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Income Tax Appellate Tribunal - Madras

P. Govindaswamy vs Commissioner Of Income-Tax on 27 April, 1998

Equivalent citations: [2000]72ITD57(MAD)

ORDER

S. Ananda Reddy, J.M.

1. By this reference application the assessee seeks reference of the following questions for the opinion of the Hon'ble High Court :-

1. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the assessment order dated 28-3-1988 for the assessment year 1984-85 was not barred by limitation ?

2. Whether on the facts and in the circumstances of the case, the Income-tax Tribunal was right in holding that on the sale of properties held benami in the names of Nallendran Pillai and Late Thaimaman and others, capital gain arises in the hands of the assessee the real owner in spite of the provisions of the Benami Transactions (Prohibition) Act ?

3. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was given a proper opportunity of being heard ?

4. Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in refusing the assessee's right to cross examine the persons whose statements were relied on by the ITO against the assessee and further vitiated by its failure to examine key persons including Shri Amarlal Kishandas and Sundaram Pillai whose testimony was essential to ascertain the true nature of the transaction in Kalmanda property.

5. Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in rejecting the contention of the assessee that a sum of Rs. 110 lakhs was only connected to the transaction of sale of the Kalmanda property and did not represent the sale consideration without considering the relevant facts, materials and evidence ?

6. Whether on the facts and in the circumstances of the case the findings of the Tribunal that the assessee had sold the Kalmanda property for Rs. 110 lakhs and that he is assessable to the capital gains tax on the same apart from what is specifically excluded by the Tribunal is vitiated ?

7. Whether on the facts and in the circumstances Of the case the finding of the Tribunal that Shri Amarlal Kishandas was paid only a sum of Rs. 12 lakhs in settlement of his account with the assessee is vitiated by its failure to consider all the relevant facts, materials, and evidence ?

8. Whether on the facts and in the circumstances of the case, the finding of the Tribunal that the assessee was the sole beneficiary of the cash element relating to the sale of the Kalmanda property in its entirety is vitiated by its failure to consider all the relevant facts, materials and evidence ?

9. Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the failure to invoke section 52(2) of the Income-tax Act did not vitiate the assessment ?

2. The relevant facts are as follows. The assessee is an individual. The main issue relates to the capital gains arising out of the sale of the property known as 'Kalmanda' property. This property admeasuring 27 grounds is situated on the Nungambakkam High Road, Madras, Part of the property which was divided into 4 plots was purchased in the year 1973 from Smt. Srideviamma in the names of the following parties :-

P. Govindaswamy                   - 5 grounds. 
N. Nallendran Pillai              - 2 grounds & 2000 sq.ft. 
Late N. Thaimaman & Others        - 5 grounds. 
M/s. Century Flour Mills          - 3 grounds 2132 sq.ft. 
 
 

It is an admitted fact that the assessee was the purchaser of 3 plots, one in his name and the other two in the names of his benamidars and one by M/s. Century Flour Mills. This position was accepted by the Settlement Commission also by its order passed in July, 1979 in the case of Shri Govindaswamy, the assessee. The total extent of the 4 plots covered was 17 grounds and 1732 sq.ft. The assessee also purchased under an agreement of sale dated 16-3-1982 an extent of 8 grounds 1413 sq.ft. from the same Smt. Srideviamma. This property was purchased under a compromise in exchange for the assessee's share in the Odeon theatre in favour of Smt. Sridevi Amma and the total consideration for which the property was obtained by the assessee was for Rs. 24 lakhs. ? This entire property was sold to M/s. Gautam Construction Co. represented by Shri N. Ramesh & others under 4 registered sale deeds executed on 10-8-1983. According to the assessee the sale consideration was Rs. 2.10 lakhs per ground and on that basis the assessee had offered capital gains. There was a search in the assessee's residential and business premises on 16-3-1984 and in the course of search the authorities have recovered a number of incriminating documents including certain agreements which the assessee was alleged to have entered into with one S. Gopal. The assessee did not file his return within the time. Therefore, the Assessing Officer issued notice. Thereafter the assessee had filed his return admitting the capital gains on the sale price at Rs. 2.10 lakhs per ground. The Assessing Officer did not accept the same. Therefore, even while the assessment proceedings were pending he issued a notice under section 271(1)(c) on 22-1-1987. As there was no reply the Assessing Officer sent another letter dated 29-1-1987 pointing out various items in respect of which there was concealment of income. Later the assessee sent a reply stating that he had approached the Commissioner of Income-tax for settlement for the assessment years 1978-79 to upto date. Again by another letter dated 3-3-1987, the assessee has stated to the Assessing Officer that a revised return admitting a net profit of Rs. 16,64,000 was filed but no such return was actually filed. On being reminded by the Assessing Officer through another letter dated 9-3-1987 a revised return was filed on 10-3-1987 declaring a net profit of Rs. 14,07,390. The Assessing Officer, therefore, recorded a finding on 10-3-1987 stating that the assessee's case attracts the provisions of section 271(1)(c). Therefore, the assessment will be completed as provided under section 153(1)(b). The Assessing Officer after conducting necessary enquiries computed the capital gains taking the total sale consideration at Rs. 110 lakhs. The assessee being aggrieved carried the matter to the CIT(A). The CIT(A) also after considering all the contentions confirmed the view taken by the Assessing Officer. The assessee therefore carried the matter in further appeal to this Tribunal.

3. Before this Tribunal the assessee raised certain additional grounds and canvassed the matter elaborately on various grounds. This Tribunal after considering all the contentions raised by the assessee, negatived the contentions raised by the assessee and confirmed the order of assessment. Against the order of this Tribunal the assessee has raised various questions as stated earlier, stated to be questions of law for reference to the Hon'ble High Court of Madras. We will consider the questions in seriatim.

4. The first question relates to the question of bar of limitation. According to the assessee, the assessment had to be completed by the Assessing Officer within the time provided in the normal course i.e., 2 years from the end of the assessment year in question. The contention of the assessee was that as the Assessing Officer did not specifically extend the time limit to have a longer period of limitation for completion of the assessment, therefore, the assessment as on 28-3-1988 is barred by limitation. This was considered by the Tribunal in para 41 of its order in detail. The assessee did not file his return within the time provided under the Act. Later a return was filed on 31-12-1985. As according to the Assessing Officer there was concealment of income, the Assessing Officer issued a notice under section 271(1)(c) dated 22-1-1987 which was served on the assessee on 24-1-1987. As there was no response, another letter dated 29-1-1987 was issued by the Assessing Officer specifying as many as six grounds on which additions were proposed. Then a reply was given by the assessee stating that he had approached the Commissioner for settlement. However by another letter he has stated that he had filed a revised return admitting a net profit of Rs. 16,64,338 though he did not file any such return. On further reminder a revised return was filed on 10-3-1987 declaring a net profit of Rs. 14,07,390. The Assessing Officer has issued notice basing on various seized material as well as the statements recorded from various persons connected with the sale transaction. Therefore, the Assessing Officer recorded a finding on 10-3-1987 that the case attracts the provisions of section 271(1)(c) thereby implying that an extended time provided under section 153(1)(b) is available to the Assessing Officer for completing the assessment. When a specific notice was given by the Assessing Officer stating that the case attracts the provisions of section 271(1)(c) a longer period of limitation provided under section 153(1)(b) is available and the assessment completed by the Assessing Officer was within the time provided under section 153(1)(b). Therefore, this Tribunal concluded that the assessment as framed was not barred by limitation. The said finding was based on a fact that the Assessing Officer has recorded a finding that the case attracts the provisions of section 271(1)(c). Therefore, this question is not referable question of law.

5. The second question relates to the computation of capital gains in respect of the properties held benami. This issue was considered by this Tribunal in para 54 of its order. It is an admitted fact that the assessee had purchased 2 plots of vacant land, one in the name of Nallendran Pillai and another in the name of Late Thayamma and others. In fact, the assessee had even offered capital gains in respect of these two plots in the names of benamidars, in his original return. For the first time before this Tribunal the assessee raised a contention that in view of the Benami Transactions (Prohibition) Act, 1988 capital gains relating to those plots standing in the names of benamidars, cannot be computed in the hands of the assessee. The property in question was purchased in the name of benamidars in the year 1973 and the said property was sold in the year 1983 and the assessee had received the sale consideration also. But the assessee's contention was that as the dispute relating to the computation of capital gains was pending, the provisions of Benami Transactions (Prohibition) Act would apply to the present case. Therefore, the capital gains relating to the said two plots cannot be computed to the assessee. This Tribunal negatived this claim on the ground that the transaction of purchase in the names of benamidars was in 1973 and the sale was effected in the year 1983 and the sale proceeds were also appropriated by the assessee. By the time the Benami Transaction (Prohibition) Act, 1988 came into force in 1988, the purchase and sale of benami property was completed. By the date the Act came into force, there is no dispute relating to whom the benami property belongs to. When the benami transaction has been closed in the year 1983 by the sale of this property and also the appropriation of the sale proceeds, it is not open to the assessee to claim some benefit on the basis of the said Act which was enacted in the year 1988. Further as per the latest decision of the Supreme Court in the case of R. Rajagopala Reddy v. Padmini Chandrasekharan [1995] 213 ITR 340/79 Taxman 92, the provisions of the said Act has no retrospective effect. Even on that basis the assessee is not entitled to any relief and therefore does not give rise to any referable question of law.

