PETITIONER: M/s. RAJPUTANA TEXTILES (AGENCIES) LTD. Vs. RESPONDENT: THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY DATE OF JUDGMENT: 12/04/1961 BENCH: <NAME>, J.L. BENCH: <NAME>, J.L. AIYYAR, T.L. VENKATARAMA DAS, S.K. HIDAYATULLAH, M. SHAH, J.C. CITATION: 1962 AIR 1267 1962 SCR (1) 917 CITATOR INFO : RF 1963 SC 835 (12) ACT: Income Tax--Business transaction--Whether adventure in the nature of trade--Intention of the assessee--Profits--Whether revenue or capital receipt--Advisory jurisdiction--Points--not taken before High-Court--Whether could be raised before <ORG>--Taxation on Income (Investigation Commission) Act , 1947 , s. 8(5) . HEADNOTE: The assessee company was promoted with the idea of obtaining <ORG> of <ORG> from M/s. Sassoon JUDGMENT:

total of 25 lakhs shares of RS. 2 each. According to the agreement the assessee company bad to take the whole of the block of shares belonging to the <NAME> and pay at Rs. 4-4-0 per share Rs. 12-1/2 lakhs for the managing agency. As the assessee company had only RS. 20 lakhs as its paid up capital, it was necessary to sell 13 lakhs odd shares in order to pay off the <NAME> both for <ORG> and the shares. Therefore during the course of negotiations the promoters of the assessee company entered into an agreement with some brokers for the sale of Rs. 19,76,000 shares. As a result of the sale of shares the assessee company received a sum of Rs. 16,52.600 as excess over the purchase price which amount on taxation was held by the Income-tax Officer not to be profits and therefore not taxable. The case of the assessee company was referred to <ORG>. The <ORG> found that it was not the intention of the assessee company to retain the whole block of shares and that the sale of 13 lakhs odd shares was an adventure in the nature of trade, and directed that appropriate assessment be made, under the Indian Income-tax Act and Excess Profits Tax Act. At the instance of the assessee company the question was referred to <ORG> under S. 8(5) of the Taxation on Income (Investigation <ORG>) Act , 1947, which held that there were materials to justify the finding of the <ORG> that the purchase and sale of about 13 lakhs odd shares was an adventure in the nature of trade. An appeal was taken to <ORG> against this order.

Held, that in considering the question whether the transac- tion was or was not an adventure in the nature of trade, the court had to take into consideration the intention of the assessee keeping in view the "legal requirements which are associated with the concept of trade or business"

In the present case, the transaction that consisted of buy- ing the managing agency of <ORG> and the block of shares held by <ORG> was inescapably one of a commercial nature and had all the attributes of an adventure in the nature If of trade.

Held, further, that the jurisdiction which this <ORG> would exercise in appeal was of the same character that <ORG> would exercise. Thus the question under Art. 14 of the Constitution could not be raised in these proceedings because this <ORG> like the High <ORG> was exercising its advisory jurisdiction and its power was confined to the question which arose before the High <ORG>. M/s. Ramnarain Sons (Pr.) <CITATION> - tax, Bombay,  2 S.C.R. 904, <ORG>, Bombay v. <NAME>, Bombay Presidency & Aden, (1037) L.R. 64 I.A. 215, Commissioner of, Income-tax, Central and United Provinces, Lucknow v. M/s. <NAME>, (1939) L.R. 67 I.A. 71, <NAME> v. <NAME>, [1930) A.C. 415, Commissioner of Inland Revenue v. <NAME>, (1953) 34 T.C. 389 and <CITATION> ,  SUPP. 2 S.C.R. 846, distinguished.

<CITATION> ,  27 I.T.R. 49, Edwards v. <NAME>,  A.C. 14 and <CITATION> - tax,  SUPP. 1 S.C.R. 646, discussed.

& CIVIL APPELLATE, JURISDICTION: Civil Appeal No. 282 of 1955. Appeal by special leave from the judgment and order dated March 20, 1953, of <ORG> in Income-tax Reference No. 31 of 1951.

<NAME> and <NAME>, for the appellants.

