Gift-tax liability depends on a proven transfer; declaratory relief and an agreement to sell did not create a taxable gift.

Gift-tax proceedings were upheld despite objection to notice because the section 16 notice was addressed to the legal representatives, received on behalf of one of them, and participation without timely objection defeated the service challenge. On the merits, no taxable gift was established: a declaratory decree recognising pre-existing rights under an alleged family partition did not create a new transfer of property, and an agreement to sell was not an executed and registered conveyance. In the absence of a proved transfer during the relevant year, gift-tax liability did not arise and the assessment failed.

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Issues: (i) Whether the gift-tax proceedings were invalid for want of proper notice to the legal representatives of the deceased assessee. (ii) Whether the transactions relied upon by the Revenue resulted in a taxable gift.

Issue (i): Whether the gift-tax proceedings were invalid for want of proper notice to the legal representatives of the deceased assessee.

Analysis: The notice under section 16 of the Gift-tax Act, 1958 was addressed to the legal representatives and was in fact received on behalf of one of them. The objection that the notice was issued to or served on a dead person was rejected. The challenge based on alleged non-service on another legal representative was not entertained, as it was not raised at the appropriate stage and the assessee had participated in the proceedings without objection.

Conclusion: The proceedings were not invalid for want of notice.

Issue (ii): Whether the transactions relied upon by the Revenue resulted in a taxable gift.

Analysis: The declaratory decree in favour of the wife and daughters of one son did not create a new title or amount to a transfer; it merely recognised pre-existing rights said to arise from a family partition. Likewise, the document concerning the other son was only an agreement to sell and not an executed and registered conveyance. On these facts, no transfer of property in the relevant previous year was established and, therefore, no gift arose.

Conclusion: No taxable gift was proved.

Final Conclusion: The Revenue failed on both the jurisdictional objection and the merits, and the gift-tax assessment was not sustained.

Ratio Decidendi: A declaratory decree recognising pre-existing ownership does not by itself effect a transfer of property, and an agreement to sell does not amount to a transfer; in the absence of a proven transfer, no gift-tax liability arises.

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