2005-VIL-360-ITAT-CHN
Equivalent Citation: ITD 094, 044, TTJ 093, 1061,
Income Tax Appellate Tribunal COCHIN
Date: 31.01.2005
GIFT-TAX OFFICER.
Vs
PJ. KURIAN.
BENCH
Member(s) : VIMAL GANDHI., DR. O. K. NARAYANAN.
JUDGMENT
Per Dr. O.K. Narayanan, Accountant Member. - This gift-tax appeal is filed by the Revenue. The cross-objection is filed by the assessee. The relevant assessment year is 1994-95. The appeal is filed against the order of the CGT (Appeals)-IV, Kochi, dated 28-3-2002 and arise out of the assessment completed under section 15(5) of the Gift-tax Act, 1958.
2. The assessee in this case had executed seven deeds of conveyance of properties in favour of his daughter, Miss Sunitha Kurian during the period from 8-10-1993 to 17-2-1994. Those documents were cancelled by the assessee in 1997. The Gift-tax Officer held the view that the first set of documents executed by the assessee conveyed that much properties in favour of his daughter and as those transfers of properties were without any consideration, the transfer amounted to gift. The case of the assessee was that these documents were subsequently recalled; they were cancelled and therefore there were no valid transfers and any valid gifts. The Assessing Officer rejected the contentions of the assessee and completed the gift-tax assessment holding that the first set of transactions amounted to gift of properties. In first appeal, the CGT (Appeals) held that the transfers made by the assessee at the first instance were not complete and the consequent gifts were not absolute and therefore, there cannot be a case of proper gift. The CGT (Appeals) held that, therefore, the gift-tax assessment was not valid. The assessment was accordingly cancelled.
3. The Revenue is aggrieved and therefore the appeal before us. The grounds raised by the Revenue in this appeal read as below:
1. The order of the CIT(A)-IV, Cochin canceling the gift-tax assessment order is against law, facts and circumstances of the case. The CIT (Appeals) should have held that there was a valid gift as there is a voluntary transfer effected by registered documents duly attested. The gift was accepted by the donee during the lifetime of the donor as is evidenced by mutation effected in the donee's favour in village office records.
2. There was no happening of a specified event agreed upon by the donor and donee that the gifts can be revoked.
3. The affidavit filed by the donee before the appellate authority that she has not accepted the gift should not have been relied upon.
4. This appeal was heard and disposed of by this Tribunal along with the cross-objection through the order dated 30-10-2003. The Tribunal took the view that the CGT (Appeals) was not correct in his conclusion that the transfers were not complete and the gifts were not absolute. His order was accordingly vacated and the assessment order was restored. The appeal filed by the Revenue was allowed and the Cross-objection filed by the assessee was dismissed.
5. Thereafter the assessee filed a rectification petition in MP No. 46/Coch./2003 on 14-11-2003. The assessee stated therein that the Tribunal has not considered certain crucial facts of the case while disposing of the appeal of the Revenue. The assessee submitted that the first set of documents executed by the assessee were thereafter cancelled through registered documents and such documents cancelling the earlier transfers could not have been effected unless the assessee had title in respect of those properties and the factom of the second set of documents registered cancelling the earlier gifts were not considered by the Tribunal while deciding the appeal. Among other things, the assessee also submitted that the assessee's daughter had given an affidavit stating that she had not accepted the gifts said to be made by the assessee, nor taken possession of those properties, which fact also was not considered by the Tribunal. The assessee also submitted that the Tribunal has not considered the ratio laid down by the Hon'ble Madras High Court in the case of R. Jamuna Bhai v. M.A. Anusuya AIR 2001 Mad. 392, wherein the Hon'ble High Court held as follows:
"13. The next question is assuming without admitting it was a settlement deed, whether there was any acceptance on that date. The legal provisions regarding the gift is very clear. Section 122 of the Transfer of Property Act reads as follows:
'"Gift" defined - "Gift" is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. Acceptance when to be made - Such acceptance must be made during the life time of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void.' Unless there is acceptance there can be no gift. In the judgment relied on by the learned counsel for the appellant in (1996) c2CTC 150 (cited supra), there is a reference to the decision reported in Venkatasubbamma v. Narayanaswami AIR 1954 Mad. 215. If there is acceptance of the gift after execution of the deed, even though the registration was postponed to a later date, the gift would become irrevocable. The fact that the deed was executed and registered would not make it irrevocable, if in fact there was no acceptance by the donee, either before registration but after execution or even after registration. What the law requires is acceptance of the gift after its execution though the deed may not be registered. Anterior negotiations or talks about the transfer of property by way of gift would not amount to acceptance of the transfer of the property by gift. Acceptance may be implied but the facts relied on to draw an inference of acceptance must be acts of positive conduct on the part of the donee or persons acting on his behalf and not merely passive acquiescence such as standing by when the deed was executed or was registered.'
This shows that mere standing by when the deed was executed or registered will not be sufficient to prove acceptance. It is true as pointed out by the learned counsel for the appellant that it was extremely probable that Arunachalam was standing beside his father Varadaiya Chetty when Ex.A1 was registered. But that alone will not amount to acceptance. The ld. counsel for appellant submitted that the title deed were with the appellant, so this should prove delivery and acceptance. Even regarding the title deeds in the plaint the appellant had averred that Varadaiya Chetty had insisted and prevailed upon the plaintiff to give the documents of title relating to the suit property. From this the learned counsel wanted to draw the conclusion that custody of the title deed would show acceptance. However, in the evidence she has stated that, (vernacular matter omitted-Ed.) Therefore, even with regard to custody of title deeds the evidence and the pleadings are very unsatisfactory. But it must be remembered that it is Arunachalam who ought to have accepted the settlement deed for the settlement deed to come into effect. On the date of the settlement deed Ajit Kumar's right was still depending upon Arunachalam not having any natural children of his own. If a son or daughter had been born to Arunachalam, then the clause in the settlement in favour of Ajit Kumar would have no effect. Therefore, what is crucial in this case is acceptance by Arunachalam for the gift deed to come into effect. There is not an iota of evidence to show that Arunachalam had accepted the gift. In the absence of pleadings and other evidence, I do not think this Court sitting in second appeal can draw inference merely from the fact that Arunachalam must have stood by the time of the registration of Ex.A1 and arrive at the conclusion that the deed was accepted."
6. The assessee therefore submitted that the order of the Tribunal may be recalled and the appeal may be considered afresh.
7. The said rectification M.P. No. 46 (Coch.)/2003 was allowed by the Tribunal through the order dated 27-2-2004. The Tribunal recalled its order dated 30-10-2003 in GTA No. 6 (Coch.)/2002 and CO No. 50 (Coch.)/2002. The relevant portion of the order passed by the Tribunal in the rectification petition is extracted below:
"4. Hearing the rival submissions and considering the submissions of the authorized representative of the assessee that the cancellation of the gifts made by deeds executed by the assessee was not an after thought to avoid tax liability because the cancellation deed in fact was anterior to the notice issued under section 16(1) and also on the basis of the submission that the Tribunal had not considered the facts brought on record by the learned first appellate authority vide para 2, page 8, which reads as under:
'In the deed of transfer she has not signed accepting the gift, the assessing officer states in page 5 of the assessing order that Miss Sunitha Kurian has made application for transfer of documents as reflected in the transfer deed in, village records also. On going through case records I do not find any basis for such an observation by the Assessing Officer. There is no document where Miss Sunitha Kurian has signed. The Assessing Officer has not collected any copy of application by Miss Sunitha Kurian to village officer to transfer of property in her name. As such the Assessing Officer's observation is only a matter of conjecture and not a finding based on concrete evidence. In the village officer's letter addressed to Assessing Officer also, there is no mention regarding any application made by Miss Sunitha Kurian for transfer of property in her name. The certificate only mentions about transfer and not as to who made the application for transfer. All these make the Assessing Officer's observation that Miss Sunitha Kurian has accepted the gift as hollow and unsubstantiated.' we are of the opinion that the matter requires consideration on the basis of facts brought hereinabove. Thus, the order of the Tribunal dated 30-10-2003 is recalled for fresh adjudication."
8. It is in these circumstances that this appeal and cross-objection have been placed for the second time before the Tribunal for hearing and disposal.
9. We heard Shri K.K. John, the learned Departmental Representative and Shri R. Krishna Iyer, the learned Chartered Accountant appearing for the assessee.
10. The assessee had executed certain documents transferring some of his properties in favour of his daughter. The daughter was unmarried at that time she was a student. She was fully dependent upon the assessee. Later on, the assessee executed another set of documents cancelling the earlier gifts made by him. Those cancellation deeds were registered with the Registration Authorities under the provisions of the Registration Act. In order to appreciate the taxable event of a transaction, the transaction need to be considered in its entirety. The transaction cannot be evaluated in a piece-meal fashion.
11. The Revenue says that the first set of documents executed by the assessee transferring the properties in favour of his daughter amounted gift, as those documents were properly registered. If the said legal proposition is logically extended, one should also agree with the contention of the assessee that the cancellation deeds are also valid deeds, as they were registered under the provisions of law. If a document registered under the Registration Act is a valid piece of evidence and showing the intention of the parties thereto, we cannot discriminate one document against the other. Either we should accept both the documents or we should reject both the documents.
12. Here in the present case, the Assessing Officer has accepted the first set of documents by which he held that the assessee had made gifts of properties to his daughter. At the same time he refused to accept the second set of registered documents, by which the assessee stated that those gifts were subsequently cancelled by him.
13. And now, what is a gift? A gift must be the unconditional transfer of an existing property in favour of another person and free of consideration. Acceptance of the gift also is a must. Nobody can thrust upon gifts on others. While the facts of a particular case are considered in the light of the above legal position, we should give more importance to the pith and substance of that transaction, rather than the ornamental format of that transaction. In the present case, who are the parties to the transaction? The assessee and his daughter. The assessee is the father and guardian. Daughter was unmarried at that time. She was a student. She was dependent on her father. In such circumstances, what is the reason to presume that the assessee's daughter had exercised her free will and had involved in the transaction in a conscious manner and had accepted the gifts from her father. So long as she is dependent on the assessee and as she was a student at that time, it is too exaggerated to believe that the assessee might have sought a formal consent from his daughter for all the above transactions and the assessee's daughter might have given her conscious consent to the assessee for entering into such transactions.
14. The assessee might have resorted to such forms of transactions for his own purpose, which are known only to him. We do not know that was the exact motive behind in executing the gift deeds and thereafter cancelling those deeds. The intention of the assessee might be good or bad. The Assessing Officer has not made any enquiry into the above crucial aspect.
15. In this context, it is very worthwhile to know the observations of the Hon'ble Madras High Court in R. Jamuna Bhai v. M.A. Anusuya AIR 2001 Mad. 392," ... the fact that the deed was executed and registered would not make irrevocable if in fact there was no acceptance by the donee either before registration or after registration. It is true as pointed out by the learned counsel for the appellant that it was extremely probable that Arunachalam was standing besides his father Varadaiya Chetty when Ex. A1 was registered. But that alone will not amount to acceptance."
16. We are of the considered view that the above observation of the Hon'ble Madras High Court applies to the present case. There is no evidence to show that the assessee's daughter had accepted the gifts made by her father at the first instance. Thereafter the assessee himself has executed documents cancelling the earlier gifts. The second set of transactions are not invalid. They are valid documents registered under the Registration Act. De facto speaking, in spite of all the above camouflage of transactions, the assessee was very much in possession and enjoyment of the properties during the relevant period. There was no de facto gift at all.
