AYUSH GARG

TAXATION SUBJECT MOOT, 2023

BEFORE THE HON’BLE KARNATAKA HIGH COURT

Writ petition No. _____/2021

In The Matter of

Mr. Ram----------------------------------------------------------------------Petitioner

V.

Income Tax Commissioner. ------------------------------------------------------Respondents

Under Article 226 of Constitution

Before

The Hon’ble bench of Justice

Of

The Hon’ble Karnataka High Court

Submitted To: Submitted By:

Amar Anshul Gauri Dwivedi

(Asst. Professor) BA LLB (VII SEM)

JNU,SSLG

Memorial on Behalf of the Appellant -

 TABLE OF CONTENTS

Table of Contents.....................................................................................................................2
List of abbreviations................................................................................................................3
INDEX OF AUTHORITIEs....................................................................................................4
Statement of Jurisdiction.........................................................................................................5
Statements of Facts..................................................................................................................6
Issues Raised.............................................................................................................................8
SUMMARY of arguement.......................................................................................................9
Arguement advanced..............................................................................................................10
PRAYER.................................................................................................................................15

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 LIST OF ABBREVIATIONS

Abbreviations Words

Sec. Section

A.I.R. All India Report

HC High Court

SCC Supreme Court Cases

SC Supreme Court

v. Versus

i.e. that is

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 INDEX OF AUTHORITIE S

STATUTE

 NCOME TAX ACT,1961

 TRANSFER OF PROPERTY ACT,1882

ONLINE DATABASES& WEBSITES

 www.scconline.com.
 www.manupatrafast.com.
 www.eci.gov.in

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 STATEMENT OF JURISDICTION

The Hon’ble High Court of Karnataka has the jurisdiction to hear the present Writ

Petition by virtue of Article 226 of Constitution of India.

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 STATEMENTS OF FACTS

Para1. Mr. Ram, employed in a MNC and earning salary income.Ram got married
to Sita in November,2019.
Para2. Sita’s maternal uncle, Mr.Shakuni who lives in US,unable to attend her
marriage due to his work commitments.During the wedding week,the newly
wedded couple Mr.Ram and Sita received letter from Mr.Shakuni,wherein
Shakuni expressed his affection and wanted to gift a land parcel situated near
Pune on the occasion of their wedding to Mr.Ram and Sita.
Para3. In October 2020,Shakuni came to India and executed & registered a gift
deed for the land parcel in the favour of Ram and Sita.The said land parcel was a
rural agriculture land as per section 2(14)(iii) of Income Tax Act,1961,as it was
situated beyond 25 kilometers from the municipal limits.Value of the land as per
the stamp valuation authority was 40,00,000/-
Para4. Ram filed his return of Income for the assessment year 2021-22 declaring
income from salary of Rs.10,00,000/- and paid the applicable taxes.
Para5. On 10th June,2021 Ram Recieved a notice under section 143(2) of the Act
from the Assessemnt officer stating that his income-tax return filed by Ram for
the assessment year 2021-22 was selected for scrutiny on account of a specific
information pointing tax evasion from other agency.
Para6. On 15th October 2021,notce under section 142(1) of the Act issued by the
officer asked Ram about the deails of immovable property purchased during 20-
21,Copy of purchase agreement, source of fund,value of property as per stamp
valuation authority
Para7. On 25th October2021,Ram responded to the notice dated 15 th October,made
the following submission-During the previous year,Ram received a land parcel as
a gift,Also uploaded scanned registered gift deed, land was made by gift not by
any other fundng source belonging to Ram,Stamp duty was 40,00,000/- but fair
market price was 25,00,000/- since the bounders were enchroached illegally and
the matter is pending.
Para8. On 2nd December,a show cause notce was received by Ram, containing
draft assessment order stated that since Ram has received gift from a person other
than relative, value of the land parcel is to be considered as Ram’s income

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 chargeable to tax under the head, ‘Income from Other Sources’. The Assessing
Officer proposed to make an addition ofRs.25,00,000/-under section 56(2)(x) of
the Act.
Para9. On 12th December 2021,Ram submitted a letter to authority:-
He had received the land parcel as gift on the occasion of his marriage
and the same falls in the exceptions for attracting provisions of section
56(2)(x) of the Act;
The land was an agricultural land and not a capital asset as defined in
section2(14) of the Act and thus does not attract the provisions of
section 56(2)(x) of the Act;
He wanted an opportunity of personal hearing through video
conferencing to explain the facts involved in his case and such an
opportunity be granted before passing any adverse order against him.
Para10. On 18th December 2021, the assessment officer without giving Ram
opportunity of Personal hearing passed an order under section 143(3) of the Act
making an addition of Rs.40,00,000/- under section 56(2)(x) of the Act, without
referring to the submissions made by Ram in his letter dated 12 th December 2021
Para11. Ram also recieved a notice from Income tax department that Shakuni
ought to have deposited TDS undersection 194-IA of theAct on Rs.40,00,000/-
before conveying the property to Ram. As this was not done, Ram was asked to
show cause why he should not be taxed in respect of Rs.40,00,000.
Para12. Aggrieved by the assessment order passed under section 143(3) of the
Act by the Assessing Officer, Ram filed a writ petition before the High Court
praying for quashing of the entire assessment proceedings including the said
assessment order dated 18 th December 2021 on the grounds as Argued in the
Arguments.

