Per Shri G. Santhanam, Accountant Member - This is an appeal by the assessee against the order of the Commissioner of Income-tax (Appeals).
2. The assessee along with certain others purchased certain house property from one Smt. Razia Begum. The Registered deed showed a consideration of Rs. 4,00,000. A search was carried out by the Income-tax Department at the resident of Smt. Razia Begum and her two daughters Smt. Anees Ali and Smt. Rafat Zaheer. Cash amounting to Rs. 7,56,600 was found out of which Rs. 7,20,000 was seized as per the following details : During the course of the search operation statements were recorded under section 132(4) from the above ladies. Smt. Razia Begum stated that the sale consideration of the house sold by her to the assessee and his brothers was only Rs. 4,00,000. She could not explain the sources of cash Rs. 3,69,600 which was found with her. A statement was recorded from her husband Dr. Zaheer Ahmed in the course of the search wherein he stated that his wife had sold the house property recently to the assessee and his brothers for a sum of Rs. 4,00,000. Smt. Anees Ali stated that the cash found with her represented sale proceeds of her jewellery, gold ornaments and silver articles. Smt. Rafat Zaheer stated that she received the cash from her mother as a gift and that she was not absolutely sure of the nature of the receipt.
3. One and half months after the search i.e. on 11-5-1984, Smt. Razia Begum filed an affidavit before the Commissioner of Income-tax (Survey and Investigation), Hyderabad, stating that cash found with her and her two daughters belonged to her and represented part to the sale proceeds of her house property bearing Door No. 8-2-583/2 Road No. 9 Banjara Hills, Hyderabad which had been sold by her to Sri Ramesh Pershad and others. She stated that she had sold her property for Rs. 11.75 lakhs and that the sale proceeds were partly in cash of Rs. 7.75 lakhs and partly by demand draft for Rs. 4,00,000, but in the sale deed only Rs. 4,00,000 was declared as sale consideration due to pressure from the vendees. Out of the cash of Rs. 7.75 lakhs, she gave Rs. 1.97 lakhs to Smt. Anees Ali and Rs. 1.9 lakhs to Smt. Rafat Zaheer, being her daughters, for safe custody. She stated that she had already purchased 3 years National Rural Development Bonds to the tune of Rs. 4,00,000 and had made a request to the Commissioner of Income-tax to invest the seized cash also in 3-year National Rural Development Bonds or in the Capital Gains Units Scheme.
4. Acquisition proceedings were started against the assessee and his brothers. The department also obtained the valuation of the property seems to have been valued thrice by the valuation cell. This property seems to have been valued thrise by the valuation cell. The first, valuation report dated 26-5-1984 by Sri Veerabhadra Rao, Valuation Officer, determined the value of the property at Rs. 4.53 lakhs. A second valuation report was obtained by the inspecting Assistant commissioner of Income-tax, Acquisition Range, Hyderabad from Sri. B.R. Rao, Executive Engineer, Unit I valuation cell, which determined the value of the property at Rs. 11.85 lakhs. Sri B. R. Rao had also given a statement before the Income-tax Offcer, Central circle III, Hyderabad, under section 131 of the Income-tax act, in which he made certain a varmints to the effect that he took the value of land as per rates indicated by the Superintending Engineer, that he did not visit the property at Door No. 8-2-583/2, that he saw it from outside and that he did not give any intimation of his visit to the assessee nor cold he recollect the date of his visit as the same was not recorded, that the Superintending Engineer told him orally that the vendor, Smt.
Razia Begum had given a sworn statement stating that the actual consideration received for the property was about Rs. 10 lakhs and thereupon he obtained a photostat copy of the affidavit given by Smt.
Razia Begum and thus determined the value at Rs. 11,85.000. The Inspecting Assistant Commissioner (Acquisition) in his letter dated 20-5-1985 addressed to the Valuation Officer, requested him to submit a report after visiting the property and after collecting all the relevant materials necessary for proper valuation of the property and after visiting other properties quoted by him earlier as comparable cases. In this revised valuation report forwarded on 12-7-1985 the very same Valuation Officer, Sri B. R. Rao, reestimated the value of the property at Rs. 4.60 Lakhs. The acquisition proceedings, which were initiated by the competent authority were held to be not valid by the Tribunal in its order dated 6-11-1986 in IT Acq. A. No. 12/Hyd. /1986 on the ground that the provisions of section 269D (2) which are mandatory, have not been complied with be the competent authority.
