1967 (9) TMI 139 - HC - Income Tax

Court Validates Rectification & Deemed Property Inclusion

TS. Rajan Versus Controller of Excise Duty

The court validated the rectification under section 62 of the Estate Duty Act, 1953, and upheld the inclusion of Rs. 1,58,000 as property deemed to pass ... - Issues Involved:1. Validity of rectification under section 62 of the Estate Duty Act, 1953.2. Inclusion of Rs. 1,58,000 as property deemed to pass on the death under section 9 read with section 27 of the Estate Duty Act.Issue-Wise Detailed Analysis:1. Validity of Rectification under Section 62:The propriety and legality of the revenue's exercise of jurisdiction under section 62 of the Estate Duty Act, 1953, were challenged. The Assistant Controller of Estate Duty initially assessed the estate of the deceased, determining the principal value at Rs. 3,84,066. Later, this was revised to Rs. 6,12,879, citing a mistake in the valuation of 1,000 shares sold by the deceased to his sons and grandsons. The accountable person argued that there was no mistake apparent from the record or in the valuation of any property, nor any omission of property in the assessment. The court noted that section 62 allows rectification of mistakes apparent from the record, mistakes in valuation, or omissions of any property. The court emphasized that such provisions should be applied liberally to further the remedy and suppress the mischief.2. Inclusion of Rs. 1,58,000 as Property Deemed to Pass on Death:The main dispute was regarding the 1,000 shares sold by the deceased to his sons and grandsons. The Assistant Controller considered this sale a disposition in favor of relatives under section 27 of the Act and deemed the difference between the market value and the sale price as a gift under section 9. The Central Board of Revenue upheld this view, stating that the shares should be valued at Rs. 258 each, and the difference between this value and the sale price should be considered a gift. The accountable person contended that the sale was bona fide and fully supported by consideration, and that sections 9 and 27 were not applicable. The court, however, found that the Assistant Controller did not consider the applicability of these sections in the original assessment and thus, the rectification was permissible.Analysis of Legal Provisions and Precedents:The court analyzed the terms 'mistake,' 'mistake apparent from the record,' and 'rectification' in the context of taxing laws, referencing several judicial precedents under analogous provisions in the Income-tax Act. It was noted that a mistake could be an error discerned after a judicious probe into the records, not necessarily an arithmetical or clerical error. The court emphasized that the essence of rectification is to bring the order in harmony with the law, correcting any mistakes that result in an incorrect assessment.Application of Sections 9 and 27:The court examined whether the sale of shares constituted a disposition involving an element of bounty. It was noted that section 27 treats dispositions to relatives as gifts unless made for full consideration in money or money's worth. The court found no satisfactory explanation for the low sale price of Rs. 100 per share, compared to the agreed value of Rs. 258 per share for other similar shares on the date of death. The court concluded that the sale involved an element of bounty, making it a gift under section 9.Conclusion:The court held that the rectification under section 62 was valid and that the inclusion of Rs. 1,58,000 as property deemed to pass on the death was in accordance with the law. The accountable person was to be given an opportunity to prove the fair price of the shares on the date of sale. The court answered both queries in the affirmative and dismissed the tax case with costs.Judgment:The court answered both questions in the affirmative, validating the rectification and the inclusion of Rs. 1,58,000 as property deemed to pass on the death. The tax case was dismissed with costs, and counsel's fee was set at Rs. 250.