17. A gift for the purpose of levy of gift-tax must be a real gift. It should not be an empty formality of documents. Possession and enjoyment of the property must invariably be transferred from the donor to the donee. There must be irrevocable change of process in transferring the properties in favour of another person. In the present case, except for the format of documents relating to gifts, there was no actual transfer of possession or enjoyment of properties. There was no acceptance of the gift.
18. Therefore, in the facts and circumstances of the case, we find that the finding and order of the CGT (Appeals) is just, fair and in accordance with law.
19. In the result, the appeal filed by the Revenue is dismissed and the Cross-objection is allowed. Order accordingly.
Per Mahavir Singh, Judicial Member. - I have the benefit of going through the proposed order of my learned brother Hon'ble Accountant Member in this case. Despite my best efforts and great persuasion to myself I have not been able to agree with the conclusion as arrived at by my learned brother. The reasons for the same are incorporated in the present order of mine which is as under.
2.1 The respondent-assessee executed seven gift deeds for conveyance of properties in favour of his daughter during the previous year 1993-94 relevant to the assessment year 1994-95. That the total value of the properties under consideration was Rs. 13,26,700 as per the value given in the gift deeds. The details of immovable properties transacted by gift deeds are available in the gift-tax assessment order as well as the order of the first appellate authority and the same is being reproduced as under:
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Date Document No. Amount Rs. Extent of land Re-Survey No.
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4-2-1994 475 1,96,000 17.5 Cents 43/2
16-2-1994 639 1,99,000 10 Cents 516/5
8-10-1993 3,494 1,87,600 15 Cents 516/5
19-1-1994 251 1,95,200 15 Cents 43/2
17-2-1994 655 1,99,000 18 Cents 516/3
6-1-1994 94 1,99,000 10 Cents 43/2
8-10-1993 3,531 1,50,000 10 Cents 516/3
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2.2 The assessee has not filed any return of gift for the assessment year 1994-95 and the Assessing Officer issued notice under section 16(1) of the Gift-tax Act, 1958 (herein after referred to as G.T. Act) on 27-4-1998 calling upon the assessee to file the return of gift in respect of gifts which have been escaped assessment for the assessment year 1994-95 and this notice was served on the assessee on 14-5-1998. The proceedings initiated under section 16(1) of the G.T. Act, were dropped as there was a mistake in the notice. The proceedings were re-started on 23-3-1999 by issuing fresh notice. In spite of this notice, the assessee did not file any return of gift. Subsequently, the Assessing Officer issued notices for framing the assessment of gift. Before the Assessing Officer, the assessee raised various submissions like the gift is not complete as the donee has not accepted the gift and the donor has already cancelled the gift deeds. The assessee submitted the details of cancellation, which are as under:
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Extent of land Document value Date of cancellation Document Number
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15.0 cents. Rs. 1,87,600 8-5-1997 2057
10.0 cents. Rs. 1,50,000 29-7-1997 3215
10.0 cents. Rs. 1,99,900 8-7-1997 2984
15.0 cents. Rs. 1,95,200 8-7-1997 2983
17.5 cents. Rs. 1,96,000 8-7-1997 2982
10.0 cents. Rs. 1,99,000 8-5-1997 2056
18.0 cents. Rs. 1,99,000 8-5-1997 2055
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2.3 The Assessing Officer rejected the submissions of the assessee, on the basis of evidence adduced before him, by passing a speaking order and accordingly assessed the value of these properties transferred by way of gift deeds and charged gift-tax. Aggrieved, the assessee preferred an appeal before the C.G.T. (Appeals). The C.G.T. (Appeals), after hearing the assessee, cancelled the gift-tax assessment and he put forth the reasoning for cancellation of the assessment in his order. Aggrieved, the revenue preferred this second appeal before the Tribunal and raised three effective grounds of appeal. The grounds raised are already reproduced by my learned brother in his proposed order, so to avoid duplicity I am not reproducing the same again. The assessee has also come to the Tribunal by way of cross objection.
3. The appeal and cross objection were heard and disposed of by the Tribunal vide its order dated 30-10-2003. The Hon'ble Bench of the Tribunal reached at the conclusion that the transfer was complete and the gift was absolute, making the assessee's case falling under the purview of the Gift-tax Act and in view of this, the order of the Assessing Officer was restored. Aggrieved, the assessee filed a Misc. Petition on 14-2-2003. The Hon'ble Bench, considered the submissions of the assessee and re-called the order of the Tribunal dated 30-10-2003 for fresh adjudication by giving the reasoning, which are in the paragraph 4 of the recalled order dated 27-2-2004. This paragraph is already reproduced by my learned brother in his proposed order at page 6, so to avoid duplicity I am not reproducing the same again.
4.1 During the course of hearing, the Department was represented by Shri K.K. John, the learned Departmental Representative and he relied on the paper book containing pages 1 to 23. The documents relied on by the learned Departmental Representative are as under:
1. Argument Notes
2. Copy of relevant pages of Registration Act, 1908
3. Copy of Village Officer's letter No. 18/2001
4. Copy of gift deed
5. Copy of Assessing Officer's letter dated 12-8-2003
6. Copy of letter and relevant pages of Village Office registers
7. Copy of order sheet of Income Tax file for assessment year 1996-97
8. Copy of relevant pages from Transfer of Property Act
The assessee was represented by the learned counsel Shri R. Krishna Iyer, who also relied on the papers containing extracts from Transfer of Property Act, 6th Edition Sanjiva Row's. He also relied on the following case laws:
1. CGT v. R. Kesavan Nair [1974] 96 ITR 365 (Ker.)
2. Pankajakshiamma v. Chandramathiamma 2001 (1) Ker. LJ. 438
3. CIT v. Sirehmal Nawalakha [2001] 251 ITR 108 (SC).
4.2 During the course of hearing, it was noticed that few of the documents filed by the Departmental Representative are in vernacular language i.e., Malayalam and he was specifically asked by the Bench to provide translation of the documents. He provided free translation in English. The learned Departmental Representative filed free translation of gift deed dated 16th February, 1994 by the assessee in favour of his daughter. All the gift deeds are drafted in the same manner except survey Nos., extent of land and amount involved in the transaction etc. Now I reproduce the free translation of deed of gift dated 16-2-1994 which reads as under:
"- Page-12-
Deed of gift executed on 16th day of February, 1994 in favour of Smt. Sunitha Kurian, 18 years, student, daughter of Palakunnel P.J. Kurian, Kottayam Taluk, Athirampuzha Village, Padinjarubhagam Kara, by her father Sri P.J. Kurian, 47 years, business, S/o. Palakunnelaya Kanjiramnilkum Kalayil Joseph, Padinijarubhagam Kara. The property of 10 cents mentioned in Schedule I below is included in property purchased by me from Tellakam Karayil, Chemmacherilaya Maruthumala Chacko Abraham & others vide document No. 2544 of 1978, of Ettumannor Sub-Registrar's office Book No. 1, Volume 323, pages 321 to 324.
-Page-14-
The property of 15 cents mentioned in Schedule 11 below is included in property purchased by me from Kulavelil Mariamma alias Maryamma vide document No. 3008 of 1978, Book Number 1, volume 327, pages 301 to 303, and is held by me directly by paying taxes and with all freedom and free from any encumbrances and the scheduled property is included in Thandaper Number 4666 Sunitha Kurian is my eldest daughter. On the basis of my affection towards you as daughter, and on account of your dependence on me and for your educational needs and as your share and for your daily needs the 25 cents mentioned below as Number 1 and Number 2 including all trees therein, I hereby transfer all my rights and ownership.
-Page - 15 -
And give the same to you as gift vide document executed. I hereby fully agree that from today onwards Sunitha Kurian will have and hold the scheduled properties and pay the Government taxes in your name and take pattayam and have rights of transaction and enjoyments forever. The schedules property has no loans or encumbrances and the schedule property is valued at Rs. 1,99,000 (Rupees One lakh Ninety Nine Thousand) only."
4.3 Again, a letter written by the Village Officer, Athirampuzha to the ITO, Ward-II, Kottayam, dated 12-8-2003 is further being reproduced along with the revenue records of State Government submitted by the Village Officer to the Income-tax Officer, as it is:
"Translation of Page - 17.
No: 274/03
Village Office,
Athirampuzha
Dated 12/8/03.
The Income tax officer,
Ward-2, Kottayam
Sir,
Sub.:- Gift-tax Assessments - Sri P.J. Kurian -Palakunnel, Athirampuzha,
Ref:- Your Office letter Income-tax Officer Wd-2/KTM/K-1154/2003-04, dated 23/7/03. As requested for in the above referred letter photocopy of Pokkuvaravu Application register showing the submission of Pokkuvaravu Application by Smt. Sunitha Kurian, d/o P.J. Kurian, Palakunnel, Athirampuzha, and copy of daily collection register (Receipt No. 435/92, dated 29/10/99 for payment of Pokkuvaravu, fees Rs. 4 in Sub-Division (not clear), and Rs. 20, P.V. Charges) is sent herewith.
Yours faithfully
Sd/-
Village Officer, Athirampuzha."
(Seal)
Translation of page - 18
Only relevant column - underlined in Paper book already submitted.
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1 2 3 4 5 6 7
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Sl. Not Date of Name of Survey Extent Action
No. Clear receipt of applicant No. Hect- taken by
application in and address Re. Sy. No. ares the
Village Office Village
Officer.
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3531 14-10-93 Athirampuzha B-27 4 05 Gift
Padinjarekarayil 516/3
Sunitha Kurian
D/o. Kurian
Palakunnel
Father, Kurian
-do-
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Translation of page No. 19
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1 2 3 4 5 6 7
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Date of Receipt Not clear Not clear Name of Details Rs. Ps.
collection Number person
who remitted.
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29-10-93 92 435 P.V. 463/93 SD 4. 00
Palakunnel charge
Sunitha Kurian
-do- -do- 5. 00
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5.1 It is seen from these documents that the donor has gifted the properties in favour of his daughter out of love and affection. This gift deed further states that all the rights and interests in the properties of the assessee are being exclusively and entirely handed over to the donee. In this way, the donor transferred all the rights and ownership to the donee as gift vide gift deed. The words of the gift deed are very crucial which read as under:
"I hereby transfer all my rights & ownership and give the same to you as gift vide document executed. I hereby fully agree that from today onwards Sunitha Kurian will have and hold the scheduled properties and pay the government taxes in your name and take pattayam and have rights of transaction an enjoyments forever."
