1. This is an appeal filed by the assessee against the order of the AAC relating to the assessment year 1978-79. In order to understand the grounds of appeal, it appears that some background facts may be given.
2. The dispute relates to the question of income from property. Besides a self-occupied property in Green Park, New Delhi, [the assessee owns a house property at M-25, Greater Kailash. This property was constructed in the year 1968. According to the assessee, there were certain difficulties faced by him in finding out a proper tenant for this house. The assessee, therefore, entered into a lease agreement with his brother D.R. Singhal and his wife Smt. Anjali Rani acting as a partnership firm through Shri Balkrishan Gupta in the name of B.K.Gupta & Co. From this agreement, it appears that it was a house and a commercial shop and the asses-see had leased this property at a consideration of Rs. 9,600 which was settled as annual theka value of the ground floor and upper portion. This agreement which is stated to have been entered in 1968 was for a period of five years. It is not clear from the orders of the lower authorities whether this agreement was further renewed after a period of five years. The assessee has been showing only the rent received from this so-called partnership firm B.K. Gupta & Co. The ITO, however, made enquiries and found that the actual rent received was much higher and in respect of this property it was about Rs. 3,000 per month. According to him, the total rent received from the let out portion was Rs. 29,500. The ITO proceeded to work out the income on the above basis. According to the ITO the assessee was the owner and was liable to be taxed on the actual rent received from this property. The AAC has upheld this action of the ITO.He referred to the amendment made in law, according to which, the actual rent has also to be taken into consideration for assessing the income from property. The AAC also directed that the above expenses claimed by the assessee should be considered and allowed to the extent they are established.
3. The learned counsel for the assessee has submitted before us that the action of the lower authorities in assessing the rent received by the firm in the hands of the assessee was not justified as the assessee was receiving an amount which was fixed under the agreement. He also submitted that the genuineness of this agreement has not been gone into and that it was not possible to reject the case of the assessee. He drew our attention to the Court cases which were the responsibility of the lessees. It was also contended that the municipal corporation has fixed the rateable value at Rs. 12,500 only and that too was under dispute. It was, therefore, contended that more rent at Rs. 4,500 could not be assessed in the hands of the assessee.
4. We have perused the paper book filed by the assessee and we are of the view that this matter should go back to the ITO for proper determination of facts. The large number of papers filed before us do not appear to have been furnished before the lower authorities. It may be that the ITO has not called for these papers but it was also the duty of the assessee to place these before him. It is necessary to go into the question of genuineness of this agreement and also the fact whether this agreement was further renewed after the end of five years.
The parties involved should also be examined. Without that it is not possible to know whether the arrangement was genuine. No doubt the owner has to be assessed under the provisions of the Income-tax Act, but one has also to see the legal effect of any valid subsisting agreement. The ITO is, therefore, directed to bring on record all the materials and to give a clear finding regarding the nature of the agreement, its renewal and legal effect. He may also take into consideration the assessments made in the hands of the firm known as B.K. Gupta & Co. With these directions, the matter is restored to the file of the ITO for proper determination of the facts so that the income may be properly assessed. To this extent, the appeal shall be treated as allowed for statistical purposes.
1. Having gone through with utmost respect and care, the proposed order of my senior learned brother, the Accountant Member and being not reconciled to his point of view as also the directions to the ITO 'to bring on record all the materials' I jot down the following note of dissent.
2. Men may tell lies but documents never and a photostat copy of lease deed dated 25-6-1968 placed on our file as the assessee's paper book (page 7) makes it amply clear rather beyond any doubt that there was a lease agreement entered into by B.K. Gupta & Co. and the assessee. The subject-matter was a house and commercial shop commonly known as M-25, Greater Kailash-I, New Delhi. The said lease-deed also makes it amply clear that B.K. Gupta & Co. was constituted by Shri Bal Kishan Gupta son of Shri Shankar Lal and Smt. Anjali Rani, wife of Shri Brij Rattan Singhal (the assessee). The lease-deed is a registered document with endorsement No. 4030-Vol. No. 2,000-Bahi No. 1A, pp. 103 to 105, registered with the competent authority (the Registrar). The lease-deed is on a non-judicial stamp paper of Rs. 101. This document warrants the one and the only irrefutable inference and it is that there was a lease agreement between the assessee and B.K. Gupta & Co. The tenure being five years and the corroborative evidence to the above is the copies of the following documents : (i) Compromise terms in the case of Barm Ram v. B.K. Gupta & Co.