5. Be that as it may in the income-tax assessment of the assessee, the Income-tax Officer initially proposed to treat the undeclared consideration as the income of the assessed and his brothers. In the process, he examined the assessee, examined the Valuation Officer, issued summons to Smt. Razia Begum and others, took note of all the materials placed by the assessee in support of his stand and the other materials before him and reached the conclusion that the fair market value of the property sold by Smt. Razia Begum to Sri Ramesh Pershad did not exceed Rs. 4.56 lakhs as on the date of sale and the allegation of Smt. Razia Begum that she received excess and unrecorded consideration of Rs. 7.75 lakhs from the assessee and his brothers was not proved and hence the assessee is not liable to be assessed in respect of the excess consideration under section 69B of the Income-tax Act, 1961. Having thus, held in the computation part of the assessment order, the Income-tax Officer remarked as follows : "3. (ii) I have held that the assessee is not liable to be assessed undersection 69B in respect of 11 per cent of Rs. 7.75 lakhs alleged to have been paid by the assessee to Smt. Razia Begum as the allegation of Smt. Razia begum is not proved by her. In the case of Smt. Razia Begum, the amount, alleged to have been received by her from Shri Ramesh Pershad, to the extent of cash found with her and her daughter (the amount Rs. 7,56,600) is assessee as income from undisclosed sources under section 69A. If the appellate authorities in the appeal that may be filed against my decision by Smt. Razia Begum hold that the amount of Rs. 7.56,600 or Rs. 7.75 lakhs represents part of sale proceeds received from Sri Ramesh Pershad by Smt. Razia Begum on the sale of her house, then it may not be possible to re open the assessment of Shri Ramesh Preshed. Hence, I add 11 per cent of Rs. 7.75 lakhs amounting to Rs. 85,250 under section 69B, as a protective measure. The demand on this addition will be kept in abeyance till the matter is decided in appeal." 6. The assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals) and the ground of appeal was against the addition Rs. 85,250 under section 69B of the Income-tax act even on a protective basis. When the CIT (Appeals) was in seize in of the matter, the Inspecting Assistant commissioner (Asst.) who was holding jurisdiction over the case, moved a petition for enhancement or modification of the assessment order on the following grounds : "(a) Dr. Zahir Ahmed Husband of Smt. Razia Begum, had owned the adjacent property. The property of Shri Zahir Ahmed was larger than the property sold by Smt. Razia Begum. There was evidence to show that Sri Zahir Ahmed had sold his property on 17-6-1983 for Rs. 12 lakhs. Sri Zahir Ahmed had produced two pages of seribling noes which showed that the property had been sold for Rs. 12 lakhs. If this property had been sold for Rs. 12. lakhs, the property of Smt. Razia Begum which was slightly smaller in dimensions could have fetched Rs. 11.75 lakhs, The IAC enclosed photo state copies of the notes alleged to have been recorded on 2nd February, 1983 and 6th April 1983 and containing signatures of the buyer and seller.
(b) The property belonging to Mr. J. P. L. Gwyn in the neighbourhood on an area of 1,875 sq. meters with a built up area of 314.86 sq. meters had been sold for Rs. 10,80,000. The sale deed had been executed on 22-8-1984.
(c) Another property belonging to Smt. Rafat Zahir on an area of 750 sq. yds. together with a residential house had been sold under a deed dated July 1985 for Rs. 9 lakhs.
(d) The IAC pointed out that the varmints in the affidavits filed by Smt. Razia Begum have not been effectively countered by the appellant.
(e) The IAC also referred to the affidavits of Sri Laxminivas Ganariwal and Sri Kadar Ali Khan filed by Smt. Razia Begum in support of her statement that her property had been sold for Rs. 11.75 lakhs. The IAC pointed out that Sri Kadar Ali Khan had not been examined by the ITO.The CIT (Appeals) upheld the objection of the assessee that the authenticity of the document relied on by the Inspecting Assistant Commissioner, on the basis of which he had requested for enhancement, was not established and, therefore, the same could not be used against the assessee. At the same time, he felt that proceedings against Dr.
Zahir Ahmed, husband of the seller, were in progress and it was premature or him to give his finding on the genuineness or otherwise of the document relied on by the IAC and thus held that the IACs request for enhancement was premature.
7. Addressing himself to the main objection of the assessee that the Income-Tax Officer. having held that the assessee had only paid Rs. 4 lakhs to Smt. Razia Begum should not have made an addition of Rs. 85,150 even on a protective basis, the CIT (Appeals) held that the stand of the assessee was well-taken and concurred with the assessee that such a protective addition was not legally valid. However, the CIT [Appeals] felt that he gathered the impression that the Income-tax Officer had dealt with the case in a topsy-turvy fashion. If the Income-tax Officer and come to the conclusion that what Smt. Razia Begum had stated in her affidavit was true and the property had fetched really Rs. 1.75 lakhs and not Rs. 4 lakhs, and then, and then only, the matter should have been put to the assessee and his assessment should have been finalised after taking into account his objections. On the other hand, the Income-tax Officer, by issuing summons to Smt. Razia Begum and others, had generated two sets of grievances-firstly Smt.
Razia Begum is aggrieved that the whole enquiry is done behind her back, and secondly, by conducting the enquiry in the assessees case and in his presence, the Income-tax Officer had given a needless assurance to the assessee that there would be no addition in his case. He also felt that there was absolutely no need to discuss the various issues involved in the assessees case in his assessment order. This was an unusual spectacle of the Income tax officer the assessee in turn contending in the proceedings before the appellate authority that the Income-tax Officer was correct in the manner he investigated the matter and, of course, in his conclusions. Therefore, the CIT (Appeals) felt that the Income-tax Officer had put the cart before the horse by straight away putting the material filed by Smt. Razia Begum to the assessee and conducting further proceedings on that basis. He also noticed that there was a serious lacuna in that the department failed to comfort Smt. Razia Begum and the assessee at any sage in the investigation or in the assessment proceeding. He also noticed that the Income-tax Officer had issued summons to Smt. Razia Begum on 27-2-1985 but she could not attend because she was ill. Thus, he set aside the order of the Income-tax Officer with a direction of the inspecting Assistant Commissioner to redo the same afresh after completing the proceedings in the case of Smt. Razia Begum and after giving sufficient opportunity to the assessee in case the Inspecting Assistant Commissioner wanted to make an addition in the assessees case. The assessee is on appeal before us.
