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Commissioner of Income-tax, Central Vs. L.G. Ramamurthi and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 229 of 1972 and 64 of 1975 (Reference No. 42 of 1972 and 64 of 1975)
Judge
Reported in[1977]110ITR453(Mad)
AppellantCommissioner of Income-tax, Central
RespondentL.G. Ramamurthi and ors.
Appellant AdvocateA.N. Rangaswami and ;Nalini Chidambaram, Advs.
Respondent AdvocateS. Swaminathan and ;K. Ramgopal, Advs.
Cases ReferredT.M.M. Sankaralinga Nadar and Brothers v. Commissioner of Income
Excerpt:
direct taxation - gift - whether tribunal rightly held that amounts represented by cross-gifts were not held by donees as benamidars of respective donor (hindu undivided family) but in their own right and that income attributable to cross-gifts not assessable in hands of donors - if tribunal wanted to take opinion different from one taken by earlier bench it should have referred to full bench of tribunal - tribunal erred in coming to conclusion it did at variance with and opposed to conclusion of tribunal on earlier occasion - question answered in negative and against assessee. - - commissioner of income-tax [1963]49itr102(mad) observed at page 106 :the finding of the department as well as of the tribunal is that there was an indirect transfer of assets by l. if that is the stand of.....ismail, j. 1. in t. c. no. 229 of 1972, the income-tax appellate tribunal, madras bench, under section 256(1) of the income-tax act, 1961, has referred the following question of law for the opinion of this court:'whether, on the facts and in the circumstances of the case, the appellate tribunal was right in holding that the amounts represented by cross-gifts were not held by the donees as benamidars of the respective donor-hindu undivided families but in their own right and that the income attributable to the cross-gifts is not assessable in the hands of the donors ?'2. in the application made to the tribunal, the commissioner of income-tax had requested the tribunal to refer four questions, of which the question actually referred was question no. 1. the tribunal did not refer the other.....
Judgment:

Ismail, J.

1. In T. C. No. 229 of 1972, the Income-tax Appellate Tribunal, Madras Bench, under Section 256(1) of the Income-tax Act, 1961, has referred the following question of law for the opinion of this court:

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the amounts represented by cross-gifts were not held by the donees as benamidars of the respective donor-Hindu undivided families but in their own right and that the income attributable to the cross-gifts is not assessable in the hands of the donors ?'

2. In the application made to the Tribunal, the Commissioner of Income-tax had requested the Tribunal to refer four questions, of which the question actually referred was question No. 1. The Tribunal did not refer the other three questions and referred the only question which we have extracted above. Thereupon, the Commissioner of Income-tax approached this court in T.C.Ps. Nos. 16 to 18 of 1973 and by an order dated February 18, 1974, this court directed the Tribunal to refer the following question also for the opinion of this court:

'Whether the Tribunal was right in refusing to entertain and adjudicate upon the contention of the department that the alleged gifts were void in law ?'

T.C. No. 64 of 1975 covers the above question.

Both the questions referred to above relate to the same assessment year, namely, 1963-64.

3. The short facts are : There were four brothers by name L.G. Bala-krishnan, L.G. Varadarajulu, L.G. Ramamurthy and L.G. Nityanand and they constituted a partnership with the firm name of L.G. Balakrishnan and Brothers. In the accounting year ending 31st March, 1958, relevant to the assessment year 1958-59, the Income-tax Officer found the followingdeposits in the books of the firm called L.G. Balakrishnan and Brothers and the said deposits were made by debiting the capital account of the partners and crediting the account of the minor children as shown below :

DonorDateAmount

Rs.Name of donee in whose name credited

1.L. G. Balakrishnan1-2-5850,000Miss V. Vanitha, daughter of I,. G. Varadarajulu2.L. G. Varadarajulu3-2-5850,000Miss : R. Chitra, daughter of L. G. Ramamurthy3.L. G. Ramamurthy5-2-5850,000B. Vijayakumar, son of L, G. Balakrishnan

4. The firm paid interest on these credits to the respective persons referred to above. In the assessment proceedings for 1958-59, the Income-tax Officer considered these gifts to be really in the nature of cross-gifts and he was of the opinion that though there were no direct transfers of assets by the fathers to the minor children these transactions amounted to indirect transfers within the meaning of the said expression in Section 16(3)(a)(iv) of the Indian Income-tax Act, 1922. He, therefore, included the interest on the sum of Rs. 50,000 in the respective assessments of the three persons who figured as donors. We may mention in this context that all the four were partners of the firm as karta of their respective joint families.