<NAME> and <NAME>, for the respondent. 1961. April 12. The Judgment of the Court was delivered by KAPUR, J.-This is an appeal against the judgment and order of <ORG> in a reference under s. 8(5) of the Taxation on Income (Investigation Commission) Act , 1947 (Act XXX of 1947), hereinafter termed the 'Act'. The assessee company was the applicant before <ORG> and is the appellant before us and the Commissioner of Income-tax, Bombay City, was the respondent in <ORG> and is the respondent here also. Being a reference under s. 8(5) of the Act, it was heard and decided by three judges of <ORG>. The assessee company is a private limited company which was incorporated on May 6, 1943, with a paid up capital of Rs. 20 lacs. It was promoted by two groups of persons who for the sake of convenience may be called <ORG> and <ORG>. <ORG> of Bombay with a capital of Rs. 50 lacs divided into 25 lacs shares of Rs. 2 each, had as its Managing Agents M/s. E. D. Sassoon & Co. Ltd., who for the sake of brevity, will be referred to in this judgment as the <NAME>'. They held 19,76,000 shares out of the 25 lacs. The promoters of the assessee company entered into an agreement with the <NAME> on April 27, 1943, by which the <NAME> agreed to transfer their Managing Agency in <ORG> for Rs. 12-1/2 lacs to the promoters of the assessee company and the whole of their holding of 19,76,000 shares at Rs. 4-4-0 per share, i.e., for Rs. 83,98,000. These shares were to be transferred to the promoters or to the company which they were proposing to float. By clause (3) of this agreement the sale of <ORG> and the transfer of the shares was to be simultaneously completed and neither party could require the completion of the one without the other. On November 1, 1943, a tripartite agreement was entered into between the <NAME> as Assignors, the promoters of the company as Confirming Parties and the assessee company as Assignees. By that agreement <ORG> rights were for-.ally transferred to the assessee company so also the Share Certificates for the whole of holding of the <NAME> in <ORG> and the necessary blank transfer deeds went) Before the agreement of April 27, 1943, and during the course of negotiations with the <NAME> the promoters of the assessee company entered into an arrangement with some share brokers for the sale of a large portion of the total holding of 19,76,000 shares of <ORG> The price of these shares varied from Rs. 5- 8-0 to Rs. 5-13-0. In all 10,00,000 shares out of the total holding of <ORG> were sold to these brokers and: they in turn sold these block of shares in smaller lots to a number of purchasers. Some shares were sold later; 1,20,000 shares were transferred to 13 nominees of <ORG> at cost price. As a result of sale of all these 13,74,000 shares the assessee company received a sum of Rs. 16,52,600 as excess over the purchase price. The remaining shares the assessee company retained. The assessee company submitted that the profits of the entire holding of the shares had not been worked out and had therefore not been transferred to the profit and loss account.

The assessee company was taxed by the Income-tax Officer but the sum of Rs. 16,52,600 which was the excess of the sale price over the purchase price of 13,74,000 shares was held not to be profit and therefore not taxable. When the Act came into force the case of the assessee company was referred to <ORG> by <ORG> and <ORG> made its report on November 9, 1949, in Case No. 406A. By this report the <ORG> directed that appropriate assessment be made under the Indian Income tax Act for the assessment year 1945-46 and the Excess Profits Tax Act for the corresponding chargeable accounting period.

At the instance of the assessee company the Commissioner of Income-tax, Bombay City, by his order dated May 1, 1951, referred the following question to <ORG>:

"Whether on the facts found by the <ORG> the sum of Rs. 16,52,600 being the excess price realised by the sale of 13,74,000 shares of <ORG>, was 'profit' and as such taxable or whether it was either of the nature of a capital appreciation or a casual and non- recurring receipt and as such exempt from taxation under Section 4(3)(vii) of the Income-tax Act."

<ORG> reformulated the question as follows:-

"Whether there were materials to justify the finding of the <ORG> that the transaction of purchase and sale of 13,74,000 shares was an adventure in the nature of trade?"

and answered the question so formulated in the affirmative and therefore against the assessee company. In its application for reference under s. 8(5) of the Act the assessee company wanted some other questions also to be referred but <ORG> only referred the question which has been set out above. The assessee company therefore took out a Notice of Motion on November 8, 1952, which was dismissed by <ORG> on the ground that either the questions which were sought to be raised did not arise out of the finding of the <ORG> or they were included in the question which had been referred and answered by <ORG>. Although <ORG> did not so hold, the Notice of Motion was barred by time, being filed after more than six months allowed under s. 66(2) of the Indian Income-tax Act. Against this judgment and order of <ORG> the assessee company has come in appeal to this Court by special leave.

This appeal is brought against the judgment of <ORG> answering the question referred and therefore in its advisory jurisdiction. The jurisdiction which this Court exercises in appeal is of the same character and therefore any question which was not referred to <ORG> cannot be allowed to be raised at this stage. Consequently the constitutional question in regard to discrimination under Art. 14 of the Constitution which is now sought to be raised cannot be raised. The main question which would then survive for decision is the nature of transaction relating to the sale of 13 lacs odd shares and whether or not the sale was an adventure in the nature of trade and therefore the amount of Rs. 16,52,600 the excess of sale price over the purchase price of the share is a Revenue Receipt and therefore taxable profits or is it a Capital Receipt and therefore not liable to tax. <ORG> by their order dated May 1, 1949, found:-

(1) that a distinction should be made between the 6 lacs shares which the assessee company intended to and did retain and the 13 lacs odd shares which it intended to and did sell; the former was kept in order to enable the assessee company to make their Managing Agency rights effective. (2) During the negotiations between the <ORG> and the promoters of the. assessee company, the promoters of the assessee company had started negotiations with certain brokers for the transfer of 13 lacs odd shares soon after the arrangement between the <ORG> and the assessee company was completed.

