Petitioner moot memorial

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CHAMBER5OTHFTTHAEXCCHOANMSBUELRTOAFNTTAS XNACTOINOSNUALLTAONNTLSI
NE MOOT COURT

TEAM CODE K

BEFORE THE HON’BLE HIGH COURT OF BOMBAY

CIVIL W.P /2021

RAJ …Petitioner

V.

THE NATIONAL FACELESS ASSESSMENT CENTRE AND OTHERS …Respondent

WRITTEN SUBMISSION ON BEHALF OF THE PETITIONERS

Most Respectfully Submitted to the Hon’ble High Court of Bombay

Counsel for the Petitioner

Sd/- (Signature)

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TABLE OF CONTENTS

Sl. No Particulars Page No.

1. LIST OF ABBREVATIONS 3

2. INDEX OF AUTHORITIES 4-8

• Books referred

• Law Lexicons

• Statutes referred

• Websites referred

• Table of cases
3. STATEMENT OF JURISDICTION

4. STATEMENT OF FACTS 10-11

5. STATEMENT OF ISSUES 12

6. SUMMERY OF ARGUMENTS 13

7. ARGUMENTS ADVANCED 14-43

8. PRAYER 44

LIST OF ABBREVIATIONS

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AO Assessing Officer
ART Article

CGT Commissioner of Gift Tax

CIT Commissioner of Income Tax
FMV Fair Market Value
HC High Court
HON’BLE Honorable
I.E., That is
IT Act Income Tax Act
Ltd Limited
r.w. Read with
SC Supreme court
Sec section
T.N Tamil Nadu
V. Versus
W.r.t With reference to

INDEX OF AUTHORITIES

BOOKS REFFERED

1. V.G. Ramachandran’s, Law of Writs,6th edition, Volume 1 & 2 ,EBC

2. DURGA DAS BASU, Constitutional Law,8th edition, Volume 1&3
3. DURGA DAS BASU, Administrative Law, Kamal Law House
4. M P JAIN & S N JAIN, Principles of Administrative Law ,7th edition, Volume 1
5. TAXMANN, Income Tax Act,49th edition 2005
6. M.P. Jain, Indian Constitutional Law,4th Ed.1994
7. V.N. Shukla, Constitution of India,13th edition, EBC

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8. N S Bindra, Interpretation of Statutes,9th edition

LEXICONS

• BRIAM A. GARNER, BLACK’S LAW DICTIONARY (10TH ED. 2014)

• P RAMANATHA AIYAR, THE MAJOR LAW LEXICON (4TH ED. 2010)

STATUTES REFERRED

• Income Tax Act 1961 and Income Tax Rules,1962

• Finance Act 2022

• Constitution of India 1950

WEBSITES REFERRED

• [Link] and [Link]

TABLE OF CASES

CASES CITATION

[Link]
1. A. Rudrakodi v. CIT [2000] 244 ITR 309

(Mad.)
2. Assistant Commissioner of Land Tax, Madras, and 1969 (4) TMI 28

others v. Buckingham and Carnatic co. Limited

3. Assistant Commissioner of State Tax v. LL 2021 SC 438

Commercial Steel Limited

4. Assistant commissioner, commercial tax (2010) 4 SCC 785, 790-

Department, Works contracting and leasing, Kota v. 91

Shukla and Brothers

5. Bharat Aluminium Company Ltd. v. UOI and Ors 1995 (3) SCR 497

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6. Ceylon University v. Fernando; PC Local Govt. (1960) 1 WLR 223, 232,

Board v. Arlidge (1915) AC 120

7. CGT v. G. Venkataswamy [1999] 236 ITR 539

(Mad.)
8. CGTv. Smt. C.K. Nirmala [1995] 215 ITR 156 (FB)

9. CIT v. Dr. (Mrs.) Neelambai Ramaswamy [1986] 164 ITR 369 –

Mad. HC
10. CIT.v. Vatika Township Pvt. Limited [2014] 367 ITR 466 (SC)
11. Commissioner of Central Excise Surat-I VS (2012) 7 SCC 153; P.169

Favorite Industries
12. Commissioner of Income Tax, Amritsar vs straw AIR 1989 SC 1490

Board Mfg. co.,

13. Commissioner. of Income Tax v. NGC Networks itxa-1783-2016

India Pvt. Limited (2019)

14. Competition Commission of India v. Steel (2010) 10 SCC 744, 77

Authority of India Limited

15. Dhakeswari Cotton Mills Ltd v. Commissioner of AIR 1955 SC 65: 1955

Income Tax (1) SCR 941

16. Geeta Dubey vs. Income Tax Officer 2(1) (28.08.2018 - ITAT

Indore) : MANU/II/0045/
17. Gordhanbhai Kahandas Dalwadi v. Commissioner MANU/GJ/0026/1980 :

of Income-tax (1981) 27 ITR 664

18.. Hansraj Gordhandas v. H.H. Dave, Asstt. Collector AIR 1970 SC 755

of Central Excise & Customs, Surat

19. Income Tax Officer Vs. Komal Kumar Bader MANU/IJ/0004/2009

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20. Jindal Realty Ltd v. National Faceless Assessment (WP No. 5741 / 2021 dt

Centre, Delhi 2-6 -2021 )

21. K.K. Nag Ltd. vs. ACIT (2012) 52 SOT 381

(Pune)
22. Maneka Gandhi v. Union of India AIR 1978 SC597
23. [Link] Vedachalam -vs. - The Assistant 369 ITR 558 (Madras)

Commissioner of Income Tax

24. Pendurthi Chandrasekhar vs. Deputy Commissioner MANU/HY/0571/

of Income Tax (30.07.2018 – HYHC)

25. Piramal Enterprises Limited Vs WP(L) No. 11040 of

Additional/joint/Deputy/Assistant CIT/ITO 2021

National e-Assessment Centre

27. Rajinder Mohan Lal v. DCIT [2013] 263 CTR 231

28. Ritnand Balved Education Foundation (Umbrella in W.P. (C) 5537/2021

Organization of Amity Group of Institutions) Vs.

National Faceless Assessment Centre & Ors

29. S. L. Kapoor v. Jagmohan , AIR 1981 SC 136:

(1980) 4 SCC 379

30. Sahara India (Firm) Vs. Commissioner of Income- reported in [2008] 169

tax, Central-I Taxman 328 (SC)

31. Sarifabibi Mohammed Ibrahim & Ors. v. CIT 204 ITR 631 (SC)

32. Sarwan Kumar v. ITO ITA No. 4379/Del/2009

34. State of Orissa v. Dr. (Miss) Binapani Dei [1967] 2 SCR 625

35. Sumatilal H. Kapadia (HUF) v. Gift tax Officer [1992] 43 ITD 580 – Ahd.

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ITAT.
36. Swadeshi polytex Ltd. vs Collector of Central AIR 1990 SCC 301

Excise
37. The Assistant Commissioner of Income Tax, Circle MANU/IL/0124/2016

6(3) (1) vs. M.R. Anandaram and Ors.

