9911796707
TMI Blog1984 (4) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 91,048. The valuation of shares was supported by a Valuer's report dated 28-10-1972 and was based on the company's balance sheet dated 31-3-1972. The GTO completed the assessment on 24-1-1976 on the same taxable gift of Rs. 91,048. During the course of original assessment proceedings, the assessee claimed deduction for stamp duty of Rs. 3,910. This claim was rejected by the GTO while making the assessment. The appellant filed an appeal to the AAC against this assessment contesting against the disallowance of claim of stamp duty. The appeal was allowed by the AAC, vide his order dated 4-1-1978 giving relief of Rs. 3,910 in the assessed gift, Thereafter, the GTO reopened the appellant's assessment under section 16(1)(b) vide notice dated 22-3-1978 and completed the reassessment on 11-7-1978 on a taxable gift of Rs. 2,48,260 by revaluing the shares at Rs. 7,035 per share. In his order of reassessment, the GTO has mentioned that the assessment was reopened under section 16(1)(b) ; that when the original assessment was completed, these shares have been valued as per Wealth-tax Rules but under the Gift-tax Act, the Gift-tax Rule 10(2), the value of unquoted shares of a company are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 287 and R.K. Malhotra, ITO v. Kasturbhai Lalbhai [1977] 109 ITR 537 have lost their force in view of the subsequent decision in the case of Indian Eastern News paper Society, and (iii) the GTO was not justified in reopening the assessment on the basis of certain events which took place after the date of the gift, viz., on 29-3-1973. In support of these submissions, the assessee relied on the decision of the Hon'ble Mysore High Court in the case of CED v. J. Krishna Murthy [1974] 96 ITR 87 and of the orders of the Tribunal in the cases of C.V. Krishnammal [GT Appeal No. 35 (Mad.) of 1979, dated 12-3-1980] and Smt. Gira Sarabhai [GT Appeal No. 23 (Ahd.) of 1981, dated 31-8-1982]. It was, therefore, urged that the assessment framed by the GTO under section 15(3) read with section 16(1)(b) should be quashed. 4. After considering the submissions made on behalf of the assessee as well as the revenue, the Commissioner (appeals annulled the assessment framed under section 15(3) read with section 16(1)(b). In order to appreciate the rival submissions of the parties, it would be necessary to reproduce the concluding portion of the order of the Commissioner (Appeals), which reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the department under the Estate Duty Act in the context of similar provisions under section 37 of the Estate Duty Act, e.g., the Mysore High Court decision in CED v. J. Krishna Murthy [1974] 96 ITR 87. The Supreme Court in CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 also recognises the practice of valuation under rule 1D of the Wealth-tax Rules for gift-tax purposes as well as one of the methods of valuation. The revenue audit objection, therefore, constitutes only an opinion as to the state of the law regarding valuation of shares under the Gift-tax Act which is on a question of law. It cannot, therefore, be said that the revenue audit objection in this context constituted ' information ' within the meaning of section 16(1)(b) to enable the GTO to reopen the case. I am supported in my view by the Supreme Court decision in Indian Eastern Newspaper Society v. CIT [1979] 119 ITR 996. It would have been a different position if the law on the point were settled and the audit party had pointed out some Court's decision to the ITO holding that application of rule 1D for valuation of shares under the Gift-tax Act was contrary to the provisions of rule 10(2) of the Gift-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 16(1)(a) or 16(1)(b), cannot be upheld because it is a settled law that even if an assessment is reopened under section 16(1)(a) but was within time and could be justified as valid under section 16(1)(b), such reassessment would not be invalid in law for the simple reason of reopening under sub-clause (a) rather than (b). The ground No. 5 of the grounds of appeal has also no substance in it because the question whether the gift in question is valid in law or not does not arise out of the reassessment as it is not the case either of the assessee or the department and the point had not been raised in the original assessment. Therefore, that point cannot be raised in the reassessment proceedings. 11. In view of the legal position discussed in earlier paras, I annul the reassessment made on 11-7-1978 being without jurisdiction and ab initio void." 5. Being aggrieved by the order of the Commissioner (Appeals), the revenue has come up in appeal before the Tribunal. The learned representative for the department vehemently argued that the Commissioner (Appeals) was not justified in annulling the assessment framed by the GTO. Inviting our attention to the decision of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of valuing the shares in question in different way, their value would be higher than the one earlier determined by him under the provisions of rule 1D of the Wealth-tax Rules, 1957 (' the 1957 Rules '). In other words, the learned counsel for the assessee wanted to impress upon us that the GTO had reopened the assessment on a mere change of opinion. At this stage, he invited our attention and highlighted the fact that the Hon'ble Supreme Court was pleased to dismiss the special leave petition filed by the revenue against the decision of the Bombay High Court in the case of Tulsidas Kilachand. The learned counsel for the assessee further submitted that since, while valuing the shares in question at the time of framing the assessment originally, the GTO had followed the circular issued by the Board in 1968, he cannot take action under section 16(1)(b) on the ground that the said circular was revised subsequently by the Board. According to the learned counsel for the assessee, the circulars issued by the Board have no retrospective effect. For this proposition, he relied on the decision of the Hon'ble Kerala High Court in the case of CIT v. B.M. Edward, India Sea Foods [197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int at issue is covered by the decision of the Tribunal in the case of C.V. Krishnammal. However, since both the parties had advanced their arguments at some length on the issue of reopening the assessment, we would like to discuss some of them. Any decision pronounced by the Hon'ble Supreme Court is the law of the land and is binding on all concerned. It may be true that when the GTO initiated the proceedings under section 16(1)(b), the earlier decision of the Hon'ble Supreme Court in the cases of Kalyanji Mavji Co. and Kasturbhai Lalbhai was in force. However, by its subsequent decision in the case of Indian Eastern Newspaper Society, the Hon'ble Supreme Court had held that its observations regarding ' oversight, inadvertence or mistake ' in Kalyanji Mavji Co.'s case were too wide. After referring to its decision in the cases of Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 and Bankipur Club Ltd. v. CIT [1971] 82 ITR 831, the Hon'ble Supreme Court went on to observe, viz., ' any observations in Kalyanji Mavji Co.'s case suggesting the contrary do not, we say with respect lay down the correct law '. With reference to its decision in the case of Kasturbhai Lalbhai, the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r No. IB/GT of 1968 issued by the Board was in force at the relevant time and it had a binding effect on all the officers of the Income-tax Department even if it contained certain instructions which are in variance with the provisions of the Act---see Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 (SC). Therefore, if the GTO had originally valued the shares in question as per the instructions contained in that circular, he would not be justified in initiating the proceedings under section 16(1)(b), merely on the ground that the said circular was subsequently modified or revised by the Board. The aforesaid decision of the Hon'ble Kerala High Court in B.M. Edward, India Sea Foods' case, clearly supports the stand taken on behalf of the assessee on this proposition. Further, when two methods are provided for valuing the shares in question and the GTO adopts one, he would be prevented from reopening the assessment under section 16(1)(b), by taking recourse to the other method subsequently just because he felt that by adopting the second method more tax will be recovered from the assessee. We are fortified in our view by the aforesaid decision of the Hon'ble Bombay High Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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