(3) From the very beginning the intention of the promoters of the assessee company was to sell all the 13 lacs odd shares and in pursuance thereof they were sold. (4) The paid up capital of the assessee company was Rs. 20 lacs only and according to the agreement they had to take the whole block of shares belonging to the <NAME> and pay for the shares as well as for <ORG> both of which were separately valued in the agreement. It was therefore necessary and it was intended to sell the 13 lacs odd shares in order to pay off the <NAME> both for <ORG> and the shares. The inference drawn from this by the <ORG> was that a distinction had to be drawn between the 6 lacs shares which the assessee company intended to retain and did in fact retain and the 13 lacs odd shares which they intended to sell and did sell. (5) that the intention to sell which the assessee company entertained from the very outset was a complete answer to the argument that the acquisition was in the nature of an investment. In giving its finding the <ORG> said:-

"Aggregating the 121 lakhs paid for the <ORG> right and the full price of 6 lakhs and odd shares at Rs. 4-4-0 per share, the capital investment must amount to 121 lakhs and 251 lakhs, i.e., 38 lacs and odd. By deducting therefrom the profits of Rs. 16,52,600, the Company showed a capital investment of Rs. 21,54,200 and with the addition of a few sundry items, it was brought up to Rs. 22,06,408 (see para 7 supra)."

From this finding the inference drawn by the <ORG> was that the sale of 13 lacs odd shares was an adventure in the nature of trade.

<ORG> reformulated the question which has already been quoted and it was contended that <ORG> was in error in narrowing down the scope of the question referred by the <ORG>. It is not necessary to adjudicate upon this argument because in our opinion taking the question as referred to be a proper question arising out of the report of the Investigation <ORG> the answer to the first part thereof would,still be in the affirmative. Inconsidering the question whether the transaction is or is not an adventure in the nature of trade we have to take into consideration the intention of the assessee keeping in view the "legal requirements which are associated with the concept of trade or business". The inference from the facts found by the Investigation <ORG>, i.e., whether the assessee company's transaction in purchasing and selling 13 lacs odd shares is or is not an adventure in the nature of trade is a mixed question of law and fact and the legal effect of the facts found by <ORG> is a question of law. See M/s. Ramnarain Sons (Pr.) <CITATION> (1).

It was argued on behalf of the assessee company that: (1) that the dominant idea with which the whole transaction was entered into was to obtain the Managing Agency of <ORG>;

(2) that the assessee company was forced to buy the whole block of shares, i.e., 19,76,000 shares by the <NAME> because they were not prepared to part with <ORG> without the whole of their stock in the mill company; (3) that as the assessee company did not not have sufficient amount of money, their capital being only Rs. 20 lacs, it was to implement the tripartite agreement dated November 1, 1943, that the sale was made; and (1) (1961] 2 S.C.R. 904, 908.

(4) that the Memorandum of Association of the assessee company showed that it was a holding company and dealing in shares was not one of its objects.

The agreement shows that the <NAME> had separately evaluated <ORG> and the shares held in <ORG> As <ORG> has found, it was never the intention of the assessee company to retain the whole block of shares. Before the agreement was entered into they had made arrangement for the sale of the bulk of shares which were to be transferred by the <NAME> and therefore division of the shares into two sets was made by the promoters of the assessee company and the assessee company themselves and was not the result of anything done by <ORG>.

In; support of his contention that the amount of Rs. 16,52,600 was in the nature of Capital Receipt, reliance was placed on the judgment of this Court in M/s. <NAME>'s case (1) but there are certain features and details which distinguish that case from the present case. It was held in that case that the question had to be decided in the light of the intention of the assessee and the assessee in that case bad purchased the shares of <ORG> not as a business transaction. That was clear from the fact that the assessee bad purchased the shares at Rs. 2,321-8-0 per share and the market price was only Rs. 1,610, and the purpose of acquisition of such a large block of shares at a price exceeding the market price by a million rupees was the acquisition of <ORG>, which yielded the inference that the intention of purchasing the shares in that case was not to acquire them as a part of the trade of the assessee in shares but for obtaining <ORG> of the Mills. There was no separate price paid for <ORG> and the shares purchased and <ORG> acquired were both assets of a capital nature and the shares did not constitute stock-in-trade of a trading venture. In the present case the facts as shown were entirely different.

(1) [1961] 2 S.C.R 904, 908.

Counsel for the assessee company also relied on <CITATION> (1). In that case the Managing Director of the company which was formed for the purpose of carrying on general business and trade of commercial undertaking and dealing in bills, hundis and other securities, entered into an agreement with a sugar syndicate by which the company was to be given <ORG> of the sugar syndicate when such mill was erected in lieu of the company subscribing shares worth 3 lacs, and undertaking to sell shares worth 2 lacs. It was further provided that if the mill was not erected the assessee company was to be paid a commission on the amount invested by them. The Managing Director died and the assessee company sold the shares and thus received Rs. 2 lacs more than they had expended. The question was whether Rs. 2 lacs were receipts from business and not a mere appreciation in capital. It was held that that amount was not a result of an adventure in the nature of trade but was merely the result of an investment. It was found as a fact that the object of the company was merely to obtain the Managing Agency of the mill which would have been an asset of an enduring nature bringing profits but there was from the very inception no intention on the part of the company to resell the shares either at profit or otherwise. It appears that it was not contested that the conclusion to be drawn from those facts was that the investment in the purchase of shares in the circumstances of the case of a capital nature, and profits arising therefrom were an accretion to the capital. In that ease the court was trying to find out the intention of the assessee (the company) and taking all the circumstances into consideration it, came to the conclusion that it was a case not of profits arising out of an adventure in the nature of trade but the, intention of the assessee company was to invest its monies and therefore the excess arising out of sale of the shares was an accretion to the capital. That case must be taken to have been decided on its facts as (1)  27 I.T.R. 49.

