1. These nine appeals, though they have been filed against nine separate orders of the AAC, involve a common question. They are, therefore, disposed of by this single order.
2. The dispute in these appeals relates to the deemed gift which Shri Abdul Qayumc was alleged to have made to some of his relations. It appears that originally Shri Abdul Qayume was the owner of the properties in dispute which he sold to S/Shri Vishnu Saran Gupta and Shyam Sunder Lal Gupta for Rs. 30,000 by registered sale deed dated 12-2-1963. The same day these vendees emanated to resell the properties to him or his nominee for Rs. 30,000 within three years. They also leased out the said property to the deceased assessee by an other deed executed that very day. The agreement to resell the property was renewed on different dates and lastly on 9-11-1970 with a change in the amount of consideration from Rs. 30,000 to Rs. 45,000. In the year under consideration, different portions of the property were sold to some relatives of the deceased and two educational institutions for a sum of Rs. 81,000. In respect of this sale, the ITO noticed that the assessee had paid stamp duty payable at Rs. 1,40,000. He, accordingly, initiated proceedings for levy of capital gains tax and gift-tax in respect of this sale. Initially, he brought to tax a sum of Rs. 64,406 as being the amount of the deemed gift by the deceased on the assumption that the market value thereof was only Rs. 1,40,000.
However, the revenue audit party pointed out that the market value of the properties should be taken at Rs. 2,44,240 on the basis of the valuation shown by the assessee in respect of these properties in his wealth-tax return for the assessment year 1972-73. The GTO, therefore, ultimately brought to tax a sum of Rs. 1,64,646 (after allowing statutory deduction for Rs. 5,000) as the value of the deemed gift made by the assessee to the various vendees. Before these proceedings could be concluded, the deceased assessee had already died and the assessments were made on his nine legal heirs who are now the respondents before us.
3. All these nine persons went in appeals to the AAC, who discussed the matter at length in his order in the case of Smt. Akhtari Begum [GT Appeal No. 18/II of 1982-83/M]. According to them, the deceased assessee was not the owner of the properties in question at the time of the sale and in support of this argument the representative of the heirs of the deceased relied upon a decision of the Tribunal in IT Appeal No. 3626 (Delhi) of 1980, dated 15-1-1982. He then quoted certain observations made in the order of the Tribunal, which reads as under : We are unable to appreciate the second ground taken by the revenue in the present case. In fact, in IT Appeal No. 5142 (Delhi) of 1976-77, dated 31-7-1979, the Tribunal, Delhi Bench 'E', had examined the facts of the case elaborately and held as follows in paragraphs 8 to 10. We have carefully considered the submission of the learned representative of the parties. The assessee sold the property to the Guptas by sale deed dated 12-3-1968. This deed did not contain any item for the repurchase of the property by the assessee. The assessee took the property on lease by a separate deed and there was no question of payment of interest on the sale proceeds by the assessee. The agreement of repurchase was by a contemporaneous deed of 12-3-1967 for the amount of Rs. 30,000 for which the property has been sold. The repurchase was to be made within a period of 3 years. These facts show that the parties had no intention to treat the sale as a mortgage. The subsequent renewal of the agreement does not change the original position and creates a relationship of debtor and creditors between the parties. The assessee, therefore, was not the owner of the property at the time of sale.
Ultimately, the AAC concluded that the deceased was not the owner of the properties and, therefore, there was no question of applicability of Section 4(1)(a) of the Gift-tax Act, 1958 ('the Act') and as such the assessee was not liable to any gift-tax. He, therefore, cancelled the assessment. Following this line of reasoning, he also cancelled the remaining assessments made on the eight other legal heirs of the deceased. The revenue has come up in second appeal before us.
4. Notice of the hearing of these appeals was sent to all the respondents by registered post and acknowledgements of Smt. Akhtari Begum, respondent in GT Appeal No. 32 and Shri Lique Ahmed, respondent in GT Appeal No. 27, are on the record. In case of the other respondents, the letters have been returned with the following endorsements : The letter sent to Mohd. Ulyas, GT Appeal No. 26, has not been received back but is presumed to have been duly served. Nobody appeared on behalf of the respondents at the time of hearing of these appeals.
Since the main respondent in whose case the AAC has written a detailed order was served in person and the point involved is common, we have heard the departmental representative ex parte.