[Suit No. 159 of 1969] entered into by the parties in that suit in the Court of Shri Mohammed Shamim, Additional Rent Controller, Delhi, and it is dated 19-12-1973 (page 8 of assessee's paper book) ; (ii) order dated 20-7-1971 of the learned Rent Controller, Delhi, in Suit No. 54/SR of 1971 filed by Shri Baldev Raj Nagpal against B.K. Gupta & Co. whereby standard rent was fixed ; (iii) copy of plaint in Suit No. 261/79 filed by B.K. Gupta & Co., M-25, Greater Kailash-I Market, New Delhi-48 against one Dr. Ashok Kumar Soni, the plaint being an application for eviction of tenant under Section 14(1)(a) of the Delhi Rent Control Act, 1958. This evidences the factum of B.K. Gupta & Co. being the landlords and Dr.
Ashok Kumar Soni being the tenant of the property commonly known as M-25, Greater Kailash-I, New Delhi ; (iv) lease-deed dated 10-2-1969 executed on a non-judicial stamp paper of Rs. 25 between B.K. Gupta & Co. as the lessors and one Shri Anand Kumar Michael as the lessee vis-a-vis demising unto the lease, the premises described as two room set with kitchen, bath and latrine on second floor of property M-25, Greater Kailash-I, New Delhi ; (v) copy of lease-deed having been executed on a non-judicial stamp paper of Rs. 30 only as between B.K. Gupta & Co. as the lessors and one Shri Rakesh Kumar Neb as the lessee vis-a-vis demise unto the lessee the premises-one shop in property M-25, Greater Kailash-I, New Delhi ; (vi) copy of order dated 22-9-1977 which is a judgment by the learned Additional Rent Controller (Shri J.D. Kapoor) in Suit No. E-350/76 whereby B.K. Gupta & Co. is shown as the petitioner and Smt. Vinod Kumari Chabra and another as the respondent ; (vii) copy of judgment order dated 26-11-1977 of the learned Third Additional Rent Controller (Shri Kanwal Inder), showing B.K. Gupta & Co. as the petitioners and Jaipur East, New Delhi, as respondent in an application for eviction of tenant made under Section 14. Here also the let out premises are property No. M-25, Greater Kailash-I, New Delhi.
3. From the above evidence which is unimpeachable in nature the only inference that can be drawn is that the lease agreement between the assessee and B.K. Gupta & Co. was subsisting and a genuine one during the accounting period relevant to the assessment year under appeal and being in vogue since the date of the execution of the registered lease-deed mentioned above. No other inference is possible on facts and from material on record. The above inference gets support from the finding of the learned AAC, New Delhi, who vide orders dated 19-12-1981 made in his appeal files No. 446, 463 and 464 of 1980-81 in relation to the assessment years 1975-76 to 1977-78, on appeals by the assessee, observed as under : In passing I may also observe that on the basis of the evidence as filed by the assessee before the Income-tax Officer, the rent of the property originally fixed by virtue of the lease deed between the assessee and B.K. Gupta and Co. in 1968 was quite in keeping with the prevalent market conditions. This is so because as per the letter dated 18-7-1981 of municipal corporation, the rateable value of the property in question has been fixed at Rs. 12,500 per annum with effect from 1-4-1981 subject to the dispute taken by the assessee and now pending before the Delhi High Court.