38. Travancore Rayons v. Union of India (1969) 3 SCC 868:AIR

1971 SC 862: (1970) 3

SCR 840
39. Union of India (UOI) vs. Elphinstone Spinning and MANU/SC/0019/2001

Weaving Co. Ltd. and Ors

40. Vithaldas Jagannath Khatri (D) through Shakuntala MANU/SC/1188/2019

and Ors. Vs. The State of Maharashtra Revenue and

Forest Department and Ors. (29.08.2019 – SC)

41. W.B Electricity Regulatory Commission v/s CESC AIR 199 SC 3588:

Ltd (2002)8SCC715
42. Whirlpool Corporation v Registrar of Trademarks, (1998) 8 SCC 1

Mumbai

STATEMENT OF JURISDICTION

The WRIT PETITION has been filed invoking the jurisdiction of the High Court of
Maharashtra under Article 32 of the constitution.
The right to move the Supreme Court by appropriate proceedings for the enforcement of the
rights conferred by part III is guaranteed.
Article 226 in The Indian Constitution:
(1) Notwithstanding anything in Article 32 every High Court shall have powers, throughout
the territories in relation to which it exercise jurisdiction, to issue to any person or authority,

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including in appropriate cases, any Government, within those territories directions, orders or
writs, including writs in the nature of habeas corpus, mandamus, prohibitions, quo warranto
and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III
and for any other purpose
(2) The power conferred by clause ( 1 ) to issue directions, orders or writs to any
Government, authority or person may also be exercised by any High Court exercising
jurisdiction in relation to the territories within which the cause of action, wholly or in part,
arises for the exercise of such power, notwithstanding that the seat of such Government or
authority or the residence of such person is not within those territories
(3) Where any party against whom an interim order, whether by way of injunction or stay or
in any other manner, is made on, or in any proceedings relating to, a petition under clause
( 1 ), without
(a) furnishing to such party copies of such petition and all documents in support of the plea
for such interim order; and
(b) giving such party an opportunity of being heard, makes an application to the High Court
for the vacation of such order and furnishes a copy of such application to the party in whose
favour such order has been made or the counsel of such party, the High Court shall dispose of
the application within a period of two weeks from the date on which it is received or from the
date on which the copy of such application is so furnished, whichever is later, or where the
High Court is closed on the last day of that period, before the expiry of the next day
afterwards on which the High Court is open; and if the application is not so disposed of, the
interim order shall, on the expiry of that period, or, as the case may be, the expiry of the aid
next day, stand vacated.

STATEMENT OF FACTS

BACKGROUND:

Raj is an individual employed with an MNC and earning salary income. In September
2019, Raj got engaged to Anita. Anita’s paternal uncle, Ramesh, who lived in United
Stated of America expressed his intention to gift a land parcel near Pune to Raj, out of love
and affection. But Ramesh could not fly down to India in November 2019 for Anita’s
marriage due to his work commitments
Ramesh came to India in October 2020 and executed and registered a gift deed for the

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land parcel in favor of Raj. The said land parcel was a rural agricultural land as per
section 2(14)(iii) of the Income-tax Act, 1961 (the Act) as it was situated beyond 25
kilometers from the municipal limits. Value of the land as per the stamp valuation
authority was Rs.40,00,000/-. Raj filed his return of income for the assessment year 2021-22
declaring income from salary of Rs.10,00,000/- and paid the applicable taxes.
ASSESSMENT PROCEEDINGS
On 10th June 2021, Raj received a notice under section 143(2) of the Act from the
National Faceless Assessment Centre stating that the income-tax return filed by him for the
assessment year 2021-22 was selected for scrutiny on account of a specific information
pointing tax evasion received from another agency.
On 15th October 2021, notice under section 142(1) of the Act was issued by the
Assessing Officer asking Raj to submit the following details / documents on immovable
property purchased during the year, copies of agreements, source of funding and stamp value
of it.
Raj responded through a letter dated 25th October 2021 making the submissions that the
land was received as a gift from Ramesh. He also uploaded scanned copies of registered gift
deed. Also, he clarified that the value as per stamp valuation authority is Rs.40,00,000/-.
However, the fair market value of the property was Rs.25,00,000/- since the boundaries of
the land were illegally encroached by the nearby locals and the matter is pending for
adjudication before the Hon’ble High Court.
Thereafter, the Assessing Officer issued a show cause notice dated 2nd December 2021,
containing draft assessment order that he proposed to pass. Value of the land parcel is to be
considered as Raj’s income chargeable to tax under the head, ‘Income from Other Sources’.
The Assessing Officer proposed to make an addition of Rs.25,00,000/- under section 56(2)(x)
of the Act.
In response to the said show cause notice, Raj submitted a letter dated 12th December
2021 wherein he stated that the land was received as a gift on the occasion of marriage and as
it is an agricultural land, it is not a capital asset. Thus, he contended that the same fell under
the exceptions under section 56(2)(x). He also prayed for an opportunity of personal hearing.
7. The Assessing Officer passed an assessment order dated 18th December 2021 under
section 143(3) of the Act making an addition of Rs.40,00,000/- under section 56(2)(x)
of the Act, without referring to the submissions made by Raj in his letter dated 12th
December 2021 and without giving an opportunity of personal hearing.

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MATTER TO BE PRESENTED TO HON’BLE COURT:
Aggrieved by the assessment order passed under section 143(3) of the Act by the
Assessing Officer, Raj filed a writ petition before the High Court praying for quashing of
the entire assessment proceedings including the said assessment order dated 18th
December 2021 praying for a non-est order. The matter is taken up for admission as well as
for final disposal

ISSUES RAISED

1. WHETHER THE WRIT PETITION IS MAINTAINABLE

1.1. The Fundamental Rights of petitioner have been violated

1.2. The Assessing Officer has failed to observe the principle of Audi Alteram Partem

1.2.1. An opportunity of personal hearing [oral hearing] was not afforded

1.2.2. Reply filed in response to show cause notice with draft assessment order

[written hearing] by Petitioner not considered by A.O

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1.3. The existence of alternative remedy is not a bar to writ remedy

2. THE ASSESSMENT ORDER IS A NON- EST ORDER DUE TO LACK OF

PROPRIETY

2.1. Procedure established under Section 144B of Income Tax Act not being

followed by A.O

2.2. The retrospective amendment to Section 144B (9) through Finance Act of 2022

may not allow the A.O. to defy the legal correctness of the procedures

conducted.

3. WHETHER THE LAND PARCEL IN THE ISSUE IS AN AGRICULTURAL

LAND, IF SO WHETHER IT FALLS UNDER THE CATEGORY OF CAPITAL

ASSETS? CAN THE LAND IN POSSESSION OF [Link] BE CONSIDERED

AS GIFT RECEIVED ON THE OCCASION OF MARRIAGE?

3.1 land parcel in possession of raj is an agricultural land and not a capital asset.

3.2 The land parcel is gifted on the occasion of marriage, which falls in the exemption

for attracting the provision of section 56(2) (x) of the Act.

4. FAIR MARKET VALUE MAY BE CONSIDERED INSTEAD OF STAMP

VALUE

4.1. The Stamp Duty value has exceeded Fair Market Value

4.2. Price is a fact and value is an estimate of what price ought to be.

SUMMARY OF ARGUMENTS

ISSUE 1: WHETHER THE PETITION IS MAINTAINABLE? - The council for the

petitioners humbly submits that the present writ petition is maintainable and the fundamental

rights of the petitioner have been violated. The assessing officer has failed to observe the

Principles of Audi Alteram Partem and non-exhaustion of available remedy is no bar for writ

petition

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ISSUE 2: THE ASSESSMENT ORDER IS A NON- EST ORDER DUE TO LACK OF

PROPRIETY- It is humbly submitted that that the present proceedings and assessment order

is Non-Est due to lack of legal correctness. The procedures established by law is not

followed and the retrospective amendment to Section 144B (9) through Finance Act of 2022

may not allow the A.O. to defy the legal correctness of the procedures conducted.

3. WHETHER THE LAND PARCEL IN THE ISSUE IS AN AGRICULTURAL LAND,

IF SO WHETHER IT FALLS UNDER THE CATEGORY OF CAPITAL ASSETS? CAN

THE LAND IN POSSESSION OF [Link] BE CONSIDERED AS GIFT RECEIVED

ON THE OCCASION OF MARRIAGE? - It is humbly submitted before the Hon’ble court

that the land parcel in the present issue is an agricultural land, hence the same does not comes

under the purview of capital asset. Section 2(14) defines the term capital assets, where

agricultural land is an exception under this section. The words ‘on occasion of marriage’

must be strictly construed.

