JUDGMENT
N.V. Balasubramanian, J.
1. The assessee is an individual. The assessee made certain gifts to her minor children of a sum of Rs. 12,000 each on 31st March, 1969, 31st March, 1970 and 1st May, 1970 by transfer of book entries. The GTO accepted the return filed by the assessee and levied the gift-tax. The WTO also for some subsequent year accepted the validity of the gifts made in some of the subsequent assessment years. The WTO subsequently in the assessment proceedings for the asst. yrs. 1973-74, 1974-75, 1975-76, 1976-77 and 1977-78 found that the gifts were made by making book entries in the assessee’s own books of accounts maintained in her moneylending business, but the money was neither available, nor actually delivered by the assessee to the donees who were minors, or to the guardian of the minors. He also found that on the respective dates of the alleged gifts, the cash balances were only Rs. 9,130, Rs. 11,810 and Rs. 6,810 which were insufficient to make valid gifts and the assessee had not made any attempt to deliver the amounts to the donees and, therefore, he held that there were no valid gifts at all and included the sum of Rs. 36,000 in the wealth-tax assessment for the said assessment years.
2. The assessee preferred appeals before the AAC against the order of assessment. The AAC noticed that gift-tax was levied in respect of the above gifts, and, therefore, it is not open to the WTO to challenge the validity of the gifts and levy tax once again under the provisions of the WT Act causing jeopardy to the assessee. He further held that the provisions of s. 4(5A) of the WT Act which was introduced only w.e.f. 1st April, 1976 has no retrospective operation and, therefore, the amounts cannot be included in the wealth of the assessee.
3. Aggrieved by the order of the AAC, the Revenue preferred appeals before the Tribunal. The Tribunal held that the gifts were not valid as on the respective dates as the assessee did not have the requisite cash balance and the donor had not made available the cash to the donees and there is nothing to show that the gifts were accepted by and on behalf of the donees. Therefore, the Tribunal came to the conclusion that there were no valid gifts at all and the sum of Rs. 36,000 is liable to be included in the net wealth of the assessee for all the years. The Tribunal also held that the provisions of s. 4(1)(a) of the WT Act are not applicable as the gifts were not valid gifts and the gifts were not chargeable to gift-tax and, therefore, the proviso to s. 4(1)(a) of the WT Act did not apply. The Tribunal came to the conclusion that the mere fact that gift-tax assessments were wrongly made would not prevent the AO to make proper assessment under the WT Act. The Tribunal, however, did not agree with the contention of the Revenue that the provision of s. 4(5A) of the Act was retrospective in nature.
4. Aggrieved by the order of the Tribunal, the assessee has sought for and obtained a reference and pursuant to the directions of this Court in TCP Nos. 245, 284, 295, 300 and 361 of 1981, dt. 19th April, 1982, the Tribunal has stated a case and referred the following question of law for the consideration of this Court :
“Whether the gifts made by the assessee on 31st March, 1970 and 1st May, 1970 to the minor sons are includible in the assessee’s wealth-tax assessment ?”
5. Mr. P. P. S. Janarthana Raja, the learned counsel for the assessee, submitted that under the proviso to s. 4(1)(a) of the WT Act, 1957 (hereinafter to be referred to as ‘the Act’), the amounts gifted cannot be included in the assessment of the assessee as the gifts were made during the period mentioned under the proviso and the gift-tax was also levied by the AO. The counsel for the assessee further submitted that it is not the case of the Revenue at any time that the provisions of s. 4 of the Act were not attracted and the WTO cannot question the validity of the gifts in the wealth-tax proceedings. It is submitted that it is only after the introduction of s. 4(5A) of the Act, the WTO has the jurisdiction to go into the question of validity of the gifts made by transfer of book entries and since the gift-tax was levied, it is not open to the WTO to include the same amount in the hands of the assessee. He relied upon the decision of this Court in the case of K. V. Iyer vs. CIT and the decision of the Supreme Court in the case of CWT vs. Hashmatunnisa Begum . He further submitted that GT Act, WT Act and IT Act are all integrated tax codes and when a tax has been levied under any one of the provisions, it is not permissible for the Revenue to invoke other provisions of the Acts as per the decision of the Supreme Court in the case of K. P. Varghese vs. ITO .
6. Mr. C. V. Rajan, learned counsel for the Revenue, submitted that the provisions of s. 4 of the Act were not invoked as the gifts were not valid gifts and it is open to the WTO to include the amount in the hands of the assessee. He also submitted that since the provisions of s. 4 of the Act were not invoked, the proviso to s. 4 of the Act has no application to the facts of the case. He also submitted that the levy of gift-tax does not prohibit the WTO to include the amount of the gifts as the gifts were found to be not valid at all, and the decision of this Court in K. V. Iyer’s case, cited supra, has no application to the facts of the case as in that case, the proviso to s. 4(1) of the Act was applied. He relied upon the decision rendered by the Supreme Court in the case of CIT vs. Dr. R. S. Gupta (1987) 165 ITR 36 (SC) : TC 35R.375 and submitted that there are no materials to show that the gifts were valid and the entire amount is liable to be included in the net wealth of the assessee.