52. From the revenue records of the Village Officer, it is seen that document No. 3531 which is a registered gift deed dated 8-10-1993 and on the basis of this gift deed the donee applied for mutation of this property in her favour in the revenue records and the revenue department transferred this property in her name as is clearly indicated from the revenue records, the copy of which is reproduced above. This finding has also been given by the Assessing Officer in his assessment order which reads as under:
"I have made verification with the concerned Village Office and it is informed by the Village Officer, Athirampuzha in his letter No. 18/2001 that transfer has been effected in respect of properties comprised in his territorial area which are under consideration in this assessment order. After effecting he transfer in the village documents in favour of the donee in this case, land tax has also been paid by the donee, Smt. Sunitha Kurian in respect of the properties under reference. In respect of certain properties lying in the territorial area of Village Officer, Ettumanoor also, transfer has been effected in the village records in favour of the donee and also payment of land tax has been made by the donee herself in respect of the properties so transferred. For effecting the transfer in the village records consequent upon the transfer deed itself, the transferee who is to make an application to the village officer to effect the transfer reflected as per the transfer deed. Clearly, in this case the donee K. Meenakshisundaram Sunitha Kurian has made application for transfer of documents as reflected in the transfer deed in the village records also. This shows that the donee in this case, K. Meenakshisundaram Sunitha Kurian has given her concurrence or accepted the gift by her action in filing an application in village office for effecting transfer. Hence, any argument that the donee has not accepted the gift is of no avail"
5.3 The C.G.T. (Appeals) has created doubt vide paragraph 4 of his order which reads as under:
"(4) No doubt, the property has been transferred in the name of the appellant's daughter in the village office records. The mutation in her favour also finds a mention in the letter written by the Village Officer to the Assessing Officer. However, this alone does not constitute a 'transfer' for the gift-tax purposes. As per the commentary of Sanjiva Row on Transfer of Property Act 6th Edition-page 126 para 13), 'mutation or change of name in the revenue records does not itself operate as a transfer. It is only evidence of transfer'. Thus the mutation in the Village Office records in favour of the appellant's daughter can be attached with any importance for the purpose of gift tax only if the mutation had taken place at the instance of the donee. This has not been proved beyond doubt by the Assessing Officer at all. The appellant's daughter has also given an affidavit stating that she had not accepted the gift nor taken possession of the property. Though this affidavit per se cannot decide the issue, the submissions in the affidavit deserve acceptance in conjunction with the other facts of the case."
Finally, the CGT (Appeals) held as under:
"5. Apart from my above observations, one pertinent issue will be as to whether Gift Tax Act can have a concept of 'transfer' that is independent of Transfer of Property Act. In other words, can the definition of the word 'gift' in the Gift Tax Act be wider than the definition of 'gift' in the Transfer of Property Act? This interesting question arose in the case of Sirehmal Nawalakha decided by the Supreme Court reported in 251 ITR 108. In this case, the Supreme Court has clearly held that in Gift Tax matters, the general law did not stand abrogated and the requirement of applying the provisions of the Transfer of Property Act and the Registration Act had to be fulfilled. In the instant case, as discussed by me in the foregoing paras, all the requirements of the Transfer of Property Act cannot be held to have been met by virtue of the fact that the acceptance by the donee of the gift has not been established beyond doubt by the Assessing Officer."
6. From the above facts the two issues emerge for deciding this case and those are as under:
1. Whether the gift is complete, as the property is transferred in the revenue records on the basis of registered gift deed and on the basis of application submitted by the donee.
2. Whether the cancellation of gift deeds subsequently alter the character of the gift, as the gift deeds are unconditional and the Transfer of Property Act, 1882 (hereinafter referred to as T.P. Act) permits revocation of gift if the gift is conditional only. There is no provision as regards to the cancellation of gift deeds in the G.T. Act.
6.1 To decide the first issue, I have to see whether the gift is complete or not. The registered gift deeds were executed by the donor in favour of the donee and this is not disputed by either of the sides. These gift deeds are unconditional and totally convey the properties in favour of the donee. It is seen from the gift deeds that the donor has gifted the properties in favour of his daughter out of love and affection. This gift deed further states that all the rights and interests in the properties as gifted are being exclusively and entirely handed over to the donee. In this way, the donor transferred all his rights and ownership to the donee as gift vide gift deeds. Further, from the revenue records of the Village Officer, it is seen that the donee vide document No. 3531 which has registered gift deed applied for mutation as is clearly indicated from the letter of the Village Officer, who has submitted the copies of land revenue records along with this letter and further, I have also reproduced the same in the above paragraphs. On these facts, I want to analyze the position of G.T. Act as well as the T.P. Act. In this regard I have to discuss the provisions of section 2(viii), 2(xii) and 2(xxiv) of the G.T. Act as well as the provisions of section 122 of the T.P. Act. The definition of gift as provided in section 2(viii), (xii) & (xxiv) of the G.T. Act are as under:
"Section 2. Definitions - In this Act, unless the context otherwise requires,-
Section 2(viii): 'donee' means any person who acquires any property under a gift, and, where a gift is made to a trustee for the benefit of another person, includes both the trustee and the beneficiary;
Section 2(xii): 'gift' means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and [includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section];
Section 2(xxiv): 'transfer of property' means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and without limiting the generality of the foregoing, includes-"
6.2 The definition of gift as provided in sections 122 and 123 of the T.P. Act, reads as under:
"122. 'Gift defined'--'Gift' is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. Acceptance when to be made. Such acceptance must be made during the lifetime of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void.
123. Transfer how effected-For the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses. For the purpose of making a gift of movable property, the transfer may be effected either by a registered instrument signed as aforesaid or by delivery. Such delivery may be made in the same way as goods sold may be delivered."
6.3 On comparison of the above definitions of gift, it appears that the definition in the G.T. Act is wider import than the one in the T.P. Act. Any transfer of existing property by one person to another person need voluntary and without any consideration as a gift under the G.T. Act. The acceptance of gift by a donee or some-one on his behalf does not appear to be a specific requisite condition for a gift made under the G.T. Act. In this regard, the definition of gift under G.T. Act, the element of acceptance of gift by the donee is lacking. But in the provisions of section 122 of the T.P. Act, the element of acceptance of gift is present. This issue has been largely dealt with in the Commentary to Chaturdevi & Pithisaria's Income-tax Law, Vol. 9, 4th Edition at page 1552 which is being reproduced as it is:
"Acceptance of the donee, whether essential under the Gift-tax Act? - Unlike the provisions of section 122 of the Transfer of Property Act, 1882, section 2(xii) of the Gift-tax Act does not specifically refers to the acceptance of the gift by the donee. In other words, the element of acceptance of the gift by the donee is lacking in the definition of the expression 'gift' in section 2(xii) of the Gift-tax Act, whereas under section 122 of the Transfer of Property Act, 1882, that element is also present. On a comparison of the phraseology of the two provisions, one may argue that in order to constitute a valid gift under the Gift-tax Act, it is not essential that the donee should have accepted the gift. Such an argument cannot be accepted especially in view of the definition of 'donee' [section 2(viii) as a person who acquires any property under a gift]. 'The meaning of the word 'acquire' as given in Chambers' Twentieth Century Dictionary is 'to gain; to attain to'; Shorter Oxford English Dictionary gives the meaning as: acquire: 1. To gain, to get as one's own (by one's own exertions or qualities). 2. To receive, to come into possession.' This connotes that the person concerned should have a positive mental attitude 'to gain', 'to get as one's own, to receive or to come into possession of. Moreover, under section 29 of the Gift-tax Act, the donee can be called upon to pay the tax if the Assessing Officer is of the opinion that the same cannot be recovered from the donor. It does not seem to be that the intention of the Legislature was to make a person liable for tax in respect of a transaction which he does not agree to or even repudiates. If such an argument is accepted, the result will be that the donee can be made liable for tax even in cases where he repudiates the gift, for the taxable event arises on the donor executing the gift deed. The question of acceptance of the gift by the donee is closely related to the question whether the donor has perfected the gift on his part. It is a well-accepted principle of law that a conveyance takes effect only if the interest created thereby vests in the transferee, and such vesting can never take place without the transferee's consent and concurrence. In that view of the matter, the acceptance of the donee is also essential under the Gift-tax Act [CGT v. R. Kesavan Nair [1974] 96 ITR 365, 369-70 (Ker.)].However, according to the Andhra Pradesh High Court, in Vadulla Venkata Rao v. CGT [1972] 85 ITR 249, 259 (AP), the acceptance of gift by a donee or some one on his behalf does not appear to be a specific requisite condition for a gift under the Gift-tax Act."
6.4 The Hon'ble Apex Court in the case of CIT v. Sirehmal Nawalakha [2001] 251 ITR 108 has clearly held that in the gift-tax matters, "The general law did not stand abrogated by section 4 of the Gift-tax Act, and the requirement of complying with the provisions of the Transfer of Property Act and the Registration Act had to be fulfilled". Further, the Hon'ble Apex Court, finally held at page 112 that:
"In the instant case, the High Court did not even refer to the provisions of the Registration Act and, therefore, fell in error in coming to the conclusion that the case fell within the provisions of section 4 of the Gift-tax Act and, therefore, as it was a deemed gift it was not necessary that the document had to be registered. In our view, the general law did not stand abrogated and the requirement of complying with the provisions of the Transfer of Property Act and the Registration Act had to be fulfilled. The High Court, therefore, erred in answering the question of law in the negative and against the Revenue."
6.5 By going through the provisions of sections 122 and 123 of the T.P. Act, I have seen that the acceptance by the donee or on his behalf is a mandatory condition in the provisions of section 122 of the T.P. Act and further as regards to the effecting of transfer by registered instrument signed by or on behalf of the donor and attested by at least two witnesses is also mandatory in the provisions of section 123 of the T.P. Act. The essential elements of the gift are:
1. The absence of consideration.
2. The Donor.
3. The Donee.
4. The subject-matter.
5. The transfer.
6. The acceptance.
Going through these essential elements, it is seen that the acceptance is an essential element and as in the present case the gift deeds executed by the donor in favour of the donee clearly states that he has transferred all the rights and ownership and given the same to the donee as gift vide document executed and he has also agreed that from that day onwards the donee will have and hold the scheduled properties and pay the Government taxes in her name and taken pattayam and have rights of transaction and enjoyment for ever. In view of this registered gift deed, the mutation of property was done on the application of the donee which is evident from the copies of the revenue records supplied by the Village Officer, Athirampuzha of the land revenue Department of the State Government. Here, I do not agree with the finding of the C.G.T. (Appeals) that, all the requirements of the T.P. Act cannot be held to be met by virtue of the fact that the acceptance of the gift by the donee has not been established beyond doubt by the Assessing Officer. After effecting the transfer on the basis of gift deeds, the donee has also paid land revenue tax in respect of the properties under reference which is very clearly evident from the revenue records. In view of this, I have no hesitation in holding that the donee has accepted the gift. There is no other requirement under the T.P. Act and no other legal formalities to be left to execute the mutation effecting in favour of the donee. In the revenue register, it is a clear cut fact and that also on the basis of application submitted by the donee as is evident from the revenue records, the donee has accepted the gift. In my view, where the deed of gift was delivered by the donor to the donee and delivery of the deed and on the basis of the deed mutation effecting in revenue records, this is sufficient for acceptance of transfer within the meaning of the sections 122 and 123 of the T.P. Act. Further, the plea of the assessee that the transfer of the property was not accepted by the respondent-assessee's daughter and she has not taken the possession of the said landed properties or dealt with the same in any manner. The documents were cancelled considering the fact the respondent-assessee's daughter who has just completed 18 years and was doing her B.Com. course would not be in a position to manage the said properties and if the properties were transferred in her name, the property may fall in somebody's hands. I do not agree for this preposition that the donee being 18 years and studying in B.Com. cannot accept the gift. Even in the T.P. Act, the donee is a person who accepts the gift. A gift may be accepted by or on behalf of a person who is not competent to contract. A minor may therefore, be a donee, but if the gift is onerous, the obligation cannot be enforced against him. The words 'accepted by or on behalf of the donee' shows that the donee may be a person unable to express the acceptance. A gift can be made to a child en ventre sa mere and could be accepted on its behalf. In this case, mutation is complete in the transaction of the property and there is no question of non-acceptance. In view of this, I have no hesitation in holding that the transfer is complete in view of the provisions of sections 122 and 123 of the T.P. Act.
