JUDGMENT
CHANDRA REDDY C.J. – The question we are called upon to answer in this reference is formulated in these terms;
“Whether the appeal of the assessee to the Appellate Assistant Commissioner not accompanied by the notice of demand as required by the rules, was not liable to be rejected as time-barred ?”
The facts giving rise to this reference are shortly these :
The assessee, an individual, had settled upon his undivided minor sons 54 acres 70 1/2 cents of agricultural land by a gift deed dated the 12th December, 1957. In response to a notice issued under section 13(2) of the Gift-tax Act, the assessee filed a return in the prescribed form, but claimed exemption of all the transactions amounting to Rs. 28,000 contending that the Gift-tax Act had no application to agricultural lands and that even otherwise there was no liability to pay tax on these transactions as they do not partake of the nature of gifts, since the properties were settled on his own dependent undivided minor sons. The proper officer negatived these objections and estimating the value of the properties at Rs. 1,36,750 called upon the assessee to pay gift-tax in respect thereof.
The assessee, dissatisfied with this order, carried an appeal to the Appellate Assistant Commissioner under section 22 of the Gift-tax Act. Appeal, which was filed within thirty days of the receipt of the notice of demand, was not accompanied by the notice of demand. The appeal petition was, therefore, returned to the assessee, but the cover containing the appeal petition was received back unserved. This time, it was sent to the Income-tax practitioner who presented the appeal petition on behalf of the assessee. This was re-submitted on the 16th March, 1959, with an endorsement that the notice of demand was èenclosed. However, it was found that the notice of demand was not in fact sent. Once again, the appeal petition was returned to the income-tax practitioner. This time, the assessee wrote a letter to the Appellate Assistant Commissioner saying that he had applied on 23rd May, 1959, 6th June, 1959, and 11th June, 1959, as the original demand notice was filed in the High Court in connection with certain writ petitions filed therein questioning the validity of the Gift-tax Act. Being of the opinion that the presentation of the appeal was defective in the sense that the notice of demand was not produced along with the memorandum of appeal and there were not sufficient grounds for excusing the delay in presenting the appeal, the appeal petition was rejected. An appeal to the Income-tax Appellate Tribunal was also unsuccessful. However the Tribunal, at the request of assessee, made this reference under section 26(1) of the Gift-tax Act.
The question for consideration is whether the non-production of the notice of demand with the appeal petition is a vital defect so as to render the presentation ineffective ? To answer this question, we have to first turn to the provisions of section 22 of the Gift-tax Act (XVIII of 1958). That section, in so far as it is material for this enquiry, is as follows :
“22. (1) Any person –
(c) denying his liability to be assessed under this Act…..
may appeal to the Appellate Assistant Commissioner against the assessment or order, as the case may be, in the prescribed form and verified in the prescribed manner….
(2) An appeal shall be presented within thirty days of the receipt of the notice of demand relating to the assessment or penalty objected to, or the date on which any order objected to is communicated to him, but the Appellate Assistant Commissioner may admit an appeal after the expiration of the period aforesaid if he is satisfied that the appellant had sufficient cause for not presenting the appeal within that period.
(3) The Appellate Assistant Commissioner shall fix a day and place for the hearing of the Appeal and may from time to time adjourn the hearing.”
Indisputably, prescribed by Rules. The legislature has conferred the rule power upon the Central Board of Revenue under section 46 of the Act. The section (omitting the unnecessary portions) provides :
(2) In particulars and without prejudice to the generality of the forgoing power, rules made under this section may provide for -…
(c) The form in which appeals and applications under this Act may be made and the manner in which they shall verified.”
Pursuant to the powers vested in the Central Board of Revenue, this authority had promulgated the Gift-tax Rules, 1958, rule 5(1)(a) whereof postulates that an appeal under section 22 shall be in Form D, if the asessee objects to the value of his taxable gifts determined under the Act or to the amount of tax determined as payable by him under the Act or denies his liability to be assessed under the Act. Sub-rule (2) further says that every such appeal shall be accompanied by a copy thereof and shall be verified in the manner specified in the form applicable thereto. We are unconcerned with the other clauses of rule 5. as they do not play any part in this enquiry. We will now look at Form D prescribed under rule 5(1)(a).
“Form D”.
To
The Appellate Assistant Commissioner of Gift-tax……… The …… day of…… 19.
The petition of….. residing at…. (Post Office)……(District)…… (State)…. showeth as follows :
1. Under section 15 of the Gift-tax Act, 1958, for the èassessment year……
(a) the value of taxable gifts of your petitioner for the previous year ended on………… has been determined at Rs……
(b) the amount of Gift-tax payable by your petitioner has been determined at Rs……..