7. We have carefully considered the rival submissions of the learned counsel. It is no doubt true that the gift-tax was levied when the assessee transferred Rs. 12,000 each by way of book entries to minor children on 31st March, 1969, 31st March, 1970 and 1st May, 1970. It is not disputed that the respective cash balances on those dates were only Rs. 9,130, Rs. 11,810 and Rs. 6,810. Though the gift-tax assessments were made levying gift-tax, the WTO held that there was no valid gift as cash balances in the accounts book of the assessee were not sufficient to cover the transfer made by book entries. The Tribunal found that there was no valid gift at all of Rs. 12,000 each aggregating to Rs. 36,000, and therefore, it is not possible to accept the contention of Mr. Janarthana Raja, learned counsel for the assessee that since the gift-tax has been collected from the assessee, it is not open to the WTO to question the validity of gifts for a sum of Rs. 36,000. The legal effect of holding that the transactions were invalid is that there were no valid gifts in the eye of law and the money continued to remain with the assessee. When that is the legal effect of a valid gift, we are of the view that a wrong order made by the GTO would not clothe a right on the part of the assessee to claim that the amount should not be assessed under the WT Act. It is known that two wrongs cannot make right. Similarly, when the gifts were found to be invalid by the Tribunal, the gifted amounts are liable to be included in the hands of the assessee.
8. Mr. Janarthana Raja, learned counsel for the assessee relied upon the provisions of the proviso to sub-s. (1) of s. 4 of the WT Act and submitted that this Court in K. V. Iyer vs. CIT (supra) held that where an assessee is subject to gift-tax and the gift-tax has been charged on the said gifts for any assessment year commencing after 31st March, 1964, but before 1st April, 1972, the amount is entitled to be excluded from the wealth-tax. We are of the view that the decision relied upon by the learned counsel for the assessee has no application to the facts of the case. It is not a case of application of s. 4 of the WT Act by which the asset in the hands of the transferee is included in the hands of the assessee. On the other hand, it is a case where the gifts were held to be void and because of the voidness of the gifts, the amount is included in the hands of the assessee on the ground that there was no transfer of assets by the assessee in favour or minor children. It is well established that a pre-requisite condition for the applicability of sub-s. (1) of s. 4 of the WT Act is a valid transfer of the assets in favour of specific persons and when there is no transfer at all, the question of applicability of s. 4 of the WT Act does not arise and consequently, the proviso to s. 4(1)(a) of the Act does not apply. The decision in K. V. Iyer’s case, cited supra, is a case arising under sub-s. (1) of s. 4 of the WT Act and in that context, the proviso to sub-s. (1) of s. 4 of the WT Act was held to be attracted. It is also relevant to notice the decision of the Supreme Court in the case of CWT vs. Hashmatunnisa Begum (supra) wherein the Supreme Court was dealing with a case of interpretation of proviso to sub-s. (1) of s. 4 of the WT Act and the Supreme Court while holding that the expression, ‘for any assessment year’ commencing after 31st day of March, 1964 found in proviso to s. 4(1) of the WT Act would apply to gift-tax assessment, held that where the assessee transferred certain assets before the notified date, which did not attract the proviso to cl. (a) of subs. (1) of s. 4 of the WT Act, the amount was to be included in the wealth-tax proceedings though the gifts were chargeable to gift-tax. The decision of the Supreme Court makes it clear that though the gift-tax was levied in respect of certain gifts, still the amount is liable to be included under the relevant provisions of WT Act. It therefore, cannot be stated as a general proposition of law that whenever there is a levy of gift-tax, the WTO precluded from levying wealth-tax on the amount gifted, even if there was a valid gift.
9. Mr. Janarthana Raja, learned counsel for the assessee submitted that under the proviso to cl. (a) of sub-s. (1) of s. 4 of the Act, if any transfer of asset is chargeable to gift-tax, then, the value of such asset could not be included in the net wealth of the individual. We have already held that the proviso to cl. (a) of sub-s. (1) of s. 4 of the Act has no application to the facts of the case. Secondly, that the gift-tax was actually charged does not mean that the gift-tax was chargeable and the expression, ‘chargeable’ only contemplates a valid gift. Therefore, a wrong decision of the GTO would not stop or prevent the WTO from coming to a right conclusion. Therefore, the expression, ‘chargeable’ in the proviso to cl. (a) of sub-s. (1) of s. 4 of the Act would show that there must be a valid gift and it was chargeable under the provisions of the Act.