4. FAIR MARKET VALUE MAY BE CONSIDERED INSTEAD OF STAMP VALUE- The

Fair Market Value may be considered instead of stamp value since the Stamp Duty value has

exceeded Fair Market Value and price is a fact and value is an estimate of what price ought to

be.

ARGUMENTS ADVANCED

1. WHETHER THE WRIT PETITION IS MAINTAINABLE?

1. It is humbly submitted before this Hon’ble High Court that the present writ petition is

maintainable as [1.1] The fundamental rights of petitioner have been violated and

[1.2] The assessing officer has failed to observe the Principles of Audi Alteram

Partem.

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2. While assessing the quantum of tax payable by a tax payer, the assessing authority

discharges a quasi-judicial function and consequently, the authority is bound to

observe natural justice in reaching its conclusions. Accordingly, it has been held

that natural justice is applicable in the assessment of various taxes, such as, income

tax, sales tax, property tax1.

3. Thus, the petitioner, under the writ of certiorari has approached this Hon’ble

Court, against the assessment order passed by assessing officer.

1.1. The Fundamental Rights of petitioner have been violated

1. It is a settled law that when there is a violation of principles of natural justice, the

availability of an appellate remedy does not operate as a bar to the maintainability of

the writ petition.2 A taxpayer’s right to a hearing or right to be heard in income tax

matters is an absolute right as any adverse orders passed in such hearings can have

huge implications on the taxpayer. Under such circumstances, denial of such rights

or leaving them to the discretion of the authorities can make such rights illusory and

violates the fundamental rights of the taxpayer.

2. Where a statute confers a right of notice before action can be taken, which is in

conformity with the principles of natural justice, the same cannot negatived by a court

on any imaginary ground that there is a likelihood of an unmanageable hearing before

the forum concerned. The first is that an opportunity of hearing must be given and

second is that the opportunity must be reasonable. Where a right of hearing is

conferred by statute, the same cannot be taken away3.

1 Dhakeswari Cotton Mills Ltd v. Commissioner of Income Tax, AIR 1955 SC 65: 1955 (1) SCR 941;
Rajesh Kumar v. CIT, (2007) 2 SCC 181 (para25 and 53)
2 Jindal Realty Ltd v. National Faceless Assessment Centre, Delhi
3 W.B Electricity Regulatory Commission v/s CESC Ltd

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3. Art 21 would no longer mean that law could prescribe some semblance of procedure

however arbitrary or fanciful, to deprive a person of his personal liberty. It now

means that the procedure must satisfy certain requisites in the sense of being fair and

reasonable. The procedure “cannot be arbitrary, unfair or unreasonable”. The concept

of reasonableness must be projected in the procedure contemplated by Art.21.4

4. Thus, the principle of reasonableness which legally as well as philosophically is an

essential element of equality or non-arbitrariness pervades art 14 like a brooding

omnipresence. Thus, the procedure in Art. 21 “must be right, just and fair” and not

arbitrary, fanciful or oppressive, otherwise, it would be no procedure at all and the

requirement of Art. 21 would not be satisfied.

5. Procedure in Art. 21, means fair, not formal, procedure; ‘law’ is reasonable law and

not any enacted piece. This makes the words “procedure established by law” by and

large synonymous with the ‘procedural due process’ in the U.S.A. this makes the right

of hearing a component part of natural justice.

6. Section 144-B of the Income Tax Act, 1961 captioned ‘Faceless Assessment’

commences vide its sub-section (1) with a non obstante clause and compulsively

requires assessment u/ss 143(3) and 144 shall be by prescribed procedure contained in

sub-section (1) of section 144-B in the cases referred to in sub-section (2) thereof.

7. In the present case, the usage of word ‘may’ in Section 144B(7)(viii) instead of

‘must’ or ‘shall’ violates Art.14 of the Indian Constitution. There is no straight jacket

formula as to the basis on which the discretion of Assessing Officer while granting an

opportunity of personal hearing is based upon and such a discretion may be

challenged. Also, principles of natural justice have been violated as the Petitioner was

not afforded an opportunity to clarify himself, personally. The submissions made by

4 Maneka Gandhi v. Union of India

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him in the letter dated 12th December 2021 enlists his response to the show cause

notice, which was not referred to by the A.O. Henceforth, the procedure established by

law, under Income Tax Act, 1961 was not followed by the Assessing Officer, thus

violating fundamental rights in toto.

1.2. The Assessing Officer has failed to observe the principle of Audi Alteram Partem

8. The principle of fair hearing (Audi alteram partem) is a central principle of natural

justice, which requires that no person is condemned unheard.5 A person to be affected

by an order has a right to be heard in his own defence6 and to correct or contradict any

relevant statement to his [Link] authorities after hearing the parties and

considering their objections should pass a reasoned order.8

9. This principle is founded on the rule that no one should be condemned or deprived of

his right even in quasi-judicial proceedings unless he has been granted liberty of being

heard9.

10. In a leading case, the three basic principles of Audi Alteram Partem were observed,

they being –Firstly, a person against whom on order is required to be passed or

whose rights are likely to be affected adversely must be granted an opportunity of

being heard. Secondly, the authority concerned should provide a fair and transparent

procedure and lastly, the authority concerned must apply its mind and dispose of the

matter by a reasoned or speaking order10.

5 Grayson, 2000; Parpworth, 1996; Boyes 2000

6 Australian Securities Commission v. Multiple Sclerosis Society of Tasmania (1993) 10 ACSR 489 at 515
7 Ceylon University v. Fernando (1960) 1 WLR 223, 232; PC Local Govt. Board v. Arlidge (1915) AC 120
8 Punjab SEB v. Ashwini Kumar (1997) 5 SCC 120
9 Competition Commission of India v. Steel Authority of India Limited, (2010) 10 SCC 744, 77 (para66)
10 Assistant commissioner, commercial tax Department, Works contracting and leasing, Kota v. Shukla
and Brothers, (2010) 4 SCC 785, 790-91 (para 10)

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11. There is no fixed form of hearing procedure to be followed in various situations. It

may vary from case to case. It is ultimately for the courts to decided whether the

hearing procedure followed in a specific case accord with natural justice or not11.

12. In the present case, there has been clear violation of one of the Principles of Natural

Justice since an opportunity of personal hearing [oral hearing] was not afforded and

reply filed in response to show cause notice with draft assessment order [written

hearing] made by Petitioner not considered by A.O.

1.2.1. An opportunity of personal hearing [oral hearing] was not afforded

13. Raj, in response to the show cause notice, submitted a letter dated 12th December,

2021, wherein he specifically requested an opportunity of personal hearing through

video conferencing to explain the facts involved in his case.

14. Personal hearing in the present matter is essential to properly appreciate the nature and

manner in which the transactions are carried out and intricacies of the same can be

better explained and brought forth as well as misconstruction by the authorities can be

sorted out with proper understanding of the matter. In personal hearing and by oral

submissions various aspects, operations/workings which could not be properly

appreciated though inscribed under the responses can be resolved. In many a case, it

would be possible to appreciate unrealised aspects during hearing and can be

effectively explained.12

15. Sometimes the facts involved in a particular case are so complex or a single taxpayer

has multiple additions that are so intertwined with each other that a physical hearing to

put forth certain points or to ensure that the AO has at the very least understood the

11 S. L. Kapoor v. Jagmohan, AIR 1981 SC 136: (1980) 4 SCC 379

12 Piramal Enterprises Limited Vs Additional/joint/Deputy/Assistant CIT/ITO National e-Assessment Centre

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facts correctly becomes imperative. If a situation demanded clarification, which may

not be sought well through written submissions, a personal hearing through video

conferencing must be afforded.

16. Sub section (1) of section 144B of the Income Tax Act, mandates that assessments

covered under the said section shall be made in a faceless manner as per the prescribed

procedure. Section 144B(7)(viii) mandates the assessing officer to afford an

opportunity for personal hearing and record reasons if not granted. However, the same

was not observed by the Assessment Officer.

