Commissioner of Gift Tax vs A.C. Mahesh and Others

R. Jayasimha Babu, J.—The question referred to us is with regard to maintainability of the appeal by a donee against whom recovery

proceedings were initiated u/s 29 of the Gift-tax Act, 1958 (in short ""the Act""). The assessment years in question are 1966-67 and 1973-74.

The assessment was made by the assessing authority against the legal representatives of the donor from whom the donees have received gifts.

Without taking any proceedings against those legal representatives of the donor for the recovery of the amount of tax, recovery proceedings were

instituted against the donees u/s 29 of the Act. The donees appealed against that order to the Appellate Assistant Commissioner, who allowed the

appeal. The Department carried the matter further to the Tribunal contending that the appeals should not have been entertained at the instance of

the donees. The Tribunal rejected the points raised by the Revenue and held that the appeal was maintainable and also that the order of the

Appellate Assistant Commissioner was right on the merits as well.

The Revenue has caused this reference regarding the correctness of the order of the Tribunal on the question of the donees'' right to maintain the

appeal.

Chapter VI of the Gift-tax Act contains provisions which deals with appeals, revisions and references. Section 22 of the Act is the provision

which provides for appeals to the Deputy Commissioner of Appeals from the orders of the Assessing Officer. Section 23 of the Act deals with

appeals to the Appellate Tribunal. Section 24 deals with the powers of the Commissioner to revise the orders of subordinate authorities. Section

25 provides for an appeal to the Tribunal from the order of the Commissioner made u/s 24 or u/s 17 or Section 17A of the Act. Sections 17 and

17A provide for levy of penalties.

Section 22(1) of the Act deals with class of persons who may prefer appeals under that section. Section 22(1) in the opening part gives such

right subject to the provisions of Sub-section (1A) to ""any person"". In contrast, the other sections in the Chapter dealing with appeals and revisions

confer the right only to ""assessees"". Section 23(1) enables the assessee to appeal up to the Tribunal. Section 24 enables the assessee to apply to

the Commissioner for exercising the revisional powers which power can also be exercised by the Commissioner on his own motion. Section 25

enables the assessee to appeal to the Appellate Tribunal from the orders of enhancement made by the Chief Commissioner.

The marked difference in the expression used in these provisions indicates the legislative intention to confer the right of appeal u/s 22 to a larger

class than the assessee, while the other provisions earlier referred to limit the right, given under those provisions only to assessees. The term ""any

person"" used in Section 22(1) of the Act is, therefore, required to be construed as comprising persons other than the assessees as well, if they

object to the orders of the nature referred to in Sub-section (1) of Section 22 which orders affect them adversely.

Section 22(1), Clause (a), enables a person to object to the value of taxable gifts determined under the Act to file an appeal. Clause (b) enables

the persons objecting to the amount of gift-tax determined as payable by him under the Act to file an appeal. The other Clauses (c) to (g) enable

persons objecting to liability to be assessed under the Act; objecting to imposition of penalty by the Assessing Officer u/s 17, objecting to an order

made by the Assessing Officer u/s 20(2), objecting to the penalty imposed by the Assessing Officer u/s 33 read with Section 221(1) of the Income

Tax Act; and persons objecting to an order of the Assessing Officer u/s 34, to file appeals. While some of the clauses of Section 22(1) come to

the rescue only of assessees like Section 22(1)(d), (e) and (g), the other clauses are applicable to non-assessee as well.

Section 22(i)(b) of the Act enables a person to object to the amount of gift-tax determined as payable by him to file an appeal. But the

determination referred to in this provision, having regard to Section 29 of the Act, must be given a liberal construction and is not to be restricted to

the determination made in the order of assessment. This enables the person affected prejudicially by the action taken by the authorities under the

Act to have an opportunity of at least one appeal before the appellate forum. There is no other provision under the Act which entitles the donee

from whom the tax is sought to be recovered u/s 29 of the Act to prefer appeal or revision to any of the authorities. Although, an order u/s 29 of

the Act is not to be made, unless it is first found that the tax cannot be recovered from the donor, there is no other forum provided under the Act to

decide as to whether the power u/s 29 of the Act had been properly exercised. Having regard to the scheme of the Act, the language employed in

Section 22 which is in contrast to the narrower language employed in the other provisions of Chapter VI with regard to persons entitled to file

appeals or revisions it must be held that the term ""person"" in Section 22(1) will include the donee against whom the recovery proceedings are taken

u/s 29 of the Act. The question referred to us is, therefore, answered in favour of the assessees and against the Revenue.