4. Yet that apart, the assessee vide a petition dated 14-12-1971 made with the Hon'ble High Court of Delhi at New Delhi, which petition has since been registered as Civil Writ No. 1311 of 1971, has made averments that the property M-25, Greater Kailash-I, New Delhi, was let out to B.K. Gupta & Co. on 24-6-1968 by lease-deed duly executed on stamped paper and registered as No. 4080, Bahi No. 1, pp. 103 to 105 dated 25-6-1968. The lease-deed is annexed to the said petition as Annexure 'A'. Those pleadings by the assessee before the Hon'ble High Court support the stand of the assessee vis-a-vis the letting out of the property to B.K. Gupta & Co. being genuine arrangements and factually true and correct (copy of the order of the learned AAC) is placed on our file as the assessee's paper book (pages 49 to 53) while copy of Civil Writ No. 1311 of 1971 is pages 42 to 46 of the assessee's paper book. The above factual position which is based on cogent evidence and material on record supports the case of the assessee and belies the stand of the lower authorities. I hold accordingly.
5. Yet that apart, in the assessment order which is presently impugned before us, the learned ITO while framing the assessment observes that, "... property income from M-25, Greater Kailash, shall be taxed in the hands of my assessee, i.e., Shri B.K. Gupta." 6. With the above findings on record, the property having been leased out by the assessee to B.K. Gupta & Co. as from 24-6-1968 vide registered lease-deed dated 25-6-1968, and since continuing the arrangements cannot be said to be sham, much less, ingenuine one or else that the entire rental receipts actually belongs to the assessee.
The lower authorities seem to be influenced by the situation of the property, since the learned AAC observes, "in the present case the actual rent that this property can fetch is Rs. 3,000 per month ..." The learned AAC has not appreciated the date of the lease which is 24-6-1968 when Greater Kailash-I was not known as a colony even in Delhi. The lower authorities seem to have been influenced by the situation, viz., Greater Kailash-I, New Delhi, and it does not stand to reason.
7. The apparent is the real and correct state of affairs and the registered lease-deed depicts the true and correct state of things ; to dislodge the same, the onus is on the revenue and there is no material on the file to warrant any other inference except that the arrangements are genuine and the returned income of the assessee merits to be accepted.
8. To give a second innings to the ITO and to direct him to go into the question of genuineness of the agreement or else to direct him to bring on record all the materials afresh, is to place the assessee in a disadvantageous position, since the revenue is not in appeal, but the assessee is. Secondly, if the ITO can go into the fresh evidence, this forum (Tribunal) can certainly do at its level also and the evidence relied upon by the assessee before us being of unimpeachable nature and cogent one, in a petty case like this, which was a Single Member case transferred to the Division Bench because the Single Member Case Bench was not functioning, will amount to a delayed justice. Among others, one of the glorious traditions of the Tribunal is to dispense quick justice unfettered by technicalities and rules of evidence, hence, on my part, I will rely upon the cogent evidence of the assessee and hold in his favour, with the result, that the appeal succeeds and the returned income of the assessee stands accepted.
We, having differed in the above case, proceed to draw up the following point of difference and refer the case to the President, the Tribunal for referring the matter to one or more other Members of the Tribunal as required under Section 255(4) of the Income-tax Act, 1961 ('the Act') : Whether, on the facts and in the circumstances of the case, the orders of the lower authorities require to be set aside with the directions as given in paragraph No. 4 of the order of the Accountant Member or the appeal by the assessee was to be accepted 1. The assessee in this appeal is an individual deriving income mainly from property. There is also small income from business and from other sources which is both inconsiderable and not relevant for my present purpose. The income from house property was declared at Rs. 4,550. The assessee had two properties, one situated at Green Park and the other at Greater Kailash bearing No. M-25, Greater Kailash. In respect of this property of Greater Kailash, the claim of the assessee was that under a contract entered into between his wife and his brother on 29-6-1968, he was receiving a rent of only Rs. 9,600 per year. Pursuant to that contract the assessee computed the income and eventually arrived at Rs. 4,550 but the ITO was of the opinion that this entering into an agreement with his wife and his brother was only a novel method adopted to divert the income from the house property. After those two persons referred to above took the property on lease from the assessee, they formed into a partnership firm called B.K. Gupta & Co. and that firm let out the property in the course of its business in such a way that its income was about Rs. 30,000 per year. The ITO was of the opinion that the entire rental receipt received by that firm of B.K.Gupta & Co. was in truth and reality the income of the assessee. In support of this view, the ITO relied upon Sections 22 and 23 of the Act to say that the income from house property could be taxed only in the hands of the owner and not in the hands of the other people like the partners of B.K. Gupta & Co. Thus, he estimated the income from property on the basis of the income received by B.K. Gupta & Co. at Rs. 29,500 and after making the statutory deductions determined the income at Rs. 18,506, to which was added the other income from business and from other sources. Aggrieved by this method of assessment, the assessee filed an appeal before the AAC. It was contended before the AAC that the lease of