1. The assessee in this case had executed seven Deeds of Conveyance of immovable properties in favour of his daughter, Miss Sunita 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 (A) 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(A) 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 Jamuna Bhai v. M.A. Anusooya (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.
1. 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 fats 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 of the learned CIT(Appeals) is justified in canceling 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, 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, Ahirampuzha allegedly gifted his properties to his daughter Miss Sunita Kurian through separate deeds executed and registered with Sub-Registrar. All the above Deeds related to immovable properties. It is further stated that Miss Sunita 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 (Commissioner of Gift tax 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 a 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 done 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." "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 for completing the gift tax assessments.Total value of Property transferred : Rs. 13,26,700Less : Exemption given for education of the donee.
: Rs. 25,000 Rs. 13,01,700Less : Basic exemption Rs. 30,000TAXABLE GIFT Rs. 12,71,700Gift tax @ 30% --- Rs. 3,81,510Less: Deduction Under Section 18A (stamp duty paid) --- Rs. 29,410Balance Tax --- Rs. 3,52,100Add : Interest Under Section 16 B --- Rs. 5,70,402 -------------Less: Tax paid --- Nil ------------- Balance payable --- Rs. 9,22,502" ------------- 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 Donee. The assessee also challenged the findings that mutation on the basis of alleged gift deeds was 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 was between 08.10.1993 and 17.02.1994. The cancellation deeds are dated between 08.05.1997 and 29.07.1997. The notice Under Section 16(1) was issued on 27.04.1998.
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 23.09.1998. 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 Pankajakshy Amma v. Chandramathy Amma reported in (2001) 1 Kerala 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 for 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 Section 122 and 123, it can be seen that in order to execute a valid gift, the following elements are to be proved:- (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 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." (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 can not 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 findings 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 decided the issue, the submission in the affidavit deserve acceptance in conjunction with the other facts of the case.
(5) The fact 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 08.02.2001, 06.10.1998 and 09.02.2001. 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 stamp duty paid cannot decide the issue of dispute. 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 Property Act can not 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 I.T.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 decisions of Hon'ble Madras High Court in the cases of R.Jamuna Bhai v. M.A. Anusooya (AIR 2001 Mad 392); Venkta Subbamma v.Narayanaswami (AIR 1954 Mad 205) 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:- (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 canceling 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 proposal 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 & 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 herein before 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 gifts deeds in the G.T.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, 251 ITR 108 (SC), 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 promoted 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:- 6. Copy of letter and relevant - in vernacular pages of Village Office registers.
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 and Ors. v. Daulat Singh (deceased) through L/Rs and Ors., AIR 1997 SC 2719. It is also decision of Bhopal High Court, 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 & 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." (Underlined to emphasize) 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 (Commissioner of Gift tax 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 he 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 a 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 of 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 after thought 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 and 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 the 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 donee in accordance with statutory provisions. Both the learned Members as also the learned representatives of parties who appears 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 (supra). Apart from the decision of the Hon'ble Supreme Court in the case of Sirehmal Nawalakha (supra), 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 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." (Underlined to emphasize) Similarly in the case of Pankajakshiamma v. Chandramathiamma (2001) (1) Kerala Law Journal 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 authorise 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." (Underlined to emphasize).
In the case of R. Jamuna Bai v. M.A. Anusuya, AIR 2001 Madras 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 (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 fact 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." (Underlined to emphasize).
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 Arunchalam was standing besides his father Varadaiya Chetty when Ext. 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 a 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." (Underlined to emphasize).
It is clear from above cited decisions that acceptance of gift and concurrence of the donee is essential to great 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 is same as under the 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 AO that record maintained by the Village Officer are the fundamental documents with regard to immovable properties and their ownership, 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 AO, 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 mater 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 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 AO 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 done were examined.
20. The AO 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 A.O. 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 No. 5915 of Reshring Block No. 27. I may also inform that Sy. Nos. 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 Officer, Kottayam." (Underlined by me to emphasize).
It is evident from the underlined portion that the AO did ask about possession/transfer of possession on mutation based on documents but this was not confirmed by the Village Officer. The AO 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 AO will not seek information on the above application. That is why the letter written by the A.O. 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 A.O. 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 AO 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 the finding of the AO that gift was accepted and donee gave consent and concurrence or that she had made application to Village. 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 AO 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 A.O. 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 pages No. 18 & 19 in the Paper Book of the revenue. The above evidence was collected by the AO 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 lettery, 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 & 19 of the Paper Book of the revenue in the column name of 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 A.O. 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 accept, consented or concurred to gifts in question. Another relevant document on this question is letter, dated 12.8.2003 written by the AO 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, Palakkunnel House, Athirampuzha in favour of his daughter Smt. Sunitha Kurian.
In this regard, the request was made to the Village Officer by letter dated 23-07-2003 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." (Underlined to emphasize).
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 as 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 AO 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 AO in assessment proceedings. What prevented the Assessing Officer from sending his Inspector then to the Village Officer to collect the application allegedly filed by Miss Sunitha Kurian; when the A.O. 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 recorded. The assessee had to rebut to totally imaginary finding relating to application filed, by filing an affidavit before the CGT(A). In the light of above circumstances particularly the manners in which the findings were recorded by the A.O. 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. More over 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 & 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 the 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.