indeed was the decision in M/s. Ramnarain Son's case (1). Counsel for the assessee company referred to other cases: <ORG>, Bombay v. <ORG>, Bombay Presidency & Aden (2); <CITATION> . <NAME> (3), <NAME> v. <NAME> (4) and Commissioner of Inland Revenue v. <NAME> (5). It is unnecessary to re- view these cases in any detail because they are clearly distinguishable in material respects and were decided on their own special facts. In <ORG>' case (2) the question for decision was whether 25% of the commission earned which was paid to the two financiers was expenditure deductible under s. 10(2)(ix) and it was held that it was not because the obligation to make the payment was in consideration of acquiring the Managing Agency and the right to conduct business and not for the purpose of producing profits in the conduct of business. Similarly in <CITATION> . <NAME> (3) the expenditure was for securing the agency which was to carry on business. Sir <NAME> said at p. 81:

"The question in such a case a,% the present must be "what is the object of the expenditure?" and it must be answered from the standpoint of the assessees at the time they made it-that is, when they were embarking upon the business of organizing agents for the company."

Jones v. Leeming (4) was a case of an isolated transaction. The finding was that it was not in the nature of trade. Commissioner of Inland Revenue v. Reinhold(5) was' decided on its own facts. Another case decided by this court upon which counsel for the appellant relied was <CITATION> (6) but that case was also decided on its own facts and it was held that there was no clear evidence in support of (1)  2.C.R. 004, 908 (3) (1939) L. R. 67 I. A. 71 (5) (1953) 34 T-C. 389.

(2) (1937) L. R. 64 I. A. 215.

(4) [1930] A.C. 415.

(6) [1959] SUPP. 2 S C.R. 846.

the inference of <ORG> that the land was purchased with the sole intention of selling it later at a profit.

The English and Scottish cases on which the appellant relied were considered by <ORG> in <NAME> v. <NAME> (1).In that case the assessees who were the respondents embarked on a joint venture to purchase and complete a spinning plant agreeing between themselves not to hold it but to make a quick resale. With that object in view they approached and there were diverse negotiations and the whole plant was sold in about two years' time at a profit of about pound 18,000 and for that purpose incurred commission for help in effecting sales, for insurance and other expenses. <ORG> found that it was not an adventure in the nature of trade to justify an assessment to income- tax under Case 1 of Schedule D to the Income-tax Act , 1918. It was held that the facts led inevitably to the conclusion that the transaction was an adventure in the nature of trade and that the Commissioner's inference to the contrary should be set aside.

Counsel for the respondent next relied on a Judgment of this Court in <CITATION> (2) in which it was held that the presence of all the relevant factors may help the Court to draw the inference that the transaction is in the nature of trade but it is not a matter of counting the number of facts and circumstances for and against. What is important is to consider the distinctive character and it is the total effect of all the relevant factors that determines the character of the transaction. All these cases are illustrative. As was said by <NAME>, J., in the above mentioned case the totality of circumstances of a case and the pros and cons have to be considered and inference drawn from those facts whether a particular transaction was in the nature of trade or was merely an investment and the resulting excess from the transaction was therefore profit which was taxable or was merely an accretion to the capital. In the instant case (1)  A.C. 14.

(2) [1959] SUPP. 1 S.C.R. 646.

the pi of its from the transaction that consisted of buying <ORG> of <ORG> and the block of shares held by the <NAME> were in our view the profits of an adventure in the nature of trade. The two groups, <ORG> and <ORG>, put Rs. 20 lacs into the assessee company which was floated for the acquisition of <ORG> and shares of <ORG> which were beyond the holding capacity of the assessee company. That company never intended to hold the whole block of shares. It or its promoters before even entering into the agreement of purchase and during the course of negotiations for the purchase had entered into arrangements with different brokers for the sale of shares or at least of a bulk of those shares which were subsequently sold at a profit and but for that sale the transact-ion could not have been completed by the assessee company. The purchase of shares was not with the intention of holding them, the intention of the assessee was just the contrary and by the sale at a profit of the shares actually sold the assessee company expected to and did finance the completion of the transaction and thus was enabled to secure <ORG> and keep 6 lacs shares. This inescapably was a transaction of a commercial nature. It had all the attributes of an adventure in the nature of trade. The contention that dealing in buying and selling of shares was not one of its objects is without substance. <ORG> found that dealing in shares was within the objects of the assessee company and this is one circumstance in the totality of the circumstances which must be considered, though by itself it is not determinative of the question. All the circumstances lead to the inference which was rightly drawn by <ORG> and by <ORG>. The answer to the first part of the question referred by <ORG> must therefore be in the affirmative.

