9911796707
TMI Blog1993 (4) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... er 1, 1987. In that notice, the Gift tax Officer has said that by an agreement dated March 27, 1982, the petitioner had sold his business which he was carrying on under the name and style of "B. Sarkar Johuri" to a private limited company known as B. Sarkar Johuree Private Limited. By that agreement, the petitioner was to receive a sum of Rs. 3,29,567.09 being the book value of the petitioner's assets from the company. It is further stated that the petitioner was "interested from both sides" and that consequently the sale was made at a consideration less than the market price. According to the Gift-tax Officer, the value of assets over liabilities was reduced by a sum of Rs. 68,20,761. The difference between the actual consideration and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration money had not been received by the petitioner. Therefore, the petitioner was asked to show cause as to why these two sums should not be treated as gift made by the petitioner to the company. The petitioner filed this writ application on February 24, 1988. Affidavits have been filed. The petitioner has, inter alia, submitted that the Gift-tax Officer had wrongfully assumed jurisdiction inasmuch as the conditions precedent to the exercise of the jurisdiction under section 16 of the Act were absent. These conditions included (1) a finding that there was a transfer within the meaning of the Act, and (2) that there had been a transfer for inadequate consideration. As far as the first precondition is concerned, it is submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket value of the assets had been determined in terms of section 4(1)(a) of the Act read with Schedule II to the Act read with Schedule III, rule 18 of the Wealth-tax Act. It is further submitted at this stage that the court was only required to consider whether the Gift-tax Officer had prima facie material before him, which material was responsible to seek to reopen or make the assessment. It is emphasised that there was no question of any order of reassessment at this stage nor any final finding. It is then submitted that in the facts of the case section 4(1)(b) of the Act was applicable as admittedly the petitioner had not received the sum of Rs. 94,567.09 which had been stated to be part of consideration. The court's attention was drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grounds sought to be taken by the petitioner at the hearing were not in fact taken in the petition, but had been taken only in the affidavit-in-reply. In my view, the writ petitioner is entitled to succeed. It is well established that the court in exercise of jurisdiction under article 226 can consider whether the authorities had wrongfully decided a jurisdictional fact or had acted in excess of jurisdiction without fulfilment of the preconditions on the basis of which the power was to be exercised. Before proceeding further it is to be noted that the respondents handed over a xerox copy of the document dated October 8, 1987, addressed by the Inspecting Assistant Commissioner to the Gift-tax Officer. In that document, the Inspectin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that it has been the consistent case of the respondent-authorities at all stages that the petitioner was in fact seeking to benefit himself by making the transfer at book value, because he was substantially interested or had the controlling interest in the transferee. The respondent-authorities certainly did not proceed on the basis that the petitioner was a mere one-third shareholder in the transferee-company. The principles enunciated in the decisions relied upon by the petitioner in this connection, therefore, are fully applicable. As far as the submissions regarding the applicability of the provisions of section 4(1)(b) is concerned, the petitioner stated categorically before this court that it was a matter of record that the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as adopted, both with regard to the assets transferred and the consideration received, it may have been that the Gift-tax Officer would not have found the consideration to be inadequate, particularly, when the bulk of the interest of the company was being held by the petitioner himself. In other words, what was being transferred by the petitioner to the company was being received back by the petitioner from the company in the form of shares. This aspect of the matter was admittedly not considered by the Gift-tax Officer. For the reasons aforesaid, the writ application is allowed. Rule nisi is made absolute. There will be no order as to costs. All parties are to act on a signed copy of the operative portion of this judgment on the usual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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