17. The word “May” used in the above section must be interpreted according to the

intention of the law makers. It is rightly observed in a leading case that –

Use of the expression “May” in section 144B(7)(viii) is not decisive where a

discretion is conferred upon a quasi-judicial authority whose decision has civil

consequences. The word “May” which denotes discretion should be construed to

mean a command. Consequently, this court of the view that requirement of giving an

assessee a reasonable opportunity of personal hearing is mandatory.13

18. Thus, the language of a statute must not be twisted so as to interpret the intentions of

lawmakers according to the needs of authorities. Considering the facts and situation

revolving the present case, the meaning of the word “May” used is not water tight but

is expansive. This imposes a positive duty on the authorities to provide an opportunity

of personal hearing.

19. The main intention behind framing and enforcing the Faceless Assessment Scheme,

2019, was to curb corruption by adopting the E-Assessment system and to also simply

13 Bharat Aluminium Company Ltd. v. UOI and Ors

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the whole procedure of filing tax returns. However, the intention was not to eliminate

any chance of personal interface between the assessee and an A.O.

1.2.2. Reply filed in response to show cause notice with draft assessment order [written

hearing] by Petitioner not considered by A.O

20. Raj, in response to the show cause notice, submitted a letter dated 12th December,

2021, wherein he has explained the issues around which assessment proceedings were

initiated. He has submitted that the gifted land parcel attracted the provisions of

section 56(2)(x) which provides exemptions from tax on gifts. He has also submitted

that the land was an agriculture land and not a capital asset.

21. However, the A.O without considering the submission made by Raj, passed the

assessment order with a revised addition of Rs.40,00,000, which will put the petitioner

at a detrimental position.

22. Assessee’s response must be analysed by Administrative Units, which will then

prepare a revised draft assessment order, which shall be served to the assessee

through National Faceless Assessment Centre. However, such a procedure is not

followed by A.O.

23. Thus, the above two incidents outrightly showcase that the petitioner has not been

heard, orally as well as through written submissions which clearly violates the

principles of natural justice. Although there have been written responses and

submissions explaining situation, the impugned draft assessment order does not take

the same into account in proper perspective and does not give reasons for disagreement

with the response.

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24. The facts and circumstances surrounding the present case demanded an opportunity of

personal hearing to the petitioner since the AO, in the absence of application of

judicial mind, passed an assessment order despite the fact that the land parcel was

received on occasion of marriage. Also, the penalty imposed through an assessment

order dated 18th December 2021 under section 143(3) of the Income Tax Act, 1961

was an addition of Rs.40,00,000 which was imposed without referring to the

submissions made by Raj and not providing an opportunity for personal hearing.

1.3. The existence of alternative remedy is not a bar to writ remedy

25. Under Article 226 of the Constitution, the High Court, having regard to the facts of

the case, has a discretion to entertain or not to entertain a writ petition. But the High

Court has imposed upon itself certain restrictions one of which is that if an effective

and efficacious remedy is available, the High Court would not normally exercise its

jurisdiction. But the alternative remedy has been consistently held by this Court not to

operate as a bar in at least three contingencies, namely:

Where the writ petition has been filed for the enforcement of any of the Fundamental

Rights or where there has been a violation of the principle of natural justice or where

the order or proceedings are wholly without jurisdiction or the vires of an Act is

challenged.14

26. Existence or availability of an alternative remedy does not oust the jurisdiction of

a Writ Court, is well established. It is not the law that a writ petition would not be

maintainable because of the party has not exhausted the alternative remedy. The

14 Whirlpool Corporation v Registrar of Trademarks, Mumbai, (1998) 8 SCC 1

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question is one of entertainability of the writ petition, in exercise of sound judicial

discretion, despite the aggrieved party having a remedy.15

27. Thus, the statutory authority has not acted in accordance with the provisions of the

enactment in question, or in defiance of the fundamental principles of judicial

procedure, or has resorted to invoke the provisions which are repealed, or when an

order has been passed in total violation of the principles of natural justice, the writ

remedy is available as these are exceptional situations under which the petitioner

can approach the Hon’ble High Court even while statutory remedies are available.16

28. Since the above exceptions are established under this issue, the Hon’ble High

Court may entertain and admit the present writ petition.

2. THE ASSESSMENT ORDER IS A NON- EST ORDER DUE TO LACK OF

PROPRIETY

29. In e-assessment system / faceless assessment system, information given in fixed

format of the department appears to be taken into account and the particulars given

provided schedules and appendices do not appear to have been appreciated, hearing is

eminently imperative as there are several issues which would be required to be

addressed to and explained. There are certain aspects which can be peculiarly

explained and understood during oral submissions and thus a hearing is a must which

is allowed in the scheme, however, is not afforded and is wanting in the present case.

15 Ibid 14
16 Assistant Commissioner of State Tax v. Commercial Steel Limited LL 2021 SC 438

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30. Therefore, the assessment order dated 18 December 2021 under section 143(3) stands

to be non-est since [2.1] The procedures established by law is not followed and [2.2]

That the retrospective amendment to Section 144B (9) through Finance Act of 2022

may not allow the A.O. to defy the legal correctness of the procedures conducted.

2.1. Procedure established under Section 144B of Income Tax Act not being followed by

A.O

31. After receipt of show-cause notice, assessee is supposed to furnish response as referred

to in sub clause (xxii) within specified time, inter alia, requesting opportunity for

personal hearing. In case, no response is furnished, the NFAC can proceed with the

draft assessment order / final draft assessment order.

32. However, if response is furnished and request for hearing is made, NFAC, under

clause 144B(1)(xxiii)(b) has to assign responsibility to the Assessment Unit. After

considering the response and after giving opportunity of being heard, Assessment Unit

shall send revised draft assessment order to NFAC. After receipt of the revised draft

assessment order, NFAC shall, in case of variation in the revised draft assessment

order is prejudicial to the interest of the assessee in comparison to the draft assessment

order or final draft assessment order, follow the procedure under sub-clause (b) of

clause (xvi) of subsection (1) of section 144B. In the present scenario, an opportunity

of hearing as is available and allowed pursuant to section 144B(xvi)(b) is getting lost.

33. Impugned assessment order and consequential notices of demand and penalty were

flawed being in contravention of provisions of section 144B(7)(vii) of the Income Tax

Act and the standard operation procedure (SOP) for personal hearing through video

conferencing under the faceless assessment scheme, 2019 issued by the CBDT under

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Circular dated 23/11/202017. It has been also observed that since statute itself makes

provision for personal hearing, the respondent revenue cannot veer away from the

same.18

34. Necessity and importance of having opportunity of pre-decisional hearing to an

assessee even in the absence of any express provision and requirement of following

principles of natural justice and their reading into the provisions.19

35. It is also pertinent to mention here that Section 144B (1) of the Income Tax Act,

mandates that assessments covered under the said section shall be made in a faceless

manner as per the prescribed procedure. Earlier Section 144B (9) of the Act provides

that any assessment made shall be non-est if such assessment is not made in

accordance with the procedure laid down under this section.

2.2. The retrospective amendment to Section 144B (9) through Finance Act of 2022 may

not allow the A.O. to defy the legal correctness of the procedures conducted.

36. Retrospective amendments are those amendments that are scheduled to be in force

from a date that has already been mentioned in the past and therefore the same would

be in effect from before and not in the future like the prospective amendments. The

term retrospective signifies looking backwards

37. Even after the omission of section 144B (9) retrospectively with effect from 1.4.2021,

the compulsory requirement of adherence to the prescribed procedure of conduct of

faceless assessments, u/s 144B, still remains intact, by virtue of section 144B (1) of the

Act.