"The appellant has noting to do with the assessment order of Razia begum and our dispute is with the Income-tax Department and not with Mrs. Razia Begum. The Income-tax Department has not established the case against the appellant. The Commissioner of Income-tax (Appeals) is not correct in setting aside to enable Mrs. Razia Begum to establish her case in assessment, so that income tax department can put it against the appellant in his assessment order.
Having come to the conclusion that in the light of facts of the case there is no warrant or justification for making protective addition, the learned commissioner of Income-tax (Appeals) ought to have allowed the appeal.
The learned Commissioner of Income-tax for appeals having sustained the objection that the scribbling introduced in appellate stage is unproved, irrelevant and unconnected to the issues in appeal and having agreed that the genuineness of the paper is in serious doubt, ought not to have prolonged the litigation by setting aside the assessment.
The learned Commissioner of Income-tax (Appeals) ought to have noted that the absence of any mention or whisper about this noting at an earlier stage and when its very execution was denied by the concerned person is not only irrelevant in evidence but to be considered to have been manufactured as an after-thought and was introduced with the sole aim a causing vexatious litigation.
Having noted that the valuation reports submitted by the departmental Valuation Officer on more than one occasion did not arrive at any high figure than the recorded consideration, the learned Commissioner of Income-tax (Appeals) should have confirmed the findings arrived at by the income-tax Officer after a detailed scrutiny and investigation of the case.
The Commissioner of Income-tax (Appeals) while holding that the examination of Smt. Razia Begum would, be irrelevant as far as the appellant is concerned, erred in setting aside the assessment order, for further cross examination of Smt. Razia Begum, though he is fully aware that this lady had passed away.
The appellant objects to the entertainment of fresh evidence, which wa not before the Income-tax Office, for consideration. Further the evidence sought to be used does not relate to the property purchased by the appellant and others.
The appellant submits the Commissioner of Income-tax (Appeals) is precluded from entertaining a new plea, especially when such plea was based on information not relevant to the appellant. The Commissioner of Income-tax (Appeals) cannot go beyond the points raised by the appellant, except when it is a case of enhancement. The appellant submits that the order of the Commissioner of Income-tax (Appeals) is illegal, and having held that a protective assessment cannot be made, the appellant prays that the appeal should be allowed by deleting the amount of Rs. 85,250.
Finally it is submitted that on irrelevant and unconnected material which is found to be totally lacking in proof, the learned Commissioner of Income-tax (Appeals) ought not to have set aside the assessment.
The Commissioner of Income-tax (Appeals) has no jurisdiction to set aside an assessment at the instance of the Income-tax Officer, He may by virtue of provisions of section 250(A) himself make enquiries as he thinks fit, or may direct the Income-tax Officer, to make further enquiry and report the result of the same to the Commissioner of Income-tax (Appeals).
Besides section 251(1) (a) empowers the AAC/ CIT (A) to set aside the order of assessment under appeal and direct the Income-tax Officer to make a fresh assessment in accordance with the provisions of law. Such an order can be made when the CIT (A) / AAC after considering the evidence and material on record come to the conclusion that the order under appeal is erroneous, or is based on insufficient material or that some fresh evidence has to the considered or there has been a failure of natural justice has to be considered or there has been a failure of natural justice prejudicial to the appellant. None of the above 4 factors are in existence in your appellants case and as such the action of CIT (A) in setting aside the order of assessment is illegal and contrary to the facts and circumstances of the case. The CIT (A) erred in directing the Income-tax Officer to put the conclusion, in Smt.
Razia Begums case, before, the appellant for his rebuttal. Hence, your appellant prays the Honorable Members to cancel the order setting aside the assessment and allow the appeal." 1. The Commissioner of Income-tax (Appeals) has held that protective assessment was incorrectly made on the Applicant [vide para 10 of the order of the CIT (Appeals)]. The only ground on which the appellant has gone in appeal before the CIT (Appeals) was that protective assessment cannot be made in his case, Having held that the protective assessment cannot to be made the CIT has thus annulled the order of the Income-tax Officer. In effect the substratum of assessment having been nullified, the source for which the appellant has come in appeal is extinct. The CIT (Appeals) cannot give directions in respect of a source which has thus become extinct.
2. The CIT (Appeals) has held in para 8 of his over, that the IACs request for enhancement of assessment is premature. Having held so, the appellant submits that the Commissioner (Appeals) was not justified in conceding the IAC requested for enhancement.
3. Under section 251 of the Income-tax Act, certain power are conferred on the appellate authorities, to consider and decide any matter arising out of the proceedings raised by the appellant, there is no similar provision for the assessing authority to traverse beyond the assessment records and ask for setting aside of the assessment order and ask for setting aside of the assessment order, on a representation made by the assessing authority. This would, in effect, confer on the assessing authority a right to make a piece-meal assessment which is illegal.