6. The third question relates to the claim of the assessee that proper opportunity of being heard was not given. This issue was considered by this Tribunal in para 72 of its order. The claim of the assessee was that he was not given sufficient opportunity to explain his case. Admittedly, the assessment proceedings were started on 17-8-1984 by issue of a notice under section 139(2). Only after the issue of notice under section 142(1) and after taking various adjournments the assessee has filed his return of income on 31-12-1985. Thereafter the case was posted on number of occasions and the matter was pending before the Assessing Officer till 14-3-1988 when it was finally heard and concluded the hearing. The contention of the assessee was that he filed a letter dated 8-3-1988 seeking an opportunity of being heard and, thereafter he was not given an opportunity of being heard. This Tribunal has considered this issue elaborately. After considering various decisions cited by the assessee before this Tribunal, the Tribunal concluded that the letter which the assessee has alleged to have been filed on 8-3-1988 was not a mere letter seeking an opportunity of being heard but it was an explanation filed by the assessee with reference to various statements recorded by authorities during the course of search and seizure in respect of the sale transaction of Kalmanda property. The matter was pending before the Assessing Officer all through. Even after the filing of the letter dated 8-3-1988 before the Assessing Officer, the matter was posted for hearing on 9-3-1988, 10-3-1988, 11-3-1988 and finally on 14-3-1988 and nothing prevented the assessee either from explaining his case or producing any further evidence if at all he wanted to produce. Therefore, this Tribunal has concluded that sufficient opportunity was given to the assessee and the assessee was not deprived of sufficient opportunity of being heard while the proceedings were pending before the Assessing Officer. In view of the clear finding of fact by this Tribunal, the question is not a referable question of law.

7. The next question relates to the claim of refusing the right of the assessee to cross-examine the persons whose statements were relied upon by the Assessing Officer and further the assessee's claim that non-examination of key persons such as Amarlal Kishandas and Sundaram Pillai the assessment proceedings are vitiated. This issue is also part of the earlier issue. This Tribunal has considered while considering the earlier issue this contention of the assessee also. The assessee is aware of the various statements recorded by the authorities with reference to the sale transaction of Kalmanda property and in fact reference was made by the Assessing Officer even in his earliest notices issued under the provisions of section 271(1)(c). But the assessee did not either seek for an opportunity to cross-examine the persons nor claimed the examination of any other person. When the assessment proceedings were pending, the assessee made an application for copies of the statements recorded by the authorities and the Assessing Officer has given copies of all the statements available with him in the month of January, 1988. Basing on the copies of the statements, he has filed his explanation in his letter dated 8-3-1988. Even in the said letter also except asking for an opportunity to explain the case, the assessee did not ask for an opportunity to cross-examine the persons whose statements were recorded. This claim was not made even before the first appellate authority also. Only by way of additional grounds before this Tribunal for the first time the assessee has raised this ground. When the assessee was aware of all the statements recorded by he authority and even obtained copies of the statements and when he did not show any interest to cross-examine those persons at the stage of assessment proceedings, the claim by the assessee at this belated stage, this Tribunal concluded, is only an afterthought by the assessee to wriggle out of the situation from the liability to capital gains out of the sale transaction of the property in question. Therefore, this Tribunal negatived this claim of the assessee. In so far as examination of other persons claimed by the assessee, according to the Assessing Officer they are not relevant persons to be examined for the purpose of determining the issue in dispute. The issue in dispute was about the sale consideration in respect of the Kalmanda property. For that purpose the persons named by the assessee are not relevant. In view of the findings arrived at by this Tribunal, the question is not at all a referable question of law.

8. Questions 5 to 8 relate to the conclusion of this Tribunal that the total consideration was Rs. 110 lakhs and not half of it as claimed by the assessee. This contention was considered by this Tribunal from paras 92 onwards. This Tribunal has considered all the material on record elaborately with reference to various sale agreements entered into by the assessee.

As per the finding of this Tribunal, the earlier agreements show that the sale consideration was @ Rs. 1.25 lakhs per ground as per the agreement of sale with one Srinivasulu Reddy entered into in the year 1980. The rate was @ 2.83 lakhs per ground with reference to the agreement of sale entered into on 20-12-1980 with one Amarlal Kishandas and with reference to the said agreement the assessee has even received a sum of Rs. 10 lakhs as advance. Later in March, 1982 the assessee had agreed with one Sri Arumaidurai to sell the property in dispute at Rs. 4.25 lakhs per ground and even received an advance of Rs. 2 lakhs. The assessee also quoted the price of the land at Rs. 4.5 lakhs per ground for the construction of a commercial complex for O.N.G.C. The assessee ultimately did not honour any of the earlier agreements but finally sold under the sale deeds executed on 10-8-1983. As per the sale deeds, the sale consideration was Rs. 2.10 lakhs per ground. According to the assessee's claim, he had entered into an agreement with one S. Gopal to sell the property in question at Rs. 2.10 lakhs per ground and S. Gopal in turn entered into an agreement dated 7-6-1983 for the sale of the very same property for a total consideration of Rs. 110 lakhs which works out to Rs. 4.25 lakhs per ground. This claim of the assessee that he had entered into an agreement with Gopal was not accepted by the authorities below. Even this Tribunal also after considering all the material on record, disbelieved the claim of the assessee that he had entered into an agreement with S. Gopal, who is a man of no means. Therefore, this Tribunal concluded that Gopal was interposed as an intermediate agreement holder for the purpose of avoiding capital gains tax. Therefore, this Tribunal concluded that the assessee is the beneficiary of the transaction and the total sale consideration was Rs. 110 lakhs. In fact, the assessee has even admitted that he had received over and above the stated consideration in the document but he has claimed that he did not receive the entire sale consideration of Rs. 110 lakhs. This Tribunal has concluded that the agreement with Gopal was only colourable one. Therefore, this Tribunal concluded that the assessee was the beneficiary of the total consideration of Rs. 110 lakhs and directed the Assessing Officer to compute the capital gains tax accordingly. However, in the miscellaneous petition filed by the assessee this Tribunal has directed the Assessing Officer to allow the relief while computing the capital gains in respect of any payment made to Amarlal Kishandas, over and above the refund Rs. 10 lakhs received as advance, if the same is supported by proper evidence. Therefore, the said conclusion of this Tribunal is based on the material on record and the finding is only a finding of fact and the same does not give rise to any referable question. Therefore, the questions 5 to 8 are rejected as not referable questions.

9. The next question relates to the failure to invoke the provisions of section 52(2) of the Act. According to the assessee the stated consideration is Rs. 2.10 lakhs per grounds. If it is the case of the departmental authorities that the assessee had received some amount over and above the stated consideration, then the course open to the assessing authorities to invoke the provisions of section 52(2) of the Act and determine the capital gains on the estimated market value of the property in question. As this was not done by the Assessing Officer, the proceedings are vitiated. This Tribunal has considered this aspect from paras 60 onwards. The Assessing Officer after considering the entire material on record concluded that the sale consideration was Rs. 110 lakhs basing on the evidence available on record. The total consideration of Rs. 110 lakhs is also be considered in the agreement entered into between S. Gopal and the purchaser viz. Gautam Construction. When the Assessing Officer has concluded that the agreement-holder, Shri S. Gopal is only a name-lender, the necessary inference is that the assessee is the beneficiary and the total consideration is Rs. 110 lakhs and not the stated consideration in the document. When the Assessing Officer has concluded that the total sale consideration was Rs. 110 lakhs based on the material on record, there is absolutely no need for the Assessing Officer to invoke the provisions of section 52(2). The capital gains was determined by the Assessing Officer based on the sale consideration determined as per material on record. Even during the proceedings it was even accepted by the assessee that the total consideration involved was Rs. 110 lakhs but his objection was that he did not receive the amount of Rs. 110 lakhs. When the finding of the authorities as well as this Tribunal that the agreement entered into between the alleged agreement-holder S. Gopal and the purchaser Gautam Construction was not a genuine one, the necessary inference is that the assessee is the beneficiary of the total sale consideration mentioned in the said agreement. This was even supported by various statements as well as other material on record. The finding of this Tribunal is that in the light of the evidence available on record as to the total sale consideration, therefore there is absolutely no need to invoke the provisions of section 52(2) of the Act. Therefore, the same does not give rise to any referable question.

10. In the above circumstances, the reference application is rejected.

Shri G. Santhanam, Accountant Member

1. The appeal in this case was heard by the Tribunal over a few days and at the instance of the Tribunal both the assessee and the Revenue have filed written submissions running to several pages which are on record. The assessee upon receipt of the order of the Tribunal dated 30-6-1994 filed a Miscellaneous petition and has made written submissions as well as oral submissions. One of the submissions in the Misc. Petition was that certain points or aspects or submissions made before the Tribunal were not considered by the Tribunal in its order dated 30-6-1994, however, the Tribunal took the view that points not specifically dealt with should be deemed to have been decided against the assessee. The Misc. Petition was ultimately dismissed.

2. In this backdrop, I have carefully gone through the order proposed by the learned Judicial Member. With very great respect I am unable to agree with his finding that the issues involved in the questions raised by the assessee are questions of fact only, not giving rise to any question of law.

3. The first question is about the limitation. There was a search in the assessee's residential and business premises on 16-3-84 and in the course of the search the authorities recovered certain documents and agreements. The assessee filed his return of income on 31-12-1985.

Copies of the statements recorded in the course of the search were provided to the assessee only on 20-1-1988. But these copies were available with the Department. Therefore it was contended before the Tribunal that when the assessee filed his return on 31-12-1985 all the materials on record were available with the Department and therefore, the assessment should have been completed with the normal time allowed under the provisions of section 153. The Assessing Officer's notice on 21-1-1987 stating that the assessee's case attracted the provisions of section 271(1)(c) was only a pretence to extend the time limit because, by that time the Assessing Officer had not provided the copies of the statements recorded in the course of the search and other documents to the assessee nor he had by then heard the assessee on the issues involved. Therefore, there was no basis at that stage for him to reach a prima facie conclusion that the provisions of section 271(1)(c) would stand attracted. The assessee also relied on the decision of the Calcutta High Court in the case of M.B. Mercantile Co. v. CIT [1988] 169 ITR 201/35 Taxman 169.

4. These contentions were not accepted by the Tribunal in its original order dated 30-6-94. The Misc. Petition on the issue was also rejected. In the circumstances, in my opinion, the first question gives rise to a mixed question of law and fact and therefore it is fit for reference.

5. The second question concerns the interpretation of the provisions of Benami Transactions (Prohibition) Act, 1988 which has undergone more than one interpretation in the hands of the Supreme Court and its impact on the facts of the case will certainly give rise to a question of law fit for reference.

