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TMI Blog1973 (3) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... e land as well as the garden-house to this company for Rs. 93,450. In his income-tax return for the assessment year 1962-63, the assessee claimed that the lands which he had sold to the company were agricultural lands and, therefore, no capital gains could be assessed on account of this transaction. The Income-tax Officer did not accept the assessee's claim and not only held that the lands were not agricultural lands but also held that the provisions of section 52 of the Income-tax Act. 1961, were attracted to the transaction. He estimated the market value of the property sold by the assessee to the company at Rs. 5,14,600 and on that basis, he determined the capital gains that accrued to the assessee as a result of this transaction of transfer of the land from the The Income-tax Officer also called upon the assessee to file a gift-tax return in respect of this transaction. The aassessee filed a return on Februray 16, 1965, showing the taxable gift as nil with an explanatory note to the effect that no gift was involved in the transaction of transfer of the land from the assessee to the company. The Gift-tax Officer, however, held that the assessee had made a gift of the lands to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he default continued, but subject to a maximum of 50% of the tax. The penalty calculated at 2% would amount to Rs. 14,657. But the Gift-tax Officer levied a penalty of Rs. 11,633 which was the maximum which could be levied under section 17(1)(c)(i) of the Act. There is no dispute regarding the quantum of penalty. The controversy is whether a penalty at all is leviable under the circumstances. The learned counsel for the assessee, Shri. Randhawa, has first contended that it was not obligatory on the part of the assessee to file a gift-tax return in respect of transactions which do not amount to gifts as such under section 3 of the Act but which are deemed to be gifts under section 4 of the Act. In support of this contention, the learned counsel sought reliance on the following three decisions : (1) D. R. Dhanwate v. Commissiomer of Income-tax (2) V. S. Arulanandam v. Commissioner of Income-tax and (3) V.D.M. RM.M. RM. Muthiah Chettiar v. Commissioner of Income-tax. All the three cases cited by the learned counsel were cases of an assessee not having included in his income-tax return the income which was assessable in his hands under section 16(3) of the Indian Income-tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) at the rate or rates specified in the Schedule." Section 2(xii) of the Act as it stood before its amendment in 1971, defines gift as follows: " 'gift' means the trasnfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer of any property deemed to be a gift under section 4." Therefore, a gift which is assessable to tax under section 3 of the Act is a gift as defined in section 2(xii) of the Act which includes a gift under section 4 of the Act. There are similar provisions in the Income-tax Act also. Section 2(6C) of the Indian Income-tax Act, 1922, defines income as including : "(i) dividend;...... (iv) any sum deemed to be profits under the second proviso to clause (vii) of sub-section (2) of section 10, and any sum deemed to be profits and gains under sub-section (2A) of that section or under sub-section (5) of section 12 ; (v) any sum deemed to be profits and gains of business, profession or vocation under sub-section (5A) of section 10; ........" Section 2(6A)of the said Act defines dividend as follows: "(e) any payment by a company, not being a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian Income-tax Act, 1922, namely, section 22(3) of the said Act, and to a decision of the Supreme Court in Commissioner of Income-tax v. Kula Valley Transport Co. P. Ltd. which considered the effect of filing a return under section 22(3) of the said Act. The learned counsel specially relies upon the following observations of the Supreme Court in the said case: "It can well be said that section 22(3) is merely a proviso to section 22(1). Thus, a return submitted at any time before the assessment is made is a valid return. In considering whether a return made is within time sub-section (1) of section 22 must be read along with subsection (3) of that section. A return whether it is a return of income, profits or gains or of loss must be considered as having been made within the time prescribed if it is made within the time specified in section 22(3). In other words, if section 22(3) is complied with, section 22(1) also must be held to have been complied with." The above observations of the Supreme Court have, however, to be read in the context in which they were made. In the case before the Supreme Court, the assessee had not filed any return under section 22(1) of the Act and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently files a return in pursuance of a notice under section 139(2) and an assessment is made on the basis of that return." We are in respectful agreement with the view expressed by the Rajasthan High Court. The last contention urged by the learned counsel for the assessee is that there was a reasonable cause for the assessee for not filing a return under section 13(1) of the Act. In the first instance, the question whether there was a reasonable cause for not filing the return is purely a question of fact and the finding of the Tribunal on this question is binding upon this court. The Tribunal after considering the explanation offered by the assessee for not filing the gift-tax return under section 13(1) of the Act has rejected the explanation. Even if it was permissible for this court to re-examine the explanation given by the assessee, we see no valid reason to differ from the finding of the Tribunal on this point. The explanation offered by the assessee was two-fold, namely :- (i) that the revenue itself had treated the transaction in question as one resulting in capital gains and had also treated it as a gift under section 4 of the Act which, according to the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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