17
[Link]
18 Ritnand Balved Education Foundation (Umbrella Organization of Amity Group of Institutions) Vs. National
Faceless Assessment Centre & Ors., in W.P. (C) 5537/2021
19 Sahara India (Firm) Vs. Commissioner of Income-tax, Central-I, reported in [2008] 169 Taxman 328 (SC)

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38. Therefore, in view of the express and mandatory requirement of adherence to the

prescribed procedure in conduct of faceless assessments, in section 144B(1) of the

Income Tax Act and also on account of the well settled legal position that the

principle of natural justice is a principle of common law and has the constitutional

backing of Article 14 and Article 21 of the Constitution of India, the faceless

assessments, conducted in contravention of the principle of natural justice, say,

without issuing the mandatory show cause notice, or granting an opportunity of

personal hearing to the assessee through video conferencing, are still liable to be set

aside and considered as non-est in law, even after the omission of the said section

144B(9), by the Finance Act 2022.

39. In a leading case20, the hon’ble Supreme Court recognised the power of legislature to

amend the law retrospectively. However, the same was limited to the extent to cure the

inadvertent defects or errors only and not where the object of the statute is to affect

vested rights or to impose new burdens or to impair existing obligations.

40. The principle of ‘fairness’ must be the basis for every legal rule, especially when

construing a statute that conferred a benefit without inflicting a corresponding

detriment.21The legislature can make a retrospective amendment of the law in cases

where such legislation does not contravene other provisions of the Indian Constitution

or to cure a defect noticed by judicial retrospectively cure the defect noticed by the

judicial decision thereby rendering the judgement ineffective, by way of a validating

legislation.

41. The deciding authority is not in the position of a Judge called upon to decide an action

between contesting parties, and strict compliance with the forms of judicial procedure
20 Assistant Commissioner of Land Tax, Madras, and others v. Buckingham and Carnatic co. Limited 1969
(4) TMI 28
21 CIT.v. Vatika Township Pvt. Limited [2014] 367 ITR 466 (SC)

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may not be insisted upon. He is however under a duty to give the person against whom

an enquiry is held an opportunity to set up his version or defence and an opportunity to

correct or to controvert any evidence in the possession of the authority which is sought

to be relied upon to his prejudice. For that purpose, the person against whom an

enquiry is held must be informed of the case he is called upon to meet, and the

evidence in support thereof.

42. The rule that a party to whose prejudice an order is intended to be passed is entitled to

a hearing applies to judicial tribunals and bodies of persons invested with authority to

adjudicate upon matters involving civil consequences. It is one of the fundamental

rules of our Constitutional set up that every citizen is protected against exercise of

arbitrary authority by the State or its Officers.

43. Duty to act judicially would therefore arise from the very nature of the function

intended to be performed; it need not be shown to be super-added. If there is power to

decide and determine to the prejudice of a person, duty to act judicially is implicit in

the exercise of such power. If the tails of justice be ignored and an order to the

prejudice of a person is made, the order is a nullity. That is a basic concept of the rule

of law and importance thereof transcends the significance of a decision in any

particular case.22

44. The maxim of “lex non-cogit ad impossibilia” to establish that a party could not be

expected to perform the impossible task of predicting the future and comply with a law

that would be introduced at a later point in time. This puts a check on the abuse of

legislative power and prevents taxpayers from bearing the burden of an unreasonable

tax.23

22 State of Orissa v. Dr. (Miss) Binapani Dei [1967] 2 SCR 625

23 Commr. of Income Tax v. NGC Networks India Pvt. Limited (2019)

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45. The petitioner in the present case was denied one of the basic rights which is afforded

to him by the Constitution and the present statute of Income Tax. The respondents

have passed a circular regarding the detail procedure for conducting personal hearing.

Thus, when a SOP has been laid down, it is a positive obligation on A.O to afford

opportunity of personal hearing, especially when additional financial burden is

imposed on an assessee. Thus, the existing law before such a retrospective amendment

must be applied.

46. In a leading case, it was held that an ordinary court of law cannot consider the

application of a new law brought about after the judgment of the appeal handled by the

court has been rendered for the rights provided to the litigant in the concerned appeal

have been decided according to the law in force on that date when the suit was filed.

Taking this into concern the court also observed that the laws affecting the procedure

always acquire a retrospective nature. Further -But this does not make way to eliminate

the existing rights and obligation conferred to the litigant. The court will, therefore,

inspect the new law on grounds that whatever it speaks should be clear and the same

will help in solving pending matters as well, only then will the court of appeal give

preference to the law even after the judgment has been passed by the court. 24

47. It is true that the rules do not require that personal hearing shall be given, but, if in

appropriate cases where complex and difficult questions requiring familiarity with

technical problems are raised, personal hearing is given, it would conduce to better

administration and more satisfactory disposal of the grievances of citizens.25

48. Raj received a notice on 10th June 2021from NFAC, Pune intimating him that IT return

filed by him for the assessment year, i.e., AY 2021-22 was selected for scrutiny.

24 Smt Dayawati v. Inderjit

25 Travancore Rayons v. Union of India, (1969) 3 SCC 868:AIR 1971 SC 862: (1970) 3 SCR 840

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Thereafter, he received a notice under section 142(1) on 15th October 2021, asking him

to furnish details and certain documents. Raj had replied on 25 th October 2021.

However, a show cause notice was received by him on 2 nd December 2021, containing

a draft assessment order. It is at this juncture that the A.O failed to abide the procedure

as laid down. The response by Raj to the above notice, filed on 12 th December 2021

was not considered and equally opportunity for personal hearing was not granted. But

a final assessment order under section 143(3) of the act was passed.

49. Thus, Raj, a law-abiding citizen has rightly played his duty and discharged his

obligations by replying to the notices served upon him. However, when he requested

for an opportunity for personal hearing, which by itself is also his right, it was not

provided.

50. Raj filed the writ petition on 18 th December 2021 and the matter is being heard by the

Hon’ble Court. Thus, the retrospectivity may not apply to this case as it has been taken

into judicial cognizance. Pre existing right which formed the basis of this petition, for

enforcement of rights, by itself may not be snatched away from the petitioner. The

principle of fairness by itself cannot me tarnished.

3. WHETHER THE LAND PARCEL IN THE ISSUE IS AN AGRICULTURAL LAND,

IF SO WHETHER IT FALLS UNDER THE CATEGORY OF CAPITAL ASSETS?

CAN THE LAND IN POSSESSION OF [Link] BE CONSIDERED AS GIFT

RECEIVED ON THE OCCASION OF MARRIAGE?

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51. It is humbly submitted before the Hon’ble court that the land parcel in the present issue

is an agricultural land, hence the same does not comes under the purview of capital

asset. Section 2(14) defines the term capital assets, where agricultural land is an

exception under this section. In order to prove these contentions, the following sub-

issues are framed:

3.1. land parcel in possession of raj is an agricultural land and not a capital asset.

52. Raj, on the occasion of his marriage, received the land parcel which was a rural

agricultural land as per section 2(14) (iii) of Income Tax Act, 1961 from Anita’s paternal

uncle, Ramesh, out of love and affection for the couple. Ramesh came to India and executed

and registered a gift deed for the land parcel in favor of Raj, which is situated beyond 25

kilometers from the municipal limit.26

53. Sec 2(14) of Income Tax Act, 1961, “capital asset” means property of any kind held by

an assesse, whether or not connected with his business or profession, but does not include—

(iii) Agricultural land27 in India, not being land situate—

(a) in any area which is comprised within the jurisdiction of a municipality (whether known

as a municipality, municipal corporation, notified area committee, town area committee,

town committee, or by any other name) or a cantonment board and which has a population of

not less than ten thousand according to the last preceding census of which the relevant figures

have been published before the first day of the previous year; or

(b) In any area within such distance, not being more than eight kilometres, from the local

limits of any municipality or cantonment board referred to in item (a), as the Central

26 Para 2 of Moot proposition

27 Substituted for “(iii) agricultural land in India” by the Finance Act, 1970, w.e.f. 1-4-1970.

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Government may, having regard to the extent of, and scope for, urbanization of that area and

other relevant considerations, specify in this behalf by notification in the Official Gazette.