It was contended that the question should not have been reframed and we have therefore proceeded to answer the question as framed by <ORG>. In our opinion the question even as framed must be answered in the affirmative.

The Notice of Motion to raise other questions in <ORG> was rightly dismissed. Apart from the fact that the Notice of Motion was barred by time and there was no application for condonation of delay, the questions which were sought to be raised were rightly held either to be covered by the question answered or they did not arise at all. The constitutional question under Art. 14 of the Constitution cannot be raised in these proceedings because as we have said above this <ORG> is exercising its advisory jurisdiction and its power is confined to the questions which arise in an appeal.

This appeal must therefore be dismissed with costs.

Appeal dismissed.


JUDGMENT <NAME>, J.

1. The question involved in this reference is with regard to the extent of the revisional powers of the Commissioner acting under section 263 of the Income-tax Act, 1961 (which is hereinafter referred to as "the Act").

2. The facts which give rise to this reference can be shortly stated as under. The respondent-assessee was a registered partnership firm consisting of two partners at the relevant time. The assessment year with which we are concerned in this reference is 1965-66. The assessee's income was assessed by the Income-tax Officer for this year on 21st March, 1970, at Rs. 1,03,840. Subsequently, on 24th February, 1972, the Additional Commissioner of Income-tax found on the facts before him that the order passed by the Income-tax Officer at the time of assessing the assessee's income was erroneous in so far as it was prejudicial to the revenue. He, therefore, issued a show-cause notice contemplated by section 263 of the Act for the purpose of giving an opportunity to the assessee of being heard on the question why the revisional powers contemplated by section 263 of the Act, should not be exercised. This notice refers to the date on which the Additional Commissioner considered that the order passed by the Income-tax Officer at the time of the original assessment was erroneous as well as prejudicial to the interests of the revenue. Shortly stated these facts are as under :

At the relevant time the assessee-firm was dealing in land transactions by making agreements to purchase or to take land on lease and assign it to others with profit. The transaction with which we are concerned in this case was with regard to the leasehold rights of land bearing final plot No. 499 of T. P. Scheme No. 3 of Ellisbridge belonging to one <NAME> and <NAME>. It is found that the banakhat for this land was originally obtained by one <NAME>. The said banakhat rights were transferred by <NAME> to a firm named <ORG> and this <ORG> transferred these banakhat rights to the assessee-firm. Assessee-firm in its turn sold these banakhat rights to a society named <ORG>. It was further found that out of this transaction, the assessee earned gross profit of Rs. 5,00,000. Out of this amount of Rs. 5,00,000 it claimed two deductions - one was of the sum of Rs. 1,45,000 and the other was of the sum of Rs. 2,00,000. Both these deductions went unchallenged during the course of the assessment proceedings before the Income-tax Officer. The assessment order passed by the Income-tax Officer under section 143(3) of the Act is found at annexure "A" and on its perusal it does not show that the Income-tax Officer had given any treatment to both these deductions.

3. It transpires from the record the originally Dr. <NAME> was believed to be the benamidar of the above referred firm of <ORG> The final deed transferring the banakhat rights in favour of <ORG> was dated 31st October, 1964. Perusal of that document shows that out of the consideration of Rs. 5,00,000, the amount of Rs. 2,00,000 was paid to <ORG> It was for this reason that the assessee had claimed the deduction of this amount of Rs. 2,00,000 from the profit of Rs. 5,00,000. As stated above, originally, Dr. <NAME> was stated to be benamidar of <ORG> However, subsequent to the assessment, on 10th March, 1971, Dr. <NAME> made an affidavit which revealed, inter alia, that he was working as a benamidar of the assessee itself. The Additional Commissioner of Income-tax, after knowing the contents of this affidavit, checked up the record and ultimately came to the conclusion that revisional proceedings contemplated by section 263 of the Act should be undertaken. He, therefore, issued the above referred notice dated 24th February, 1972. In this notice he has mentioned the fact that at the time of the original assessment, the Income-tax Officer has failed to make necessary inquiry about both the deductions, namely, the deduction of Rs. 1,45,000 and the other deduction of Rs. 2,00,000, which were claimed by the assessee during the course of the assessment.