5. As far as the assessment year 1958-59 is concerned, of the three persons in whose total income, interest on Rs. 50,000 is included, L.G. Balakrishnan alone pursued the matter all through up to the High Court. The Appellate Assistant Commissioner held that the process of gifting had been so devised as to circumvent the provisions of Section 16(3)(a)(iv) and that the inclusion was justified. In the further appeal preferred to the Tribunal, the Tribunal also affirmed the inclusion. While doing so, the Tribunal pointed out:

'All these so-called gifts are really no gifts at all. They are in effect only transfers in the books camouflaged as cash entries on different dates carried out in such a manner that the cash position of the business was not affected at all. In fact the business had no adequate cash to spare for all the gifts totalling, Rs. 2 lakhs if in fact it was the real intention of the parties to give away the amounts as gifts or donations.'

6. When the matter was taken up to this court on a reference by L.G. Balakrishnan, this court in L.G. Balakrisknan v. Commissioner of Income-tax : [1963]49ITR102(Mad) observed at page 106 :

'The finding of the department as well as of the Tribunal is that there was an indirect transfer of assets by L.G. Balakrishnan to his minor son, Vijayakumar. This, is certainly based on the evidence on record and it seems to us that this finding is fully justified and warranted.'

7. Subsequently, two other debit and credit entries were found as follows:

DonorDateAmount

Rs.Donee in whose name credited

L. G. Varadarajulu24-3-5975,000R. Chitra, daughter of L. G. RamamurthiL. G. Ramamurthi30-4-591,00,000Sudarshan, son of L. G. Varadarajulu

8. For the assessment years 1959-60 and 1960-61, in addition to the inclusion of the interest already referred to, interest on these further amounts also were included. The assessment for 1959-60 in the case of L.G. Ramamurthy was in the status of an individual, while in the case of others, it was in the status of Hindu undivided family. In the appeals preferred by these persons before the Appellate Assistant Commissioner it was held by that officer that the gifts were merely cross-gifts and that the Income-tax Officer was justified in including the income derived from the assets so transferred under Section 16(3)(a)(iv). However, on further appeals preferred to the Tribunal, it was contended that in all these cases except one, the assessments had been made in the status of Hindu undivided family and that, therefore, the provisions of Section 16(3)(a)(iv) could not be applied. The Tribunal accepted this contention of the assessees and observed:

'The provisions of Section 16(3)(a)(iv) refer to transfer by individuals and are not applicable to Hindu undivided families. As the assessments in these cases except that of L.G. Ramamurthi for 1959-60 had been made in the status of a Hindu undivided family, we consider that the inclusion of the interest from assets transferred by the individuals with that of the Hindu undivided family is not justified.'

9. When the assessment proceedings for 1961-62 and 1962-63 were taken up, the Income-tax Officer took the view that the gifts themselves were not real and that they were only sham. For this purpose he referred to the observations of the Tribunal which we have extracted relating to the assessment year 1958-59. In view of this, his conclusion was that in all the three cases, the gifts were merely sham and nominal and that the amounts continued to remain only with the respective Hindu undivided families. Consequently, he assessed the interest referable thereto only in the hands of the Hindu undivided families. The assessees took the matter on appeal to the Appellate Assistant Commissioner. It was contended before him that the interest aforesaid had originally been included by applying the provisions of Section 16(3)(a)(iv) and that the said provisions were not applicable to the case of a Hindu undivided family, as has been held already. The Appellate Assistant Commissioner, relying on the immediately preceding decision of the Tribunal, directed the deletion of interest referable to thoseamounts. The department preferred appeals to the Income-tax Appellate Tribunal and the Tribunal allowed the appeals, holding that the gifts were sham and that the funds which earned interest really belonged to the family and, therefore, the Income-tax Officer was justified in including such interest in the income of the respective families.

10. For the assessment year 1963-64, the Income-tax Officer included the interest income referable to the amounts gifted in each case in the assessment of the respective Hindu undivided families following the order of the Tribunal in the case of the assessment years 1961-62 and 1962-63. On appeal, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer in that behalf. The assessee took the matter on further appeal to the Income-tax Appellate Tribunal and the Tribunal held that the gifts were real, that the gifts having been made by the Hindu undivided families, Section 16(3)(a)(iv) was not attracted and that, therefore the order of the Appellate Assistant Commissioner was not right, with the result the appeals were allowed. It is the correctness of this conclusion of the Tribunal that is challenged in the form of the questions extracted already.