53. Under the definition, land, which is agricultural land falls outside the purview of being

capital asset subject to fulfilment of sub-clauses (a) and (b), which inter-alia provided that

the land in question should not be within the jurisdiction of a municipality or cantonment

board, its population of not less than 10,000 persons and further it should not be in an area

not being more than 8 kilometres from the municipal limits or cantonment board. In the

present case, the fulfilment of conditions in clauses (a) and (b) are considered to have been

met i.e. the land in question is situated beyond 25 kilometres from the local limits of any

municipality or cantonment board and also the area in which the said land is situated does

not have population of more than 10,000.

Therefore the land is not located within the jurisdiction of any municipality or cantonment

board and the population of the area is less than ten thousand and under Income Tax Act,

1961, the land is an agricultural land and not a capital asset as defined under section 2(14)

and thus does not attract the provisions of section 56(2)(x) of Income Tax Act, 1961, and the

agricultural land received by assesse during the year is not a capital asset as per section 2(14)

of the act, on account of the fact that it is a rural agricultural land.

55. Now coming to issue of applicability of Section 56(2) (v)28, the words used in the Sub-

section are 'any sum of money'. If any sum of money exceeds twenty-five thousand

rupees and it is received without any consideration then whole of such sum will be

taxed as income from other source. Whether "sum of money" may include an

immovable property also is the issue to be decided. It was observed that it should not

28 Income from other sources; Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.

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be restricted to hard cash and it should be read in a broader sense because otherwise

the purpose of legislation would be defeated.

56. When these provisions were introduced through Finance Act, 2004, the Finance

Minister in his budget speech maintained that to prevent money laundering, loophole

was required to be plugged and, accordingly, purported gifts from unrelated persons

above Rs. 25,000 should be taxed as income in the hands of the donee. "Money

laundering" denotes siphoning off money from country by illegal channels. Changing

hands of an agricultural land within the country and between two citizens cannot be

considered as money laundering. Thus, it cannot be said that the provisions were

introduced to stop such transfer of capital assets within India. Further, when the

language of the Section is clear, there is no need to interpret in owns way. If the

intention of the Legislature was to cover any asset apart from money, it could have

used the word 'asset' or like any other denoting movable/immovable properties. The

several instances from the Income Tax Act where the word "money" is used as

different from bullion jewellery, immovable property etc. Various case laws have

been cited where the phrase 'any sum' higher side been used as money only in Section

[Link], if agricultural land cannot be considered as 'any sum of money', the

provisions of Section 56(2)(v) cannot be applied.

57. As the agricultural income is exempted and it is not chargeable to Income-tax under

any head of income specified in Section 14, it is not covered by Sub-section (1) of

Section 56. Only an 'income' can be taxed under Income Tax Act and income is

defined under Section 2(24). An asset cannot be termed, as "any sum" as used in

various Sub-clauses of Section 2(24) or an "income" and therefore, agricultural land,

which was gifted, cannot be taxed as income. It is not covered by and heads of income

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given in Section 14 and therefore, neither agricultural land nor agricultural income is

chargeable to tax under any heads of income.29

3.2 The land parcel is gifted on the occasion of marriage, which falls in the exemption for

attracting the provision of section 56(2) (x) of the Act.

58. Section 122 of Transfer of Property Act, 1882 defines the phrase ‘Gift’. Vide such

section, ‘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.

59. In 2004, the legislature has re-introduced the taxation of gifts in specified

circumstances by insertion of Section 56(2) (vii) in the Income Tax Act, 1961

(Act/Income Tax Act). Vide Section 56(2) (vii), the tax on gifts received was to be

paid by donee in specified circumstances.

60. Gift is the sum of money or property received by an individual or a HUF without

consideration or a case in which the property is acquired for inadequate consideration.

Gift received on the occasion of marriage of the individual is not charged to tax. Apart

from marriage there is no other occasion when monetary gift received by an individual

is not charged to tax.

61. Gift received on the occasion of the marriage of the individual falls in the exemption

for attracting the provision of section 56(2) (x) of the Act. 30In following cases,

monetary gift received by an individual or HUF will not be charged to tax:-

1) Money received from relatives. Relative for this purpose means:

29 Income Tax Officer Vs. Komal Kumar Bader MANU/IJ/0004/2009

30 Inserted by the Taxation Laws (Amendment) Act, 2006, with effect from 1st April, 2006

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In case of an Individual a. Spouse of the individual; b. Brother or sister of the individual; c.

brother or sister of the spouse of the individual; d. Brother or sister of either of the parents of

the individual; e. Any lineal ascendant or descendent of the individual; f. Any lineal

ascendant or descendent of the spouse of the individual; g. Spouse of the persons referred to

in (b) to (f).

2) Money received on the occasion of the marriage of the individual.

62. The Proviso to clause (x) contemplates certain genuine transactions and excludes the

same from the tax net. They are discussed briefly as under:

a. Receipt from any ‘relative’:

The meaning of the term relative is same as defined in Explanation to clause (vii). The term is

wide enough to cover most close relations. The list of ‘relatives’ given in case of an

individual, under clause (e) to Explanation to section 56(2)(vii) is to be read as list of donors

and as such each relation is be seen from the recipient’s side.

In a case the deletion of addition on unexplained gifts was done and it was held that, from

perusal of Section 56 sub-section (2) as well as explanation (e), it was found that Sections

56(2) (v), of Act which provides a cap of sum received without consideration by an

individual as Hindu Undivided family to be taxed as income from other sources, if amount

exceeding the cap provided in these sub-sections is received by the assesse. However, the

said sub- Section 56(2) (v), of Act shall not be applicable if any sum is received from any

relative.

There was no mention about the occasion to be a necessary condition for receiving any sum

from any relative.31

31 Geeta Dubey vs. Income Tax Officer 2(1) (28.08.2018 - ITAT Indore) : MANU/II/0045/

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63. In the case, [Link] Vedachalam -vs. - The Assistant Commissioner of

Income Tax32 the court held that whether the land was classified in the revenue

records as agricultural and whether it was subject to the payment of land revenue has

to be considered for grant of exemption.

64. The decision of the Hon'ble Supreme Court in the case of Sarifabibi Mohammed

Ibrahim & Ors. v. CIT33 for considering a land as Agricultural land should not

be insisted and only cumulative effect of various circumstances has to be seen.

65. The Hon'ble Supreme Court laid down the principles to be followed in deciding the

question as to what can be construed as "Agricultural land" as under:-(i) The first

proposition laid down in the said decision was, whether a land is an agricultural land

or not is essentially a question of fact. Several tests have been evolved in the decisions

of this Court and the High Courts, but all of them are more in the nature of guidelines.

The question has to be answered in each case having regard to the facts and

circumstances of that case. There may be factors both for and against a particular point

of view. The Court has to answer the question on a consideration of all of them - a

process of evaluation. The inference has to be drawn on a cumulative consideration of

all the relevant facts.

(ii) In as much as agricultural land is exempted from the purview of the definition of

the expression "assets", it is "impossible to adopt so wide a test as would obviously

defeat the purpose of the exemption given". The idea behind exempting the

agricultural land is to encourage cultivation of land and the agricultural operations. "In

other words this exemption had to be necessarily given a more restricted meaning.

