Commissioner of Gift Tax vs Jinendra Kumar Jain

V.K. Bali, J.—The petitioner, the Commissioner, Haryana, Rohtak, herein seeks issuance of a direction to the Tribunal to refer the following question of law to this Court for its opinion in a petition filed u/s 26(3) of the Gift-tax Act, 1958 (''the Act'') pertaining to the assessment year 1983-84:

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that it cannot be said that it is a mistake apparent on the face of the record and the GTO could not rectify the order passed u/s 15(3) and withdraw the exemption allowed u/s 5(1)(vii) of the Gift-tax Act, 1958, in the case of the HUF ?

Brief facts giving rise to this petition reveal that the assessee Shri Jinendra Kumar Jain, respondent herein, is karta of his HUF. He filed return declaring gift of Rs. 50,000 which he had made to his wife Smt. Shashi Bala Jain. He claimed deduction of Rs. 50,000 u/s 5(1)(vii) of the Act and taxable gift, therefore, was declared as nil The assessment was completed u/s 15(3) of the Act and the deduction of Rs. 50,000 claimed by the assessee was allowed. The IAC (Assessment), Karnal informed the GTO by order dated 02-01-1986 that exemption u/s 5(1)(vii) was not available in the case of an HUF. The GTO then issued a notice to the assessee u/s 34 of the Act. After the assessee had filed objections, he was heard in the matter and while rejecting the objections the GTO passed an order u/s 34 and withdrew the exemption of Rs. 50,000 allowed by the GTO and computed the taxable gift at Rs. 45,000 after allowing basic exemption of Rs. 5,000. Being aggrieved, the assessee filed an appeal before the AAC who vide his order dated 1-5-1986, dismissed the appeal. Still aggrieved, the assessee filed an appeal before the Tribunal which was allowed vide its order dated 27-07-1987. The order of rectification was quashed. The Tribunal held that the provisions of section 5(1)(vii) were not attracted to the transaction of gift contemplated by the section as there could not be any spouse of the HUF as such. However, the Tribunal further held that there were two opinions on the subject and provisions of section 34 were not attracted. It was further held that the correct position of law may be against the assessee but at least it could not be said that it was a mistake apparent on the face of record. The order of the Tribunal was not accepted by the department and reference application u/s 26(1) was filed relating to the question of law mentioned above. The Tribunal vide its order dated 30-05-1988 declined to refer the question of law to this Court and rejected the reference application filed by the department. It is in these circumstances that the present petition u/s 26(3) for referring the question mentioned above has been filed.

Mr. Sawhney, the learned senior counsel representing the petitioner, has canvassed before us that exemption u/s 5(1)(vii) was not available in the case of HUF as the same had no spouse. Not only that the provisions of section are explicit but the matter stands clinched in favour of the petitioner by a judgment of this Court in CGT v. Harbhajan Singh & Sons [1979] 119 ITR 542. It was held in Harbhajan Singh & Son''s case (supra) that the provisions of section 5(1)(vii) would not be attracted to the transaction of gift contemplated by the section because there cannot be any spouse of the HUF as such. The counsel further contends that the Tribunal while declining to make a reference has opined in tune with the contention of the department but has yet rejected the reference application u/s 26(1) on the sole ground that it was not a mistake apparent from the records of the case as it was a debatable question inasmuch some other High Courts had taken a view contrary to the one taken by this Court. The learned counsel further contends that in view of the fact that the decision rendered by this Court in Harbhajan Singh & Sons ''case (supra) was binding upon the Tribunal, it could not possibly be said that it was a debatable question, there being two views in the matter and, therefore, there was no mistake apparent on the face of the record. With a view to strengthen his contention as noted above, the counsel relies upon the decision rendered by the Allahabad High Court in Omega Sports and Radio Works Vs. Commissioner of Income Tax, wherein it was held as under :

... If there is a decision on a particular point by the High Court of a State, it is binding on the income tax authorities in that State and merely because there is some judicial divergence of opinion on that point between some High Courts, it cannot be said that there is still scope for a debate on the points and that, therefore, section 154 of income tax Act, 1961 is not attracted to the case.

The learned counsel also relies upon yet another decision of the Allahabad High Court in Devendra Prakash Vs. Income Tax Officer, , wherein it was held as follows:

... It is clear, therefore, that the income tax Officer does not have to shut his eyes completely to all extraneous matters when judging whether a particular assessment record reveals a ''mistake apparent from the record''. He can take into account statutory provisions and pronouncements of the Supreme Court. We see no reason why this principle should not also apply to a case where a High Court has given a decision that shows an existing assessment order to be erroneous; and if the argument is taken to its logical extreme, the income tax Officer should be able to take note of any judicial pronouncement by any Court or Tribunal, when considering whether there is a ''mistake apparent from the record'' of a prior assessment....

For similar proposition the counsel relies upon a decision of this Court in CIT v. Mohan Lal Kansal [1978] 114 ITR 583.

The learned counsel representing the respondent-assessee could not meet the contention of the learned counsel for the petitioner. All that he could urge was that, in any case, this Court itself in Commissioner of Gift-tax Vs. Hari Chand, had held that gift in question to an extent of Rs. 50,000 was exempted if it is made by a wife to the HUF and, therefore, there was divergence of opinion on the crucial issue by this Court itself. When, however, confronted with the situation that in Harbhajan Singh & Sons'' case (supra), the Hon''ble Judge deciding the matter had taken into consideration the judgment recorded by this Court in Hari Chand''s case (supra) and distinguished it and in so far as the facts of this case are concerned then are pari materia to the judgment recorded by this Court in Harbhajan Singh & Sons'' case (supra), he had nothing at all to urge.

We have carefully examined the records and have heard the learned counsel representing the parties. We are in respectful agreement with the view expressed by the Allahabad High Court in Omega Sports & Radio Works'' case (supra) as also decision of this Court in Mohan Lal Kansal''s case (supra). Following the decision in the two cases referred to above, we hold that it was not a case of divergence of opinion inasmuch as the opinion expressed by this Court was binding upon the Tribunal. Consequently, we allow this petition and direct the Tribunal to refer the following question of law to this Court for its opinion :

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that it cannot be said that it was a mistake apparent on the facts of the record and the GTO could not rectify the order passed u/s 15(3) and withdraw the exemption allowed u/s 5(1)(viii) of the Gift-tax Act in the case of the HUF ?