Commissioner Of Income-Tax vs Mrs. V. Chandra
2000 Latest Caselaw 489 Del

JUDGMENT

Arijit Pasayat, C.J.

1. Pursuant to the directions given by this court under Section 256(2) of the Income-tax Act, 1961 (in short "the Act"), the following question has been referred by the Income-tax Appellate Tribunal, Delhi Bench-C (in short "the Tribunal"), for opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in deleting the inclusion of Rs. 32,500 from the assessee's income ?"

2. The fact situation as set out in the statement of the case is as follows :

The assessee, Smt. V, Chandra, was assessed as an individual for the assessment year 1970-71. Her husband, Shri C. N. Chandra, had purchased ten national savings certificates of Rs. 5,000 each in the names of the asses-see and her son, Shri Ramesh Chandra. In April, 1960, the assessee's husband gifted the certificates to the assessee. He died on July 13, 1968. These certificates were encashed in 1970. It was contended before the Income-tax Officer on behalf of the assessee that the maximum permissible limit for holding' such certificates was Rs. 70,000 by two adults jointly, and since in the present case the two sets of certificates worth Rs. 50,000 each were held by two different adults, the interest due thereon was exempt. The Income-tax Officer rejected these contentions. He held that the moment a letter was written by the assessee's husband to the Gift-tax Officer informing him about the gift' it become a valid gift and the certificates became the exclusive property of the assessee. He observed that where the certificates were held by only one adult, the maximum limit up to which these could be exempt under Section 10(15)(ii) of the Act was Rs. 35,000. In that view of the matter, he taxed the interest on the balance which came to Rs. 42,250. In appeal, the Appellate Assistant Commissioner of Income-tax (in short the "AAC") held that ten national savings certificates, which were in the joint names of the assessee and her son, Shri Ramesh Chandra, were exempt from tax. As regards the remaining ten certificates which stood in the name of the assessee's husband, Shri C. N. Chandra, and his son, Shri Satish Chandra, it was held that, by virtue of the gift by her husband to the assessee, they went beyond the maximum permissible limit. In that view of the matter, the Appellate Assistant Commissioner restricted the inclusion of interest to Rs. 32,500 in the assessee's income. The assessee challenged the order before the Tribunal. It was contended that Section 3 of the Government Savings Certificates Act, 1959 (46 of 1959) (in short the "Savings Act"), prescribed restrictions on transfer of savings certificates. Reference was also made to Rule 16 of the Post Office Savings Certificates Rules, 1960 (in short "the Rules"). The assessee's stand before the authorities was reiterated, while the Revenue supported the order of the Appellate Assistant Commissioner.

Noticing the restrictions imposed by the provisions of Section 3 of the Savings Act, the Tribunal was of the view that there was no valid gift and, therefore, inclusion of Rs. 32,500 was not sustainable.

3. An application was filed seeking reference of the question which has been quoted above. The prayer being turned down this court was moved under Section 256(2) of the Income-tax Act, 1961. The direction was given for reference of the question quoted above. In support of the application, learned counsel for the Revenue submitted that the Tribunal has not considered the true nature of the transaction. Once the assessee's husband intimated the Gift-tax Officer about the gift and obtained a benefit on that ground, it was not open to the assessee to take shelter under Section 3 of the Savings Act. There is no appearance on behalf of the assessee in spite of notice.

4. The only question which according to us needs adjudication is whether Section 3 of the Savings Act made the gift invalid and whether in view of the restriction, the benefit claimed by the assessee was available to be granted.

5. Section 3 of the Savings Act reads as follows :

"Notwithstanding anything contained in any law for the time being in force, no transfer of a savings certificate, whether made before or after the commencement of this Act, shall be valid unless it has been made with the previous consent in writing of the prescribed authority."

Undisputedly, the factual position is that no previous consent in writing was obtained of the authority prescribed by Rule 16 of the Rules. In the absence of such a consent, the gift made by the assessee's husband in 1960 in respect of the national savings certificates was not valid. As there can be no estoppel against the statute, even if an intimation was given to the Gift-tax Officer about the transfer, it would not make any difference in law. The expression "estoppel", is derived from the French word "estoupe". It is so called because a man's own act or acceptance stops or closes his mouth to allege or plead the truth. Estoppel is a complex legal notion, involving a combination of several essential elements--statement to be acted upon, action on the faith of it, resulting detriment to the actor. Estoppel is often described as a Rule of evidence, as indeed it may be so described. But the whole concept is more correctly viewed as a Rule of law. An estoppel is not a cause of action--it is a Rule of evidence which precludes a person from denying the truth of some statement previously made by himself, (per Lindley L. J. in Law v. Baiveria [1831] 3 Ch. D. 82 at page 101). It being the duty of a court to give effect to a statute, in spite of conduct of parties, there can be no estoppel against a statute. When a particular act is declared to be void and unlawful by the statute, a party cannot by representation, any more than by other means, raise against him an estoppel so as to create a state of things, which he is under a legal disability from creating. No court can enforce as valid that which a competent enactment has declared shall not be valid, nor its obedience to such an enactment a thing from which a court can be dispensed by the consent of parties. If the terms of a statute are absolute and do not admit of any relaxation or exemption, then anything done contrary to the terms of the statute will be ultra vires and will be void and no person can be estopped from putting forward the contention that what "he did was void. The sanctity of law and the sanctity of mandatory requirement of law cannot be allowed to be defeated by resort to the rules of estoppel. The inevitable conclusion, therefore, is that the mandatory provisions of Section 3 of the Savings Act stand in the way of the Revenue in denying the benefit claimed by the assessee for exemption. The Tribunal was justified in its view that the gifts had no validity as the requirements of Section 3 of the Savings Act were not met.

6. The question referred for opinion is, therefore, answered in the affirmative, in favour of the assessee and against the Revenue.