4. The appellant, therefore, submits that the order of the CIT (Appeals) should be canceled.
9. K. Ranganathachari, learned counsel for the assessee, submitted that the order of the CIT (Appeals) is perverse. The only issue that was before him was whether it was proper for the Income-tax Officer, after an elaborate enquiry and discussion of all the matters and materials having a bearing on the assessment of the appellant, having held that the apparent consideration was the real consideration and that the assessee did not pay a paise more than what was declared in the document of purchases of the house, to make a protective addition on the premise that if the appellate authorities took a different view, the interests of the revenue should not be jeopardised. The CIT (Appeals) erred in setting aside the order of the Income-tax Officer after having held that the protective addition is not valid. Thus he has travelled beyond the issue before him. The CIT (Appeals) erred in observing that the detailed enquiry conducted by the Income-tax Officer was in a topsy-turvy fashion in that Smt. Razia Begum, the vendor, and not been examined by him. This observation of the CIT (Appeals) was un called for, for the disposal of the appeal before him. As a matter or fact, Smt. Razia Begum had admitted in her statement under section 132(A) that the consideration for sale was only Rs. 4 lakhs. In the application for survey under section 230A of the Income-tax Act. she had specifically stated that the sale consideration was only Rs. 4 lakhs. Because she was unable to explain the surplus cash in her possession, weeks after the search she retracted her statement given before the Assistant Direction of Inspection and chose to say that the sale consideration was not Rs. 4 lakhs but Rs. 11.75 lakhs. The Income-tax Officer, while dealing with the assessment of the appellant, in fact issued summons to Smt. Razia Begum but she did not answer the summons and found some convenient excuses. Even then the Income-tax Officer put to the assessee the averments made by her in her affidavit filed weeks after the search alleging that she had received Rs. 11.75 lakhs from the assessee and his brother, elicited the objections of the assessee and also examined whether the varmints made by her in her affidavit could be considered as true or only as an afterthought. This the CIT (Appeals) objects to, because, according to him, Smt. Razia Begum ought to have been examined by the Income-tax Officer and the failure to examine her had lead to miscarriage of justice. Thus, he left that there was failure of natural justic and the investigation was like putting the cart before the horse. This is a most unfortunate approach to the whole problem. It there has been failure of natural justice in not examining Smt. Razia Begum, it is for there to agitate the matter. That might be relevant in her own assessment, but not very relevant in the assessment of the appellant. In fact, the contents of the affidavits filed by her were put to the assessee also and Smt.
Razia Begum was summoned for the purpose of examination but she had not co-operated with the department. The Income-tax Officer cannot keep the assessment pending in the case of the assessee endlessly because Smt.
Razia Begum herself wanted in her assessment that the proceeding must be kept pending for the completion of the proceeding against her husband. The Officer has to function on the basis of the records and other materials before him. Rightfully he considered the affidavit of Smt. Razia Begum, discussed it in depth in the context of to her evidence available and rejected the same as an after-thought just to explain away the explain away the surplus movies in her possession and also in the possession of her daughters. Therefore, there is noting topsy-turvy or ankle-panicky in the manner in which the investigation has been conducted by the Income-tax Officer and, at any rate, it was not the grievance of he assessee before the CIT (Appeals) that the Income-tax Officer had misdirected himself in the conduct of the investigation. Such being the case, the observations of the CIT (Appeals) are most unfortunate, unwarranted, unjustified and have slant in favour of Smt, Razia Begum.
10. Sri Rabganathachari submitted that the CIT (Appeals) erred in holding that the conclusion of the Income-tax Officer in the case of the appellant that there was no payment of money in excess of what had been declared in the registered document was not put to Smt. Razia Begum before framing the assessment. The CIT (Appeals) himself was awear that his conclusions were unsustainable when he said that while farming the assessment of the appellant, the Income-tax Officer ought to have put the result of him investigation to Smt. Razia Begum and this will be evident from his own statement that these remarks would have been irrelevant as far as the appellant is concerned. However, he sought to justify his indefensible stand that such investigation should have been done only in the case of Smt. Razia Begum and not in the case of the appellant. Even admitting that such an investigation had to be doen only in the case of Smt. Razia Begum, the CIT (Appeals) failed to notice that it was the assessee who was before him and he had no complaints about the manner in which the investigation was done by the Income-tax Officer and his only complaint was about the protective addition made in anticipation of any adverse appellate decision, and overstepped his limits by ordering a fresh enquiry taking into account extra matters and the possible failure of natural justice in the case of Smt. Razia Begum who was not the appellant before him.
11. Sri Ranganathachari vehemently argued that having considered in depth all the materials and the statements and other evidence on record, and having unequivocally held that the apparent consideration and that there was no justification for making any addition under section 69B, the Income-tax Officer erred in making a protective addition in anticipation of any possible adverse decision by the appellate authorities. This sort of protective addition is unknown to law, and in this connection he referred to the decision of the Honorable Andhra Pradesh High Court in G. Topi Saheb v. CIT [1988] 170 ITR 181. This sort of protective addition is void a in it to and the assessee was agitating this matter before the CIT (Appeals). The CIT (Appeals) himself has held that the protective addition is untenable in law. Having so held, he should have deleted the additions instead of trying to validate the proceedings by setting aside the assessment with a direction to do it de novo. Anything which is void a initio is a nullity from the very inception and it cannot be cured by the exercise of appellate jurisdiction. Accounts which are void ab inito cannot be cured or rectified by subsequent proceedings. This is the basic tenet of law which the CIT (Appeals) has ignored. In this connection, he relied on the decision of the Supreme court in Baradakanta Mishra v.High Court of Orissa AIR 12. Shri Ranganathachari vehemently argued that the enhancement sought by the Inspecting Assistant Commissioner on the basis of some scribblings in a note book which was not sown at the time of search in the residence of the husband of Smt. Razia Begum but was produced before the Income-tax authorities in support of their contention that the consideration was much more than what had been declared, was an extra material the very authenticity of which was called in question and the CIT (Appeals), having held that it was not permissible for him to take or record that particular document in the absence of it being established as a genuine document, erred in directing the Inspecting Assistant Commissioner to come to specific conclusions after establishing the genuineness of the document in the case of Dr. Zahir Ahmed and Sri Naresh Kumar who are persons totally strangers to the assessee. This document, though unrelated to the assessee, came up for consideration in the case of purchase of property from the husband of Smt. Razia Begum in the acquisition proceedings in IT Acq. Nos. 1, 2 and 3/Hyd. /1986 and the Tribunal at para 25 of its order dated 13-11-1986 had that there are strong indications to show that this agreement must have been false, and the reasons are stated therein.