6.6 I, humbly following the Hon'ble Apex Court in the case law cited above, state that the facts of this case are entirely different from the case before the Hon'ble Apex Court. Before the Hon'ble Apex Court, the issue was as regards to the registration of documents. Here, all the requirements complying with the provisions of the T.P. Act as well as the Registration Act have been fulfilled. The Hon'ble Kerala High Court in the case of CGT v. R. Kesavan Nair [1974] 96 ITR 365 has held that "It could not have been the intention of the Legislature to make a person liable for tax in respect of a transaction which he does not agree to, or even repudiates. It is a well-accepted principle of law that a conveyance including a gift takes effect only if the interest created thereby vests in the transferee, and such vesting can never take place without the transferee's consent and concurrence." Even the Hon'ble Kerala High Court decision's facts are entirely different from the facts of the present case in hand. In this case, the mutation of the property on the basis of gift deed has been done in the revenue records and that also on the basis of application from the donee as it is evident from the letter of the Village Officer which has already been reproduced in earlier paragraphs.
6.7 In view of these facts and legal aspects, I am of the view, as regard to the first issue, that the gift is complete and accepted by the donee and acceptance and transfer is complete.
7. Now coming to the second issue, in respect of cancellation of gift deed, in the G.T. Act, there is no provision as regards to the cancellation or revocation of gift. The G.T. Act is silent on the revocation of gift and if, gift is made, whether it can be cancelled, there is no specific requirement or condition in the G.T. Act. But the T.P. Act is very clear in this respect and the provisions of section 126 of the T.P. Act, applies to revocation or cancellation of gifts, which reads as under:
"126. When gift may be suspended or revoked.- The donor and donee may agree that on the happening of any specified event which does not depend on the will of the donor a gift shall be suspended or revoked; but a gift which the parties agree shall be revocable wholly or in part, At the mere will of the donor, is void wholly or in part, as the case may be. A gift may also be revoked in any of the cases (save want or failure of consideration is which, if it were a contract, it might be rescinded. Save as aforesaid, a gift cannot be revoked. Nothing contained in this section shall be deemed to affect the rights of transferees for consideration without notice."
7.1 In view of the above provisions of the T.P. Act, the gift can be revoked if the donor and donee agrees with, on the happening of any specified event, particularly which does not depend on the will of the donor, a gift can be revoked. The gift can also be revoked if it is a contract as envisaged in the provisions of section 126 of the T.P. Act which clearly states that 'Save as aforesaid, a gift cannot be revoked'. A gift is a transfer of property and when an absolute gift is made, subject to a condition restricting alienation, the condition would be void. A gift may be a subject to the condition precedent under section 27, and there is no transfer and no gift unless and until the condition is fulfilled. Revocation under the first paragraph of this section depends upon the donor and the donee at the time of acceptance agreeing to a condition subsequent which puts an end to the gift. The condition must be made at the time, the donor cannot impose such a condition after the gift is absolute. And further more such a condition must be expressed. In the absence of such condition the donor has no power for revocation. In view of the provisions of section 126 of the T.P. Act, the condition cannot depend upon the will of the donor and a gift revocable at pleasure is no gift at all. This provision provides only two conditions where a gift can be revoked and which are as under:
(a) When the donor and donee have agreed that on the happening of a specified event (not depending upon the will of the donor) the gift should be suspended or revoked.
(b) A gift may also be revoked in any of the cases (save want or failure of consideration) in which if it were a contract, it might be revoked e.g., when the gift is made undue influence, coercion, fraud or misrepresentation. But in the present case in hand, it is very clear that there is no such condition in the gift deed for revocation or impossibility. It is also clear from the gift deed that the donor has not imposed any condition which puts an end to the gift. The condition must be made at the time of gift and the donor cannot impose such condition after the gift is absolute. In the absence of such condition, the donor has no power for revocation of the gift.
7.2 Now I have drawn my strength on conditional gift from Halsbury's Laws of England, Third Edition, Volume 18, page 389 which is as follows:
"Gifts may be made subject to conditions either precedent or subsequent. A condition precedent is one to be performed before the gift takes effect. A condition subsequent is one to be performed after the gift had taken effect, and, if the condition is unfulfilled, will put an end to the gift; but, if a condition subsequent is void, the gift remains good. If the words of the condition are capable of being construed either as a condition precedent or as a condition subsequent but the words of the written instrument point to the inference that the donors intended the condition to be subsequent rather than precedent, the court will hold the condition to be subsequent."
8. In view of the above, I am of the view that when the gift is complete and which is not a conditional one as envisaged in section 126 of the T.P. Act, the donor has no power of revocation, the gift deeds revoked by the donor by way of cancellation deeds, the cancellation deeds are invalid documents. In view of this, I am of the view that the gift-tax levied by the Assessing Officer on the basis of gift deeds executed by the donor in favour of the donee and transferring the properties on that basis in favour of the donee, is according to law. Accordingly, I restore the order of the Assessing Officer and set aside the order of the C.G.T. (Appeals).
9. In the result, the appeal filed by the Revenue is allowed and cross-objection is dismissed.
FACTS OF THE CASE
Per Dr. O.K. Narayanan, A.M. - The assessee in this case had executed seven Deeds of Conveyance of immovable properties in favour of his daughter, Miss Sunitha Kurian. The deeds were registered during the period from 8-10-1993 to 17-2-1994, within the previous year relevant to the assessment year 1994-95. The assessee thereafter cancelled the said seven Conveyance Deeds by executing another set of deeds in 1997. He recalled the properties to himself. Both the set of deeds were executed before the Sub-Registrar.
2. The Gift-tax Officer held the view that the assessee had conveyed the properties through the first set of documents executed by him, in favour of his daughter. The case of the assessee was that the documents were subsequently cancelled and the conveyances were recalled and therefore there were no valid proceedings and any valid gifts. The Assessing Officer rejected the contention of the assessee and completed the assessment under the Gift-tax Act, 1958.
3. In first appeal, the Commissioner of Gift-tax (Appeals) held that the transfers made by the assessee at the first instance were not complete and the consequent gifts were not absolute and therefore there cannot be a case of gift-tax assessment. The CIT(A) cancelled the gift-tax assessment.
4. It is against the above that the Revenue has come before the Tribunal in the impugned appeal in GTA No. 06/Coch./2002. This appeal was heard and disposed of by the Tribunal along with the cross objection through its order dated 30-10-2003. The Tribunal held the view that the Commissioner of Gift-tax (Appeals) was not correct in his conclusion that the transfers were not complete and the gifts were not absolute. Accordingly, the Tribunal vacated the order passed by the CGT(A) and restored the gift-tax assessment order passed by the assessing authority. The appeal filed by the Revenue was allowed and the cross objection filed by the assessee was dismissed.
5. Thereafter the assessee filed a rectification petition in M.P. No. 46 (Coch.)/2003 on 14-11-2003. The Tribunal found that it has not considered the decision of the Hon'ble Madras High Court in R. Jamuna Bhai v. M.A. Anusuya AIR 2001 Mad. 392. The Tribunal also found that in the Village Officer's letter addressed to the Assessing Officer, there was no mention regarding any application put in by Miss Sunitha Kurian for transfer of properties in her name. The Tribunal felt that the matter required reconsideration on the basis of the facts brought in the miscellaneous petition. Therefore the earlier order of the Tribunal dated 30-10-2003 was recalled for fresh adjudication.
6. The matter again came up before the Bench consisting of the present Members for hearing and disposal. The Accountant Member who authored the order, held that there was no evidence to show that the assessee's daughter had accepted the gifts made by her father on the first instance. He held that a gift for the purpose of levy of gift-tax must be a real gift. It should not be an empty formality of documentation. The possession and enjoyment of the property must invariably be transferred from the donor to the donee. There must be irrevocable change of process in transferring the properties in favour of another person. In the present case, except for the format of documents relating to gifts, there was no actual transfer of possession or enjoyment of properties. There was no acceptance of gift. He also held that the Assessing Officer is not justified in placing reliance on the first set of documents and at the same time rejecting the second set of Cancellation Deeds executed by the assessee.
7. On the basis of the above finding, he dismissed the appeal filed by the Revenue and allowed the cross objection filed by the assessee.
8. The Judicial Member could not agree with the view taken by the Accountant Member. He held that the transfers made through the first set of documents executed by the assessee and registered before the Sub-Registrar are valid which amounted to gifts by the assessee to his daughter. On the basis of the entries of mutations made by the Village Officer in the village records, the Judicial Member came to the finding that the transfer of properties made by the assessee through the first set of documents were accepted by the assessee's daughter and therefore the gifts have become complete.
9. The Judicial Member further held that the gift made by the assessee was not a conditional one as envisaged in section 126 of the Transfer of Property Act and the donor, the assessee, had no power of revocation. He held that the cancellation deeds executed by the assessee are therefore invalid documents. He upheld the contention of the Revenue and allowed the appeal filed by the Revenue by dismissing the cross objection of the assessee.
10. Therefore the difference of opinion.
ORDER UNDER SECTION 23(II) OF THE GIFT-TAX ACT, 1958 READ WITH SECTION 255(4) OF THE INCOME-TAX ACT, 1961
Per Dr. O.K. Narayanan A.M. - As there is a difference of opinion between the Accountant Member and the Judicial Member, the matter is being referred to the President of the Income Tax Appellate Tribunal with a request that the following question may be referred to a Third Member.
"Whether in the facts and the circumstances of the case and where the assessee had executed seven Deeds of Conveyance of properties in favour of his daughter during the period from 8-10-1993 to 17-2-1994, relevant to the assessment year 1994-95, and whereas, later on, the assessee has cancelled those conveyances by registering Cancellation Deeds in 1997, the Assessing Officer is justified in law in framing an assessment under the Gift-tax Act, 1958, for the assessment year 1994-95?"
ORDER UNDER SECTION 23(II) OF THE GIFT-TAX ACT, 1958 READ WITH SECTION 255(4) OF THE INCOME-TAX ACT, 1961
Per Shri Mahavir Singh, J.M. - On a difference of opinion between the Members of the Bench in the above-mentioned case, following two questions are being referred to the Hon'ble President of the Income Tax Appellate Tribunal with a request that the same may be referred to a Third Member:
"1. Whether, on the facts and in the circumstances of the case, the gift is complete, as the property stands transferred in revenue records on the basis of registered gift deeds on an application submitted by the donee?
2. Whether, on the facts and in the circumstances of the case, the subsequent cancellation of the gift deeds are valid in view of provisions of the Gift-tax Act, 1958 and the provisions of section 126 of the Transfer of Property Act, 1882, as the gift deeds are unconditional?"
THIRD MEMBER ORDER
Per Shri Vimal Gandhi, President.- This matter has come before me on account of difference between learned Members of Cochin Bench, who heard the appeal and the cross objection. According to the learned Accountant Member, the difference is reflected in the following proposed question:
"Whether in the facts and the circumstances of the case and where the assessee had executed seven Deeds of Conveyance of properties in favour of his daughter during the period from 8-10-1993 to 17-2-1994, relevant to the assessment year 1994-95, and whereas, later on, the assessee has cancelled those conveyances by registering Cancellation Deeds in 1997, the Assessing Officer is justified in law in framing an assessment under the Gift-tax Act, 1958, for the assessment year 1994-95."
The learned Judicial Member, on the other hand, is of the view that following questions should be considered:
"1. Whether, on the facts and in the circumstances of the case, the gift is complete, as the property stands transferred in revenue records on the basis of registered gift deeds on an application submitted by the donee?