this property to B.K. Gupta & Co. was supported by a registered lease-deed, the lease having been given at a time when Greater Kailash-I was totally undeveloped, the rent fixed under the lease was quite reasonable, considerate and accords with the market value of the property prevailing at that time and should have been accepted more particularly when the department did not prove that the lease was sham and the income earned by B.K. Gupta & Co. was received by the assessee. It was further pointed out that the department acting upon this lease agreement has made an assessment for the assessment year 1969-70 on 3-12-1971. It was further pointed out that the property having been leased to B.K. Gupta & Co., it was not open to the assessee to get them vacated. Moreover, the municipal corporation fixed the latest rateable value of the property at Rs. 12,500 and that shows that the lease of Rs. 9,600 fixed long before the fixation of the rateable value by the municipal corporation was genuine. The AAC without dealing with all these points raised and concentrating her attention only on the question whether it was open to the ITO to adopt the actual rent received in preference to the rateable value, held that the action of the ITO was justified. The matter then came before the Tribunal.
2. After considering the contentions raised on behalf of the assessee and the department, the learned Accountant Member, who spoke for the Bench in his leading order, observed thus : 4. We have perused the paper book filed by the assessee and we are of the view that this matter should go back to the ITO for proper determination of facts. The large number of papers filed before us do not appear to have been furnished before the lower authorities.
It may be that the ITO has not called for these papers but it was also the duty of the assessee to place these before him. It is necessary to go into the question of genuineness of the agreement and also the fact whether this agreement was further renewed after the end of five years. The parties involved should also be examined.
Without that it is not possible to know whether the arrangement was genuine. No doubt the owner has to be assessed under the provisions of the Income-tax Act, but one has also to see the legal effect of any valid subsisting agreement. The ITO is, therefore, directed to bring on record all the materials and to give a clear finding regarding the nature of the agreement, its renewal and legal effect.
He may also take into consideration the assessments made in the hands of the firm known as B.K. Gupta & Co. With these directions, the matter is restored to the file of the ITO for proper determination of the facts so that the income may be properly assessed. To this extent, the appeals shall be treated as allowed for statistical purposes.
The learned Judicial Member, however, expressed his disagreement with this view with utmost respect by going through his order with great care. He felt that the learned Accountant Member was throwing doubts on the genuineness of the lease agreement and that the facts on record did not support that view. He referred to a number of the Court cases in the Court of Additional Rent Controller, involving this property and held that provided unimpeachable evidence that the arrangement of lease between the assessee and B.K. Gupta & Co. was genuine and subsisting.
He also made a reference to an order passed by the AAC for the assessment years 1975-76 to 1977-78 in the assessee's own case where the lease agreement appeared to have been approved by him. When the lease agreement was genuine, one should proceed to compute the income on that basis and it would be unfair either to ignore it or to throw doubts upon it or to provide a second innings to the ITO to go into the question of genuineness of the agreement again by directing him to bring on record the material in support of that view. The learned Judicial Member has converted the direction given by the learned Accountant Member in his order to the advantage of his view and that is when the ITO could be directed to take fresh evidence, it is open to the Tribunal whose powers are co-extensive with that of the ITO to look into the fresh evidence and record a finding thereon. The evidence provided by the assessee by way of the Court cases which ultimately ended up in High Court provided ample proof that the lease was a very genuine arrangement and for this purpose there was no need at all to send the case back to the ITO. Thus, both the learned brothers have differed and the following difference of opinion was referred to the President, who in turn, nominated me as Member to resolve the difference, namely : Whether on the facts and in the circumstances of the case, the order of the lower authorities require to be set aside with the directions as given in paragraph No. 4 of the order of the Accountant Member or the appeal Third by the assessee was to be accepted 3. I have gone through the record carefully and heard the learned advocate for the assessee Shri Bishan Lal and the departmental representative Shri J.S. Rao. Naturally both of them depended upon those orders which are, respectively, in their favour. In particular the learned departmental representative pointed out that this was only a device adopted to divert the income. It is unthinkable that an assessee, who has a house in a locality like Greater Kailash would lease it out to his wife and his brother and be satisfied with lesser income than the property could fetch. Nothing is more easier for exploitation than house property to produce maximum income. There was no inhibition in the way of the assessee to let out the property to the same party as was let out by B.K. Gupta & Co. was only a facade inserted to divert the income from property. The assessment made in the past could not be a guide in these matters more particularly when the ITO on enquiry can come to different conclusions diametrically opposite to the one arrived at in the earlier years provided there was evidence.