4. So far as the deduction of Rs. 1,45,000 was concerned, the same was claimed by the assessee on the ground that he had to pay this amount on account of the building structure, which was standing on the land in question. But the Additional Commissioner found that the ownership of this building structure was to remain with the assessee and, therefore, the said deduction was not allowable. In this connection, the Additional Commissioner has stated as under in his show-cause notice :

"In returning the said income you had claimed a deduction of Rs. 1,45,000 being a payment for purchase consideration of the buildings standing on the said land. According to the documents registered on October 31, 1964, the buildings were to be purchased by you from the landlords and you were to be the sole owner of the buildings and also of sale realisation in the event of the sale of said buildings by you. The buildings were however transferred to <ORG> by the landlords and the said <ORG> paid to the landlords the sale consideration of the said building; but since according to your agreement with the said <ORG> the buildings were to remain your property, and you were to be the sole owner of the realisation from the said buildings, you agreed to reimburse the said <ORG> for the payment made by it to the landlords in respect of the said buildings. Thus, the payment of a sum of Rs. 1,45,000 by you for acquisition of the buildings has nothing to do with the profit of Rs. 5,00,000 which you received on sale of banakhat rights for the lease of the land. In the circumstances, the claim of deduction of a sum of Rs. 1,45,000 from the profit of Rs. 5,00,000 received in the transactions of purchase and a sale of banakhat rights were not admissible and, therefore, the Income-tax Officer had erred in allowing the said deduction claimed by you.

5. As for the other deduction of Rs. 2,00,000 the Additional Commissioner of Income-tax stated as under in his show-cause notice :

"In computing the profit from the said transaction of purchases and sale of banakhat rights you have further claimed a deduction of Rs. 2 lakhs being profit paid to an intermediary, <ORG> It appears <ORG> purported to have acquired banakhat right form one Dr. <NAME> who has been described as benamidar of <ORG> in the document dated October 3, 1964, and registered on October 31, 1964, which was executed between four parties including your firm. The said Dr. <NAME> has deposed on oath that he was not a benamidar of <ORG> but was in fact benamidar of your firm and he had entered into a contract for lease of the land with the landlords for and on your behalf. In the circumstances it would appear that <ORG> was only another intermediary nominated by you as your benamidar with a view to bifurcate the profits realised by you on sale of banakhat rights to the said <ORG>. In the circumstances it would appear that the Income-tax Officer has not gone into the facts as he ought to have and has accepted your claim without making any inquiry worth the name. The Income-tax Officer erred in allowing your claim of deduction of Rs. 2 lakhs."

6. In view of these allegations the Commissioner proposed the action under section 263 in the following terms :

"I, therefore, intend to make an order under section 263 cancelling the assessment order of the Income-tax Officer with a direction to him to make a fresh assessment according to law after making full inquiry and giving necessary opportunity of being heard."

7. This shows that at the very start the Commissioner proposed to take action by setting aside the assessment order and by giving direction to the Income-tax Officer to make fresh order of assessment. The above facts further show that the above referred show-cause notice was issued by the Commissioner on certain factual data which he has in his possession at the relevant time. The initiation of the proceedings under section 263 can be made if the Commissioner considers that any order passed by the Income-tax Officer is erroneous and prejudicial to the interests of the revenue. The above averments, which are quoted from the show-cause notice clearly reveal that in the opinion of the Commissioner, the order passed by the Income-tax Officer was erroneous inasmuch as he had not made the necessary inquiry on certain important points with regard to these deductions and, therefore, the order passed by him was prejudicial to the interest to the revenue.

8. In reply to the show-cause notice, the assessee submitted its written statement on March 15, 1972. With regard to the deduction of Rs. 1,45,000 it stated as under :

"It was the scheme of <ORG> to demolish the old structures and float a multi-storeyed residential building a flat system and to building a commercial building on the road side so as to enable the society that may be proposed (to be formed) to earn the sufficient lease rent. It would have been impossible to carry out this scheme if the buildings were not demolished and as a matter of fact the buildings were immediately demolished. So we did not remain the owner of the buildings any more, but only of the net proceeds realised from the sale of the super structures. We sold the super structures with a condition to give the land in ground level after doing the necessary filling for Rs. 2,018.50. Hence, our profit would not be Rs. 1,45,000 but Rs. 2,018.50 which is shown in our return of income and correctly assessed by the learned Income-tax Officer after considering all these aspects."

9. With regard to the other item of deduction of Rs. 2,00,000 the assessee stated as under :

"The second averment in your honour's notice is not correct and so it is specifically denied. That though Dr. <NAME> seems to have been examined long back on March 10, 1971, it is a matter of great regret that his statement is supplied to us on March 13, 1972, on the last minute when action under section 263 is proposed. The said statement is incorrect in many respects and with a view to bring out the true facts we desire to cross-examine him at the earliest. We should, therefore, be given opportunity to do so on any date convenient to your honour to establish that the department has no prima facie case either to pass order as contemplated or set aside the assessment on unwarranted facts."