2. Whether, on the facts and in the circumstances of the case, the subsequent cancellation of the gift deeds are valid in view of provisions of the Gift-tax Act, 1958 and the provisions of section 126 of the Transfer of Property Act, 1882, as the gift deeds are unconditional?"
2. In my considered opinion, the question that would cover the controversy is:
"Whether on the facts and in the circumstances of the case the learned CIT (Appeals) is justified in cancelling the gift-tax assessment made on the assessee?"
3. I shall proceed to consider and dispose of above question. I have heard Shri K.K. John, the learned Departmental Representative and Shri R. Krishna Iyer the learned representative of the assessee. I have also examined orders of learned Brothers in the light of material available on record.
4. The facts of the case are that one Shri P.J. Kurian r/o Palakunnel House, Athirampuzha allegedly gifted his properties to his daughter Miss Sunitha Kurian through separate deeds executed and registered with Sub-Registrar. All the above Deeds related to immovable properties. It is further stated that Miss Sunitha Kurian also got mutation entered in the revenue records in her name on the basis of above Deeds by paying the prescribed mutation fee. The Donor however, thought that gifts made through the Gift Deeds were incomplete and he was entitled to revoke the gifts. With above purpose in view the assessee donor executed Revocation Deeds and registered the same with Sub-Registrar on 8-5-1997; 29-7-1997; 8-7-1997; 8-7-1997; 8-7-1997; 8-5-1997 & 8-5-1997 respectively. The assessee also claimed that he all along continued to be in possession and control of the property gifted and exercised all rights of ownership.
5. The Assessing Officer after coming to know of above Gift Deeds initiated proceedings under Gift-tax Act to bring to charge the value of properties gifted under the Gift-tax Act by issuing notice to the assessee on 27-4-1998. The assessee in response to above notice submitted a return declaring gift at Nil The assessee during the course of gift-tax proceedings, relied upon the fact that gifts purported to be made by him were never accepted by the Donee. The assessee also relied upon the Revocation Deeds executed by him and thus claimed that no gift chargeable to tax was made by the assessee. In response to further queries the assessee elaborated his case in letter dated 28-10-1999 referred to by the Assessing Officer in the assessment order.
6. In rejecting the claim of the assessee and while holding that chargeable gifts were made by the assessee the Assessing Officer observed as under-
"The assessee has in his letter dated 28-10-1999 further argues that the gift is not complete unless it is accepted by the donee. In support of this, the assessee has placed reliance upon a decision of the Hon'ble High Court of Kerala, reported in 96 ITR 365 (CGT v. R. Kesavan Nair). According to the assessee, the donee in this case has not accepted the gifted property and hence the gift has not become complete. This argument of the assessee is without any merit. The village documents are the fundamental documents with regard to immovable properties and their ownership. Whenever a transfer is effected in respect of an immovable property by way of document registered in the office of the Sub-Registrar, a corresponding transfer should be effected in the village records also to make the transfer complete. Then only, the transferee can effect payment of land tax in her favour in respect of the property so transferred. In this case, I have made verification with the concerned Village Office and it is informed by the Village Officer, Athirampuzha in his letter No. 18/2001 that transfer has been effected in respect of properties comprised in his territorial area which are under consideration in this assessment order. After effecting the transfer in the village documents in favour of the donee in this case, land tax has also been paid by the donee, Smt. Sunitha Kurian in respect of the properties under reference. In respect of certain properties lying in the territorial area of Village Officer, Ettumanoor also, transfer has been effected in the village records in favour of the donee and also payment of land tax has been made by the donee herself in respect of the properties so transferred. For effecting the transfer in the village records consequent upon the transfer deed itself, the transferee who is to make an application to the village officer to effect the transfer reflected as per the transfer deed. Clearly, in this case the donee Ms. Sunitha Kurian has made application for transfer of documents as reflected in the transfer deed in the village records also. This shows that the donee in this case, Ms. Sunitha Kurian has given her concurrence or accepted the gift by her action in filing an application in village office for effecting transfer. Hence, any argument that the donee has not accepted the gift is of no avail Therefore, the argument that 'the donee has not accepted the gift and so the gift has not become complete' is not at all correct and hence it is rejected. A copy of the letter of the village officer is annexed to this assessment order."
Thereafter the Assessing Officer concluded as under:
"I have gone through the deeds of transfer effecting the gift by the assessee I have also verified the location of the property, its importance, the market value of properties with a view to see whether the market value of the property shown in the document of transfer is reasonable with regard to the market conditions and importance of the properties transferred. On a verification of the above aspect, I am of the view that the market value of the properties as declared in the documents of transfer are reasonable in all respects and needs no variation. Hence, the value of the property shown in the document of transfer will be adopted straightaway or completing the gift-tax assessments.
The assessment is accordingly completed as under:
Total value of Property transferred Rs. 13,26,700
Less: Exemption given for education of the donee Rs. 25,000
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Rs. 13,01,700
Less: Basis exemption Rs. 30,000
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Taxable Gift Rs. 12,71,700
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Gift-tax @ 30% Rs. 3,81,510
Less: Deduction under section 18A
(stamp duty paid) Rs. 29,410
Balance tax Rs. 3,52,100
Add: Interest under section 16B Rs. 5,70,402
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Rs. 9,22,502
Less: Tax paid Nil
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Balance payable Rs. 9,22,502"
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The assessee impugned above assessment in appeal before the Commissioner of Gift-tax (CGT) (Appeals) and contended that gifts allegedly made were never accepted by the Donee. The assessee also challenged the findings that mutation on the basis of alleged gift deeds were got made in the revenue records by the donee. Affidavit of the Donee to the above effect was placed before the learned CGT (Appeals). The assessee further relied upon the revocation deeds to contend that averments therein were equally important.
7. After considering facts and circumstances of the case, the learned CGT (Appeals) held that no valid gift was made by the assessee. He held as under:
"4. ...I have carefully considered the elaborate reasoning given by the Gift-tax Officer as well as the vehement arguments put forward on behalf of the appellant. I am of the view that the submissions made on behalf of the appellant merit favourable consideration for the following reasons:-
'(1) The gift made by the appellant as between 8-10-1993 and 17-2-1994. The cancellation deeds are dated between 8-5-1997 and 29-7-1997. The notice under section 16(1) was issued on 27-4-1998. The proceedings initiated by this notice were dropped due to insufficient time given to the appellant in the notice. The proceedings were restarted by issue of fresh notice under section 16(1) on 23-9-1998. This means that the gift deeds as well as cancellation deeds had been made much before the initiation of gift-tax proceeds. Hence, the cancellation deeds cannot be taken as an act of after-thought to avoid gift-tax liability. It also means that the gifts had been revoked and had become void at the time of the initiation of proceedings by the Assessing Officer. The Assessing Officer should have considered the totality of the facts and circumstances of the case as they existed at the time of initiation of the proceedings. Instead, he has chosen to ignore the fact of existence of cancellation deeds by raising technical issues such as low stamp duty paid, etc. The Assessing Officer attaching all the importance to the gift deeds and practically ignoring the cancellation deeds cannot be taken as a fair approach for deciding the issue.
(2) In the case of Pankajakshiamma v. Chandramathiamma reported in [2001] 1 Ker. Law Journal 438, the Kerala High Court has dealt with the issue as to what constitute a valid transfer as gift. The Court has observed that 'section 123 of the Transfer of Property Act deals with the manner of execution of gift deed. If the purpose is or making a gift of immovable property, the transfer must be effected by a registered instrument signed by on or behalf of the donor and attested by atleast two witnesses. By a reading of sections 122 and 123, it can be seen that in order to execute a valid gift, the following elements are to be proved:-
(i) It must be a voluntary transfer.
(ii) The gift must be accepted by the donee during the lifetime of donor.
(iii) The gift must be effected by a registered document. It must be attested by two attestors. If all the elements are fulfilled, there will be a valid gift, if not, it will have no legal consequence.'
The crucial word in the above decision is the word 'all'. This means that the three conditions mentioned above are cumulative and run together. Even if one of these conditions is not fulfilled, the gift cannot be deemed to have been executed. In the present case, there is no doubt regarding the satisfaction of condition (i) since the appellant has voluntarily executed the transfer deeds. Regarding condition (iii) also, there cannot be any doubt regarding the attestation since the Registrar has accepted the validity of the transfer and the registration has been done in the name of appellant's daughter. That leaves only condition No. (ii), namely, the issue of acceptance by the donee for a closer examination by me. In this case, the Assessing Officer has no evidence to prove that the appellant's daughter had accepted the gifts. In the deed of transfer, she has not signed accepting the gift. The Assessing Officer states in page 5 of the assessment order that 'Miss Sunitha Kurian has made application for transfer of documents as reflected in the transfer deed in the village records also.' On going through the case record, I do not find any basis for such a observation by the Assessing Officer. There is no document where Miss Sunitha Kurian had signed. The Assessing Officer also has not collected any copy of application by Miss Sunitha Kurian to the Village Officer for transfer of property in her name. As such, the Assessing Officer's observation is only a matter of conjecture and not a finding based on concrete evidence. In the Village Officer's letter addressed to the Assessing Officer also, there is no mention regarding any application made by Miss Sunitha Kurian for transfer of the property in her name. The certificate only mentions about the transfer and not as to who made the application for the transfer. All these make the Assessing Officer's observation that Miss Sunitha Kurian has accepted the gift as hollow and unsubstantiated.
(3) Paramount importance has been attached to the issue of consent by the donee in the Kerala High Court decision in the case of R. Kesavan Nair [96 ITR 365]. In this case the court opined as under:
'Section 2(vii) of the Act defines a "donee" as a person who acquires any property under a gift. This connotes that the person concerned should have a positive mental attitude to receive or come into possession of the property. Moreover, under section 29 of the Gift-tax Act, the donee can be called upon to pay the tax if the Gift-tax Officer is of the opinion that the same cannot be recovered from the donor. It could not have been the intention of the Legislature to make a person liable to tax in respect of a transaction which he does not agree to or even repudiates. It is a well-accepted principle of law that a conveyance including a gift takes effect only if the interest created thereby vests in the transferee and such vesting can never take place without the transferee's consent and concurrence.'
Thus, the above decision prescribes that the provisions of the Gift-tax Act can be invoked only if the Assessing Authority proves that there was consent by the "donee" towards the gift being made. This onus cast on the Assessing Officer has not been properly discharged in this case.
(4) No doubt, the property has been transferred in the name of the appellant's daughter in the village office records. The mutation in her favour also finds a mention in the letter written by the Village Officer to the Assessing Officer. However, this alone does not constitute a "transfer" for the gift-tax purposes. As per the commentary of Sanjiva Row on Transfer of Property Act 6th Edition - page 126 para 13, mutation or change of name in the revenue records does not itself operate as a transfer. It is only evidence of transfer. Thus the mutation in the village office records in favour of the appellants daughter can be attached with any importance for the purpose of gift-tax only if the mutation had taken place at the instance of the donee. This has not been proved beyond doubt by the Assessing Officer at all. The appellant's daughter has also given an affidavit stating that she had not accepted the gift nor taken possession of the property. Though this affidavit per se cannot decide the issue, the submissions in the affidavit deserve acceptance in conjunction with the other facts of the case.
