1987 (5) TMI 53 - AT - Income Tax

Fair Market Value, Orders Prejudicial To Interests, Subject Matter, Valuation Officer, Valuation Report

Issues Involved:
1. Violation of principles of natural justice.
2. Application of mind by the Commissioner of Gift-tax.
3. Consideration of the registered valuer's report.
4. Jurisdiction of the Commissioner of Gift-tax.
5. Proper basis for valuation of the gifted property.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The first ground raised by the assessee was that the Commissioner of Gift-tax violated the principles of natural justice by not supplying a copy of the valuation report to the assessee. The Tribunal found that this ground could not be sustained. The Commissioner of Gift-tax did not use the report to enhance the assessment prejudicially against the assessee but used it to determine whether the Gift-tax Officer had properly applied his mind to the valuation. The Commissioner specifically directed the Gift-tax Officer to give the assessee an opportunity to raise objections about the report. The Tribunal concluded that the mere fact that a copy of the report was not given to the assessee was not a proper basis for canceling the order.

2. Application of Mind by the Commissioner of Gift-tax:
The second ground was that the Commissioner of Gift-tax did not apply his mind to the facts of the case, as evidenced by his statement that the assessment required reconsideration on merit. The Tribunal found that this ground also could not be sustained. The Commissioner had applied his mind to whether there had been undervaluation and concluded that there was a prima facie case of undervaluation. He considered it necessary for the assessee to have a full opportunity to present all materials on record, which justified his direction to the Gift-tax Officer to frame a fresh assessment.

3. Consideration of the Registered Valuer's Report:
The third ground was that the Commissioner of Gift-tax had not applied his mind to the registered valuer's report submitted by the assessee. The Tribunal found that the Commissioner had considered the materials on record. The Commissioner formed an opinion that the fair market value was considerably higher than the actual investment up to the date of the gift, which justified setting aside the assessment order. The Tribunal noted that the matter was still open, and the assessee had the opportunity to establish the fair market value.

4. Jurisdiction of the Commissioner of Gift-tax:
The Tribunal examined the question of the Commissioner's jurisdiction in greater detail. The Tribunal referred to several Supreme Court decisions, including Rampyari Devi Saraogi v. CIT and Smt. Tara Devi Aggarwal v. CIT, which established that the Commissioner could direct the Income-tax Officer to make a fresh assessment after proper inquiries. The Tribunal concluded that the Commissioner was justified in exercising jurisdiction under section 24(2) of the Gift-tax Act, as the Gift-tax Officer had failed to make necessary inquiries regarding the valuation of the gifted property.

5. Proper Basis for Valuation of the Gifted Property:
The Tribunal found that the Gift-tax Officer had not made the necessary inquiries to ascertain whether the actual investment made under an agreement dated 29-10-1971 could represent the fair market value of the half share of the flat on 29-3-1978. The Tribunal noted that there was a long time gap and that property values had risen in the interval, necessitating a comprehensive inquiry into the valuation. The Tribunal concluded that the order of the Gift-tax Officer was erroneous and prejudicial to the interests of the revenue, justifying the Commissioner's direction for a fresh assessment.

Conclusion:
The Tribunal confirmed the order of the Commissioner of Gift-tax, emphasizing that the assessee would have full opportunity to place all materials on record to rebut the valuation report and that the Gift-tax Officer should treat the valuation report as one piece of evidence, not conclusive evidence. The appeal was dismissed.

← Previous Next →