6. The third question is whether a proper opportunity of being heard was given to the assessee or not. Statements were recorded in this case as early as on 21-8-1984. But copies were furnished to the assessee only on 20-1-1988. By this letter dated 8-3-1988 the assessee contested and objected to the averments contained in the statements recorded by the Department and had concluded his letter by asking for an opportunity to explain his case and to give further explanation. This letter was received by the Department and the assessee was heard on 9-3-88, 10-3-88, 11-3-88 and finally on 14-3-1988. It may be stated in this context that the statements were recorded in the absence of the assessee but they were used against the assessee in the assessment. Either the statement should be recorded in the presence of the assessee or, if it is recorded otherwise the assessee should be given an opportunity to cross examine the persons who have deposed against the assessee. Whether mere posting of the case on a few days for hearing without making available the persons from whom the statements were recorded would constitute sufficient opportunity to the assessee, is a debatable issue. The Assessing Officer in his order (para 10.5 page 8 of his order) had stated that he would be dealing with the assessee's contention and objections contained in his letter dated 8-3-88, but he had not dealt with the same in any part of his order. Further, in this case the draft order was dated 28-3-1988 and the assessment order also was of the same date and the I.A.C. while granting approval to the order on 30-3-1988 had remarked that it would have been better if the contentions of the assessee had been met. The Misc. Petition on that score also stood rejected by the Tribunal. In such circumstances, in my humble opinion the question about the lack of opportunity gives rise to a mixed question of law and fact and, therefore, it is fit for reference.

7. Question No. 4 is an allied question to Question No. 3 and therefore, it has to be referred.

8. Questions 5 to 7 relate to the conclusion of the Tribunal that the total consideration was Rs. 110 lakhs and not half of it as claimed by the assessee and that the assessee is the sole beneficiary of the entire consideration. The issues were considered by the Tribunal, from para 92 onwards of its order dated 30-6-94. It was contended that the view that the actual sale consideration was Rs. 110 lakhs and difference between the registered consideration and the said sum was pocketed by the assessee was taken on the basis of the basis of the statement of certain persons especially Shri Ramesh and Shri Subramania Pillai. It is the contention of the assessee that these statements were not corroborated by other witnesses who were examined by the officers of the Department in the course of the search in the assessee's premises on 16-3-84 and thereafter. It was also pointed out that no cash or unexplained investment to the extent was noticed. The statements recorded as early as on 16-3-84 were made available to the assessee only on 20-1-88. The principle of audi alteram partem was not observed. Adequate opportunity was not given to the assessee to cross examine these persons or to test the veracity of their statements. It was contended that there was no material to connect the assessee with the impugned amount. It was also pointed out that the statement of Ramesh and Subramania Pillai lacked corroboration. In one place Ramesh stated that after the drafts were encashed the entire amount was taken away by Shri Govindaswamy, but in another place he stated that he himself and Govindaswamy left together. Both he and Shri Subramania Pillai said that the taking away cash by Sri Govindaswamy was witnessed by Advocate Shri Dasappan and the Bank Manager but both of them had denied the same. As a matter of fact Sri Dasappan was emphatic that he was not at all present in the bank. Shri Subramania Pillai also is not very clear about the passage of money and thus consistency is lacking in these statements. It was pointed out that from the statements it was not clear that at any point of time Sri Govindaswamy was left alone with the cash encashed from the bank. Ramesh also had submitted that he was present all the time and was handling the entire transaction and dealings with all the agreement holders and it was he who settled the claim of various agreement holders, including Sri Amarlal Kishandas. Therefore, it was contended that the needle of suspicion could as well be upon Ramesh. It was also contended that there were atleast two holders of earlier agreements in respect of the very same property and out of that Amarlal Kishandas was in possession of the original title deed and he had gone to the Court over the agreement and if he had come to know that the real consideration of Rs. 110 lakhs, it was inconceivable that he was just satisfied with Rs. 12 lakhs in draft and Rs. 7 lakhs in cash. Therefore, it was urged that it should be held that the consideration must have been shared by various persons and not by Govindaswamy, alone. The assessee urged before the Tribunal that if proper weightage had been given to the above facts the Tribunal could not have come to the conclusion that the assessee is the sole beneficiary of the transaction of Rs. 110 lakhs. In view of these contentions which are found in the written submissions filed before the Tribunal in the course of the original hearing of the case as well as in Miscellaneous Petition. I am of the considered view that a mixed question of law and facts do arise as has been suggested in the questions 5 to 7.

9. Question No. 8 is also related to the computation of the capital gains. There are three parts - (a) Rs. 7 lakhs stated as given by Ramesh to Gopal, (b) Rs. 7 lakhs draft given to Amarlal Kishandas and (c) Rs. 40 lakhs balance remaining. As far as the first sum of Rs. 7 lakhs is concerned, Sri Gopal had denied having received the same from Ramesh. But Ramesh's statement is to the contrary. As far as the second Rs. 7 lakhs is concerned, which is a draft encashed Subramaniam Pillai stated that the same was given in cash to Amarlal Kishandas, but Amarlal Kishandas does not appear to have been questioned by the search party. In respect of the balance of Rs. 40 lakhs the assessee points out that the Assessing Officer believed at para 10.60 of page 11 of the assessment order that Shri Govindaswamy had entered into an agreement with Shri Sundaram Pillai a relative and a substantial shareholder in Century Flour Mills of which the assessee was the Managing Director for the purchase of his shares for Rs. 92 lakhs, that out of this sum a sum of Rs. 17.95 lakhs was given by cheque and that the balance of Rs. 74.64 lakhs was given in cash and part of this cash element came from the Kalmanda transaction. Although he refers to certain developments over the matter and the same being taken to court, he proceeds on the basis of assessee having admitted the same. The fact is that Shri Sundaram Pillai was never examined on this aspect at all and when he was recently examined by the department, he flatly denied having received any such cash. Later events show beyond doubt that no such cash was given to Sundaram Pillai and ultimately the shares of Sundaram Pillai group were transferred to Ramaswamy Udayar group and not to the assessee. Ramaswamy Udayar group paid the entire money by way of bank drafts and details of such payments are available. The shares were transferred by Sundaram Pillai group in a compromise between him and Sri Govindaswamy with Ramaswamy Udayar acting as the mediator and in the bargain purchasing the shares for his group. All these would have come to light had the Assessing Officer examined Sri Sundaram Pillai. The reasons which promoted the Assessing Officer not to examine the said person are not known. Therefore, the very basis on which the Assessing Officer proceeded that the cash portion of the sale consideration was utilised by the assessee in the purchase of shares from Sundaram Pillai and so he was the beneficial enjoyment of the said sum is not supported by facts. (pages 100 and 101 of the written submissions filed by the assessee before the Tribunal). It is now urged before us that if proper weightage is given to the points made in the written submissions, the Tribunal could not have come to the conclusion it has reached in its order dated 30-6-94. In my considered view these are not mere ifs and buts, whether proper weightage has been given to the above contentions would itself form a mixed question of fact and law.

10. This apart, in the context of allegations of non-compliance of the principles of natural justice at the time of the assessment, it is a moot point whether the conclusion reached by the Tribunal as against the assessee would remain only as questions of fact. In my considered opinion all the above questions are mixed question of law and fact and therefore, a reference would lie.

11. Question No. 9 is purely academic and therefore, I agree with the learned Judicial Member that no reference would lie on the same.

REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT The order in the reference application on which difference of opinion is expressed by the Members of the C-Bench of the Tribunal, Madras is placed before the Hon'ble President of the I.T.A.T. for action under section 255(4) of the Income-tax Act, 1961.

Points of difference In the opinion of the Judicial Member none of the questions are fit for reference to the High Court of Madras.

In the opinion of the Accountant Member, except question No. 9. All other questions are fit for reference as mixed questions of law and facts.

THIRD MEMBER ORDER

1. As there is a difference of opinion between the Hon'ble Judicial Member and the Hon'ble Accountant Member, the Hon'ble President of the Income-tax Appellate Tribunal has nominated me as Third Member under section 255(4) of the Income-tax Act, 1961 to resolve the points of difference in this reference application that has been referred to me as below :

1.2 In the opinion of the Judicial Member none of the questions are fit for reference to the High Court of Madras. In the opinion of the Accountant Member except question No. 9, all other questions are fit for reference as mixed questions of law and facts.

1.3 Those questions are respectively in seriatum mentioned below :

(1) "Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the assessment order dated 28-3-1988 for the assessment year 1984-85 was not barred by limitation ?"

(2) "Whether on the facts and in the circumstances of the case, the Income-tax Tribunal was right in holding that on the sale of properties held benami in the names of Nallendran Pillai and late Thaimaman and others, capital gain arises in the hands of the assessee the real owner in spite of the provisions of the Benami Transactions (Prohibition) Act ?"

(3) "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was given a proper opportunity of being heard ?"

(4) "Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in refusing the assessee's right to cross examine the persons whose statements were relied on by the ITO against the assessee and further vitiated by its failure to examine key persons including Shri Amarlal Kishandas and Sundaram Pillai whose testimony was essential to ascertain the true nature of the transaction in Kalmanda property ?"

(5) "Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in rejecting the contention of the assessee that a sum of Rs. 110 lakhs was only connected to the transaction of sale of the Kalmanda property and did not represent the sale consideration without considering the relevant facts, materials and evidence ?"

(6) "Whether on the facts and in the circumstances of the case the findings of the Tribunal that the assessee had sold the Kalmanda property for Rs. 110 lakhs and that he is assessable to the capital gains tax on the same apart from what is specifically excluded by the Tribunal is vitiated ?"

(7) "Whether on the facts and in the circumstances of the case the finding of the Tribunal that Shri Amarlal Kishandas was paid only a sum of Rs. 12 lakhs in settlement of his account with the assessee is vitiated by its failure to consider all the relevant facts, materials, and evidence ?"