(5) The facts of non-acceptance of the gift by appellant's daughter is also clear from the fact that she has not disputed the re-transfer of the property to her father by the cancellation deed which has been duly acted upon by the Sub-Registrar. The registration of the cancellation deed by the Sub-Registrar goes to prove that legally there was nothing wrong as per the Registration Act to re-transfer the property on account of revocation of the gift by the appellant. The re-transfer of the property in the appellant's name is evidenced by the documents such as Land tax certificates, encumbrance certificate etc. (copies filed before me) wherein the appellant has been shown as the owner on dates 8-2-2001, 6-10-1998 and 9-2-2001. These dates are much beyond the original transfer deeds which are held as completed gift deeds by the Assessing Officer. The re-transfer of the property as evidenced by these documents confirm the fact that overall there was no gift that took place that was liable to tax under the Gift-tax Act.
(6) The Assessing Officer seems to be nonplussed as to how a gift deed executed on a stamp paper worth Rs. 5,000 could be cancelled by a cancellation deed executed on a stamp paper worth Rs. 100. This is not a relevant matter to the issue. The stamp duty for various types of deeds are fixed by the Government and the quantum of the stamp duty paid cannot decide the issues of disputes. The issue of quantum of the stamp duty is also out of Assessing Officer's domain. The very fact that the cancellation deeds have been accepted for registration by the Sub-Registrar goes to show that the cancellation deeds were proper. Even presuming that the stamp duty paid was less, it is for the Sub-Registrar to initiate proceedings against the appellant and it is not incumbent on the Assessing Officer to give any weightage for the same.
5. Apart from my above observations, one pertinent issue will be as to whether Gift-tax Act can have a concept of 'transfer' that is independent of Transfer of Property Act. In other words, can the definition of word "gift" in the Gift-tax Act be wider than the definition of "gift" in the Transfer of Property Act? This interesting question arose in the case of Sirehmal Nawalakha decided by the Supreme Court reported in 251 ITR 108. In this case, the Supreme Court has clearly held that in Gift Tax matters, the general law did not stand abrogated and the requirement of applying the provisions of the Transfer of Property Act and the Registration Act had to be fulfilled. In the instant case, as discussed by me in the foregoing paras, all the requirements of the Transfer of Property Act cannot be held to have been met by virtue of the fact that the acceptance by the donee of the gift has not been established beyond doubt by the Assessing Officer.
6. Considering these facts, I am of the view that the transfer was not complete and the gift was not absolute thereby making the appellant's case not falling under the purview of the Gift-tax Act. Hence the Gift Tax assessment made in the appellant's case is hereby cancelled."
8. The Revenue being aggrieved came up in appeal before the Appellate Tribunal against the order of the learned CGT(A). The assessee filed a cross objection. The learned Members of Cochin Bench heard the appeal and confirmed the order of CGT (Appeals) vide their decision dated 30-10-2003. However on the request of the assessee the aforesaid order was recalled under section 35 of the Gift-tax Act read with section 254(2) of IT Act vide order dated 27-2-2004 and appeal was fixed for fresh hearing. During the course of fresh hearing and disposal of appeal, the difference arose between the Members. The learned Members have expressed their views as under:
9. The learned Accountant Member has held that the impugned order is required to be confirmed. After taking note of the grounds raised by the revenue in their appeal before the Tribunal and the background of the case, the decision of Hon'ble Madras High Court in the cases of R. Jamuna Bhai v. M.A. Anusuya AIR 2001 Mad. 392; Chennupati Venkatasubbamma v. Nelluri Narayanaswami AIR 1954 Mad. 215 as also observations in the recalled order dated 27-2-2004, the learned AM upheld the order of the CGT(A). His findings are summarized as under:-
(1) That the gift in question was not accepted by the donee.
(2) That entire transaction i.e., execution of deed as well as cancellation deeds should be read together. Transaction cannot be evaluated in a piecemeal fashion. So either both the set of documents should be accepted or both of them should be rejected. The Assessing Officer was not justified in holding that the assessee made gift of properties to his daughter and at the same time, refused to accept cancellation deeds through which gift was cancelled.
(3) The AO did not go into the intention of the assessee in making and in cancelling the gift.
(4) There was no evidence to show that the assessee's daughter had accepted the gift made by her father. Further the cancellation deeds could not be treated as invalid as these were duly registered under the Registration Act.
(5) The assessee was very much in possession and enjoyment of properties during the relevant period. There was no de facto gift at all.
(6) Gift for purposes of levy of Gift-tax must be a real gift. Possession and enjoyment of the gifted property must invariably be transferred from the donor to the donee. In the present case except for format of documents relating to gifts, there was no actual transfer of possession or enjoyment of the properties. There was no existence of the gift. The learned AM accordingly held that the impugned order of the CIT(A) was just and fair and in accordance with law and was required to be upheld.
10. The learned Judicial Member (JM) in the proposed order did not agree with the view taken by the learned AM. After taking note of dates of gift deeds and dates of cancellation of deeds as also the submissions of the assessee, the learned JM held that valid gifts were made and completed by the assessee. Gifts made were not conditional as envisaged under section 126 of the Transfer of Property Act. The donor therefore, had no power of revocation. In the above circumstances, Gift-tax levied by the AO on the basis of gift deeds executed by donors in favour of donee and transferring of the properties was made in accordance with law. The learned JM accordingly restored order of the AO setting aside the order of the CGT(A). The reasons in brief given by the learned JM are as under:-
"(1) On examination of gift deeds and mutation made thereof, reply of Village Officer dated 12-8-2003 as also translation of pages 18 and 19 (representing translation of Registers maintained by the Village Officer), the learned JM held that properties were gifted by the assessee to his daughter out of love and affection. All rights and interest in properties were entirely and exclusively handed over to the donee who was to hold the properties and pay Government Taxes.
(2) That the donee on the basis of gift deed dated 8-10-1993 had applied for mutation of the property in her favour in the revenue record and revenue department made necessary transfers in their record as per evidence produced by the revenue. The learned JM accordingly held that finding of the AO reproduced hereinbefore was justified.
(3) That after considering order of the learned CGT(A) the learned JM framed the following two questions for decision in his proposed order:-
1. Whether the gift is complete, as the property is transferred in the revenue records on the basis of registered gift deed and on the basis of application submitted by the donee.
2. Whether the cancellation of gift deeds subsequently alter the character of the gift, as the gift deeds are unconditional and the Transfer of Property Act, 1882 (hereinafter referred to as T.P. Act) permits revocation of gift if the gift is conditional only. There is no provision as regards to the cancellation of gift deeds in the GT Act."
To answer about questions, learned Judicial Member again referred to the Gift Deeds, held them to be unconditional, total and complete in favour of the donee. Further donee had applied for mutation in the revenue record on the basis of above deeds which was made as applied. Therefore, on facts of the case and in the light of relevant provision of Gift-tax Act; Transfer of Property Act; Comments by Authors Chaturvedi & Pithisaria (Volume 9 Fourth Edition) (relevant portion of statutory provision and commentaries cited), the learned JM held that gift was complete, legal and valid and was accepted by the donee. All the elements of the gift as provided in sections 122 and 123 of the T.P. Act were satisfied in this case. Learned JM had some reservations on the question whether acceptance was essential under the Gift-tax Act. However after considering decision of the Hon'ble Supreme Court in the case of CIT v. Sirehmal Nawalakha [2001] 251 ITR 108, learned JM also accepted that acceptance of gift by the donee was essential and that in this case the donee did accept the gifts. The learned JM in the proposed order did not agree with the learned CGT(A) that acceptance of gift by the donee was not established beyond doubt.
11. As regards second question relating to cancellation of gift deeds, learned JM has held that there was no provision relating to cancellation or revocation of gift. Gift-tax Act is silent on this. Judicial Member also analyzed provisions of section 126 of T.P. Act. He held that in the original gift deeds, the donor did not lay any condition and gifts were unconditional, therefore, the provision of section 126 did not apply. The donor reserved no power of revocation and therefore, cancellation deeds were invalid. On account of above, the learned JM set aside the order of the CGT(A) and restored the order of the AO in his proposed order.
12. On account of above difference the matter has come before me. I have heard Shri R. Krishna Iyer, learned counsel on behalf of the assessee and Shri K.K, John, learned DR. The learned DR in support of appeal, drew my attention to the dates of gifts and dates of cancellation. He argued that the assessee was not assessed under the Income-tax Act prior to assessment year 1991-92. However, all the returns for assessment years 1991-92 to 1994-95 were filed on 6-8-1997. In this connection, the learned DR drew my attention to order-sheet entry dated 29-11-1996 wherein the AO recorded reasons under section 148 of the I.T. Act, for issuing notices for assessment years 1995-96 and 1996-97. Taking wind of above action, the assessee was prompted to execute cancellation deeds to avoid levy of the Gift-tax. In this background, no importance should be attached to cancellation deeds. Moreover, gifts being complete in all respect as pointed out by the learned JM in the proposed order under reference, question of cancellation of gifts did not arise. The learned DR also laid emphasis on the mutation in the revenue record on the basis of gift deeds. Mutation was primarily important to establish existence and completeness of gifts. The learned DR also referred to the written submissions filed by him in the Paper Book which comprises of pages 1 to 28 with the following details:-
1. Argument Notes.
2. Copy of relevant pages of Registration Act, 1908.
3. Copy of Village Officer's letter No. 19/2001.
4. Copy of Gift deed - in vernacular.
5. Copy of Assessing Officer's letter dated 12-8-03.
6. Copy of letter and relevant - in vernacular pages of Village Officer registers.
7. Copy of order sheet of Income-tax filed for A.Y. 1996-97.
8. Copy of relevant pages from transfer of Property Act.
9. English Translation of pages 12, 14, 15, 17, 18 & 19 of Paper book submitted at the time of earlier hearing.
10. Copy of written submissions made on 17-3-04 at the time of hearing in M.P. filed by assessee. The learned DR emphasized that execution of registered deeds coupled with mutation in the revenue record entered at the instance of the donee fully established that gifts were valid and complete in all respect. In this connection the learned DR relied upon decision of the Hon'ble Supreme Court in the case of Balwant Singh v. Daulat Singh AIR 1997 SC 2719. It is also decision of Bhopal High Court Mulla Zawar Hussain v. Smt. Mono Bai AIR 1956 Bhopal 66. In fact these two decisions were relied upon and placed by the assessee's representative in his Paper Book. The learned DR read certain observations out of above decisions, which supported the case of the revenue as accepted by the learned JM in his proposed order. The learned DR accordingly supported the proposed order of the learned JM as also of the AO.
13. The learned counsel for the assessee on the other hand, supported the proposed order of the learned AM as also of the CGT(A). He referred to detailed submissions made by the assessee before the AO particularly to pages 15 and 16 of the Paper Book filed by him. He argued that alleged gift was never accepted by the donee nor the possession was ever delivered to her. Even original gift deeds remained in possession of the donor and were still available with him. The donee never made any application for mutation in the revenue record as alleged by the AO and the learned JM in the proposed order. He accordingly submitted that observations made by the learned JM in the proposed order were factually incorrect. The learned counsel for the assessee also relied upon observations at page 2285 of Commentary of Harish Singh Gaur and on various decisions included by him in his paper book. He accordingly prayed that order of the CGT(A) be upheld.
