1985 (7) TMI 127 - AT - Income Tax

Issues involved:
1. Validity of proceedings initiated under section 59 of the Estate Duty Act, 1953.
2. Withdrawal of exemption of Rs. 1 lakh for property at 23, Gokhale Marg, Lucknow under section 33(1)(n).
3. Deduction of Rs. 3,75,000 for marriage, maintenance, and education of female members from the value of the estate belonging to the HUF of N.N. Mohan & Sons.
4. Valuation of shares owned by the deceased.

Detailed Analysis:

1. Validity of proceedings initiated under section 59 of the Estate Duty Act, 1953:
The accountable person contended that the reopening of the assessment was illegal and invalid as there was no material with the Assistant Controller to form a belief that any property chargeable to estate duty had escaped assessment. The Assistant Controller initiated proceedings under section 59(b) of the Act based on an audit report. The audit report, prepared on 15-9-1975 and formalized on 24-10-1975, pointed out errors in the original assessment, including a wrong exemption of Rs. 1 lakh and undervaluation of shares. The Tribunal held that the Assistant Controller had sufficient information from the audit report to initiate proceedings under section 59(b). The audit report constituted 'information' within the meaning of section 59(b), and the reopening of the assessment was valid.

2. Withdrawal of exemption of Rs. 1 lakh for property at 23, Gokhale Marg, Lucknow under section 33(1)(n):
The accountable person claimed an exemption of Rs. 1 lakh for a property at 23, Gokhale Marg, Lucknow, under section 33(1)(n), which was allowed in the original assessment. However, the audit report indicated that the property was incomplete and unfit for residence at the time of the deceased's death. The Tribunal upheld the view that the property was not exclusively used for the deceased's residence, as it was under construction and only a small tenement costing about Rs. 12,000 was built. Therefore, the exemption was incorrectly granted, and the withdrawal of the exemption was justified.

3. Deduction of Rs. 3,75,000 for marriage, maintenance, and education of female members from the value of the estate belonging to the HUF of N.N. Mohan & Sons:
The accountable person claimed a deduction of Rs. 3,75,000 for the marriage, maintenance, and education of female members from the value of the estate belonging to the HUF of N.N. Mohan & Sons. The Assistant Controller disallowed this deduction, citing the Karnataka High Court's decision in CED v. N. Ramachandra Bhat, which held that no such deduction was permissible. However, the Tribunal noted a contrary view by the Madras High Court in CED v. Dr. B. Kamalamma, which allowed such deductions as enforceable against ancestral property. Given the divergence of views, the Tribunal followed the principle that the interpretation favoring the assessee should prevail. Consequently, the deduction of Rs. 3,75,000 was allowed, and the proportionate additions of Rs. 23,437 and Rs. 46,874 were deleted.

4. Valuation of shares owned by the deceased:
The Assistant Controller increased the value of certain shares owned by the deceased by Rs. 24,127, but the Appellate Controller sustained only Rs. 4,687. The accountable person argued that the shares had no marketable value as the companies were suffering losses and had not declared any dividends. The Tribunal agreed with the accountable person, noting that the shares did not have any marketable value, and the addition was too insignificant to warrant detailed consideration. Therefore, the original valuation of the shares was upheld.

Conclusion:
The Tribunal upheld the reopening of the assessment under section 59(b) and the withdrawal of the Rs. 1 lakh exemption for the property at 23, Gokhale Marg, Lucknow. However, it allowed the deduction of Rs. 3,75,000 for the marriage, maintenance, and education of female members from the value of the estate belonging to the HUF of N.N. Mohan & Sons and maintained the original valuation of the shares. The appeal was partly allowed.

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