(8) "Whether on the facts and in the circumstances of the case, the finding of the Tribunal that the assessee was the sole beneficiary of the cash element relating to the sale of the Kalmanda property in its entirety is vitiated by its failure to consider all the relevant facts, materials and evidence ?"

(9) "Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the failure to invoke section 52(2) of the I.T. Act did not vitiate the assessment ?"

2.1 Facts of the case relevant are briefly these : The assessee is an individual. As the Managing Director of M/s. Century Flour Mills P. Ltd. he was getting remuneration from the said company. He was also having income from property and income from investments. For the assessment year 1984-85, as the assessee failed to file his return, a notice was served and after seeking number of adjournments a return of income was filed on 31-12-1985 declaring a total income of Rs. 9,10,766.

2.2 There was a search on 16-3-1984 in the assessee's residence and also his office in the company's premises. During the search, certain documents were seized and statements were recorded. The statements show that the assessee has finalised a transaction of sale of what was known as Kalmanda property belonging to him and to the company and the real sale consideration was very much higher than the consideration declared in the sale deed. As there were material to show suppression of receipts and consequential income, after recording the said facts a notice under section 271(1)(c) was issued on 22-1-1987 which was served on the assessee on 24-1-1987. For the said notice, there was no reply. The Assessing Officer issued another letter dated 29-1-1987 pointing out, inter alia, that the assessee had failed to account for (i) the commission received from Suvir Enterprises, (ii) the extra consideration received on the sale of Kalmanda property, (iii) the investments made in the purchase of jewellery, (iv) the expenditure incurred on daughter's marriage and (v) the dinner parties given in connection with his election as a candidate for the Madras Race Club. To this, the assessee replied in his letter dated 9-2-1987 stating that he had approached the CIT for settlement of accounts for the assessment year 1978-79 upto date. Again he filed another letter dated 3-3-1987 in which he has stated that he had filed a revised return admitting a net profit of Rs. 16,64,338, but did not actually file the return. On being reminded by a letter dated 9-3-1987 by the Assessing Officer, the revised return was filed on 10-3-1987 declaring a net profit of Rs. 14,07,390 which is at variance with his earlier letter. As the income declared in the revised return was at variance with the original return, the Assessing Officer recorded this fact after providing the assessee an opportunity of being heard and extended the time for completing the assessment, as the material on record required further investigation. The Assessing Officer after conducting further enquiry into the matter framed the assessment on 28-3-1988.

2.3 The main issue relates to the capital gains arising out of the sale of the what is known as Kalmanda property. The brief facts relating to this property are as follows : This property admeasuring about 27 grounds is situated on the Nungambakkam High Road. This property was originally purchased by Smt. Velugotti Lakshmi Pappaya Raogaru alias Srideviamma, under a deed of sale dated 4-2-1942. It was covered by certain old dilapidated building and got it demolished thereby converting the building site into a vacant land, which was divided into four convenient plots 1 to 4 after obtaining the necessary sanction. In the year 1973 the said property, in four plots were sold by Smt. Srideviamma, to the following parties :

P. Govindaswamy                        :  5 grounds 
N. Nallendran Pillai                   :  2 grounds & 2000 sq.ft. 
Late N. Thaimaman & others             :  5 grounds 
M/s. Century Flour Mills               :  3 grounds 2132 sq.ft. 
 
 

It is an admitted fact that the assessee was the purchaser of three plots, one in his name and the other two in the name of his benamidars and one by M/s. Century Flour Mills. This position was accepted by the Settlement Commission also by its order passed in July, 1979 in the case of Shri Govindaswamy, the assessee. The total extent of the property covered by the above four plots was about 17 grounds 1732 sq.ft.

2.4 The assessee purchased, under an agreement of sale dated 16-3-1982, an extent of 8 grounds 1413 sq.ft. from Srideviamma. This property was purchased by the assessee under a compromise in which the assessee had given up his right to his half share in Odeon Theatre in favour of Smt. Srideviamma, who was having title to the other half in the said theatre. As per the agreement the total consideration was mentioned at Rs. 12,75,285 of which the assessee was shown to have paid a sum of Rs. 8,75,285, leaving a balance of Rs. 4 lakhs to be paid at the time of registration of the sale deed. The material on record relating to the dispute regarding the Odeon Theatre and the compromise between the assessee and Srideviamma shows that the assessee's interest in the Odeon Theatre was sold to Srideviamma for a total consideration of Rs. 20 lakhs. As the said Smt. Srideviamma was not having liquid resources to pay the said sum of Rs. 20 lakhs, she agreed to sell the land in an extent of 8 grounds 1413 sq.ft. situated at Nangambakkam High Road, Madras for a sum of Rs. 24 lakhs. Setting off of the sum of Rs. 20 lakhs payable by the said Srideviamma towards the half share in the Odeon Theatre as per the compromise, the assessee was to pay Rs. 4 lakhs at the time of registration.

2.5 The assessee, Shri Govindaswamy, was authorised by M/s. Century Flour Mills to sell the land purchased by it. Since 1980 the assessee was exploring the possibilities of selling the lands standing in his name, in the name of his benamidars and that of Century Flour Mills. The assessee entered into an agreement on 20-12-1980 for the sale of the above said property with one Amarlal Kishandas for a total consideration of Rs. 50 lakhs and the assessee had received a sum of Rs. 10 lakhs as advance. As per the said agreement, the sale price works out to Rs. 2,83,167 per ground. Later, the assessee had negotiated for the sale of the above said property, together with another property admeasuring 8 grounds 1434 sq.ft. with one Arumaidurai at the rate of Rs. 4.25 lakhs per ground in March, 1982 on behalf of one Mr. Jain of Calcutta and received a sum of Rs. 2 lakhs as advance. In both the above cases, the assessee did not honour the commitment, as the prices of land in the city were registering a steep rise. The assessee also negotiated with O.N.G.C. for the construction of a commercial complex. In the negotiations on behalf of the assessee, the site was offered to the O.N.G.C. at a price of Rs. 4.5 lakhs per ground. But the transaction did not fructify. Ultimately, the entire site of about 27 grounds belonging to the assessee, M/s. Century Flour Mills and the property purchased by the assessee from Smt. Srideviamma under an agreement of sale, was sold to M/s. Gotham Construction Company represented by Shri N. Ramesh under four registered sale deeds executed on 10-8-1983. According to the assessee, the property was sold at the rate of Rs. 2.10 lakhs per ground which was also the consideration stated in the documents and accordingly the assessee computed the capital gains.

2.6 The Assessing Officer, after considering various statements recorded during the search that took place on 16-3-1984 and thereafter, held that the total consideration for the sale was Rs. 110 lakhs. Though it was contended by the assessee that there was an agreement between the assessee and one S. Gopal dated 5-5-1983 whereunder it was agreed to sell the property at the rate of Rs. 2.10 lakhs and another agreement dated 7-6-1983 between S. Gopal and M/s. Gowtham Constructions, where the total consideration was Rs. 110 lakhs, the Assessing Officer ignored the agreement said to have been entered into between the assessee and S. Gopal, because, first, the said Gopal was a person of no means and secondly it was unbelievable that the said agreement was entered into in the regular course of a transaction of sale. Hence ignoring the said agreement of sale, the Assessing Officer computed the capital gains, taking the total consideration as Rs. 110 lakhs. The Assessing Officer also took into consideration the statement of the said Gopal and also the mode of payment of the extra consideration (not specified in the sale deeds) by way of demand drafts in the name of S. Gopal which were encashed by Govindaswamy. The Assessing Officer also relied upon the papers seized at the time of search where certain notings were made which refers to the total consideration of Rs. 110 lakhs regarding the transaction, though the assessee denied the knowledge of those papers which were in fact found in the drawer of the assessee's table in his office. The Assessing Officer also relied upon the statement of the assessee filed before the Settlement Commission, showing the availability of cash and payment of cash to one Sundaram Pillai on 6-10-1983 for purchase of his shares in Century Flour Mills. Basing on the above said material, the Assessing Officer computed the capital gains (long term) in respect of the property purchased by the assessee in the year at Rs. 52,76,388. Though the assessee had claimed that this property purchased under agreement is also part of the agreement of sale entered into with S. Gopal, the agreement of sale was ignored by the Assessing Officer, who computed the total consideration after deducting the cost for the purpose of short term capital gains. Though it was contended by the assessee that the assessee has not acquired any rights over the land and hence no capital gains could be computed in respect of the said transaction, the Assessing Officer overruled those objections. Hence, he computed the short term capital gains at Rs. 11,90,065.

2.7 Aggrieved by the order of assessment, the assessee preferred appeal to the CIT(A). As appeals were filed both by the assessee and M/s. Century Flour Mills, the CIT(A) considered the issue relating to capital gains of the Kalmanda property in the appeals filed by M/s. Century Flour Mills which was followed in the appeal filed by the assessee. Before the CIT(A) the assessee reiterated all the contentions raised before the Assessing Officer. Apart from that, it was also contended that the burden to prove that there was understatement of sale value is on the department and the department had not discharged the burden. Another contention was that even if some other persons had received the amounts over and above the declared amounts in the sale deeds, such amount cannot be said to belong to the assessee. Another contention was that 8 grounds 1434 sq.ft. of land was purchased under an agreement of sale and the assessee had not entered into an agreement with a view to get any capital gains. Hence no capital gains tax can be levied in respect of that transaction and even if the assessee bad received certain amount over and above the amount for which the assessee had agreed to purchase, the same should be treated as capital receipt. The assessee also contested the computation of the extra amount in relation to the property purchased by M/s. Century Flour Mills, of which the assessee was the Managing Director.