There was ample evidence to justify his conclusions. It is, therefore, open to him to include the income derived by B.K. Gupta & Co. in the hands of the assessee. When the Tribunal was satisfied on first impression that the view of the ITO could be justified but with a little more evidence being brought on record, there was nothing wrong in directing the ITO to re-examine it to fill the lacuna. If in the process the ITO is convinced about the genuineness of the arrangement, there was nothing preventing him from accepting the assessee's contention nor did the directions given by the learned Accountant Member place a fetter on his power. He, therefore, commended for acceptance the view of the learned Accountant Member. But the other side relying on the view expressed by the learned Judicial Member has seriously disputed these contentions and pointed out that it is not open to the department to keep on investigating into the matters over and again every year almost in a repetitive nature. That is not the intention of the Legislature nor does the ITO get vested with that power. There is one thing to enquire into the facts which come to light and suspecting the already existing facts and inferences drawn therefrom. While an enquiry on the basis of the former is permissible, an enquiry on the basis of the latter is not only impermissible but even prohibited and even frowned upon by the judicial authorities almost repeatedly. There are no new facts that have come to the light of the ITO except a review of the earlier views. The order passed by the ITO does not show any new facts having come to his light nor the order of the AAC. This very point has come up for consideration in the assessment year 1977-78. The ITO after going through the entire record, the agreement, the evidence and the reports of the inspector came to the same conclusion as the ITO had come to in this year but on appeal the Commissioner (Appeals) reversed it. Although the department had preferred an appeal to the Tribunal, it did not question the conclusion reached by the Commissioner (Appeals) at all either impliedly or directly. It only questioned the conclusion of the Tribunal on the correctness of the application of the provisions of Section 147(a) of the Act. The Tribunal held that Section 147(a) was rightly inapplicable and the reference application filed thereon was also rejected. Thus, the conclusion reached by the Commissioner (Appeals) on appeal on merits had become final, the department not having agitated that conclusion in appeal it accepted or must be deemed to have accepted.
Such being the position and in the absence of any new facts the question is, is it open to the ITO to doubt the arrangement arrived at and call it a device or a novel method adopted and is it open to the Tribunal to direct the ITO to re-examine it He submitted, therefore, that when after an exhaustive enquiry was made into the facts and a firm conclusion was reached against the ITO, there was no need to have the matter re-examined all over again. It is this exercise that was not normally accepted by the judicial authorities, the learned Judicial Member had advocated in his order. He therefore, pleaded that the view expressed by the learned Judicial Member should be accepted.