Therefore, there is no merit in the petition for enhancement and the CIT (Appeals) by directing the Inspecting Assistant Commissioner to conduct investigations, etc. Was only opening up a course for needless and vexatious proceedings not warranted by the ground of appeal before him.
13. Sri Ranganathachari further submitted that it was stage that the CIT (Appeals) should have observed that he did not comprehend he circumstances in which a third valuation report was obtained by the revenue. A careful look into the order of assessment and other records including the acquisition proceedings, which were all before him, would have certainly convinced the CIT (Appeals) about the circumstances in which the third report was obtained and had he considered the third valuation report, he would have certainly felt that was no case for setting aide the order of the Income-tax Officer and perhaps this is the reason why he chose not to refer to the circumstances in which the third report was obtained.
14. Sri M. Anandam, learned Chartered Accountant, supporting Sri Ranganathachari, submitted that once it was held by the CIT (Appeals) that a protective addition could not be made in the facts and circumstances of the case of the assessee, the substratum of the assessment is gone and the course for which the appellant had come in appeal was extinct and it was certainly outside the powers of the CIT (Appeals) to order a fresh investigation by setting aside the order of assessment itself. He should have stopped with deleting the particular part dealing with protective addition which was the issue before him and by not doing so, he had exceeded his jurisdiction.
15. Sri P. Radhakrishna Murty, learned departmental representative, submitted that the CIT (Appeals) was not only seized of the appeal of the assessee but also the appeal preferred by Smt. Razia Begum and he took a comprehensive view of both the appeals in giving directions in the appeal of the assessee. When the order is on appeal before him, the whole order is at large and it is for the CIT (Appeals) to give appropriate directions or pass such orders as he may deem fit for the proper disposal of the appeal and, therefore, he was very much within his rights when he set aside the assessment directing a fresh enquiry into the whole matter. In this case, there are certain intriguing features : for example, there are three valuation reports holding different valuations. The Income-tax Officer had not examined Smt.
Razia Begum who is one of the kingpins in the transaction. He was in an unseemly haste of complete the assessment and the results of his investigations were not put to Smt. Razia Begum. In fact, in the case of Smt. Razia Begum, she had apprehended that no justice would be done to her in the hands of the Income-tax Officer. Subsequently, the Inspecting Assistant Commissioner had asked for an enhancement on the basis of certain records, chief among them being an agreement on the writing pad of Dr. Zahir Ahmed, husband of Smt. Razia Begum, containing certain agreements between him and one Sri Naresh Kumar and others who are related to the assessee. These special aspects of the matter require reconsideration before a proper assessment could be framed and, therefore, the CIT (Appeals) took note of all these circumstances while setting aside the order of assessment, ordering a fresh enquiry; there was nothing wrong in his order. He refereed in extenso to the order of the CIT (Appeals) and thus justified his action.
16. Having regard to rival submissions and the materials on record, we set aside the order of the CIT (Appeals) and delete the protective addition of Rs. 85,150 from the assessment of the appellant. The assessee along with his brothers and cousins purchased a house property bearing door No. 8-2-583/2, Road No. 9, Banjara Hills, Hyderabad, on 5-3-1984 for Rs. 4,00,000 from Smt. Razia Begum and as per the sale deed on the records of the Income-tax Officer, the details of ownership are as follows : (4) Master Sunil Kumar S/o Sri Mahaveer Pershad (Minor represented by father) 11% (5) Master Manish Kumar S/o Mahaveer Pershad (Minor represented by father) 11% (6) Master Mahender S/o Sri Jagdish Pershad (Minor represented by father) 17% (7) Master Pavan Kumar S/o Sri Jagdish Pershad (Minor represented by father) 17% The purchase consideration proceeded from the funds withdrawn from M/s.
Surajbhan & Co. in which they had accounts. In the application under section 230A of the Income-tax Act dated 19-2-1984, duly signed and verified by Smt. Razia Begum, the sale consideration was mentioned at Rs. 4,00,000. On 24-3-1984, there was a search in the premises of Smt.