2.8 The CIT(A) considered all the contentions raised before him. He also went into the applicability of section 52(2) of the Income-tax Act. The CIT(A) referred to and relied upon the observations of the Assessing Officer that even in the year 1980 the assessee agreed to sell the disputed property to Shri Amarlal Kishandas at the rate of Rs. 2,82,167 per ground, that similar agreement was entered into with T. Arumaidurai in March, 1982 for the sale of the land at Rs. 4.25 lakhs per ground, that the assessee had quoted the price of the land at Rs. 4.5 lakhs per ground as per the statement of J. S. Rajasingh, Engineer, when there was a proposal to put up constructions for O.N.G.C., and M/s. Gowtham Constructions represented by Shri N. Ramesh finally purchased the property for a sum of Rs. 110 lakhs, which works out to about Rs. 4.20 lakhs per ground. The CIT(A) also referred to the statements of the persons recorded during the search and thereafter, which reveals that Shri S. Gopal, the agreement-holder was a man of no means having a monthly income of about Rs. 200 to Rs. 500. He has stated that he has signed an agreement without knowing the contents since he had known the assessee for the last 20 years and he was promised a commission of Rs. 40,000 by Shri M. A. Subramanya Mudaliar, a broker. He also stated that he had signed on two drafts for which he was paid a brokerage of Rs. 1,000 and the amount encashed was taken away by the assessee. Shri M. A. Subramanya Mudaliar, the broker who had finalised the transaction between the assessee and M/s. Gowtham Constructions had stated that the sale of the property was for a sum of Rs. 110 lakhs and the transaction was settled by him between Shri N. Ramesh of M/s. Gowtham Constructions and the assessee. The CIT(A) also referred to the statements of Andhra Bank Manager, Main Branch, Lingichetty Street, who has deposed that the beneficiary of the drafts has left the bank after signing of the drafts and the amount was collected and taken away by two other persons, namely P. Govindaswamy and N. Ramesh, who had identified the beneficiary. The CIT(A) also held that the provisions of section 52(2) of the I.T. Act are applicable as the conditions stipulated therein are complied with. The stated consideration as per the sale deeds executed by the assessee was at the rate of Rs. 2.10 lakhs per ground, whereas the evidence showed that the total consideration paid by the purchasers was Rs. 110 lakhs, which works out to about Rs. 4.20 lakhs per ground. The CIT(A) also gave a categorical finding that the assessee was guilty of tax evasion since he had intended to evade taxes through devising a strategy in which an intermediary, Shri Gopal, was deliberately roped in with a view to show that he had received only half of the payment. There is not only documentary evidence to establish that the sale value of the total land was at Rs. 110 lakhs, but also direct evidence to prove that the entire amount of money was paid to the assessee. There are eye witnesses who have made statements under oath that full payment was made only to the assessee and that the said Shri Gopal had received only a sum of Rs. 1,000 or so as and by way of commission. Therefore, the CIT(A) upheld the view taken by the Assessing Officer.

2.9 However, the capital gains in respect of the property standing in the name of Century Flour Mills was directed to be deleted. The CIT(A) also directed the Assessing Officer to find out the actual cost at which the property was purchased by the assessee from Smt. Srideviamma under an agreement dated 16-3-1982 (wrongly typed as 19-3-1982), as in the agreement the cost of the property was mentioned at Rs. 12,75,285, though it was later declared as Rs. 24 lakhs. The effect of the order of the CIT(A) is that the long term capital gains in respect of the three plots purchased by the assessee in his name and in the name of his benamis was confirmed. The long term capital gains relating to the plot purchased by M/s. Century Flour Mills was deleted. In so far as the capital gains arising in respect of the property purchased under the agreement of sale, the issue was remitted back to the Assessing Officer for fresh consideration regarding its purchase price.

2.10 The assessee being aggrieved has preferred appeal to this Tribunal. To the extent of deletion of the capital gains relating to the part of Kalmanda property purchased by M/s. Century Flour Mills, the Revenue has preferred the other appeal.

2.11 In so far as the appeal giving rise to this Reference Application is concerned, the Tribunal, in sum and substance, held as below : On the facts and in the circumstances of the case assessment order dated 28-3-1988 for the assessment year 1984-85 was not barred by limitation. On the sale of properties held benami in the names of Nallendran Pillai and late Thaimaman & others, capital gains arose in the hands of the assessee, the real owner. The provisions of the Benami Transactions (Prohibition) Act has no application, much less retrospectively, to the transactions involved since they were completed much before the introduction of the said Act. The assessee was given proper opportunity of being heard. The Tribunal rejected the assessee's claim to cross-examine the persons whose statements were relied on by the Assessing Officer for the reason that it cannot be raised before the Tribunal when it was not raised before the CIT(A). The assessee's contentions that a sum of Rs. 110 lakhs was only connected to the transaction of sale of Kalmanda property and did not represent sale consideration are not correct. The assessee had sold the Kalmanda property for Rs. 110 lakhs and that he is assessable to capital gains tax on the same. Shri Amarlal Kishandas was paid only a sum of Rs. 12 lakhs in settlement of his accounts with the assessee. The assessee was the sole beneficiary of the cash element relating to the sale of the Kalmanda property in its entirety. The failure to invoke the provisions of section 52(2) of the Income-tax Act has not vitiated the assessment.

2.12 The assessee thereafter filed miscellaneous application under section 254(2) of the Income-tax Act challenging the order of the Tribunal as the one wherein mistakes have crept into it as apparent from record. After hearing the parties, the Tribunal dismissed it on 10-11-1995. Consequently the assessee has come on reference application seeking to refer the questions stated to be of law as in paragraph 1 referred to above. While there was no difference of opinion between the learned Members both in the second appeal as well as in the miscellaneous application therein, it arose in the Reference Application wherein the learned Judicial Member opined that none of the questions sought for reference are referable to the High Court whereas the learned Accountant Member viewed that all questions except question No. 9 are fit for reference as mixed questions of law and facts. Hence this reference to this third Member by the Hon'ble President as stated in para 1 above.

3.1 The learned counsel for the assessee submitted that : In regard to the first question on the point of limitation, pages 92 to 94 of the paper book may be seen at paragraphs 1(a) thereunder to demonstrate that the assessment is invalid. This aspect of the matter has been discussed in pages 31 to 42 of the order of the Tribunal in the appeal, the paragraphs being 41 to 53 dealing with the issue in detail apart from pages 1 and 2 of the miscellaneous application. This is also discussed in the statement of facts furnished before the Tribunal in the reference application at pages 140 to 142 of the paper book. Even after issue of notice under section 271(1)(c) on 22-1-1987 the Assessing Officer wrote to the assessee on 29-1-1987 proposing to finalise the assessment on a certain basis, the very basis of the assessment completed on 28-3-1988 vide Assessing Officer's letter dated 29-1-1987 addressed to Govindaswamy contained at pages 111 and 112, which is also ref erred to in line 13 at para 46 in page 36 of the paper book, which is the order of the Tribunal in the appeal giving rise to this reference application. Hence notice under section 271(1)(c) was not issued with a view to extend the time limit for completing the assessment. After the hearing on 16-3-1987 the next date of healing was 19-1-1988 vide page 113 of the paper book, which is the assessment order and there was no evidence of any investigation during the period. Hence extension of time limit was only a pretense. Therefore, the decision in the case of M.B. Mercantile Co.'s case (supra) would apply. That apart the recent decision in the case of Kumar Jagdishchandra Sinha v. CIT [1996] 220 ITR 67/86 Taxman 122 (SC) and also the decision in CIT v. Dhariwal Sales Enterprises [1996] 221 ITR 240 (MP) holding that the provisions of the Income-tax Act have to be construed strictly and that negligence on the part of the authorities cannot be countenanced for construing provisions of limitation would also apply. All statements were recorded even before 29-1-1987 and that only copies thereof were not granted till January, 1988 besides the fact that the investigation was over before 29-1-1987. In effect, the order of the Accountant member allowing the reference application the relevant portions being at pages 201 and 202 of the paper book at para 3 & 4 is relied upon.

3.2 On the other hand, the learned Representative for the Revenue countered, to the same extent as submitted before the Tribunal in the reference application by also relying upon the order of the Judicial Member who has rejected the reference application, the relevant portions being at pages 191 and 192 of the paper book at para 4.

3.3-1 Rival submissions heard and relevant orders read. On the first point of limitation, this issue is dealt with elaborately in the operative paragraphs from 44 to 53 of the order of the Tribunal in the appeal, while it is dealt with at paragraphs 191 to 192 of the order of the Judicial Member and 201 to 202 of the order of the Accountant Member in the reference application. The plea of the Revenue is that the finding of the Tribunal is based on facts and no question of law arises from the finding of the Tribunal. The Tribunal has considered while deciding this issue the following facts in detail viz. the search had taken place on 16-3-1984 in the premises of the assessee where statements and documents regarding Kalmanda property were seized and recorded. No return was filed by the assessee for this assessment year. The Assessing Officer issued notice and posted the matter for hearing on 19-1-1985. After several reminders, the assessee filed his return on 31-12-1985 declaring a total income of Rs. 9,10,766 and proposing to file a revised return after collecting some more details. As the assessee did not file revised return, the Assessing Officer from the material on record was satisfied that there was concealment of income and issued notice under section 271(1)(c) on 22-1-1987, even when the assessment proceedings were pending, and served it on 24-1-1987. As there was no response to that penalty notice, the Assessing Officer by his letter dated 29-1-1987 specified to the assessee the additions proposed to be made by him. The assessee filed a reply dated 9-2-1987 stating that he was going to the CIT for settlement. Again the assessee filed a letter dated 3-3-1987 stating that he had filed a revised return admitting a net profit of Rs. 16,64,338, but in actuality did not file any revised return. Being reminded of these facts, a revised return was filed on 10-3-1987 declaring a net profit of Rs. 14,07,390 which is different from the figure of Rs. 16,64,338 which was declared in his letter dated 3-3-1987. Thereafter on 10-3-1987 the Assessing Officer recorded a finding that as per the revised return, the income returned is more by nearly Rs. 5 lakhs over the income returned originally on 31-12-1985 and that, therefore, the assessee had committed default under section 271(1)(c) of the Act. From these facts the Tribunal came to a factual finding that the Assessing Officer has clearly followed the procedure laid down in the provisions of section 153(1)(b) read with section 271(1)(c) of the Act to avail of a longer period for completion of the assessment. The decisions rendered in the cases of M. B. Mercantile Co., Pawankumar Dalmia, P.M. Shah, Varkey Chacko respectively by Hon'ble High Courts of Calcutta, Kerala and Bombay as well as the Hon'ble Supreme Court were all distinguished on facts by the Tribunal.

