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TMI Blog1962 (3) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... certain transfers within the definition of "Gift" under the Act and reads as follows: "Section 4. For the purposes of this Act,--, (a) Where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor; (b) where property is transferred for a consideration which, having regard to the circumstances of the case, has not passed or is not intended to pass either n full or in part from the transferee, to the transferor, the amount of the consideration which has not passed or is not intended to pass shall be deemed to be a gift made by the transferor; (c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gift is not revocable. (3) Where the value of any property cannot be estimated under sub-section (1) because it is not saleable in the open market, the value shall be determined in the prescribed manner." Section 15 of the Act deals with assessment of gift-tax in the following language: "(1) If the Gift-tax Officer is satisfied without requiring the pres- ence of the assessee or the production by him of any evidence that a return made under section 13 or section 14 is complete, he shall assess the value of the taxable gifts made by the assessee and determine the amount payable by him as gift-tax. (2) If the Gift-tax Officer is not so satisfied, he shall serve a notice on the assessee either to attend in person at his office on a date to be specified in the notice or to produce or cause to be produced on that date any evidence on which the assessee may rely in support of his return. (3) The Gift-tax Officer, after hearing such evidence as the person may produce and such other evidence as he may require on any specified points shall, by order in writing, assess the value of taxable gifts made by the assessee and determine the amount payable by him as gift- tax....... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n immovable properties to your company during the accounting period relevant to 1959/60 assess- ment for extremely inadequate consideration for which section 4(a) of the Gift-tax Act has been attracted. As the tax cannot be recovered from the donors who have left India for good after having disposed of all their assets, I call upon you to pay the tax in terms of section 29 of the Gift-tax Act." Along with the letter a notice of demand claiming ₹ 1,47,255 as gift-tax and a challan for payment of the tax, by December 24, 1959, were sent to the petitioner. The petitioner characterised the said notice as illegal and harassing and also as violating the principles of natural justice, because the peti- tioner company had no opportunity of representing its case before the Gift-tax Officer and, therefore, it called upon the said officer to with- draw the notice. Failing to get redress from the Gift-tax Officer, the petitioner company moved this court praying for a writ of certiorari to quash the notice and for a writ of mandamus restraining the respond- ents from enforcing the demand against the petitioner and obtained the present rule. Mr. A.C. Mitter, the learned standing c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed advocate for the respondents, strongly relied upon the judgment of the Supreme Court in Sadasib Prakash Brahmachari v. State of Orissa* in which the constitutional validity of schemes framed under the Orissa Hindu Religious Endowments Act came up for consideration. In that case Jagannadhadas J. observed: "But in order to judge whether the provisions in the present Act operate by way of unreasonable restriction for constitutional purposes, what is to be seen is whether the person affected gets a reasonable chance of presenting his entire case before the original Tribunal which has to determine judicially the questions raised and whether he has a regular appeal to the ordinarily constituted court or courts to correct the errors, if any, of the Tribunal of first instance." Mr. Pal contended that under section 15(2) of the Act, if the Gift- tax Officer is not satisfied with the return made by the assessee, he shall call upon the assessee to produce evidence in support of the return and that gave opportunity to the assessee to contest any incorrect valuation of gift. He also contended that even if the Gift-tax Officer went wrong, his error could be rectified by way of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs in Sadasib Prakash Brahmachari's case [1956] S.C.R. 43, because the donee does not get any opportunity whatsoever of presenting his case before the Gift-tax Officer. Moreover, I am not sure, if the donee has at all a right of appeal. Section 22 of the Act, which provides for an appeal to the Appellate Assistant Commissioner, and section 23, which provides for an appeal to the Appellate Tribunal, read as follows: "22. (1) Any person,-- (a) objecting to the value of his taxable gifts determined under this Act; or (b) objecting to the amount of gift-tax determined as payable by him under this Act; or....... may appeal to the Appellate Assistant Commissioner against the assessment or order, as the case may be, in the prescribed form and verified in the prescribed manner..... 23. (1) Any assessee objecting to an order passed by the Appel- late Assistant Commissioner under section 17 or section 22 or to an order passed by the Commissioner under section 17 may appeal to the Appellate Tribunal within sixty days of the date on which he is served with notice of such order......." The word "any person" in section 22 should be read as referring to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able because it imposes unreasonable restrictions on the rights to hold property, safe- guarded by article 19(1)(f) of the Constitution. Section 5A declares that the Government is competent to make a provisional assessment of the basic tax payable by the holder of unsurveyed land. Ordinarily, a taxing statute lays down a regular machinery for making assessment of the tax proposed to be imposed by the statute. It lays down detailed procedure as to notice to the proposed assessee to make a return in res- pect of property proposed to be taxed, prescribes the authority and the procedure for hearing any objections to the liability for taxation or as to the extent of the tax proposed to be levied, and, finally, as to the right to challenge the regularity of assessment made, by recourse to proceedings in a higher civil court. The Act merely declares the competence of the Government to make a provisional assessment, and by virtue of section 3 of the Madras Revenue Recovery Act, 1864, the landholders may be liable to pay the tax. The Act being silent as to the machinery and procedure to be followed in making the assessment leaves it to the Executive to evolve the requisite machinery and pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not dispute recovery of tax from the charged property. The donee's position was sought to be equated to that of a universal donee under section 128 of the Transfer of Property Act which made him personally liable for all the debts due by and liabilities of the donor at the time of the gift to the extent of the property comprised in the gift. This argument is not well conceived. The donee may not dispute the charge but he is entitled to dispute the quantifica- tion of the charge, arrived at behind his back and without any opportunity to him to have the incorrectness, if any, in the quantification rectified. A procedure for quantification, which keeps the donee out of the picture and does not afford to him any opportunity to present his case about the value of the taxable gift but yet then makes the tax recoverable from him is certainly an unreasonable restriction on the right to hold and acquire property and must be struck down as unconstitutional. There is yet another aspect of the matter which I need consider. Even if I had held that section 6 and 29 of the Act were constitutionally valid, in so far as the donee was concerned, even then I have to quash the determinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax is to be collected from the donee that is M/s. Khan Bahadur Waliur Rahaman Tea & Lands Co. (Pr.) Ltd. under section 29 of the Gift-tax Act." From the fact that the constituted attorney did not accept service of notice on the assessee donors, it does not follow that they left India for Pakistan for good after having transferred all their properties and that the tax cannot be recovered from them. If section 29 authorises the Gift-tax Officer to recover gift-tax from the donee merely on his subjective opinion that it cannot be recovered from the donor, that is an additional infirmity of that section, clothes as it does the Gift-tax Officer with arbitrary powers to recover tax, not from the person primarily liable but from the donee, who is liable only if the tax cannot be recovered from the donor. For the reasons aforesaid, I hold that sections 6 and 29 of the Act put unreasonable restrictions on the donee's right to acquire and hold property and is unconstitutional to that extent. I, therefore, quash the assessment order so far as the donee petitioner company is concerned and command the respondents not to enforce the same against the peti- tioner company. Let writs of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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