11. Before proceeding further, we may point out that the observations which the Tribunal has made and which have given rise to the question referred in T.C. No. 64/75 are found in paragraph 20 of its order. The Tribunal after referring to the contention of the department that even if there was a real gift, that gift was not valid in law because a Hindu undivided family cannot make a gift of its properties to any individual, observed in paragraph 20 as follows :

'As regards the argument that the Hindu undivided family cannot make gift also, we agree with the counsel for the assessee that Sri L.G. Ramamurthi being a sole surviving coparcener at the material time, his right of disposition over the Hindu undivided family property is unfettered. As regards the gifts by the other two brothers also we are of the opinion that apart from the fact that such a question requires investigation of facts, whether or not such gifts were reasonable having regard to the attending circumstances of the family, it cannot be allowed to be raised at this stage; the position in law, as we understand, is that such gifts are voidable at the option of the affected members and not void ab initio. That apart, all concerned having come to the conclusion that the gifts are, as a matter of fact, made by the respective Hindu undivided families, to the members of their own family, the case will have to be examined not from the point of view whether a karta of a Hindu undivided family could out of his joint family funds make gifts to his nephews or nieces but from the point of view whether he could make gifts to his own sons and daughters. In this connection it may not be out of place to mention here thatthe department's stand is contradictory. If that is the stand of the department, the gifts would be bad in entirety and would not be subjected to gift-tax at all. Moreover, it is here that the departments's conduct in the past and in the subsequent income-tax and wealth-tax proceedings assumes importance. The department cannot blow hot and cold at the same time. Both the contentions of the departmental representative are, therefore, liable to be rejected.'

12. We shall first deal with the question raised in T.C. No. 229 of 1972, before we refer to the question covered by T.C. No. 64 of 1975. We have already extracted the question covered by T.C. No. 229 of 1972, and it relates to the correctness of the conclusion of the Tribunal with regard to the nature of the gifts involved in these cases. Before we deal with this question, it is desirable to refer to certain things which had happened previously.

13. We have already referred to the assessment in regard to 1958-59, having been brought up to this court by L.G. Balakrishnan. Similarly, when the Tribunal held in respect of the assessment years 1961-62 and 1962-63, that the gifts were sham and not real, the matter was brought up to this court in the form of a reference in L.G. Ramamurthi v. Commissioner of Income-tax [1970] 1 ITJ 740 . In that case, the question actually referred to this court was ;

'Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the income derived by the minor children from gifts made to them by their uncles is includible in the total income of the assessee-Hindu undivided family ?'

14. In view of the general terms in which the question was couched, a vast line of argument was sought to be advanced before this court on behalf of the assessee. As a matter of fact, as we have pointed out already, with reference to these years, the finding of the Tribunal was that the gifts were sham. If so, the gifts were never made and had no existence in law and, consequently, it would immediately follow that the income referable to those amounts was liable to be assessed only in the hands of the donors. Therefore, if the question raised in that reference was to be construed as excluding any consideration of the correctness or otherwise of the finding of the Tribunal on the question of gifts being sham and non est, the question would answer itself and no further discussion would have been necessary. It is only in this context a vast amount of reference has been made to the scope of the jurisdiction of this court under Section 66(1) of the Indian Income-tax Act, 1922, corresponding to Section 256(1) of the Income-tax Act, 1961, and arguments were advanced on behalf of the assessees on the merits of the case. While referring to the limitations placed on the jurisdiction of this court in references made under the Income-tax Act, thiscourt, after referring to the decision of the Supreme Court in Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax : [1957]31ITR28(SC) :

'If this principle is borne in mind, the Tribunal in this case considered the primary facts which revolved round the scheme or device adopted by the assessees and ultimately when they found that the money came back to the minor son of each of the assessees by way of a cross-gift, they came to the conclusion after appraising the overall picture and taking into consideration their cumulative effect that the money came back to the coffers of the joint family. May be one view is that the money came back to be owned by the minor who is a coparcener of the family and, therefore, it did not literally come back to the Hindu undivided family. But this cannot be said to be the only view that is possible. In such circumstances, the High Court cannot review the finding given by the Tribunal as the other inference drawn by them is also possible and certainly not perverse or unreasonable.'