2. The notice of demand attached hereto was served upon your petitioner on………..
3. The assessment has been made under *sub-section (1)* sub-Section (3) * sub-section (5) *, of section 15 by the Gift-tax Officer,………
4. Your petitioner claims that –
* (a) the value of his taxable gifts for the previous year was Rs…… * (b) the amount of gift-tax payable by him works out at Rs……. * (c) he is not liable to be assessed under the Act.
5, For the reasons stated in the grounds of appeal below, your petitioner prays that his claim may be allowed and appropriate relief granted.
6. The address for service of notices on the petitioner is…….
Grounds of Appeal
1………………..
2………………..
3………………..
Signature……
Verification
1,……….. the petitioner named in the above petition, do hereby declare that what is stated therein is true to the best of my information and belief.
Place………
Signature……….
Date……….
Status………”
It is seen that neither section 22, nor rule 5 requires the assessee to annex the demand notice to the appeal petition. All that rule 5 contemplates is that the appeal should be filed in the form indicated, viz, Form D. Even Form D does not specifically require is an implied requirement in the above, in that, it says “the notice of demand attached hereto was served upon your petitioner”. But does the failure to comply with this implied requirement result in the dismissal of the petitioner on the ground of its being time-barred ? It is manifest from that the makes it obligatory on the assessee to sign the appeal to verify it in the manner indicated therein. But in regard to the filing or annexing the notice of demand to the appeal petition it does not make it imperative to file the notice. It is plain that the attaching of a copy of the order and also the verifying of the appeal in the manner prescribed in the Form applicable thereto, are made mandatory by rule 5(2) and the non-fulfillment of the provisions thereof will result in the presentation being not in accordance with law. The Form itself thus makes the distinction between the two, thereby establishing that the omission to file the notice of demand does not incur any penal consequences. It is only when there is a fulfill mandatory terms of a provision of law that the presentation could be ignored, that is, that there was no presentation in law. But the omission to attach a notice, as in this case, can be construed only as an irregularity in the presentation. That can be cured by the production of the notice of demand subsequently.
It is also worthy of note that the Form itself draws the attention of the party presenting the appeal to the necessity of filing a copy of the order appealed against. It says at the end :
“Please note :-…..
(3) Every appeal should be accompanied by a copy thereof.
Please delete portions inapplicable.”
All the circumstances establish beyond doubt that the legislature and even the rule-making power did not treat the non-compliance with the requirement of filing the notices of demand as fatal.
There is support for this view of ours in a judgment of the Madras High Court in Arunachalam Chettiar v. Commissioner of Income-tax [1962] 45 I.T.R. 407. That was also a case of non-production of notice of demand along with an appeal against the order of assessment under the èIndian Income-tax Act. There are analogous provisions in the Indian Income-tax Act on the subject of presentation of appeals.
Sub-section (2) and (3) of section 30 which deal with the presentation of appeals read as follows :
(2) The appeal shall ordinarily be presented within thirty days of the payment of the tax deducted under sub-section (3A), (3B) or (3C) of section 18 or of receipt of the notice of demand relating to the assessment or penalty objected to or of the order in writing notifying the amount of total income on which the determination under sub-section (5) of section 23 was based and the apportionment thereof between the several partners or of the loss computed under section 24 or of the intimation of the refusal to pass order under sub-section (1) of section 25A, or to register a firm under section 26A or of the date of refusal to make a fresh assessment under section 27, or of the intimation of an order under sub-section (1) of section 23A or under sections 48,49, or 49F, as the case may be but the Appellate Assistant Commissioner may admit an appeal after the expiration of the period if he is satisfied that the appellant had sufficient cause for not presenting it within that period.
(3) The appeal shall be in the prescribed form and shall be verified in the prescribed manner.”
It is seen that unlike section 22 of the Gift-tax Act, sub-section (3) of section 30 of the Indian Income-tax clearly lays down that the appeal shall be in the prescribed form and shall be verified in the prescribed manner. In the Gift-tax Act, it is rule 5 that prescribes the procedure in regard to the presentation of the appeals. But that does not make any difference in the procedure in regard to the presentation of the appeal. Considering the question whether an appeal against the order of assessment file under section 30, without the notice of demand, is not maintainable the Division Bench decided that the defect was not fatal so as to treat the appeal as time-barred. The learned judges expressed the opinion that the implied requirement in this behalf was not a mandatory one and that the omission to satisfy the provision in that regard amounted only to an irregularity and so the appeal could not be regarded as being beyond time. We are in entire agreement with the principle enunciated therein, as also with the reasoning underlying it.
As already mentioned, the annexing of the demand notice is not an essential requirement for the presentation of the appeal, though no doubt the rule impliedly contemplated the attaching of the notice of demand.
In these circumstances, we answer the reference in favour of the assessee. There will be no order as to costs.