Razia Begum and also those of her husband. In the statement on oath recorded from Smt. Razia Begum, the seller in this case, on 24-3-1984, she stated that she had sold the property at Banjara Hills to Sri Ramesh Pershad and others for Rs. 4,00,000. In his statement on oath, Dr. Zahir Ahmed, husband of Smt. Razia Begum, stated that his wife had a house property which was sold to Sri Ramesh Pershad, etc., for Rs. 4,00,000. Sworn statement was given by Smt. Anees Ali, one of the daughters of Smt. Razia Begum. She explained the sources of money found with her as having come out of sale of jewellery and other precious articles. In the sworn statement of Smt. Rafat Zaheer, another daughter of Smt. Razia Begum, recorded at Bombay, it was explained that her mother had given her a sum of Rs. 1,19,000 to her and she presumed it as a gift to her and she did not enquire further. Later on, Smt. Razia Begum filed an affidavit on 11-5-1984 to the effect that she had sold the property in question for a consideration of Rs. 11.75 lakhs, that in the sale deed the consideration was stated as Rs. 4,00,000 at the instance of the purchasers and that she had invested only Rs. 4,00,000 in National Rural Development Bonds for availing exemption under the Income-tax Act. She explained away her initial statement given to the Income-tax authorities in the course of the search at her premises wherein she had affirmed that she had sold the property for Rs. 4 lakhs, as being due to the fact the she was in total distress and afraid of the consequences which might follow on any statement giver by her and that she was in a state of psychological shock and could not present the facts properly. The competent authority in the course of acquisition proceedings deputed the Inspector to visit the property and submit a preliminary valuation report on the property and the Inspector submitted his estimate at Rs. 7,14,000 valuing the land component at Rs. 300 per sq. yd. and the building at Rs. 1,20,000. There was one valuation by the Valuation Cell and Sri Ch. Veerabhadra Rao, Valuation Officer, in his report dated 26-5-1984, determining the value of the property at Rs. 4,52,925 rounded off to Rs. 4,53,000. This valuation was given under section 269L (1) of the Income-tax Act. After the death of the first Valuation Officer, a second valuation was obtained by the Inspecting Assistant Commissioner (Asst.) and in the report dated 21-11-1984, the Valuation Officer Sri B. R. Rao determined the value of the property at Rs. 11,85,000. This was also in the course of the acquisition proceedings. In the assessment proceedings of the appellant, the Income-tax Officer forwarded a copy of the second valuation report valuing the property at Rs. 11,85,000 and proposed to adopt that figure. The appellant objected to the second valuation and submitted that it was inspired by extraneous considerations such as the affidavit filed by Smt. Razia Begum, etc. Therefore, the Income-tax Officer issued summons on the second valuer Sri B. R. Rao and during the examination on 27-2-1985, Sri B. R. Rao admitted that the Superintending Engineer orally told him that the vendor Smt. Razia Begum, had given a sworn statement stating that the actual consideration received by her on the sale of the property was Rs. 10,00,000 and after obtaining a copy of the said statement from the ADI, he found that she had received Rs. 11.75 lakhs, that he went to see the property along with the Inspecting Assistant Commissioner, Acquisition Range, but did not enter the house and took a view only from outside, nor did he inform the assessee about his visit, nor could he remember the date of the visit, and thus arrived at the valuation.
To a specific question whether by seeing the property from outside he found the plot level-whether road level or below the road lever or above the road level-he admitted that he had seen the property of Dr.
Zahir Ahmed, husband of Smt. Razia Begum, which was almost to the road level, but did not see the property of Smt. Razia Begum, nor did he look into the land rates mentioned by the first departmental Valuation Officer, nor had he gone through the copies of the sale deeds of the properties. When asked whether he got the measurements and plinth area of the buildings in five sale instances on which he relied in his report, the Valuation Officer replied in the negative. Further cross-examination revealed that the second Valuation Officer was only acting on the oral instructions of the Superintending Engineer as regards the land rates and the valuation. When asked why he adopted the land rate of Rs. 500 per sq. yd. in the case of property sold by Smt.
Razia Begum to the assessee when he did not apply this rate in the case of similar properties, the Valuation Officer replied that he applied this rate mainly on account of the affidavit of Smt. Razia Begum and the directions of the Superintending Engineer.
17. The Income-tax Officer, in his detailed order dated 23-3-1985, discussed the ramifications of these two Valuation Reports, took into consideration the sale instances in the neighbourhood, discussed each one of them threadbare and supported his conclusion that the fair market value of the property sold by Smt. Razia Begum to Sri Ramesh Pershad and others did not exceed Rs. 4.56 lakhs as on 5-3-1984.
18. Subsequently, the competent authority, in his letter dated 20-5-1985, addressed to the Valuation Officer, requested him to submit a report after visiting the property and after collecting all relevant materials necessary for proper valuation of the property and after visiting other properties quoted by him earlier as comparable cases. In this revised valuation report, forwarded on 12-7-1985, the very same Valuation Officer, Sri B. R. Rao, re-estimated the value of the property at Rs. 4.6 lakhs adopting the land rate at Rs. 200 for the front bit of 1,000 sq. yds. and Rs. 100 for the remaining 980 sq. yds., though in his earlier report he had taken the value of the entire land at Rs. 500 per sq. yd.
19. Thus, the third valuation by the revenue was available in the report of the Valuation Officer dated 12-7-1985 and it is on the records of the competent authority who initiated acquisition proceedings. There is force in the contention of Sri Ranganathachari that the observation of the CIT (Appeals) that he did not know the circumstances under which the third valuation report was sought for and the manner in which the valuation was done by the third Valuation Officer, is only an ipse dixit. These proceedings are available in the file of the competent authority and in fact came to the knowledge of the Tribunal in the appeals filed against the acquisition proceedings in the cases cited supra. Therefore, his observation at para 11 of his order that this matter should be investigated by the Inspecting Assistant Commissioner is totally uncalled for and cannot be justified.