14. I have given careful thought to the rival submissions and examined them in the light of material available on record. The revenue in its Paper Book has included copy of one of gift deeds in vernacular. They were also required to give complete and correct English translation of the same but I find that some extracts of one of Gift deeds have been placed on record. In the situation I would like to go by what is stated by the Gift-tax Officer in the impugned order about the gift deeds:
"On going through these documents, it could be seen that the assessee had intended to transfer the above properties by way of gift in favour of his daughter. The assessee was having absolute right over the properties transferred. The reason for the transfer has been stated as since Sunitha Kurian, the 'donee' of the deed is the daughter of the assessee and because of the love and affection towards the daughter is the only consideration for the transfer of the properties by way of gift. This is very clear from the wordings of the document that the only consideration for the transfer of the property by way of gift is love and affection' of the father, the assessee in this case, to his daughter, the 'donee' in this case. The document further states that the entire rights and interests in the properties of the assessee is being exclusively and entirely handed over in favour of the donee. In the documents of transfer, the assessee is asking the donee to take possession and ownership of the property, effect transfer in Government documents, pay tax thereon in her name etc. etc. The assessee also continues to state that the donee will have complete right for further transfers of the property now transferred while enjoying the property as her absolute property."
About acceptance of gift and on mutation of entries in the revenue's record, the AO has observed as under:-
"The assessee has in his letter dated 28-10-1999 further argues that the gift is not complete unless it is accepted by the donee. In support of this, the assessee has placed reliance upon a decision of the Hon'ble High Court of Kerala, reported in (96 ITR 365, CGT v. R. Kesavan Nair). According to the assessee, the donee in this case has not accepted the gifted property and hence the gift has not become complete. This argument of the assessee is without any merit. The village documents are the fundamental documents with regard to immovable properties and their ownership. Whenever a transfer is effected in respect of an immovable property by way of document registered in the office of the Sub-Registrar, a corresponding transfer should be effected in the village records also to make the transfer complete. Then only, the transferee can effect payment of land tax in her favour in respect of the property so transferred. In this case, I have made verification with the concerned Village Office and it is informed by the Village Officer, Athirampuzha in his letter No. 18/2001 that transfer has been effected in respect of properties comprised in his territorial area which are under consideration in this assessment order. After effecting the transfer in the village documents in favour of the donee in this case, land tax has also been paid by the donee, Smt. Sunitha Kurian in respect of the properties under reference. In respect of certain properties lying in the territorial area of Village Officer, Ettumanoor also, transfer has been effected in the village records in favour of the donee and also payment of land tax has been made by the donee herself in respect of the properties so transferred. For effecting the transfer in the village records consequent upon the transfer deed itself, the transferee who is to make an application to the village officer to effect the transfer reflected as per the transfer deed. Clearly, in this case the donee Ms. Sunitha Kurian has made application for transfer of documents as reflected in the transfer deed in the village records also. This shows that the donee in this case, Ms. Sunitha Kurian has given her concurrence or accepted the gift by her action in filing an application in village office for effecting transfer. Hence, any argument that the donee has not accepted the gift is of no avail Therefore, the argument that 'the donee has not accepted the gift and so the gift has not become complete' is not at all correct and hence it is rejected. A copy of the letter of the village officer is annexed to this assessment order."
In the light of above observations, the AO held that gift was complete, and was accepted by the donee who had applied for mutation in the revenue record, paid mutation fees and other taxes and thus had given her concurrence and acceptance to the gifts and therefore, objection of the assessee that gift was not complete is not of much avail. The AO also held that cancellation deeds were invalid and of no legal consequences. These were rejected as an afterthought also. Accordingly the assessment under the Gift-tax Act was made and the assessee was required to pay tax on gifted property of value of Rs. 13,26,700 which after exemption was taken at Rs. 12,71,700. The basic tax was worked out at Rs. 3,52,100 to which interest of Rs. 5,70,402 was added under section 16B of the Gift-tax Act. (The findings of the AO are accepted by the learned JM).
15. The assessee impugned above assessment in appeal before the CGT(A) who accepted the claim of the assessee that no gift-tax could be levied on gifts made by the assessee. The relevant portion of the order of the learned CGT(A) has already been extracted above.
16. The revenue filed an appeal before the Appellate Tribunal with the following grounds of appeal:-
"1. The order of the CIT(A)-IV, Cochin canceling the Gift-tax Assessment order is against law, facts and circumstances of the case. The CIT (Appeals) should have held that there was a valid gift as there is a voluntary transfer effected by registered documents duly attested. The gift was accepted by the donee during the lifetime of the donor as is evidenced by mutation effected in the donee's favour in village office records.
2. There was no happening of a specified event agreed upon by the donor and donee that the gifts can be revoked.
3. The affidavit filed by the donee before the appellate authority that she has not accepted the gift should not have been relied upon."
17. The assessee has come up in cross objection which is merely in support of order of learned CGT(A). It is in my view not maintainable.
18. The real controversy between the parties is whether alleged gifts in question were accepted by the donnee in accordance with statutory provisions. Both the learned Members as also the learned representatives of parties who appeared before me accepted the proposition that gift to be valid is required to be accepted by the donee and that donee's concurrence in the gift is essential in the light of decision of the Hon'ble Supreme Court in the case of Sirehmal Nawalakha. Apart from the decision of the Hon'ble Supreme Court in the case of Sirehmal Nawalakha, the Hon'ble Kerala High Court in the case of CGT v. R. Kesavan Nair [1974] 96 ITR 365, while not accepting the validity of the gift deed, observed as under:
"(ii) The contention for the department that, in order to constitute a gift under the Gift-tax Act, it is not essential that the donee should have accepted the gift, because the element of acceptance of the gift by the donee is lacking in the definition of 'gift' in section 2(xii) of the Gift-tax Act, is not correct. Section 2(viii) of the Act defines a 'donee' as a person who acquires any property under a gift. This connotes that the person concerned should have a positive mental attitude to receive or to come into possession of the property. Moreover, under section 29 of the Gift-tax Act, the donee can be called upon to pay the tax if the Gift-tax Officer is of the opinion that the same cannot be recovered from the donor. It could not have been the intention of the Legislature to make a person liable for tax in respect of a transaction which he does not agree to, or even repudiates. It is a well-accepted principle of law that a conveyance including a gift takes effect only if the interest created thereby vests in the transferee, and such vesting can never take place without the transferee's consent and concurrence."
Similarly in the case of Pankajakshiamma v. Chandramathiamma 2001(1) Ker. LJ. 438, the Hon'ble Kerala High Court observed as under:-
"It is also relevant to note that the first defendant has not signed the document as an attestor. The document was not presented for registration by the first defendant. Kunjikutty Amma herself went to the office of the scribe and got the document back. DW2 stated that she was not aware of the document till the same was handed over to her. The plaintiff's case is that in spite of the execution of the document, Kunjikutty Amma was taking the yield from the properties. The tree climber has deposed that Kunjikutty Amma was taking the income from the properties till her death. There is absolutely nothing on record to show that the first defendant has obtained possession over the properties before the death of the donor. If the gift deed was actually accepted by the first defendant she would have taken the yield from the property and she would have effected mutation and paid the tax. Ext. B1 authorize the donee to effect mutation and to pay tax. Even though DW2 has stated that she has paid tax, no tax receipt is forthcoming. These are all circumstances that goes against the first defendant."
In the case of R. Jamuna Bhai v. M.A. Anusuya AIR 2001 Mad. 392, their Lordships after reviewing the relevant case laws and relevant provisions of Transfer of Property Act, observed as under:-
"Unless there is acceptance there can be no gift. In the judgment relied on by the learned counsel for the appellant in (1996) 2 CTC 150, there is a reference to the decision reported in Venkatasubbamma v. Narayanaswami AIR 1954 Mad. 215. If there is acceptance of the gift after execution of the deed, even though the registration was postponed to a later date, the gift would become irrevocable. The fact that the deed was executed and registered would not make it irrevocable, if in fact there was no acceptance by the donee, either before registration but after execution or even after registration. What the law requires is acceptance of the gift after its execution though the deed may not be registered. Anterior negotiations or talks about the transfer of property by way of gift would not amount to acceptance of the transfer of the property by gift. Acceptance may be implied but the facts relied on to draw an inference of acceptance must be acts of positive conduct on the part of the donee or persons acting on his behalf and not merely passive acquiescence, such as standing by when the deed was executed or was registered'
This shows that mere standing by when the deed was executed or registered will not be sufficient to prove acceptance. It is true as pointed out by the learned counsel for the appellant that it was extremely probable that Arunachalam was standing besides his father Varadaiya Chetty when Ex. A1 was registered. But that alone will not amount to acceptance. The learned counsel for appellant submitted that the title deeds were with the appellant, so this should prove delivery and acceptance. Even regarding the title deeds in the plaint the appellant had averred that Varadaiya Chetty had insisted and prevailed upon the plaintiff to give the documents of title relating to the suit property. From this the learned counsel wanted to draw the conclusion that custody of the title deed would show acceptance. However, in the evidence she has stated that. [Vernacular matter omitted - Ed.]
Therefore, even with regard to custody of title deeds the evidence and the pleadings are unsatisfactory. But it must be remembered that it is Arunachalam who ought to have accepted the settlement deed for the settlement deed to come into effect. On the date of the settlement deed Ajit Kumar's right was still depending upon Arunachalam not having any natural children of his own. If a son or daughter had been born to Arunachalam, then the clause in the settlement in favour of Ajit Kumar would have no effect. Therefore, what is crucial in this case is acceptance by Arunachalam for the gift deed to come into effect. There is not an iota of evidence to show that Arunachalam had accepted the gift. In the absence of pleadings and other evidence I do not think this Court sitting in second appeal can draw inference merely from the fact that Arunachalam must have stood by at the time of the registration of Ex. A1 and arrive at the conclusion that the deed was accepted. In fact the trial Court holds as follows:
'No document has been produced on the side of the plaintiff to prove the acceptance of the gift during the life time of the deceased Varadaiya Chetty'."
It is clear from above cited decisions that acceptance of gift and concurrence of the donee is essential to treat the gift as complete and liable to charge under the Gift-tax Act. The position to prove validity and completeness of gift under the Gift-tax Act is same as under general law. The acceptance and concurrence on the part of the donee has to be established by the person who is asserting that a valid and chargeable gift was made. In the present case revenue is rejecting the case of the assessee that he was not chargeable to gift-tax and therefore, burden of proof that Gift-tax is leviable is on the revenue. The acceptance and concurrence cannot be assumed. It has to be established through clear and cogent evidence. Here I must hasten to add that above onus can be established through circumstantial evidence, if direct evidence is not available. Although I disagree with the Assessing Officer that record maintained by the Village Officer are the fundamental documents with regard to immovable properties and their ownerships, I accept that, Production of gift deed by the donee before the revenue authorities for getting mutation effected in donee's name in the revenue record would be an important factor to hold that gift of property was accepted and that the donee gave her concurrence and consent to the gift. This is the real controversy which I am required to consider. However, before dealing with above controversy, I would deal with minor controversies between the parties on which arguments were advanced-
(1) What is the effect of mutation in the revenue record? According to the Assessing Officer, village documents are fundamental documents with regard to immovable properties and their ownership. However, according to the assessee, mutation in the revenue record is not of much value. In my considered opinion a presumption of truth is attached to entries in the revenue record under the Land Revenue Code of States. In the absence of evidence to the contrary, revenue entries can be relied upon for deciding question of ownership and possession. But mutation as such does not create any right, title or interest. The proceedings are taken to fix the liability relating to payment of land revenue/tax relating to the land subject-matter of mutation. Mutation proceedings can be relied upon only as a collateral evidence to corroborate other material on record. But proposition that mutation does not create any right or interest or no presumption of truth is attached to the revenue record, does not have much relevance in this case. The mutation proceedings taken before the Village Officer were important as it is very significant in this case as to who made application for effecting mutation in the revenue record on the basis of gift deeds. This is highly controversial matter in this case.