10. From the above reply, it is clear that with regard to the deduction of Rs. 2,00,000 the assessee wanted to cross-examine Dr. <NAME> on whose affidavit the Commissioner had initiated action under section 63 . It is an admitted position that a copy of the statement made by Dr. <NAME> was supplied to the assessee before March 13, 1972. It is found to be an admitted position that initially the Commissioner was inclined to allow the assessee to cross-examine Dr. <NAME>. For this purpose, the assessee approached the Commissioner on 16th March, but on that day the assessee was informed that it was not necessary to allow him to cross-examine Dr. <NAME> at that stage as he was intending to send the matter back for reassessment to the Income-tax Officer and, therefore, the assessee was to get full opportunity to cross-examine Dr. <NAME>. The assessee thereupon filed another written statement on 17th March, 1972, setting out its legal contentions in detail. Ultimately, the Commissioner passed his final order under section 63 , which is found at annexure "B". By this order, he set aside the assessment already made and directed the Income-tax Officer to make fresh assessment. In this order, he also directed the Income-tax Officer to give the assessee proper opportunity to prove its case including the cross examination of Dr. <NAME> as desired by it. One important fact, which was revealed from the subsequent affidavit of Dr. <NAME> was that <ORG> consisted of brothers, wives, father-in-law and brother-in-law of two partners of the assessee-firm. The Commissioner found that the Income-tax Officer has acted to the prejudice of the revenue in not making any inquiry as regards the constitution of <ORG>

11. Being aggrieved by this order of the Commissioner, the respondent-assessee approached <ORG>. <ORG> was of the opinion that the Commissioner had failed to come to any "firm" conclusion that the above referred two items of deductions were allowed by the Income-tax Officer incorrectly during the course of the assessment. After quoting the provisions of section 263 , the <ORG> finally disposal of the matter with the following observations :

"In our reading of this provision, the Commissioner of Income-tax can pass an order only if he considers that any order passed by an Income-tax Officer is prejudicial to the interests of the revenue. Having substantial doubts about the correct allowance of the claim would not lead to the conclusion that the order was prejudicial to the interests of the revenue." It is thus evident from these observations of the <ORG> that the <ORG> allowed the appeal of the assessee only on the ground that the Commissioner has not come to any "firm" conclusions and had set aside the original assessment only on "substantial doubts".

12. Being aggrieved by this decision of the <ORG>, the revenue has preferred this reference in which the following question has been referred to us for our opinion :

"Whether, on the facts and in the circumstances of the case, the <ORG> was justified in law in setting aside the order of the Additional Commissioner of Income-tax made under section 263 on the ground that the Additional Commissioner of Income-tax had not come to a firm conclusion that the order by the Income-tax Officer was erroneous in so far as it was prejudicial to the interests of revenue ?"

13. <NAME>, who appeared on behalf of the revenue, has contended that the <ORG> was mistaken in taking a view that at the time of passing the final order under section 263 in Commissioner is always expected to come to a "firm" conclusion with regard to the facts of the case. According to <NAME>, the nature of the conclusions, which the Commissioner is expected to reach at the time of passing final order under section 263 , ultimately depends upon the order which he eventually passes under the said section, and in cases where the matter is sent back to the Income-tax Officer with direction for fresh assessment, it would be in a given case sufficient if the Commissioner comes to some prima facie conclusions.

14. As against this, the contention raised by <NAME> on behalf of the assessee was that it was the duty of the Commissioner to come to a "firm" and final conclusion about the controversial points before him and, therefore, merely because the Commissioner entertains some doubts about the controversial points, it would not be proper to set aside a concluded assessment and to send the matter back with a direction for fresh assessment. <NAME> also contended that the Commissioner was not justified in not allowing the assessee an opportunity to cross-examine Dr. <NAME> especially when his subsequent affidavit was obtained by the department as early as 10th March, 1971, and during the course of almost one year thereafter, the department did not take any steps in the matter. According to <NAME>, the Commissioner was bound to make an inquiry into the matter even if he wanted to send the matter back to the Income-tax Officer for reassessment. He pointed out that if the Commissioner had made such an inquiry, the assessee would have been able to show that the Income-tax Officer had not committed any error during the course of the original proceedings and that the affidavit, which was filed by Dr. <NAME>, on March 10, 1971, was not a document on which any reliance whatever could be placed.

15. Before touching the legal aspect of the extent of the revisional powers, which the Commissioner possesses under section 263 of the Act, it would be necessary to advert to some facts, which, in our opinion, are absolutely necessary to dispose of this reference. This facts will also be helpful in deciding whether the Commissioner was in any "doubt" as regards the controversial points raised before him at the time of making the final order.

16. We shall first refer to the contents of the affidavit filed by Dr. <NAME> on March 10, 1971, as found from the order passed by the Commissioner under section 263 . This is how he has summarised the contents of this affidavit :

"However, in his deposition on March 10, 1971, before the Income-tax Officer, <ORG> Ward-D, Ahmedabad, Dr. <NAME> stated that : in selling at Ahmedabad he was helped by <NAME> and when Shri <NAME> requested him to work as the benamidar of himself and <NAME>, who were in partnership, to purchase the land on lease from Shri <NAME>, he agreed to do so in view of his obligation to Shri <NAME> and it was clearly mentioned in the document which he signed at the same time as he signed the Kutch Banachithi between himself and Shri <NAME> in May or June, 1964, that he was working as benami for <ORG> consisting of two partners, viz., <NAME> and B. M. <NAME>, and the document also stated that whenever they asked him to transfer the same back to whomsoever they desired, he had to sign that about a month later when other instalment of Rs. 75,000 was to be paid, two documents known as kutcha banakhat, one between himself and <NAME> was signed, and the other between himself and <ORG> as the benami of Shri <NAME> and <NAME>; regarding <ORG> through he got knowledge of the same company on the last date of signing the final document in October, 1964, and on reading the document he questioned the partners of <ORG> 'what is the necessity of forming so called <ORG>' and they told him that according to kutcha banakhat he had to sign whatever document they asked to sign regarding lease on the same land and <ORG> as far as he knew consisted of the brothers, wives and father-in-law and brother-in-law of the two partners, viz, Shri <NAME> and <NAME>; that as confirmed that prior to the date on which the final lease deed was executed in October, 1964, he did not know anything about <ORG>; that he did not receive any single pie from <ORG> or their partners and only the loan of Rs. 20,000 which he had given was settled by the transfer of a flat in the building which he in turn transferred to the wife of Shri <NAME> through whom he had taken the loan earlier."