66. In the case of M.R. Seetharam (HUF), indicates that the coordinate bench of the

Tribunal came to the conclusion that mere conversion of land from agriculture to

non-

32 369 ITR 558 (Madras)

33 204 ITR 631 (SC)

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agriculture could not be taken as the sole criteria to hold it as a capital asset under

section 2(14) of the Act and that if that land is used for agricultural purposes till the

date of sale, despite the fact that it is converted to non-agricultural use are agricultural

lands and not capital assets under section 2(14) of the Act.34 It is a fact that the land

which was hitherto agricultural land does not automatically become a capital asset

upon a mere fact of its conversion to non-agricultural purpose. The land even though

converted for non-agricultural purpose, continues to be agricultural land and does not

become a capital asset u/s. 2(14) of the Act, if agricultural activities were being carried

out on such a land as on the date of its sale despite a fact that the land stands converted

for non-agricultural purpose.

67. The decision of Gujarat High Court upon by the DR, in the case of Gordhanbhai

Kahandas Dalwadi v. Commissioner of Income-tax35, the Hon'ble High Court held that

the potential non-agricultural use does not alter the character of the land. This was a

case wherein the land was purchased in 1954 and, subsequently, sold in 1969. The

entries in the revenue records showed that the land was agricultural continued to be so.

[Link] received on occasion of the marriage of the individual

68. Gift received by any person (without limit) on the occasion of the marriage is tax free

in the hands of the individual.

69. It would be prudent to say that a receipt of gift if it falls within purview of Section

56(2) (v), can only be liable to tax and not under the residuary head of Section 56(1) of

the Income-tax Act, 1961. At the same time, we find that the term 'gift' has not been

defined under the Income-tax Act, 1961. In general terms, gift consists in the

34 The Assistant Commissioner of Income Tax, Circle 6(3) (1) vs. M.R. Anandaram and Ors. (27.05.2016
- ITAT Bangalore) : MANU/IL/0124/2016

35 MANU/GJ/0026/1980 : (1981) 27 ITR 664

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relinquishment of one's own right over the property and creation of the right of another

in that [Link] per erstwhile Gift Tax Act, Gift has been defined under Section

2(xii) as transfer by one person to another of an existing movable or immovable

property made voluntary 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 gift under that section.

70. The Hon'ble Kerala High Court in the case of CGTv. Smt. C.K. Nirmala36 has

observed as follows: One of the essential ingredients constituting a gift under Section

2(xii) of the Gift-tax Act, 1958, is that the transfer of property by one person to another

must be without consideration in money or money's worth.

71. Through interpretation, since the Legislature wanted the people to continue gift as a

custom, the beneficial notification having their purpose as encouragement or

promotion of certain activities should be liberally interpreted.37 Exemptions with

beneficial object are construed liberally. A provision granting concession in rates of

tax to encourage industries is liberally construed.38 And exemption provision cannot

be denied full effect, by a circuitous process of interpretation.39

72. In Hansraj Gordhandas v. H.H. Dave, Asstt. Collector of Central Excise & Customs,

Surat,40 Ramaswami, J. speaking for the Court observed thus: "It is well established

that in a taxing statute there is no room for any intendment but regard must be had to

the clear meaning of the words. The entire matter is governed wholly by the language

of the notification. If the tax-payer is within the plain terms of the exemption it cannot

be denied its benefit by calling in aid any supposed intention of the exempting

authority.
36 [1995] 215 ITR 156 (FB)
37 Commissioner of Central Excise Surat-I VS Favorite Industries(2012) 7 SCC 153; P.169
38 Commissioner of Income Tax, Amritsar vs straw Board Mfg. co., AIR 1989 SC 1490
39 Swadeshi polytex Ltd. vs Collector of Central Excise. AIR 1990 SCC 301
40 AIR 1970 SC 755

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73. Gifts are traditional in nature that they are given in functions like marriages etc. When

the Act itself does not envisage any occasion for a relative to give a gift, it is well-

nigh impermissible for any authority and even for that matter for the Court to import

the concept of occasion and develop a theory based on such concept. The donor being

no other than the assesses own paternal aunt, is a 'relative' as defined under the

Explanation to s. 56(2)(v) of the Act and it cannot be said that such a gift falls beyond

"human probability" test as quite often applied by the Courts. Hence, it is not

permissible for the AO to judge the conduct of the donor sitting in his arm chair.41

74. In another case it was held that, Sec. 56(2) (v) was inserted by the Finance Act, 2005

w.e.f. 1st April, 2005. For accepting a gift from a relative, no occasion need be proved.

As could be seen from the language of sub-clause (a) and (b) of clause (v) of sub-

section (2) of section. 56, while under clause (a) which deals with a gift from any

relative no occasion is envisaged, clause (b) dealing with money received from any

other person, specifies the occasion of marriage. The Explanation to the said provision

defined 'relative', as persons including close relative of the assesse and his spouse, and

also received on the occasion of marriage is also exempted.

75. The language used as brother or sister of either of the parents of the individual and the

spouse of the person which includes Uncle, Aunt and respective spouses and in

common parlance, Kaka, Fui, Mama, Masi Kaki, Fua, Mami, Masa. Therefore

Anitha’s paternal uncle Ramesh will come under the meaning of the term relative.

Therefore any gift received on the occasion of marriage will be exempted from tax and

falls under the exception of section 56(2) (x) of the Act. Thus, paternal uncle, for

instance is

41 Pendurthi Chandrasekhar vs. Deputy Commissioner of Income Tax (30.07.2018 - HYHC)

: MANU/HY/0571/

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relative. Consequently, any sum of money gifted by paternal uncle shall not be

chargeable to tax.

76. As per the dictionary meaning ascendant means “someone from whom one is

descended” and descendant means “a person considered as descended from some

ancestor or race”. Lineal means “in a straight unbroken line of descent from parent to

child”. Therefore, lineal descendant means in a straight unbroken line of descent from

parent to child. The word used is parent, the term will include both, the father and

mother as well.

77. Besides exceptions provided in respect of gifts received from the relatives, an

individual is exempted from tax on receipts of gifts from anyone, whether relative or

not, on occasion of his/her marriage. In this exception, the word 'individual' is

preceded by the words 'marriage of' and, therefore, it is unambiguous that the

exception only relates to the marriage of the individual concerned, i.e., the assesse and

not to the marriage of any other person related to him in whatsoever degree, whether

as his daughter or son.

78. In Rajinder Mohan Lal v. DCIT42 It was observed by the Punjab & Haryana High

Court that “If the legislature had intended that gifts received on the occasion of

marriage of the assessee's children should be exempted, nothing prevented the

Legislature from adding the words 'or his children' after the words 'marriage of the

individual'”.

79. Similar exception was provided under section 5(1) of GTA43. The expression ‘on the

occasion of the marriage’ does not confine the receipt of the gift on the day of

wedding or during ancillary functions in relation to wedding. The gift may be received

on or

42 [2013] 263 CTR 231

43 Union of India (UOI) vs. Elphinstone Spinning and Weaving Co. Ltd. and Ors. MANU/SC/0019/2001

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before or after the occasion of marriage. Although normally a taxing statute is to be

strictly constructed, but when the statutory provision is reasonable akin to only one

meaning, the principles of strict construction may not be adhered to. Therefore on the

occasion of marriage confines only one meaning which includes before or after the

occasion of marriage.

80. Even though the Gift Tax Act was repealed on April 1, 1998, through Interpretation of

statutes it can be understood that, when the question arises as to the meaning of a

certain provision in a statute, it is not only legitimate but proper to read that provision

in its context. The context here means, the statute as a whole, the previous state of the

law, other statutes in pari materia, the general scope of the statute and the mischief

that it was intended to remedy. This statement of the rule was later fully adopted by

the Supreme Court.44

81. Therefore in this case Ramesh who lived in United States could not fly down to India

in November 2019 for Anitha’s marriage due to his work commitments. And during

the wedding week coupled received a letter from Ramesh where he expressed his

happiness and stated out of love and affection for the couple. He came to India in

October 2020 and executed and registered a gift deed for the land parcel in favour of

Raj.