5. After carefully considering all the facts and circumstances of the case, we are of the opinion that the order of the AAC in question cannot be sustained. The AAC has not given any finding of his own but has come to the conclusion relying upon the decision of the Tribunal in IT Appeal No. 3628 (Delhi) of 1980. The relevant observations contained therein, we have already quoted in extenso above. To understand the exact implications of that order, we sent for the order in IT Appeal No. 5142 (Delhi) of 1976-77 decided by the 'E' Bench of the Tribunal on 31-7-1979. In fact, we have collected and narrated some of the above facts from the said order of the Tribunal. A perusal of the said order would show that the conclusion now arrived at by the AAC is wholly misconceived. The que0stion involved before the Tribunal at that time was the taxability of capital gains on the sales in favour of the various vendees. No doubt, the Tribunal incidentally held that the deceased assessee was not the owner of the property at the time of the sale, but this finding would not at all exonerate the present assessee from liability to tax on the alleged present gift. Para 9 of the order of the Tribunal reads as under : 9. The assessee was in possession of the property. By the agreement, the assessee acquired an interest in property as he could defend his possession on the basis of the agreement on the principle of part performance. Such interest, in our view, amounts to a capital asset within the meaning of Section 2(14) of the Income-tax Act. The assessee, therefore, is liable to capital gains tax, in respect of the sale of that interest. The assessee received Rs. 36,000 in respect of his interest.
6. Of course, the Tribunal held that Section 52(1) of the Act was not attracted nor did the case fall under Section 52(2) as no receipt of any on-money had been proved. But ultimately, the Tribunal, after allowing certain further expenses claimed by the deceased assessee, directed the GTO to recompute the capital gain on this transaction.
Therefore, the finding of the Tribunal that the deceased assessee was not the owner of the property [which of course is the subject-matter of reference before the Hon'-ble High Court in RA Nos. 1281 and 1308 (Delhi) of 1979] does not in any way lead to the conclusion that he was not the transferor of the properties in question. In fact, while stating the facts in this case, in para 2 of the order, the Tribunal has mentioned that the deceased assessee along with the Guptas had sold different portions of the properties to six near relatives of the deceased and two educational institutions. Out of the sale consideration, only Rs. 45,000 had been received by the Guptas under the agreement. In the return filed by the deceased, he had himself disclosed a capital gain of Rs. 19,000 computing the same after adjusting Rs. 45,000 received by Guptas and some other expenses and cost of improvements incurred by him. This had been done by the assessee treating himself as the owner of the properties and the Guptas as mortgagees. Income from these properties had already been assessed in the hands of the deceased assessee. All these observations and findings of the Tribunal would lead us to the irresistible conclusion that if there was any deemed gift involved in the transaction, the liability to pay tax thereon was that of the deceased assessee because it was he who was treating himself as the owner of the property and was actually taxed on the capital gains arising out of the same. Again, in the present assessment orders, the GTO has mentioned that the audit party had pointed out that the market value of the properties should be taken at Rs. 2,45,240 on the basis of the valuation shown by the deceased assessee of the eight properties in his wealth-tax return for the relevant assessment year, so that the assessee's own conduct would fully justify the levy of gift-tax on the transactions of sales in question even if for some technical reasons he could not be considered the owner of the properties in question. 7. Coming to the liability of the assessee as pointed out above, the Tribunal has already held that Section 51(2) or Section 52(2) did not apply to the assessee's case as no more consideration over and above the sale price mentioned in the deeds had been passed on to the assessee under the table. This conclusion was arrived at in view of the observations of the Supreme Court in the case of CIT v. Vegetable Products Ltd.  88 ITR 192.
This position of law has now been finally affirmed by the Hon'ble Supreme Court in the case of K.P. Varghese v. ITO  131 ITR 597.
However, in this very judgment there are some pertinent observations of their Lordships which read as under : This construction which we are placing on Sub-section (2) also marches in step with the Gift-tax Act, 1958. If a capital asset is transferred for a consideration below its market value, the difference between the market value and the full value of the consideration received in respect of the transfer would amount to a gift liable to tax under the Gift-tax Act, 1958, but if the construction of Sub-section (2) contended for on behalf of the revenue were accepted, such difference would also be liable to be added as part of capital gains taxable under the provisions of the Income-tax Act, 1961. This would be an anomalous result which could never have been contemplated by the Legislature, since the Income-tax Act, 1961 and the Gift-tax Act, 1958, are parts of an integrated scheme of taxation and the same amount which is chargeable as gift could not be intended to be charged also as capital gains.
A reading of the same leads us to the conclusion that the deceased was certainly liable to tax on the deemed gift within the meaning of Clause (a) of Section 4(1). Accordingly, we are of the opinion that the orders of the AAC are bad in law and cannot be sustained.
8. The AAC has not considered the merits of the appeals filed by the various legal representatives of the deceased. It appears that the point requires a little further examination inasmuch as in the original proceedings culminating in the appeal before the Tribunal preferred to above, the full sale consideration was taken by the authorities below at Rs. 1,40,000 only, the amount on which the deceased and the Guptas had paid stamp duty. Now the GTO has taken the value thereof at Rs. 2,45, 240 on the basis of the valuation shown by the deceased in his wealth-tax return for the relevant assessment year. The correct market value of the properties, as it stood at the relevant time, would have to be determined afresh and for this purpose, the matters shall go back to the AAC for a fresh decision in the light of our aforesaid observations.