15. After referring to the decisions of the Supreme Court in A.V. Thomas and Co. Ltd. v. Commissioner of Income-tax : [1963]48ITR67(SC) and Commissioner of Income-tax v. M. Ganapathi Mudaliar : [1964]53ITR623(Bom) and the decision of the Privy Council in Griffiths (Inspector of Taxes) v. J. P. Harrison (Watford) Ltd. [1965] 58 ITR 328 , this court further observed--[See [1970] 1 ITJ 740:

'It, therefore, follows that if an alternative conclusion is plausible, thenthe finding is not perverse or unreasonable. We are also satisfied that suchfunnelling back of the assets into the joint family, though ostensibly throughthe minor, is absolutely an artificial transaction made with the intent toavoid tax and is, therefore, bound to be characterised as a sham one which need not be taken notice of by the revenue.'

16. Finally, this court wound up with the following statement--[See [1970] 1 ITJ 740:

'Whilst, therefore, accepting the finding of fact noticed by the Tribunal in their order and which have not been challenged by specific questions and after noticing the Tribunal's order and their reasoning we are satisfied that the Tribunal is justified in law in holding that the income derived by the minor children from gifts made to them by their uncles is includible in thetotal income of the assessee's Hindu undivided family.'

17. It is in view of this judgment only that both the sides before the Tribunal in the present case tried to put forward conflicting arguments basing themselves on certain statements contained in the judgment of this court in L.G. Ramamurthi v. Commisssioner of Income-tax [1970] 1 ITJ 740 referred to already. The contention advanced on behalf of the assessees before the Tribunal was that this court in the earlier reference,namely, in the decision referred to above, did not actually decide the question whether the gifts were sham or not because that finding of the Tribunal was not challenged by raising appropriate questions and that, therefore, it was open to the Tribunal to go into the question again and to find out whether the gifts were real or sham. On the other hand, on behalf of the revenue it was contended before the Tribunal that this court in the earlier reference had actually accepted and approved the finding of the Tribunal that the gifts were sham and that, therefore, the Tribunal could not go behind that decision of the High Court. For this purpose they relied on the extracts from the judgment of this court which we ourselves have given above. After referring to these arguments and after giving the above and other extracts, the Tribunal proceeded to observe in paragraph 11 of its order :

'It is, no doubt, true that in the aforesaid passages, the High Court has observed that the finding of fact that the gift transactions in the cases under appeal were sham or non est was not perverse and was based on the facts on record. It is, however, equally true that having regard to their earlier observations that it was not open to their Lordships, in the absence of a specific question raised on behalf of the assessee, to examine the finding of fact given by the Tribunal, the observations made herein have to be taken as casual observations only. That apart, the jurisdiction of the High Court with regard to the findings of fact given by the Tribunal is, it is significant to note, limited to such cases only where the finding of fact is perverse in the sense that no reasonable person can come to that conclusion or is based on irrelevant material or is arrived at by ignoring relevant material. Under the circumstances, the mere fact that the High Court has not upset the finding of fact given by the Tribunal in the given facts and circumstances would not necessarily lead to the conclusion that the finding of fact has become a finding of fact by the High Court, so that it cannot be reconsidered by lower Tribunals in subsequent proceedings. In other words, there might arise cases where the High Court would not upset the finding of fact given by the Tribunal on the ground that the same was neither perverse nor based on irrelevant material nor arrived at by ignoring relevant material in spite of the fact that their Lordships feel that if they had to reappraise the evidence, they would, perhaps, have come to a different conclusion. It would, therefore, depend on the language used in each decision as to what their Lordships have really held. It is, thus, not correct to say that a finding of fact not upset by the High Court in each and every case gets the stamp of approval of the High Court and that the Tribunal cannot in any circumstance reappraise the value of the evidence that may be placed before it in the proceedings for the subsequent years.'

