1976 (3) TMI 70 - AT - Income Tax

Summary

Issues:
1. Exemption from gift-tax for gifts made in contemplation of death.
2. Validity of assessment on a deceased person.

Issue 1: Exemption from gift-tax for gifts made in contemplation of death

The appeal was against the order made by the Appellate CIT regarding the taxability of gifts made by the deceased individual before his death. The donor had made gifts of movables and immovable property, with the immovable gift's taxability not in dispute. The assessee claimed exemption from gift-tax for the movable gifts under the provision of s. 5(1) of the Act, stating that the gifts were made "in contemplation of death." The definition of "gifts made in contemplation of death" was derived from s. 191 of the Indian Succession Act, 1925. The Taxation Officer initially rejected the claim, stating that the medical certificate provided was insufficient to prove that the gifts were made in contemplation of death. However, the tribunal found that the donor's subjective apprehension of death at the time of making the gifts was significant. Despite the absence of concrete evidence, the tribunal inferred that the donor did apprehend his death while making the gifts, thereby exempting them from gift-tax under the Act.

Issue 2: Validity of assessment on a deceased person

An additional ground of appeal was raised, arguing that the assessment on the deceased donor was void. The assessment was completed after the donor's death, with the assessment order and demand notice issued in the name of the deceased through his legal representative. The Department contended that the assessment was valid as the legal heir had filed the return, received notices, and participated in the assessment proceedings. However, the tribunal held that issuing a demand notice to a deceased person rendered the assessment void, despite the involvement of the legal representative in the process. The misdescription in the assessment order was considered an irregularity, leading to the conclusion that the assessment on a deceased person was invalid.

In conclusion, the tribunal allowed the appeal partially, granting exemption from gift-tax for the movable gifts made in contemplation of death. The tribunal also declared the assessment on the deceased individual as void, emphasizing the importance of proper documentation and legal procedures in tax assessments.