20. Another related point is whether the enquiry conducted by the Income-tax Officer was proper, legitimate and can stand the test of judicial norms. At the outset, it may be said that the assessee has no grievance whatsoever against the manner in which the investigation has been conducted. Sri Ranganathachari contends that that being the case, it is not for the CIT (Appeals) to prop up imaginary grievances in the manner in which the enquiry had been conducted by the Income-tax Officer. To be explicit, the CIT (Appeals) has held that the investigation in this case was done in a topsy-turvy fashion and in support of it he states that the Income-tax Officer should have examined the contents of the affidavit filed by Smt. Razia Begum giving opportunities for examination, cross-examination and re-examination to all the parties only in the course of assessment proceedings of Smt.
Razia Begum and since these matters were conducted in the assessment proceedings of the appellant, the officer had put the cart before the horse. We are unable to subscribe to this view. Smt. Razia Begum is one person within the meaning of the Income-tax Act; Sri Ramesh Pershad, the appellant, is another person, also within the meaning of the Income-tax Act. Though this transaction might effect both these persons, it is immaterial whether a thorough enquiry is done in one case or the other case. What is significant and material is that there should be a threadbare investigation covering all the aspects of the transaction. The only point to be seen in this case is whether such an enquiry had been conducted by the Income-tax Officer observing the procedures laid down in the Income-tax Act. It may be mentioned that the Income-tax Officer was having jurisdiction over nor only the assessee but also Smt. Razia Begum, the seller in this case. While dealing with the assessment of the assessee, in fact he started with a notice issued on 11-3-1985 asking the assessee to explain why the sale consideration should not be taken at Rs. 11.75 lakhs and not at Rs. 4,00,000 shown in the sale deed, in the light of the affidavit and sworn statement given by Smt. Razia Begum and second valuation report given by the Valuation Officer and also the affidavits of Sri Lakshminivas Ganeriwal and Sri Kader Ali Khan coupled with the fact that the cash of Rs. 7,56,600 had been found with Smt. Razia Begum and her daughters. This is a very material question which has got a bearing not merely in the assessment of Smt. Razia Begum but also in the assessment of the assessee. It is immaterial whether this question was put either to the seller or to the purchaser. There is nothing topsy-turvy in the way in which the Income-tax Officer had proceeded with his enquiry.
21. In the course of his enquiry, the Income-tax Officer did the following :- (1) Issued summons to Smt. Razia Begum (but she did not appear under one pretext or other); (2) Examined Sri Laxminivas Ganeriwal who was cross-examined by the assessees representative-Sri Laxminivas Ganeriwal being the person who had filed an affidavit stating that he wanted to purchase the property of Smt. Razia Begum and had offered Rs. 10.05 lakhs-and dealt with the same in his order; he also dealt with the affidavit of Sri Kader Ali Khan and doubted its veracity; and (3) Examined the second Valuation Officer who determined the value at Rs. 11.85 lakhs, considered the issue whether the fair market value of the property could be taken at Rs. 11.85 lakhs and in the course of such consideration he dealt with the sale instances not only referred to by the first Valuation Officer who determined the value at Rs. 4.53 lakhs, the second Valuation Officer who had given the Valuation at Rs. 11.85 lakhs, but also the sale instances relied on by the assessee and supported by the report on a registered valuer.
22. Thus, upon a judicious consideration of all the relevant material, the Income-tax Officer came to the conclusion that the fair market value was no more than Rs. 4.56 lakhs. The department has not brought on record anything to assail his conclusions. A faint attempt was made by the Inspecting Assistance Commissioner (Asst.) by asking for an enhancement or modification of the assessment before the CIT (Appeals) on the grounds - (a) that Dr. Zahir Ahmed had sold an adjacent property for about Rs. 12 lakhs and that he had produced two pages of scribblings which showed that the property had been sold for Rs. 12 lakhs suggesting thereby that the property sold by Smt. Razia Begum could have fetched at least Rs. 11.75 lakhs; (b) that properties in the neighbourhood had been sold for larger consideration; (c) that the averments in the affidavit filed by Smt. Razia Begum were not effectively countered by the appellant; and (d) that Sri Kader Ali Khan had not been examined by the Income-tax Officer.
The learned CIT (Appeals), while observing that unless the genuineness of the scribblings, produced by Dr. Zahir Ahmed, was established, it could not be considered in the assessment of the assessee and that all the matters raised by the Inspecting Assistant Commissioner in his enhancement petition could be gone through by him as the order was set aside. Sri Ranganathachari vehemently objects to this course of action.
There is substance in his objection that the scribblings on which reliance was placed by the IAC (Asst.) for purposes of making an enhancement, were not at all relevant for the assessment of the assessee. For one thing, the scribblings related to the property sold by Dr. Zahir Ahmed and not to the property sold by Smt. Razia Begum which is the subject-matter of appeal before us. Secondly, in I. T.Acq. Nos. 1, 2 and 3/Hyd. /1986, the Tribunal has held that there are strong indications to show that the agreement found in the writing pad and produced by Dr. Zahir Ahmed must have been false (para 35 of the order). Sri Radhakrishna Murty submits that in disposing of this appeal, the Tribunal should not take note of the findings recorded by the Tribunal at a later date in the case of Dr. Zahir Ahmed. We overrule this objection on the ground that the issue is very much before us in that we have to say whether the direction of the CIT (Appeals) are supported by any evidence. The CIT (Appeals) himself had held that the genuineness of the document on the basis of which the IAC wanted an enhancement before him had not been established at the point of disposal of the appeal and, therefore, directed the IAC to examine the same when the order was set aside. Naturally, this will again give rise to vexatious litigation and while we are testing the soundness of the direction of the CIT (Appeals), we can certainly take note of certain facts which are already on record before us and relied on by the counsel before us.