18. To say the least, we are surprised at these observations of the Tribunal, having regard to the passages in the judgment of this court, which we have extracted already. It was not merely a negative finding of this court that the finding of the Tribunal on the earlier occasion was not perverse or unreasonable. But this court went further and stated that this court was satisfied that such a funnelling back of the assets into the joint family though ostensibly through the minor, was absolutely an artificial transaction made with intent to avoid tax and was, therefore, bound to be characterised as a sham one which need not be taken notice of by the revenue. In addition, towards the end of the judgment, this court also stated that it had accepted the finding of fact noticed by the Tribunal. Whether the observations recorded by this court were correct or not is not relevant for the purpose of this case. What is surprising is that, notwithstanding the categorical statements made by this court, the Tribunal had chosen to characterise these statements as casual observations and that this court has not upset the finding, when this court positively stated that it accepted the finding and that having regard to the facts, the gifts were bound to be characterised as sham ones which need not be taken notice of by the revenue. Therefore, it will follow from this that the Tribunal committed a clear error in law in ignoring the conclusion of this court in respect of the identical transaction with reference to earlier assessment years.

19. Mr. Swaminathan, learned counsel for the assessees, very strenuously contended that the principle of res judicata has no application to proceedings under the Income-tax Act, since each assessment is considered to be a separate and independent transaction and that, therefore, any finding recorded by any authority in respect of one year will not be binding in respect of subsequent years. However, we are of the opinion that having regard to the facts of the present case, the issue involved is more fundamental than the question of res judicata. Even assuming that this court 'on the earlier occasion had not given any finding with regard to the nature of the gift, whether it was real or sham, and merely went on to consider the question of law embedded in the question actually referred, to this court, still we are of the opinion that no Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another Bench of the same Tribunal on the identical facts. It may be that the members who constituted the Tribunal and decided on the earlier occasion are different from the members who decided the case on the present occasion. But what is relevant is not the personality of officers presiding over the Tribunal or participating in the hearing, but the Tribunal as an institution. If it is to be conceded that simply because of the change in the personnel of the officers who manned the Tribunal, it is open to the new officers to come to a conclusion totally contradictory to the conclusionwhich had been, reached by the earlier officers manning the same Tribunalon the same set of facts, it will not only shake the confidence of the publicin judicial procedure as such, but it will also totally destroy such confidence.The result of this will be conclusions based on arbitrariness and whims andfancies of the individuals presiding over the courts or the Tribunals andnot reached objectively on the basis of the facts placed before the authorities. In this particular case, we are clearly of the opinion that theTribunal has come to a conclusion totally different from the one which theTribunal reached in respect of the assessment years 1961-62 and 1962-63on the identical facts and circumstances. As we have pointed out already,in respect of the assessment years 1961-62 and 1962-63, the Tribunal heldthat the gifts were sham. For the assessment year 1963-64, the Tribunalhas held that the gifts were real. The question for consideration is whetherthe Tribunal can do so.

20. When we pointed out this position to the learned counsel for the assessees, the learned counsel had to concede that the Tribunal cannot come to a different conclusion on the same facts, but that if there are new facts, the Tribunal can certainly come to a different conclusion and the learned counsel endeavoured to convince us that new facts were placed before the Tribunal. As a matter of fact, to a specific question put by us to the learned counsel as to whether the Tribunal anywhere in the course of its order had stated that facts which were not placed before the earlier Bench had been placed before it and, therefore, on a consideration of such facts, it had corne to a different conclusion, he had to admit that the Tribunal had not said so anywhere in the course of its long order and yet the argument of the learned counsel for the assessee is that new facts were placed before the Tribunal and it is on the basis of those fresh facts the Tribunal came to a different conclusion. We shall now consider the correctness of this submission.

21. In this context, stress was made on four facts as being relevant to the determination of the question whether the gifts were real or sham. One is that the donors had paid gift-tax in respect of the amounts in question. The second is that the donees themselves have been assessed to wealth-tax on those amounts. The third is that the donees have paid tax on interest accruing on these amounts. Lastly, the donees themselves have withdrawn these amounts from the accounts of L.G. Balakrishnan and Brothers for fresh investments. As far as the first three facts are concerned, the same facts were before the Tribunal when it disposed of the appeals relating to the assessment years 1961-62 and 1962-63 and the same is not in dispute. Only with regard to the last fact, namely, the fact of withdrawal, there is no reference to the same in the earlier order of the Tribunal. With regard to this, Mr. Swaminathan, learned counsel for the assessees, drew ourattention to four statements contained in the order of the Tribunal in the present case, namely:

(1) the statement that occurs in paragraph 13 of the order of the Tribunal where it has stated :