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 ISSUES RAISED

ISSUE 1: WHETHER OR NOT RAM IS LIABLE FOR PAYING TAXES ON GEFTED

PROPERTY?

ISSUE 2: WHETHER OR NOT PRINCIPLE OF NATURAL JUSTICE IS VIOLATED?

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 SUMMARY OF ARGUEMENT

ISSUE 1 WHETHER OR NOT RAM IS LIABLE TO PAY TAXES ON THE LAND OR

NOT?

Ram is liable to pay taxes because according to Section 56(2)(vii)(b)(i) 1, any immovable
property received without consideration (gift) whose stamp duty value is more than
Rs.50,000 falls under ‘income from other sources’ which is taxable. And this gift does
not lie under any of the exceptions provided under the section.

ISSUE 2: WHETHER OR NOT PRINCIPLE OF NATURAL JUSTICE IS VIOLATED?

There was no violation of principle of natural justice as the officer was only following
the procedure in accordance with Faceless Assessment scheme which is used to reduce
corruption in our country as it limits the contact of assessee with the assessment officer.
And ram’s letters were also taken into consideration but the officer was not satisfied with
his response.

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Section 56(2)(vii)(b)(i) of The income tax act, 1961: In particular, and without prejudice to the
generality of the provisions of sub-section (1), the following income shall be chargeable to income-tax
under the head "Income from other sources", namely:
(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or
persons on or after the 1st day of October, 2009,-
b) any immovable property,-
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the
stamp duty value of such property;

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 ARGUEMENT ADVANCED

ISSUE I: WHETHER OR NOT RAM IS LIABLE TO PAY TAXES ON THE LAND OR

NOT?

It is humbly submitted to the court that, Ram is liable to pay taxes on the immovable
property because as this property was gifted to Ram by the maternal uncle of his wife,
Shakuni, who is currently not living in India and according to Section 56(2)(vii)(b)(i) 2,
any immovable property received without consideration (gift) whose stamp duty value is
more than Rs.50,000 falls under ‘income from other sources’ which is taxable.

This gift was given by Shakuni who was a maternal uncle of Sita and the gift was given
to Ram and Shakuni does not fall under the category of ‘relative’ for Ram and hence
does not falls under the exceptions according to the explanation clause section 56(2) 3.
Hence this transfer does not comes under the exceptions of this particular section as the
gift deed was under the name of Ram and for him according to this section Shakuni was
not his relative.

And also it did not fall under the exception of ‘gift on marriage’ as the gift deed was
made when Shakuni returned to India in 2020 and the marriage was in 2019 and the gift
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Section 56(2)(vii)(b)(i) of The income tax act, 1961: In particular, and without prejudice to the
generality of the provisions of sub-section (1), the following income shall be chargeable to income-tax
under the head "Income from other sources", namely:
(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or
persons on or after the 1st day of October, 2009,-
b) any immovable property,-
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the
stamp duty value of such property;
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explanation clause section 56(2):
(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi).

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will be considered from the date of registration of gift deed which was in 2020. And
according to Section 123 4 of The Transfer of Property Act, 1882 for the transfer of
Immovable property as a gift, registered instrument (gift deed) is necessary. So even if
Shakuni talked about giving Ram the property as a gift in 2019 but the gift deed was
made in 2020 and gift of the immovable property will be considered from the date of
registration of the gift deed which was in 2020 so it can be said that the gift does not fall
under the exception of gift on marriage as marriage was in 2019 and the gift was made
in 2020.

Also the other exceptions does not qualify given under Section 56(2)(vii)(b)(i) 5. Hence
as it does not fall under any exception then it will be taxable.