3.3-2 The first contention of the assessee is that the first return of income filed on 31-12-1985 was only a provisional one and hence no concealment can be detected from a provisional return. his is a case in which even after search on 16-3-1984 no return was filed by the assessee till 31-12-1985, in spite of several notices and reminders being sent to the assessee. Though in the return filed on 31-12-1985, the assessee had proposed to file a revised return, delay in filing such a return will not render the first return a provisional one. In fact, though hearings were started from 19-1-1985 and many adjournments were taken, the assessee did not file any revised return as proposed by him. Only after issue of notice under section 271(1)(c) served on 24-1-1987 and subsequent letter dated 29-1-1987 proposing additions, the assessee wrote a letter dated 9-2-1987 stating that he was going to the CIT for settlement. Again a letter dated 3-3-1987 was filed proposing to file revised return showing net profit of Rs. 16,64,338, but it was not done. On being reminded, the assessee ultimately filed revised return on 10-3-1987 declaring net profit of Rs. 14,07,390 which is at variance with the earlier figure proposed. These facts show that the assessee was extremely reluctant to file any return, at all and have done so after repeated notices and letters from the Department. Taking the original return as a valid one and initiating action under section 271(1)(c) is correct on the part of the Assessing Officer. 3-3-3 The next contention of the assessee is that even after issue of notice under section 271(1)(c) the Assessing Officer wrote to the assessee on 29-1-1987 proposing to finalise the assessment proceedings and that, therefore, notice under section 271(1)(c) was issued with a view to extend the time limit. The stand of the Revenue is that this is a mere presumption not borne out by facts. Notice under section 271(1)(c) was issued on 22-1-1987 and served on 24-1-1987. Hence the provisions of section 153(1)(b), read with section 271(1)(c) came into effect from service of notice. The Assessing Officer's letter dated 29-1-1987 proposing certain additions is only in the nature of several notices and reminders sent to the assessee from time to time to give him an opportunity of representing his case.

3.3-4 Another contention of the assessee is that reliance on the decisions in the cases of Kumar Jagdish Chandra Sinha (supra) and Dhariwal Sales Enterprises (supra) to allege that the notice under section 271(1)(c) was a pretence to extend the time limit. The Revenue vehemently contended that in the decision of the Supreme Court cited supra there was a finding of fact that the Assessing Officer did not initiate proceedings under section 271(1)(c) within the period of 4 years prescribed by section 153 (1)(a)(z) nor had he made any order or record or note in the relevant file indicating that this is a case falling under section 271(1)(c) of the Act. Therefore, it had to be held that the extended time limit of 8 years envisaged under section 153(1)(b) does not apply to the case. While so, in the instant case the Assessing Officer initiated proceedings under section 271(1)(c) on 22-1-1987 and served the notice on 24-1-1987 even when the assessment proceedings were pending. Hence this is well within the time for initiating penalty proceedings as prescribed under section 153(1)(a)(1). Actually the ratio decidendi of the Supreme Court cited supra comes to the aid of the Department to establish that where the proceedings are initiated within time, the assessment would not be barred by limitation. In the decision of the Hon'ble Madhya Pradesh High Court cited supra, the issue was whether in a case where the Assessing Officer invoked the provisions of section 142(2C) and the assessee informed on 22-8-1985 that the audit report will not be available, the Assessing Officer was justified in completing the assessment on 3rd of September, 1985. In these circumstances the High Court held that as the assessee's letter regarding non-availability of audit report was received by the Assessing Officer on 22-8-1985, the Assessing Officer should have completed the assessment on that date and not waited till 3-9-1985 to complete the assessment. In such circumstances, the assessment was held to be time barred. The facts in the case before the Madhya Pradesh High Court are totally different from the facts of the instant case and that, therefore, the ratio decidendi does not in any way apply to the instant case.

3.3-5 The last contention of the assessee is that though all the statements were recorded before 21-1-1987, the copies of the same were given to the assessee in January, 1988. The Revenue countered that the assessee asked for copies of the statements only on 20-1-1988 and the same were given to the assessee on the very same date. On 20-1-1988 the assessee was allowed to inspect the seized materials also. Hence the Department cannot be mainly held responsible for furnishing the statement at a later date when such request was not made by the assessee earlier.

3.4 A close perusal of the facts of the case on record in the light of the case laws relied upon, I am of the considered opinion that the stand of the Revenue has substantial force. The contention of the assessee was that the Assessing Officer did not record a finding extending the time limit for completion of the assessment. In support thereof, the decision in the case of M. B. Mercantile Co. (supra) was relied upon by the assessee. The Tribunal considered the question of limitation from paragraph-41 onwards of its order in the appeal including the decision relied upon by the assessee at paragraph 49 therein. That apart in para 50 of its order in the appeal the Tribunal gave a categorical finding that the Assessing Officer issued notice by letter dated 29-1-1987 bringing to the notice of the assessee the various items in respect of which suppression of income was made by the assessee whereby the provisions of section 271(1)(c) attracted. Since there was no response from the assessee disputing the various allegations referred to in the letter dated 29-1-1987, the Assessing Officer recorded a finding on 10-3-1987 that the case attracts the provisions of section 271(1)(c), thus requiring to avail the extension of time provide under section 153(1)(b) of the Act. The said finding is clearly in conformity with the decision of the Calcutta High Court in the case of Mercantile Co. (supra,). The Tribunal concluded that the assessment as framed was not barred by limitation. Such finding was based on the fact that the Assessing Officer has recorded a finding that the case attracted the provisions of section 271(1)(c) of the Act. Hence this is not a referable question of law.

4.1 In regard to the second question on the point whether the Tribunal was correct in holding that on the sale of properties held benami in the names of Nallendran Pillai and late Thaimaman and others, capital gain arose in the hands of the assessee, the real owner, in spite of the provisions of the Benami Transactions (Prohibition) Act, the learned counsel for the assessee submitted that : Page 97 of the paper book may be seen at paragraph 'C' thereunder to demonstrate that the stand of the assessee is correct. This aspect of the matter has been discussed at page 44 of the order of the Tribunal in the appeal, i.e., the paragraph being 58, dealing with the issue in detail, apart from page 2 at paragraph 7 of the miscellaneous application. It is also discussed in the statement of facts furnished before the Tribunal in the reference application at pages 140 to 143. The case of R. Rajagopala Reddy (supra) has not overruled the case of Mithilesh Kumari v. Prem Behari Khare [1989] 177 ITR 97 (SC). It was held that suits already filed before the coming into force of the Benami Transaction (Prohibition) Act were saved. This was explained in the case of Nand Kishore Mehra v. Sushila Mehra [1995] 215 ITR 218/81 Taxman 418(SC). This view is also endorsed in the Journal section of Smt. Ved Ahuja v. CIT [1996] 222 ITR 53/90 Taxman 496 (Punj. & Har.) at pages 59 to 62 under the heading 'Law on benami Transactions'. The Tribunal has also examined the case of R. Rajagopala Reddy (supra) in the Wealth-tax Appeals at pages 156 to 165 of the paperbook at paragraphs 8 onwards. The fact is that the assessee did not file any suit against the benamidar. Hence the Benami Act applies to this case. The learned accountant Member has rightly taken the view that the second question concerning interpretation of the provisions of the Benami Transactions (Prohibition) Act of 1988, which has undergone more than one interpretation in the hands Supreme Court and its impact on the facts of the case would certainly give rise to a question of law fit for reference.

4.2 On the other hand the learned representative for the Revenue countered to the same extent as submitted before the Tribunal in the Reference Application by also relying upon the Order of the learned Judicial Member, who has rejected the Reference Application, the relevant portions being at pages 192 to 193 at paragraph 5.

4.3-1 Rival submissions heard and the relevant orders read. On the point of capital gains and the applicability of the provisions of the Benami Transactions (Prohibition) Act, this issue is dealt with elaborately in paragraphs 54 to 59 of the order of the Tribunal (the operative portion being at page 58), while it is dealt with in paragraph 5 of the order of the Judicial Member and also at paragraph 5 of the order of the Accountant Member in the Reference Application. The plea of the Revenue is that the finding of the Tribunal is based on facts and no question of law arises from the finding of the Tribunal. The Tribunal in its order dated 30-6-1994 has come to the conclusion that the said Act is not applicable because the property in question was purchased in the name of benamidar in the year 1973 and sold in 1983 when the assessee received the sale consideration. Hence the said Benami Act, which came into force in September, 1988, will have no effect in the year 1973 when the purchase took place and in the year 1983 when the sale was effected and the sale proceeds were appropriated by the assessee. In the case of R. Rajagopala Reddy, (supra) the Hon'ble Supreme Court held that the provisions of the said Act has no retrospective effect. In the latest decision in the case of Heirs of Vrajlal J. Ganatra v. Heirs of Purushottam S. Shah [1996] 222 ITR 391/86 Taxman 247, the Hon'ble Supreme Court has again reiterated the finding given in Rajagopala Reddy's case by stating that the provisions of the said Benami Transactions (Prohibition) Act are prospective only. The case of Nand Kishore Mehra (supra) relied on by the assessee is of no avail to the assessee because in that case the issue decided by the Supreme Court was as to whether the real owner can file a suit against his wife despite the coming into effect of the said Benami Transactions (Prohibition) Act. It was held by the Supreme Court that as the Act does not prohibit benami transaction involving purchase of property in the name of wife or unmarried daughter, filing of the suit against the wife or unmarried daughter is not prohibited under sections 4(1) and 4(2) of the said Act. Hence this case pertains only to a specific situation, namely when the banami property is being held in the name of wife and unmarried daughter. Hence the case law relied upon by the assessee cannot be applied to the instant case. As the latest Supreme Court decision in the case of Vrajlal J. Ganatra (supra) has settled the issue that the said Benami Transactions (Prohibition) Act is prospective and the Tribunal's decision is also in accordance with it, no referable question of law arises from this issue, which has already been concluded by the aforesaid judgment of the Hon'ble Supreme Court.