'The departmental representative's contention, in fact, is that if the assessee desires the Tribunal to take a different view, it must produce some material of unimpeachable character that can lead to an inference that the transaction was not sham. In reply, the counsel for the assessee has taken us through the accounts of the donees maintained in the books of the firm, L.G. Balakrishnan & Bros., for various years to show that in the subsequent years the amounts were withdrawn and utilised in some other investments.' (2) the statement that occurs in paragraph 16 of the order of the Tribunal, where it has stated :

'It has been emphasised that the money all along remained with the respective families. Here again with great respect we think that this is not proved to be the position. From the manner in which the Hindu undivided family's current account in the firm's books are maintained it appears that the firm, L.G. Balakrishnan and Bros., has been acting as a sort of bankers of the respective Hindu undivided families.' (3) the statement which is found in paragraph 19 of the order, where the Tribunal has observed:

'Sri Swaminathan had also, it may be stated, relied on the income-tax and wealth-tax assessments made on the donees by the department in subsequent years, the gift-tax assessments on the brothers and the withdrawals made by the donees in subsequent years from the firm and then making investments, etc., in support of his argument that the gifts were very much genuine and that the donees did not hold the moneys as benami-dars of the respective Hindu undivided families.' and (4) the statement that occurs in paragraph 20 of the order of the Tribunal to the following effect: 'We have looked into the statement showing the cash position of the firm on the relevant dates and find on verification from the cash book that the firm did not possess on each such date sufficient cash to enable a partner if he so desired to physically withdraw the cash for the purpose. Having regard to this factual position and the case laws relied upon by the counsel for the assessee, we have little hesitation in holding that the gifts cannot be held invalid on this score.'

22. We are unable to hold that these statements contain any reference to any new facts. We have already referred to the fact that the assessment to gift-tax, assessment to wealth-tax and the assessment of interest in the hands of the donees were very much before the Tribunal when it disposedof the matter on the earlier occasion. We have also referred to the fact that the Tribunal, when it disposed of the appeal relating to the assessment year 1958-59, itself referred to the fact that the firm did not have sufficient cash amounting to Rs. two lakhs for the purpose of payment in cash. Under these circumstances, the only material which, if at all, can be called a new material is the withdrawal of the monies by the donees from the accounts of L.G. Balakrishnan and Bros. We are of the opinion that this will not advance the case of the assessees any further for the simple reason that the same is as much voluntary and unilateral as the return for gift-tax as the return for wealth-tax and as well as the return for income-tax in respect of interest concerned. Further, there is nothing to show that the accounts of the 'donees' in the books of L.G. Balakrishnan & Bros. were not produced on the earlier occasion. On the other hand, a perusal of the earlier orders will show that all the accounts were very much before the authorities.

23. It is only on realising this position Mr. Swaminathan invited our attention to a decision of the Bombay High Court stating that there need not be even new facts. The decision relied on is H. A. Shah and Co. v. Commissioner of Income-tax : [1956]30ITR618(Bom) . The observation of the Bombay High Court on which reliance is placed is as follows :

'Nor are we satisfied that in order to enable the second Tribunal to depart from the finding of the first Tribunal it is essential that there must be some fresh facts which must be placed before the second Tribunal which were not placed before the first Tribunal. If the first Tribunal failed to take into consideration material facts, facts which had a considerable bearing upon the ultimate decision, and if the second Tribunal was satisfied that the decision was arrived at because of the failure to take into consideration those material facts and that if these material facts had been taken into consideration the decision would have been different, then the second Tribunal would be in the same position to revise the earlier decision as if fresh facts had been placed before it. On principle there is not much difference between fresh facts being placed before the second and the second Tribunal taking into consideration certain material facts which the first Tribunal failed to take into consideration.'

24. We are unable to hold that this represents the correct position of law and that it is binding on us. In the first place, this court in a Full Bench decision in T.M.M. Sankaralinga Nadar and Brothers v. Commissioner of Income-tax AIR 1930 Mad 209 ; 4 ITC 226 observed :

'It seems to us that where income-tax officials have, after enquiry, proceeded to assess the assessee on a certain basis, though they may be entitled to reopen the enquiry; they cannot arbitrarily change the assessment simply on the ground that the succeeding officer does not agree with:the preceding officer's finding. The position is just like the position of any two parties who have proceeded on a certain basis in their relations. It may be open to one party to reopen the matter. But, if he wants to do so, there should be facts which would entitle him to do it. If fresh facts come to light which on an investigation would entitle the Income-tax Officer to come to a different conclusion from that of his predecessor, we think he is entitled to reopen the question. But if there are no fresh facts it is difficult to see how he can arbitrarily go behind the finding of his predecessor. The same principles of natural justice or judicial dealing, which courts impose upon Income-tax Officers, would prevent them capriciously setting aside the orders of their predecessors based on enquiry.'