4. In my opinion there is any amount of weight and force in the arguments addressed on behalf of the assessee by the learned counsel, Shri Bishan Lal. It is not as if the enquiries that were directed to be made by the learned Accountant Member were not made in the earlier years. The entire exercise was gone into. The order passed for the assessment year 1977-78 by the ITO contained copious references on this aspect. For the assessment year 1977-78 the original assessment was completed under Section 143(1) of the Act accepting the declared income by the assessee in the return. Subsequently, a tax evasion petition was received by the ITO from one Shri Anil Kumar. Thereafter the ITO made enquiries, first by the ITO who made the assessment on the firm of B.K.Gupta & Co. and later by the ITO, who made the assessment on the assessee. On the basis of the report furnished by the ITO assessing B.K. Gupta & Co. a report was sent to the Commissioner, who gave permission to the ITO assessing the assessee to reopen the assessment under Section 147(a). As a consequence the assessments for the assessment years 1975-76 to 1977-78 were reopened. In the course of the reassessment proceedings summons under Section 131 of the Act were issued to the assessee and to the partners of B.K. Gupta & Co., namely, the wife of the assessee, Smt. Anjali Rani and Shri B.K. Gupta brother of the assessee and also to the complainant, Shri Anil Kumar. The assessee's wife did not appear in response to the summons but others appeared and their statements were recorded and opportunities were provided to cross-examine one by the other. Shri Anil Kumar stated that the entire income from property No. 25, Greater Kailash, the property in question, belonged to the assessee and that the assessee was the real owner of the property and that the lease agreement was only a device adopted to evade tax. He also stated that he was a tenant in the premises and the rental was Rs. 500 per month and that he was paying the rent to Smt. Anjali Rani and Shri B.K. Gupta. He also submitted that on his failure to pay the rent as it was instituted by Smt. Anjali Rani as partner of the firm, B.K. Gupta & Co., for non-payment of the rent in Tis Hazari Court before Senior Sub-Judge and a decree of Rs. 18,000 was obtained and that the goods worth Rs. 18,000 were attached, that he had to pay the sum of Rs. 18,000 on account of the decree executed against him and another sum of Rs. 9,200 towards rent. Thus, a total sum of Rs. 27,000 was recovered from him. The inspector attached to the ward was also deputed and he also gave his report. The ITO went into the lease-deed and recorded his findings thereon in the assessment order and the assessment order shows that a detailed enquiry was made in a very exhaustive way. The eventual conclusion reached by him was that the entering into of lease agreement with B.K. Gupta & Co. was only a device adopted by the assessee to provide a sort of smoke screen to show that the income was not realised by him but by the firm of B.K.Gupta & Co. He also referred to the point that under Section 22 as well as Section 23 of the Act, the income from house property will be assessed in the hands of the owner of the property and since B.K. Gupta & Co. were not the owners, they were not to be assessed on the income from this property, which was also the point now taken up by the ITO in his order. It is this order of the ITO that went before the Commissioner (Appeals), who did not agree with the ITO and reversed his view. As stated by Shri Bishan Lal and rightly though the matter was taken up in appeal by the department before the Tribunal, the conclusion of the Commissioner (Appeals), on merits was not disputed.
It, therefore, follows that the entire matter has already been exhaustively enquired into by the department in the earlier years and a definite conclusion in favour of the assessee was recorded and nothing more new had come to light so as to deviate from that view unless it be that the authorities deliberately want to ignore the earlier decision on the plea of non-application of principle of res judicata. The reason adduced by the ITO for the years are similar to the views given in earlier years also. I may add here that the principle that rule of res judicata does not apply to income-tax proceedings is not such as that it would not apply to all cases. This very point has come-up for consideration before me as a Third Member and relying upon the decision of the Madhya Pradesh High Court in the case of CIT v. Bhilai Engg.
Corpn. (P.) Ltd.  133 ITR 687, I have held that the principle of res judicata is no doubt inapplicable to income-tax proceedings but not in all and every situations. Unless new facts come to light or there is evidence to show that the earlier decision reached was arbitrary or perverse a decision reached in the earlier years should not be deviated from. In this case there is nothing to show that either any new facts have come to light or that the decision reached in the earlier years was arbitrary, perverse or ill-considered. Therefore, there is no need to send the case back to the ITO to reconsider the same afresh. This in my opinion is not called for and is an unnecessary exercise, on the other hand there is ample evidence by way of the Court cases to show that the lease agreement was acted upon. Even Shri Anil Kumar did not say that he paid the rent to the assessee even in the execution of the Court decree. I am, therefore, of the opinion that the case need not be sent back to the ITO for examination of the issue referred to in paragraph No. 4 of the learned Accountant Member's order. Since the genuineness of the matter has been gone into in the earlier years, and eventually in appeal it was held in favour of the assessee that decision should prevail and following that decision and the other materials brought on record and relied upon by the learned Judicial Member, I would hold that the assessee's appeal deserves to be accepted.
5. Now the matter will go back to the regular Bench for disposing of the appeal in accordance with the opinion of the majority.