(2) Considerable arguments were advanced relating to proceedings before the Registration authorities under the Registration Act. In my opinion, no title would pass if document required to be registered under section 17 of Registration Act is not registered as per the statutory provision. The authorities under the Registration Act cannot examine whether the transferor in the document has a good and perfect title in the property or not. It is none of their business to enquire into question of title. The argument that revocation was valid as revocation deeds were registered under the Registration Act based on the presumption that registration authorities must have looked into the validity of revocation deeds, is of no avail and is required to be rejected.
(3) Arguments were advanced before me as also before the lower authorities to support a legal proposition that a person cannot give a better title than he himself possesses. There can be no quarrel with this legal proposition. But this proposition has no application in this case. The legal question that could be examined was whether gift deeds were conditional and could be revoked as provided under section 126 of the Transfer of Property Act. This question is different from the question whether gifts were accepted by the donee or not. I do not see any material to hold that gift deeds were conditional in this case and could be revoked under section 126 of the TP Act. Nothing further need be stated on this proposition.
19. Now the question whether gifts were accepted in this case? The assessee in his letter, dated 28-10-1999 before the Assessing Officer stated that though documents (gifts) were executed, these were never completed. The property never vested in the donee i.e., Sunitha Kurian. The donee never took possession of the properties nor dealt with the same in any manner and that property continued to be in his possession. He further asserted that original documents did not come into force and properties continued to be with him and these facts are mentioned in the documents (cancellation deeds). The GTO did not controvert the claim that possession of properties in question was never delivered to the donee. He further did not controvert the claim of the assessee that original documents were with him and not with the donee. This was in spite of enquiries made by him from the Village Officer. Neither the donor nor the donee were examined.
20. The Assessing Officer wrote to the Village Officer enquiring about the mutation proceedings as per his letter No. 1154, dated 2-2-2001. Copy of the above letter has not been placed before the Tribunal although it was very relevant as to what exact information was sought by the Assessing Officer. The Village Officer as per his reply No. 18/2001 had stated as under.-
"Referring to the letter cited, I may inform that land comprised in survey Nos. 516/5, 516/3 transferred in favour of his daughter Sunitha Kurian as per deed Nos. 639/94, 3494/93, 655/94, 3531/93, has been mutated in her favour as per this office Thandaper Nos. 5915 of Reshring Block No. 27. I may also inform that Sy. No. 43/2, referred to in the letter cited is not in the possession of P.J. Kurian or Sunitha Kurian. Further solvency particulars may be ascertained from Taluk Office, Kottayam."
It is evident from the underlined portion that the Assessing Officer did ask about possession/transfer of possession on mutation based on documents but this was not confirmed by the Village Officer. The Assessing Officer had positively asked about insolvency of the donor/donee. Having regard to importance attached by him to the filing of application by Ms. Kurian, it is unthinkable that the Assessing Officer will not seek information on the above application. That is why the letter written by the Assessing Officer is important. Proceeding further, it is clear from record that the Village Officer did not mention that Sunitha Kurian had made any application for effecting mutation or that she had herself produced gift deeds before the Village Officer in mutation proceedings. Yet a finding to the above effect as noted in the earlier part of the order was recorded by the Assessing Officer. The CGT(A) on consideration of record found that aforesaid finding was not based on any evidence. The learned CGT(A) held as under:-
"In this case, the Assessing Officer has no evidence to prove that the appellant's daughter had accepted the gifts. In the deed of transfer, she has not signed accepting the gift. The Assessing Officer states in page 5 of the assessment order that 'Miss Sunitha Kurian has made application for transfer of documents as reflected in the transfer deed in the village records also'. On going through the case record, I do not find any basis for such an observation by the Assessing Officer. There is no document where Miss Sunitha Kurian had signed. The Assessing Officer also has not collected any copy of application by Miss Sunitha Kurian to the Village Officer for transfer of property in her name. As such, the Assessing Officer's observation is only a matter of conjecture and not a finding based on concrete evidence. In the Village Officer's letter addressed to the Assessing Officer also, there is no mention regarding any application made by Miss Sunitha Kurian for transfer of the property in her name. The certificate only mentions about the transfer and not as to who made the application for the transfer. All these make the Assessing Officer's observation that Miss Sunitha Kurian had accepted the gift as hollow and unsubstantiated."
The facts and observation of the CGT(A) are fully justified if document at page 11 referred to above is taken into consideration. No other document was on record when order dated 28-3-2002 was passed by the CGT(A). The other documents referred to by the learned JM were collected by the revenue authorities subsequent to the passing of the impugned order and are 'additional evidence'.
21. Having regard to the finding recorded by the Assessing Officer about the acceptance of gift by the donee and about her filing an application for getting mutation effected in her name, the assessee filed an affidavit of the donee denying that she had taken possession or had filed any application before the Village Officer for getting mutation effected in her name. Even otherwise it was contended that there was no evidence to support of the finding of the Assessing Officer that gift was accepted and donee gave consent and concurrence or that she had made application to Village Officer. In the above circumstances the learned CGT(A) took the affidavit of the donee into consideration.
22. On the facts of the case, the CGT(A) was fully justified in considering affidavit of the donee relating to the findings recorded by the Assessing Officer based on no material. After all how was the assessee to rebut a positive finding that Sunitha Kurian made an application to the Village Officer to mutate revenue record in her favour when it was assessee's claim that no such action was done by the donee? How negative onus could be discharged when no such application was made? The same could only be done on oath and through an affidavit. There is no other way to discharge the negative onus. There is further no material on record to show that the Assessing Officer during the assessment proceedings had put page 11 to the assessee to rebut although the same was used against the assessee in retaining a finding in the assessment order. Therefore, admission of affidavit in this case was fully justified.
23. The revenue authorities collected further material in proceedings before the ITAT and placed them at page Nos. 18 and 19 in the Paper Book of the revenue. The above evidence was collected by the Assessing Officer as per his letter dated 23-7-2003 much after passing of the impugned order. He had specifically asked the Village Officer for the application filed by Ms. Sunitha Kurian in the above referred to letter, but the Village Officer sent him copy of some registers relating to applications filed before the Village Officer as also copy of register relating to payment of charges. In the said register as per pages 18 and 19 of the Paper Book of the revenue in the column 'name of the Applicant', Sunitha Kurian is shown as applicant. It is further shown that she had paid SD charges of Rs. 9. The aforesaid additional evidence has been relied upon by the learned JM to decide against the assessee and to hold that the CGT(A) in his order recorded an erroneous finding without considering that the documents relied upon was additional evidence and was not available on record when the matter was considered and decided by the CGT(A). Having regard to the manner in which the Assessing Officer proceeded and recorded findings on filing of the application, the learned CGT(A) was right in taking affidavit of the donee on record. Ground No. 3 of appeal therefore, is decided against the revenue.
24. The further question required to be considered is whether on the facts and in the circumstances of the case there is justification to interfere with finding of the CGT(A) that Ms. Sunitha Kurian did not accepted, consented or concurred to gifts in question. Another relevant documents on this question is letter, dated 12-8-2003 written by the Assessing Officer to the Departmental Representative. The said letter on page 16 of the Paper Book of the revenue, reads as under:-
"As required by you over telephone I had deputed my inspector to the Village Office, Athirampuzha to collect a copy of application furnished before the Village Officer for effecting the transfer of properties in the village records with reference to the gift of immovable properties effected by Shri P.J. Kurian, Palakunnel House, Athirampuzha in favour of his daughter Smt. Sunitha Kurian. In this regard, the request was made to the Village Officer by letter dated 23-7-2003 through my inspector. The Village Officer has, by her letter No. 274/3 dated 12-8-2003, furnished copy of the register maintained in her office with regard to the application received for effecting transfer of properties. As per this register at Sl. No. 463, Smt. Sunitha Kurian, daughter of Shri P.J. Kurian residing at Palakkunnel House, Athirampuzha, is the applicant for effecting the transfer of properties in her name. Also, the Village Officer has furnished copy of the ledger maintained in her office with regard to the fees remitted for effecting the transfer, which is dated 29-10-1993 receipt No. 92. As per the details in this register also the payment was effected by Smt. Sunitha Kurian only. Copies of the letter dated 12-8-2003 from the Village Officer along with the copies of the register referred above are enclosed herewith for presentation before the Hon'ble Appellate Tribunal for deciding the case. It is reported by the Village Officer that the applications in original are not traceable in her office since it is relating to periods of 10 years back. However, it is felt that the evidences now collected and sent herewith are adequate to uphold the gift-tax assessment order."
25. Above justification for not placing important evidence on record, has to be taken with a pinch of salt. In the assessment order, the Assessing Officer had recorded a categorical finding that Miss Sunitha Kurian had made an application to the Village Officer for getting mutation in the Revenue record. This important factor is taken into consideration to hold that the donee had consented and concurred and accepted gifts in question. Above finding was found to be not based on any material and conjectural. Now in the second appeal, the Assessing Officer wants to take a different stand contradicting his finding in the assessment order. I have already narrated circumstances to show that all relevant information was sought by the Assessing Officer in assessment proceedings. What prevented the Assessing Officer from sending his Inspector then to the Village Officer to collect the application allegedly filed by the Miss Sunitha Kurian; when the Assessing Officer knew the importance of such an application to prove the case of Revenue? He had also written to the Village Officer to inform the change of possession on the basis of gift. Facts about the information sought were withheld in the original assessment order yet findings as noted above were record. The assessee had to rebut a totally imaginary finding relating to application filed, by filing an affidavit before the CGT(A). In the light of the above circumstances particularly the manners in which the findings were recorded by the Assessing Officer in the assessment order, it is not fair on the part of the Assessing Officer to contend that the original application is not traceable in the office of Village Officer after 10 years has lapsed.
26. Moreover letter dated 12-8-2003 and copies of register pages 18 and 19 are all additional evidence being produced for the first time in the second appeal. There is no request from Revenue under Rule 29 of the Income-tax Rules seeking permission of the Tribunal to place these additional material on record. There is no order of ITAT admitting these documents as additional material. In the absence of any request/order admitting above documents into evidence, I have doubt that these can be read in evidence. The learned Accountant Member did not refer to these documents at all whereas the learned Judicial Member in his proposed order has relied upon these documents. In my considered opinion the documents could not be read in evidence unless these were properly and legally brought on record and therefore the learned JM is not correct in relying upon these documents. Assuming for the sake of argument that these documents have been properly brought on record and are to be read in evidence, they do not advance the case of the Revenue. Pages 18 and 19 are only copies of entries in some registers maintained by the Village Officer relating to applications filed before him and fees collected by him. These registers are not part of Revenue record to which presumption of truth is attached. Under what rules the registers were maintained is not shown. Who and under what circumstances entries were made, is not shown. The detail of mutation proceedings carried by the Village Officer or order made in the proceeding is not available on record. It is well known fact that mutation proceedings are summary proceedings and it is not necessary that parties should themselves appear in those proceedings. The donor who had executed deeds might through his employees got entries in above register without any knowledge of the donee. It is highly improbable that 18-19 years old Miss Sunitha Kurian, a college going student of B.Com., would go to Village Officer to get mutation effected in her name in the revenue record. Therefore, on fact I am unable to reject solemn affirmation of the donee on affidavit. On the facts and in the circumstances of the case, particularly when the assessee continued to be in possession of properties and gift deeds and there is no good material to infer that the donee ever consented or concurred to the gift, I hold that the gifts were not accepted as required under law. I agree with the learned AM that order of the learned CGT(A) is required to be and is upheld.
27. The matter will now go before the regular Bench for decision in accordance with law.
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