25. The above observation of this court in the Full Bench decision referred to above was dissented from by the decision of the Bombay High Court relied on by the learned counsel for the assessees referred to already on the ground that far from there being uniformity, different High Courts have taken different views and they have put a gloss on the observations of the Full Bench decision of this court referred to already. So long as the Full Bench decision of this court stands and has not been reversed or dissented from by the Supreme Court or reversed by a Fuller Bench of this court, the same is binding on us and, therefore, we cannot rely on the observation of the Bombay High Court which had dissented from the Full Bench decision of this court. Secondly, even assuming that the observations of the Bombay High Court referred to above can be relied on, still the position is that the succeeding Tribunal must refer to the facts which were before the former Tribunal, but which were not taken into account by that Tribunal and must observe that if those facts had been taken into account by the former Tribunal the former Tribunal itself would have come to a different conclusion. Such a statement in the order of the succeeding Tribunal is required in the interest of comity of judicial precedents as well as in the maintenance of judicial decorum and decency. Otherwise, it will lead to an assumed superiority on the part of the succeeding Tribunal as if it had discovered something which had escaped the attention of the former Tribunal and it alone was able to find out the truth, while the former Tribunal was not able to do so.

26. In this particular case, in the whole of the order of the Tribunal, there is not a single sentence as to what facts were brought to its notice for the first time or as to what facts which were placed before the former Tribunal and which were not taken into account by that Tribunal in arriving at the conclusion which it did and if it had taken those facts into consideration, it would have come to a different conclusion. On the other hand, the only reason which the Tribunal has on this occasion given for coming to adifferent conclusion is to be found in paragragh 14 of its order where it has stated:

'As we understand the situation, the case was perhaps not presented before the Tribunal in a proper perspective.'

27. Mr. Swaminathan who had all along appeared for the assessees in these cases and who also appeared before the Tribunal on the earlier occasion represented to us that it was merely a compliment to the counsel who appeared on the earlier occasion, but he had to admit that it did not refer to any new or different facts. Apart from this one sentence, we are not able to discover any other reason given by the Tribunal for taking a view totally different from and entirely opposed to the view which was previously taken by the Tribunal. Consequently, even on the assumption of the validity of the observation of the Bombay High Court relied on by the learned counsel, the requirements of those observations have not been fulfilled in the present case, because nowhere the Tribunal has stated that it was relying on a particular fact which was before the Tribunal on the earlier occasion and which was overlooked by the Tribunal and that if it was taken into consideration by the Tribunal on the earlier occasion, the conclusion itself would have been different. We are expressing this for the simple reason that there could not have been any such fact because all the matters on which Mr. Swaminathan sought to rely were before the authorities all along, namely, the account books of L.G. Balakrishnan & Bros., in which alone entries of debits and credits as well as withdrawals are to be found.

28. It is worthwhile emphasising that if a Bench of a Tribunal on the identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single judge takes a view different from the one taken by another judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly, if a Division Bench differs from the view taken by another Division Bench, it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal in the present case wanted to take an opinion different from the one taken by the earlier Bench, it should have placed the matter before the President of the Tribunal so that he could have referred the case to a Full Bench of the Tribunal, consisting of three or more members for which there is provision in the Act itself.

29. Under these circumstances, we are clearly of the opinion that the Tribunal completely erred in coming to the conclusion it did, at variance with and opposed to the conclusion of the Tribunal on the earlier occasion, namely, that the gifts in the present cases constituted real gifts and not sham ones.

30. The result is, we answer the question referred to us in T.C. No. 229 of 1972 in the negative and against the assessee.

31. In view of this conclusion of ours, namely, that the earlier finding of the Tribunal that the gifts were sham could not be varied by the Tribunal on the present occasion, it becomes unnecessary for us to answer the second question, namely, the question covered by T. C. No. 64 of 1975, which question proceeds on the basis of there being real gifts, and, therefore, we decline to answer that question.

32. The Commissioner is entitled to his costs. Counsel's fee Rs. 750 (Rupees seven hundred and fifty only), one set, to be paid by the three assessees in equal amounts.


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