limits under the proviso to Section 15(2) of the Gift Tax Act, 1958 were applicable to re-assessment proceedings initiated under Section 16 of the Act. The Court found the assessment order dated 29.03.2001 to be invalid due to the GTO issuing the notice beyond the prescribed time limit. The Court emphasized that the absence of a valid notice rendered the assessment void, leading to a decision in favor of the assessee and against the revenue.