82. It is customary to give gifts on birth of a child, marriage and other social or religious

occasions. However, it is not necessary that a gift can be given only on a specific

occasion. Once donor expressed her intention to give gift and by registering the land in

favour of donee, executed her intention and by getting registered in his name, the

donee accepted the gift and all the ingredients of a gift are fulfilled.45

44 Justice G P Singh’s Principles Of Statutory Interpretation Including the General Clauses Act, 1897 with
Notes (14th Edition) Revised by Justice A K Patnaik Former Judge, Supreme Court of India-
LexisNexis(page no;35)
45 Income Tax Officer Vs. Komal Kumar Bader MANU/IJ/0004/2009

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83. In CIT v. Dr. (Mrs.) Neelambai Ramaswamy46, (rendered in context of GTA), gift

received 11 months after marriage was considered as gift received on the occasion

of marriage as the gift was intended to be made at the time of marriage but could not

be made. The High Court observed that – “The relationship between the gift and the

marriage is, thus, the relevant factor and not the time of making the gift.”

84. In A. Rudrakodi v. CIT47gift made after 4 years of marriage and in CGT v. G.

Venkataswamy 48gift made after 15 years of marriage was also considered, in the

facts of the cases, as gift received on the occasion of marriage. “The expression ‘on

the occasion of marriage is not synonymous with ‘at the time of marriage’” 49The

legislature has precisely chosen the word ‘marriage’50.

85. In a case, it was held that, it is not possible to lay down a hard and fast rule,

prescribing the quantitative limits of such a gift as that would depend on the facts of

each case and it can only be decided by courts51

86. Gifts of a purely personal nature will not be chargeable to income tax. Hence, in the

given facts and circumstances of the case where the assesse has received gift of

agricultural land which is of purely personal nature, out of love and affection, without

any consideration and not arising from salary or from business or profession cannot be

chargeable as income liable to tax.

87. Hence, it is humbly submitted that, the act of gift of an immovable agricultural land

received by the assesse as Gift is not liable to taxation under the Income-tax Act,

1961.

46 [1986] 164 ITR 369 –Mad. HC

47 [2000] 244 ITR 309 (Mad.)
48 [1999] 236 ITR 539 (Mad.)
49 [CGT v. K.B.B. Subudhi [1993] 201 ITR 741 (Ori.)

50 Sumatilal H. Kapadia (HUF) v. Gift tax Officer [1992] 43 ITD 580 – Ahd. ITAT.

51 Vithaldas Jagannath Khatri (D) through Shakuntala and Ors. Vs. The State of Maharashtra Revenue
and Forest Department and Ors. (29.08.2019 - SC) : MANU/SC/1188/2019

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Thus, the act of receiving of agricultural land as gift by the assesse cannot be held to

be income either under Section 56(2) (v) the Act.

4. FAIR MARKET VALUE MAY BE CONSIDERED INSTEAD OF STAMP VALUE

88. The Fair Market Value may be considered instead of stamp value since [4.1] The

Stamp Duty value has exceeded Fair Market Value and [4.2] Price is a fact and value

is an estimate of what price ought to be.

4.1. The Stamp Duty value has exceeded Fair Market Value

89. Stamp duty value means any value adopted by any authority of the Central government

or a state Government for the purpose of payment of stamp duty for the immovable

property.

90. Where an assessee had claimed before the AO that value of land and building

assessed by stamp valuation authority exceeded fair market value of property, then in

terms

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of section 50C (2) (a) the AO ought to have referred matter to valuation officer instead

of straightaway deeming the value adopted by the stamp valuation authority.52

91. In a leading case,53wherein the AO applying provisions of section 50C, adopted

stamp duty value of land and building as total sale consideration for the purpose of

computing the capital gain. The assessee raised the objection that since it had claimed

that the value assessed by the stamp valuation authority exceeded the fair market

value, the AO ought to have referred the matter to the valuation officer to ascertain the

valuation.

92. (a) of sub-section (2) of section 50C, it is provided that where an assessee claims

before the Assessing Officer that the value adopted or assessed by the Stamp

valuation authority under sub-section (1) exceeds the fair market value of the property

as on the date of transfer, then the Assessing Officer may refer valuation of the capital

asset to the Valuation Officer. Under these circumstances, the Assessing Officer ought

to have referred the matter to the Valuation Officer instead of straightaway deeming

the value adopted by the stamp valuation authority as the full value of consideration.54

93. Where assessee claims before any Assessing Officer that the stamp duty value exceeds

the fair market value of the property as on the date of transfer and such stamp duty

value has not been disputed in any appeal or revision or no reference has been made

before any other authority, court or the High Court, the Assessing Officer may refer

the valuation of the asset to a Valuation Officer- If the value assessed by Valuation

officer is lower than the stamp duty value, the assessed value shall be considered as the

deemed sale price and If the value assessed by Valuation officer is higher than the

stamp duty value, the stamp duty value remains deemed sale price.
52 Sarwan Kumar v. ITO, ITA No. 4379/Del/2009
53 K.K. Nag Ltd. vs. ACIT (2012) 52 SOT 381 (Pune)
54 K.K. Nag Ltd. vs. ACIT (2012) 52 SOT 381 (Pune)

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So, if the reference is made to the Valuation officer then it may be possible that the stamp

duty value may decrease but it cannot be increased on the basis of the valuation officer.

4.2. Price is a fact and value is an estimate of what price ought to be.

94. Section 2 (22B) of Income Tax Act, 1961define Fair Market Valuation. FMV in

relation to a capital asset means, (i) the price that the capital asset would ordinarily

fetch on sale in the open market on the relevant date; and (ii) where the price referred

to in sub-clause (i) is not ascertainable, such price as may be determined in accordance

with the rules made under this Act;

95. Once the Assessee objects to adoption of stamp duty value to be adopted for capital

gains or section 56 (2) purposes, a reference is required to be made by the AO to the

Valuation Officer U/s. 55 A and 142 [Link] such a valuation it would not be

appropriate to make again a reference to the stamp duty valuation.55

96. When the stamp duty value is more than the consideration paid / received for

transaction in land, building or both and the Assessee has not disputed this value

before the stamp duty authorities, but objects to adopting this value for tax purposes.

97. This valuation has to be based on conventional methods of valuation including –

Location; Including specific advantages and disadvantages – relying on comparable

cases; – timing of such instances, – Size of the Plots or property – belting, etc

98. In the present case, the petitioner contended the Fair Market Value of the property to

be Rs.25,00,000/- as the boundaries of the land were illegally encroached by the

nearby locals and the matter is pending for adjudication before the Hon’ble High court.

The circle rates as well as stamp duty squarely depend on the boundaries of any

property.
55 Krishna Kumar Rawat 214 ITR 610 (Raj).

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99. Here, the matter of dispute was illegal encroachment and the petitioner must not

determine the fair market value based on that. Without the issue of boundaries in

itself being clarified, the petitioner must not additionally taxed Rs.40,00,000/- based

on the stamp value, upon disputed boundaries. Prominence to physical possession and

land records must be given to ascertain the addition, if any, to be imposed by A.O.

100. Thus, Valuation Officer shall call upon records and give an opportunity for bring

heard to ascertain the true value of addition. Thus, value of what the price ought to be

must be ascertained.

PRAYER

Wherefore in the light of issues raised, arguments advanced and authorities cited, the Counsel
for the Petitioner do hereby humbly pray before this Hon’ble High Court to adjudge, hold and
declare that:

1. The petition is maintainable and may be admitted as the case has merits.

2. The assessment order and the proceedings are Non-Est as the A.O has not followed
the procedure established by law in equity and fairness.

3. The Fair Market Value may be considered for addition of tax payable under Section
56(2)(x).

4. The petitioner may be given justice by this Hon’ble court itself

AND/OR pass any other order this Hon’ble Court deems fit in the interest of justice, equity
and good conscience.

For this act of kindness, the Counsel for the Petitioner shall duty bound forever pray.

Sd/-

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(Counsel for Petitioner)

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