4.3-2 On a close perusal of the facts of the case on record in the light of the case law relied upon by both the parties, I am of the considered opinion that the stand of the Revenue has substantial force. Regarding the contention of the assessee that capital gains arose in the hands of benamidar only following the decision of the Supreme Court in the case of Mithilesh Kumari (supra) has not been dealt with, it may be seen that the Tribunal has duly considered this issue in para 54 of its order in the appeal. The property in the names of the benamidars was purchased in the year 1973 and sold in 1983. The assessee received the consideration in respect of the benami property and has even offered capital gains in his hands. The assessee pleaded that in the light of the said Benami Transactions (Prohibition) Act he is not liable for capital Rains in respect of the banami properties and that the capital gains in respect of the banami properties has to be computed in the hands of benamidars only. The Tribunal in its appellate order held that by the time the said Benami Act was promulgated the disputed items of properties were sold and the transaction was closed and that after 1983 the Banami properties did not exist at all. Hence the Tribunal concluded that the act has no application at all and, therefore, the question that capital gains arose in the hands of the benamidar does not arise at all in the instant case. Even as per the latest decision of the Supreme Court in the case of R. Rajagopal Reddy (supra), the said Banami Transactions (Prohibition) Act has no retrospective effect. Hence the said Act has no application for the past transactions which are not pending. It is, therefore, clear that by the time the said Benami Transactions (Prohibition) Act, 1988 came into force the purchase and sale of benami properties were completed and by the date when the Act came into force there was no dispute as to whom the properties belonged. When the benami transaction has been closed in the year 1983 by the sale of the properties and also the appropriation of the sale proceeds, it was not open to the assessee to claim the benefit on the basis of the said Act which was enacted in the year 1988. As has already been stated, even on the basis of R. Rajagopal Reddy (supra) the assessee is not entitled to any relief. Hence the question sought to be referred under section 256(1) of the Act is not a referable question of law.

5.1 Regarding the third and fourth questions as to whether the Tribunal was correct in holding that the assessee was given proper opportunity of being heard and in rejecting the assessee's claim to cross examine the persons whose statements were relied upon by the Assessing Officer against the assessee, the learned counsel for the assessee submitted that : Pages 95 to 96 of the paper book may be seen under the heading 'C Opportunity of a fair hearing denied'. This aspect of the matter has been discussed in paragraphs 72 onwards in the order of the Tribunal in the appeal, apart from page 4 of the Miscellaneous Application at paragraph 4 thereof. This was also discussed in the statement of facts furnished before the Tribunal in the Reference Application at pages 144 to 145 at paragraph 11 therein. Although the statements were recorded in 1984 itself, copies were furnished only in 1988, according to the assessee. Although the Assessing Officer proposed to deal with the contentions raised by the assessee at page 120 at paragraph 10.57 of the order of assessment, he did not deal with the stand of the assessee in this regard. While admitting the additional ground the Tribunal itself held that the appeal before the Tribunal was only in respect of extension of assessment proccedings-vide page 29 of the order of the Tribunal in the appeal at paragraph 36. The statements, which lacked corroboration, were used against the assessee without giving opportunity for rebuttal. Even the Deputy Commissioner while approving the order dated 28-3-1988 felt in his order dated 30-3-1988 that the assessee should have been allowed to explain his case. The Assessing Officer is duty-bound to complete the assessment as per law observing all principles of natural justice. It does not depend upon as to whether the assessee has asked for it or not. Assessment proceedings are judicial proceedings, as rendered in the cases reported in 26 ITR 13 (sic), Gargi Din Jwala Prasad v. CIT [1974] 96 ITR 97 (All.) and Hirji Nagji & Co. v. CIT [1976] 105 ITR 286 (Ori). In the case of Union of India v. Tulsi Ram Patel AIR 1985 page 1416 the Supreme Court has clearly held that statements must be recorded in the presence of the affected person and that the affected person must be granted an opportunity to cross examine them. In this connection the view taken by the learned Accountant Member in his order dated 24-12-1995 in the Reference Application at paragraphs 6 and 7 is relied upon, where in it was opined by the Accountant Member that the question regarding lack of opportunity gives rise to a mixed question of law and fact deserving reference.

5.2 On the other hand the learned Departmental Representative countered to the same extent as submitted before the Tribunal in the reference Application by also relying upon the order of the Judicial Member, who has rejected the Reference Application, the relevant portion being at pages 193 to 194 of the paper book, the relevant paragraph being para 6.

5.3 Rival submissions heard and relevant orders read. On the issue of opportunity of being heard and cross examination of the concerned persons, it is dealt with elaborately from pages 50 to 61 of the paper book, the paragraphs running from 72 to 91 of the order of the Tribunal in the appeal, while it is dealt with in paragraph 6 at pages 193 to 195 of the order of the Judicial Member and at pages 203 to 204 in paragraphs 6 and 7 of the order of the Accountant Member in the Reference Application. The plea of the Revenue is that the Tribunal's order in this regard gives only a finding of fact on both the issues cited supra and that, therefore, no question of law does arise from such finding of the Tribunal in the aforesaid order. The assessment proceedings were started on 17-8-1984 by issue of notice under section 139(2). After issue of notice under section 142(1) and various adjournments, the return of income was filed on 31-12-1985. The case was posted for hearing 25 times as recorded in the assessment order on the very first page and notice under section 271(1)(c) was also sent on 22-1-1987. The assessee was aware of the statements recorded from various parties as the Assessing Officer has made reference to them in January, 1987. The assessee asked for the copies of the statements recorded from third parties only on 21-1-1988 and copies were given on the same date and the assessee was allowed to go through the records on that date itself. Further the assessee never sought opportunity to cross examine the parties before the Assessing Officer or even before the Commissioner (Appeals). While so this plea has been taken for the first time before the Tribunal. The assessee has filed statements controverting the statements made by the third parties, but has never sought opportunity to cross examine before the lower authorities. After the assessee filed his written submissions on 8-3-1988, the matter was again posted for hearing from 9th to 11th March, 1988 and also on 14th March, 1988. Based on these facts the Tribunal came to the conclusion that ample opportunity was given to the assessee to represent his case. As the assessee did not ask for cross examination before the lower authorities and only raised such a plea before the Tribunal, the Tribunal came to the conclusion that the assessee should not be permitted to raise such an objection for the first time before the Tribunal. The Tribunal in its order at page 46 held that the conduct of the assessee clearly showed that the allegation of lack of opportunity was an afterthought to wriggle out from the assessment, where huge additions were made. The statements recorded in 1984 were asked for by the assessee only in 1988. Copies were given on the same date and the assessee was also allowed to go through the records on that date itself.

Hence the assessee cannot hold the department responsible for furnishing the statements at a later date when such a request was not made by the assessee earlier. The contention that the Assessing Officer did not deal with the contentions raised by the assessee vide para 10.87 of the assessment order should have been raised before the Appellate Commissioner himself. Having failed to do so, it cannot be raised before the Tribunal for the first time. Moreover the issue before the Tribunal in the Reference Application is as to whether the questions are referable questions of law. That apart in spite of objections raised by the department before the Tribunal all the additional grounds were admitted by stating that they related to the subject matter of appeal. Hence the assessee cannot have any grievance that proper opportunity was not given as all the additional grounds were duly considered by the Tribunal. The principles of, natural justice state that no evidence can be brought on record and used against the assessee without giving him an opportunity to rebut the same. In the instant case copies of the statements that were taken were furnished to the assessee on the very date on which they were asked for. Even before that in January, 1987 the Assessing Officer referred to these statements. Hence the assessee was aware that these statements were recorded. The assessee has even given his rebuttal to these statements by written submission on 8-3-1988. The matter was also posted for hearing on 9th to 11th and 14th March, 1988. At no point of proceedings before the Assessing officer or Commissioner (Appeals) did the assessee ask for cross examination or raise the issue of lack of opportunity. Under these circumstances the Tribunal came to a finding of fact that proper opportunity was given to the assessee. Thus when the matter was pending before the Assessing Officer from 19-1-1985 to March, 1988 and the assessee also filed clear explanation on 8-3-1988, if he wanted to file any further explanation or other material, nothing prevented the assessee from filing it. Hence the grievance of the assessee is not a genuine one. Under these circumstances the Tribunal has concluded that sufficient opportunity was given to the assessee and the assessee was not deprived of sufficient opportunity of being heard while the proceedings are pending before the Assessing Officer. In view of this clear finding of fact by the Tribunal, I am of the considered opinion that the questions sought to be referred in this regard are not referable questions of law.