10. The next submission of Mr. Janarthana Raja, learned counsel for the assessee is that only after introduction of sub-s. (5A) of s. 4 of the Act, it is open to the WTO to go into the question of the validity of the gifts by book entries. We are of the view that the powers of the WTO to include the amount in question are derived from the powers of assessment conferred on him under the relevant provisions of the WT Act and cl. (a) of sub-s. (5A) of s. 4 of the Act is an enabling provision for inclusion in the net wealth of the assessee where the assessee fails to prove before the AO that the money was actually delivered to the donees. The fact that the credit entry was not made during the assessment year would not prevent the officer from exercising his powers of assessment vested under him under the relevant provisions of the Act. Therefore, we are not able to accept the contention of the learned counsel for the assessee that the WTO has no power to determine the question whether there was a valid gift or not.
11. The next question that arises is whether the inclusion of Rs. 12,000 each for all the three assessment years is valid in law. As already stated, at the time when the gifts were made by book entries on 31st March, 1969, 31st March, 1970 and 1st May, 1970, there were cash balance of Rs. 9,130, Rs. 11,810 and Rs. 6,810 respectively. The question regarding the validity of the gifts by book entries came up for consideration before the Supreme Court in the case of CIT vs. Dr. R. S. Gupta (supra) and the Supreme Court held as under :
“In order to constitute a valid gift, there must be existing property. Where the donor makes a gift of an amount by transfer entries from the credit account which he has with a firm, HUF or company, and that amount is available with the firm, family or company as cash on hand on the date of the gift, then a valid gift by book entries is possible. But, where the firm, family or company does not carry on banking business and does not have any overdraft facilities and the amount is not available with it, mere book entries in the accounts will not effectuate a valid gift, even though there is acceptance of the gift.”
The decision of the Supreme Court makes it clear that for a valid gift by book entries, there must be amount available with the firm, family or company as cash on hand, that too, to the extent the amount was available with the donor there can be a valid gift. We are of the view that in the instant case, there were valid gifts to the extent of Rs. 9,130, Rs. 11,810 and Rs. 6,810 for the respective years. Mr. C. V. Rajan, learned counsel for the Revenue, however, contended that gifts were made by way of book entries in the assessee’s own accounts and there is no indication that the donees have accepted the gifts and there was no delivery of goods in favour of them. In support of his submission, learned counsel for the Revenue relied upon a decision of the Punjab & Haryana High Court in the case of Sukhlal Sheo Narain vs. CWT and submitted that a distinction should be drawn in cases where entries are made in the books of accounts of the donor and in the books of accounts of the donees and the cases where the donor proposed to effect transfer by making entries in his own book of accounts. He, therefore, submitted that since the donor is the proprietrix of the concern and entries were made in her own books of accounts, in the absence of any evidence to show that the donees have accepted the gifts, the gifts cannot be regarded as valid gifts even to the extent the cash available with the donor on the respective dates when the book entries were made. However, we are unable to accept the contention of the learned counsel for the Revenue. The fact that the cash to the extent mentioned above was available with the assessee is not disputed before us. It is also relevant to notice that when the donor made gifts by book entries in her own book accounts, the donees were minor children and the assessee in pursuance of her own work entries had expressed her intention of a valid gift not only by making necessary entries and filed GT return which was also accepted by the GTO. The fact that the donor has filed the GT return and paid the gift-tax clearly shows that she has divested herself of the money in question at least to the extent it was available in her own accounts. Therefore, we hold that the view of the Tribunal that there is nothing to show that donees have accepted the gifts and the donor divested the money was arrived at without appreciation of the full facts of the case. The conduct of the donor clearly shows that the donor had divested herself of the money by delivering the same. In the decision in CED vs. V. S. Suryanarayanan (1978) 114 1TR 599 (Mad), this Court held that where there is a complete gift of money by making credit and debit in the proprietary concern of the donor and the money was available in the proprietary concern, and there was no restriction for the donor in the matter of disposal of the money and when there is no dispute about the acceptance of he gift by the donees, the gift was held to be valid. In the instant case, admittedly, though donees have not expressly stated that they have not accepted the gifts, the fact that the gifts were acknowledged by filing GT return and the payment of gift-tax was also made would clearly show that there were valid gifts at least to the extent of the amount available to the proprietary concern of the donor. Therefore, we are of the view that the Tribunal was not correct in holding that there were no valid gifts at least to the extent available to the proprietary concern. In this view of the matter, though we uphold the order of the Tribunal that the gifts made by the assessee on 31st March, 1969, 31st March, 1970 and 1st May, 1970 are includible in the assessee’s wealth-tax assessment, the amount includible will only be the balance of the amount after adjusting the amount of the cash balances when the gifts were made on 31st March, 1969, 31st March, 1970 and 1st May, 1970.
12. The question of law referred to us only refers to two gifts made on 31st March, 1970 and 1st May, 1970 and 1st May, 1970, and it appears that there is omission with regard to the gift made on 31st March, 1969 in the question of law referred to us. Obviously, it is a typographical mistake and the question will be read by including the gift made by the assessee on 31st March, 1969 also. Accordingly, we hold that the gifts made on 31st March, 1969, 31st March, 1970 and 1st May, 1970 are includible in the assessee’s wealth-tax assessment, but only to the extent of the balance amount over the cash balance at the time of gifts. We answer the question of law accordingly.
13. There will be no order as to costs.