23. Another grievance of the IAC (Asst.) was that the property of Sri J. P. L. Gwyn, which was in the neighbourhood, had fetched about Rs. 10.5 lakhs and on that premise he implied that the property of Smt.
Razia Begum would have fetched more. The comparability of the value of the property sold by the Sri Gwyn with the value of the property sold by Dr. Zahir Ahmed came up for consideration in the acquisition appeals cited supra and the Tribunal at para 27 of its order, for the reasons stated therein, came to the conclusion that it cannot be said that it is a comparable case.
24. This leaves us to consider only one of the grounds for enhancement mentioned by the IAC, viz., the affidavit of Sri Kader Ali Khan. In fact, the Income-tax Officer, though had not examined Sri Kader Ali Khan, had observed that it was only an afterthought to help Smt. Razia Begum and this conclusion he reached in the context of the overwhelming evidence in favour of the assessees stand. It is for Smt. Razia Begum to produce Sri Kader Ali Khan who had filed an affidavit in her favour, but it should be noted that she herself did not choose to appear before the Income-tax Officer, and, therefore, the order of the Income-tax Officer did not suffer from any infirmity in not having examined Sri Kader Ali Khan.
25. Thus, all the points on the basis of which the IAC (Asst.) had prayed for an enhancement before the CIT (Appeals) fell to the ground and, therefore, the CIT (Appeals) is not justified in directing the IAC (Asst.) to examine all these aspects in the fresh assessment proceedings.
26. Another reason for setting aside the assessment as given by the CIT (Appeals) is that Smt. Razia Begum had not been examined by the Income-tax Officer. From a scrutiny of the records, we feel that the Income-tax Officer was not averse to examining Smt. Razia Begum. In fact, he had proceeded to frame the assessment against the assessee on the basis of the averments made by Smt. Razia Begum to the effect that she sold the property for Rs. 11.75 lakhs taking that to be gospel truth. It was only after he considered the evidence on record, the materials placed by the assessee, the examination and cross-examination of the Valuation Officer and the examination of Sri Laxminivas Ganeriwal, and on a scrutiny of the sale instances in the neighbourhood, that he came to the conclusion that what Smt. Razia Begum had stated in her affidavit was not supported by evidence on record. Even while admitting such a conclusion, the Income-tax Officer had issued summons to Smt. Razia Begum but she had not availed of the opportunity. Even in her own assessment, she was pleading with the Income-tax Officer not to proceed with the assessment until the assessment proceedings in the case of her husband had been completed.
There is no substance in the grievance made by the CIT (Appeals) that Smt. Razia Begum had not been examined. It may be mentioned in passing that Smt. Razia Begum in the mean time has passed away and is not available for examination. Besides, there was nothing wrong in the Income-tax Officer concluding the assessment of the appellant on the basis of the available records.
27. Having held that the Income-tax Officer had not conducted the enquiry in the assessment proceedings of the appellant by putting the cart before the horse-topsy-turvy examination as the CIT (Appeals) would put it-and having found that the department has not brought on record any material to impeach findings of the income-tax Officer that the fair market value of the property was not more than Rs. 4.56 lakhs, and having taken note of different valuation as given by the Valuation Officers of the department itself, we hold that the Income-tax Officer had rightly concluded that no extra money passed from the assessee to the seller and the apparent consideration was the real consideration.
Once this conclusion is reached, there is absolutely no scope for making a protective addition on the ground that the appellate authorities might take a different view of the transaction. To the extent the CIT (Appeals) deleted the protective addition, we uphold his order. We, however, do not uphold his action in having directed the IAC (Asst.) to redo the assessment afresh. This is not to say that the CIT (Appeals) does not have the authority or the power to order a fresh enquiry, but that power must be exercised judicially in appropriate circumstances. We have observed that the order passed by the Income-tax Officer was fair and reasonable in the light of the materials on record and no case is made out by the revenue to warrant setting aside of the order and, therefore, we set aside the order of the CIT (Appeals). The addition of Rs. 85,150 made on a protective basis thus stands deleted.
28. Sri Ranganathachari relied on the decision of the Supreme Court in Baradakanta Mishras case (supra), for the proposition that if the order of the initial authority is void, an order of the appellate authority cannot make it valid. IT is not the case of the assessee that the entire assessment was void ab initio and the assessee was only objecting to that part which dealt with the addition of Rs. 85,150 which was made on a protective basis. This protective addition was rightly deleted by the CIT (Appeals) and the same is not an inseparable part of the assessment order and, therefore, it cannot be contended that the entire assessment was void ab initio. As for the main question whether the CIT (Appeals) was justified in setting aside the entire order, we hold in the light of the discussions in the preceding paragraphs, that this is not a fit case where the CIT (Appeals) should have set aside the entire assessment directing assessment de novo. The assessment as framed by the ITO sans the addition on protective basis is upheld.