6.1 Regarding the fifth, sixth, seventh and eighth questions relating to the conclusion of the Tribunal that the total consideration for the sale was Rs. 110 lakhs and not half of it, as claimed by the assessee vide pages 54 to 76 of the order of the Tribunal in the appeal, the learned counsel for the assessee submitted that : Pages 97 to 101 of the paper book may be seen at paragraph 'C' to demonstrate that the contention of the assessee is correct. This aspect of the matter has been discussed at pages 61 to 79 of the paper book in paragraphs 92 to 124 of the order of the Tribunal in the appeal, apart from pages 4 to 7 of the paper book at paragraphs 12 to 18 of the Miscellaneous Application of the assessee. This is also discussed in the Statement of facts furnished before the Tribunal in the Reference Application at pages 146 to 149 of the paper book at paragraph 12 therein. Although a sum of Rs. 110 lakhs was involved in the transaction, the sale consideration was not actually that amount, as payments to various agreement holders were also included in the said sum. The Tribunal, itself referred to the various agreement holders and also that the original title deeds were with Amarlal Kishandas, who was aware of escalation in property prices. He was not examined. Yet, the Tribunal accepted that Amarlal was paid only Rs. 9 lakhs extra over and above the advance of Rs. 10 lakhs-vide paragraphs 104, 105, 114, 117, 118, 119 and 120 of the Tribunal's order in the appeal. The purchaser Mr. Ramesh has said that he directly dealt with various agreement holders, at the same time not bringing out the information as to how much was paid to various agreement holders vide page 109 of the paper book at question No. 1. Mr. Gopal denied having received Rs. 7 lakhs to be passed on to the assessee-vide page 107 of the paper book. Mr. Subramania Mudaliar said that Rs. 19 lakhs was paid to Mr. Amarlal Kishandas-vide page 104, yet the payment to Amarlal was taken as only Rs. 12 lakhs. The Tribunal also held in paragraph 6 of the order dated 16-11-1995 in the Miscellaneous Petition vide pages 135 to 136 of the paper book, that the expenditure incurred by the assessee must be allowed as deduction and this was referred to in the order in the Reference Application at page 198 of the paper book in paragraph 8, clearly showing that even as per the Tribunal the assessee was not the beneficiary. No cash was also seized from the assessee. All these therefore demonstrate that there is a mixed question of law and facts atleast. The Assessing Officer at para 10.69 of his order as well as the Tribunal in paragraph 11 of its order believed that the cash got on the sale of Kalmanda property was given in cash to Sundaram Pillai for purchase of shares held by his group in Century Flour Mills. But later events proved that no cash was paid by the assessee to Sundaram Pillai (vide order in WTA Nos. 272 to 275 (Mds)/1992 at pages 179 to 184 of the paper book at paragraphs 25 and 26 thereof) and the matter was remanded back to the Assessing Officer for ascertaining full facts. Although it is said in the Reference Application that the cash element is not relevant the Assessing Officer as well as the Tribunal went into the question of cash element and in page 13 there is reference to it. Further, the cash element is recognised by the Tribunal while directing the Assessing Office in the Miscellaneous Petition to allow all claims proved. But the point remains that payment were made by Mr. Ramesh and not by assessee. Reliance was also placed on paragraph 8 of the order of the Accountant Member at pages 196 to 198 of the paper book.

6.2 On the other hand, the learned Departmental Representative countered to the same extent as submitted before the Tribunal in the Reference Application by also relying upon the order of the Judicial Member, who has rejected the Reference Application, the relevant portion being at pages 179 to 184 of the paper book at paragraphs 25 and 26 thereof.

6.3-1 Rival submissions heard and the relevant orders read. On these questions relating to beneficial enjoyment of Rs. 110 lakhs by the assessee, the issue is dealt with elaborately in pages 61 to 79 of the paper book at paragraphs 92 to 129 of the order of the Tribunal in the appeal, while it is dealt with at pages 196 to 198 in paragraphs 8 and 9 thereof of the Judicial Member's order and at pages 204 to 207 at paragraphs 8 and 9 of the order of the Accountant Member in the Reference Application. The plea of the Revenue is that the finding of the Tribunal is based on facts and no question of law arises from the order of the Tribunal. The Tribunal took into consideration the earlier agreements entered into by the assessee in the sale of Kalmanda Property. The agreement with Amarlal Kishandas was at Rs. 2.83 lakhs per ground with Shri T. Arumaidurai at Rs. 4.25 lakhs and with ONGC at Rs. 4.5 lakhs each per ground respectively. Hence the Tribunal came to the conclusion that it is highly improbable that the assessee could have ultimately sold the property at Rs. 2.10 lakhs per ground as claimed by him. The Tribunal considered the statement of Shri Ramesh of Gowtham Construction, where he stated that he paid the assessee Rs. 110 lakhs for the property at Rs. 4.2 lakhs per ground by means of bank drafts. At page 63 of the Tribunal's order it has been elaborately discussed that Shri Gopal, whom the assessee wanted to prop up as an intermediary, is actually a man of no means. He is a hutment dweller living at No. 21-Canal Bank Road, though in the agreement the address is given as No. 14, Veeraswamy Street, Madras. Shri Gopal deposed that he was promised a consideration of Rs. 40,000 by the assessee for putting his signature on the agreement, though ultimately only an amount of Rs. 1000 was paid to him. Even though Shri Gopal was having a savings bank account with Karur Vysya Bank, Madras, none of the total consideration of Rs. 110 lakhs was deposited in his account. The Tribunal has given a finding that the agreement with Shri Gopal was a spurious one. At pages 59 to 60 of the Tribunal's order the various statements furnished by Subramania Mudaliar, Dasappan, Venkataraman, Visasam and Arumaidurai were also considered for coming to the conclusion that the beneficiary of the total consideration is the assessee. The Tribunal has also taken into consideration at pages 67 to 69 the agreement dated 20-12-1980 which the assessee had entered into with Shri Amarlal Kishandas, which was a transaction at arms length. As the assessee did not honour the agreement with Amarlal Kishandas, the matter was taken by means of a Civil Miscellaneous Petition before the High Court and ultimately the assessee had to settle the matter with Amarlal Kishandas by not only returning his advance of Rs. 10 lakhs but also paying a further sum of Rs. 2 lakhs. By considering these facts the Tribunal has established that the agreement to sell the property to Shri Gopal at the rate of Rs. 2.10 lakhs per ground is totally unacceptable. The objections taken by the assessee in his written submissions would not stand in view of the order dated 10-11-1995 passed by the Tribunal in the Miscellaneous Petition. The Tribunal has come to a factual finding that the total sale consideration is Rs. 110 lakhs and if the assessee has incurred any expenditure or made payments to certain parties, such payments should be given as a deduction while computing capital gains. In the light of this relief given to the assessee his objection that the Tribunal has not considered that some part of the sale consideration is paid to others does not stand.

6.3-2 The Tribunal has observed that even at the time of hearing it was conceded by the assessee that the stated consideration in the document was not correct consideration and in fact he had received over and above the stated consideration in the document. But his case was that he had received only a part of the over and above the stated consideration and part of the consideration was received by some other persons. It is admitted by the assessee that he had received some consideration over and above the stated consideration and therefore it is for him to prove that what was the exact amount received by him. The assessee did not adduce any evidence. The Tribunal has also ignored the agreement in favour of Gopal, the effect of which is that the total consideration of Rs. 110 lakhs had passed from the purchaser to the assessee. As the assessee was entitled to the total consideration of Rs. 110 lakhs in the transaction, he is liable to capital gains tax on the said sum. What was the amount received by Gopal was not an issue for adjudication before the Tribunal. Similarly what was the amount paid to Amarlal Kishandas was not an issue. Therefore, they are not relevant to the adjudication of the main issue, i.e. what was the sale consideration liable to capital gains tax. Similarly even the cash claimed to have been paid to Sundaram Pillai was not correct the assessee cannot escape from the liability to capital gains tax in respect of the sale transaction as it was found by the Tribunal that the total sale consideration was Rs. 110 lakhs and the assessee was the beneficiary. As the contentions are not relevant to the main issue that was in dispute, the omission to consider those contentions does not have any impact on the decision of the Tribunal on the main issue. It is, however, open to the assessee to make a claim for deduction of the expenditure incurred by the assessee in respect of the sale transaction before the Assessing Officer while computing the capital gains in respect of the said transaction. The Assessing Officer was directed to consider the assessee's claim for deduction of the expenditure based on the evidence to be produced by the assessee and decide the claim on merits while computing the capital gains. Ultimately the Tribunal has concluded that the assessee was the beneficiary of the total consideration of Rs. 110 lakhs and directed the Assessing Officer to compute the capital gains tax accordingly. In the Miscellaneous Petition filed by the assessee the Tribunal directed the Assessing Officer to allow relief while computing capital gains in respect of any payment made to Amarlal Kishandas over and above the refund of Rs. 10 lakhs received as advance if the same is supported by proper evidence. Hence the said conclusion of the Tribunal is based on the material on record and the finding is only a finding of fact not giving rise to any referable question of law.

7.1 Now coming to the last question regarding section 52(2) of the Income-tax Act, as has been already indicated at the beginning of this order, both the learned Members have agreed that the finding of the Tribunal is that in the light of the evidence available on record as to the total sale consideration, there is absolutely no need to invoke the provisions of section 52(2) of the Act. Consequently there is no difference of opinion that the decision of the Tribunal in holding that the failure to invoke section 52(2) of the Act did not vitiate the assessment does not give rise to any referable question of law.

8. To conclude, on the totality of the facts and entirety of the circumstances of the instant case, after hearing the rival submissions of both the parties before me and going through the orders of the authorities below and in particular the orders of the Tribunal in the appeal as well as in the Miscellaneous Petition, especially the proposed order of the Judicial Member and the dissented order of the Accountant Member and after careful analysis I am of the considered opinion that no question of law as sought for herein above deserves any reference to the Hon'ble High Court for its esteemed opinion, being convinced with the proposed order of the learned Judicial Member that the questions sought for reference by the assessee are all based on findings of facts arrived at by the order of the Tribunal in the appeal not involving features of law deserving any reference.

9. Now the matter will go back to the regular Bench for disposal of the case by passing an order in accordance with law as per majority opinion.

ORDER Shri D. K. Tyagi, Judicial Member

1. By this Reference Application the assessee sought reference of 9 questions appended in this Tribunal's order dated 29-12-1995 in the aforesaid R.A. arising out of the order of the Tribunal dated 30th June '94 stating these questions to be question so law to the Hon'ble High Court of Madras.

2. While dealing with these questions the Judicial Member was of the opinion that none of these Questions were fit for reference to the High Court of Madras whereas the Accountant Member was of the view that except question No. 9 all other questions are fit for reference as mixed questions of law and facts. Since, there was difference of opinions between the Members, the questions were referred to the Third Member Who has opined vide order dated 27-4-1998, that none of the questions sought for reference by the assessee are referable question as these are all based on findings of fact.

3. Under these circumstances, We dismiss all the questions sought for reference, as they are questions of facts and not questions of law.

4. In the result the Reference Application is rejected.