And according to section 56(2)(vii) of the Income Tax Act of 1961, the value of
agricultural land obtained without consideration that exceeds Rs. 50,000 is taxable,
except for property received from family. The section's explanation (d) explains that
"property" implies "immovable property being land or building or both" for the purposes
of Section 56(2)(vii). Thus, agricultural land is not a "capital asset" under section 2(14)
of the Act, but it is a property being immovable property being land or structure or both
for the purposes of this paragraph. So, even if land or a structure, or both, is not a

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123. Transfer how effected
For the purpose of making a gift of immovable property, the transfer must be effected by a registered
instrument signed by or on behalf of the donor, and attested by at least two witnesses.
For the purpose of making a gift of movable property, the transfer may be effected either by a registered
instrument signed as aforesaid or by delivery.
Such delivery may be made in the same way as goods sold may be delivered.

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Section 56(2)(vii)(b)(i) of The income tax act, 1961:
(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer or donor, as the case may be; or
(e) from any local authority as defined in the Explanation to clause (20) of
section 10; or
(f) from any fund or foundation or university or other educational institution or
hospital or other medical institution or any trust or institution referred to in
clause (23-C) of section 10; or
(g) from any trust or institution registered under section 12-AA.

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property under section 2(14), i.e. a stock-in-trade, it is a "property" under section 56(2)
(vii).

Hence, by concluding the above arguments it can be said that Ram was liable to pay
taxes.

ISSUE II: WHETHER OR NOT THE PRINCIPLES OF NATURAL JUSTICE WERE

VIOLATED?

It is humbly submitted to the court that no principle of natural justice was violated in this
case. There are two Principles of Natural Justice 6, one of which is Audi Alteram Partem
which says everybody has a right to be heard, this principle is for fairness that every
party is heard and then the decision is taken. In this ram is alleging that his right to be
heard has been violated but this is not true as the authority was only following their own
procedure which was is accordance with the Faceless Assessment Scheme which is
implemented with the view to improve openness, efficiency, and accountability in
income tax assessments, the Central Government implemented the Faceless Assessment
Scheme.

All measures implemented under the Income Tax Act, 1961, under Faceless Assessment
are intended to:- Eliminate the interaction between the Assessing Officer and the
assessee during the course of proceedings, to the degree technologically practicable;

Optimise resource utilisation through economies of scale and functional specialisation.

Introduce a team-based arm's length pricing decision with dynamic jurisdiction.

According to Section 144B of the Income Tax Act of 1961, the new initiative
"Transparent Taxation- Honouring the Honest Platform," has the admirable goal of
implementing the "faceless system," a cutting-edge system to digitise the process of
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The principle of natural justice defines two principles:
1. Audi Alteram Partem which means ‘no one can be left unheard’: It basically means that the
court should hear the other party and no one should be condemned unheard. This maxim is
based on the basis of the rule of fair hearing.
2. Nemo judex in causa sua which means ‘no one can be a judge in his case’: This maxim gives
rise to the duty to act fairly, to listen to the arguments and to reach a decision in a manner
that is untainted by bias.

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"scrutinising" a file, where no one would be subject to visits, arbitrary demands made by
officers of the IT department, or "under the table" dealings. The proposal is also
considered as a relief because it allowed taxpayers to fill out audit reports,
representations, and other forms electronically, saving them time, money, and effort.
There are four primary evaluations under the Income Tax Act-

 Section 143(1) 7 assessment, i.e. summary assessment without summoning the

assessee.
 Scrutiny assessment, as defined in section 143(3).
 Section 144 evaluation, i.e., best judgement assessment.

Here, in this case in the paragraph 4 of the statement of fact state that the income-tax
return filed by Ram for the assessment year 2021-22 was selected for scrutiny on account
of a specific information pointing tax evasion received from other agency.

This faceless assessment scheme was launched by the government to reduce corruption
in our country, a lot of people get away with tax evasions because they bribe the officials
and the officials in return let them do it. This scheme is used so that there is no direct
and unofficial meeting or dealings between the assessee and the assessment officer so
that neither the officer can demand any thing inappropriate while excersising his power
nor the assessee bribes the officer to do whatever he wants to do. In this particular case
ram’s request of a one on one meeting was denied because of this faceless assessment
scheme and it wasn’t like he wasn’t heard, the fact was that he was asking for a one on
one meeting which could lead to him asking for favours, that’s why his request was
denied and the order was passed after taking his letter into consideration but the
assessment officer was not satisfied with his response.

Hence, by concluding above arguments it can be said that there was no violation of
principle of natural justice.

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the Income Tax Act of 1961

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14
 PRAYER

In the light of the issues raised, arguments advanced, authorities cited, it is respectfully
prayed before the Honourable Delhi High court at New Delhi to adjudge & declare that::

 Ram is liable to pay taxes as assessed by the assessment officer.

And / Or

Any other order which deems fit in the interest of Justice, Equity & Good Conscience.
All of which is respectfully submitted.

Counsel for Respondent

Gauri Dwivedi

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