17. After referring to this to this affidavit of Shri Vyas the Commissioner has recorded his reasoning the conclusions on the question of deduction of Rs. 2,00,000 as under in his order :

"The above deposition would mean that according to <NAME> he was the benami of the assessee-firm and its two partners, viz., <NAME> and <NAME>, and that the so-called firm of <ORG> was incorporated only in October, 1964, when the deed dated October 31, 1964, was executed. It is also significant to note that the firm called <ORG> comprises nine partners including two lady partners, seven and eight, viz., <NAME> and <NAME>, who apparently, were the wives of the two partners, <NAME> and <NAME>, though this relationship is not disclosed in the description of their names in the lease deed. This is a curious aspect of the matter which assumes significance. It is also seen from clause (2) of the lease deed dated October 31, 1964, that though <ORG> is mentioned as the party to the deed, the condition of the banakhat provide that the assessee was to pay Rs. 25,000 per annum in advance only to these two ladies for the duration of the lease deed and this liability of the assessee-firm is assigned to the party No. 1, viz., the vendee, <ORG>, and under clause (4) if the party No. 1 defaults, the ladies have the right to take the possession of the land, etc., evidencing the dominant interest of these two ladies who are none but the wives of the two partners. It is also seen that according to the recital in the deed, the kutcha chithi by which the lease rights were assigned by the landlord and the assessee-firm is formed with effect from June 15, 1964, under the partnership deed dated June 29, 1964. The above circumstances of the case, especially Dr. <NAME>'s deposition that he was only the benami of the assessee-firm and did not receive any recompense and did not even know about <ORG> and company till October 31, 1964, do cast considerable doubt regarding the genuineness of the assessee's claim of Rs. 2,00,000 to <ORG> and company which was allowed by the Income-tax Officer without necessary inquiry."

18. As for the deduction of Rs. 1,45,000 the Commissioner has discussed the question in para. 5 of his order :

"Regarding the deduction of Rs. 1,45,000 from the profit of Rs. 5,00,000 received by the assessee from the transaction in question, the assessment's arguments are that the assessee-firm was to take the land with the old superstructures on lease for 99 years and the assessee had not purchased it from the lessor; that the assessee has to bear the loss by paying the cost of the superstructures which were to be demolished immediately and would fetch nothing; that it was the scheme of <ORG> to demolished the old structure and to float a multi-storeyed residential building on flat system and to build a commercial building on the road side so as to enable the society (that was proposed to be formed) to earn sufficient lease rent and the buildings in question were demolished immediately and the assessee did not remain the owner of the building any more but only of the net sale proceeds of Rs. 2,018 which was shown by the assessee in its profit and loss statement and this point at issue had been accepted by the Income-tax Officer after considering the matter and cannot be disturbed under section 263 . The assessee's above explanation has to be considered in the light to the recitals in the sale deed of lease rights dated October 31, 1964, according to which party No. 1 has to pay the amount to the landlord being the liability assigned to it by No. 4, i.e., the assessee (clause 4) and ownership of the superstructure shall be of the assessee and any realisation from the superstructure shall be of the assessee and the liability to pay a sum of Rs. 1,45 000 shall be of the assessee (clause 5). The profit and loss statement filed with the return merely mentioned the sale of superstructure for Rs. 2,018.50 without details and deduction for superstructure amount payable to owner, <NAME>, Rs. 1,45,000. since the assessment is proposed to be set aside, the above issue can also be examined by the Income-tax Officer after taking into account the assessee's explanation and other relevant material." These excerpts quoted from the order of the Commissioner clearly show that he has recorded a detailed and reasoned order and has taken a prima facie view of the matter before setting aside the original assessment.

19. Important facts, which are very material for appreciating the controversial points raised by the parties in this reference, are that the Income-tax Officer at the time of carrying out original assessment did not care to probe further into the details as regards the constitution of the firm of <ORG> Had he done so, he would have at once known that this firm came into existence only on the date on which the last document in favour of <ORG> was executed by the assessee and that it was constituted by very near relatives of the two partners of the assessee-firm. The revelation of these facts would have undoubtedly helped the cause of the revenue and would have also induced the Income-tax Officer to make further probe into the matter. It is thus evident that, before allowing the deduction of Rs. 2,00,000, the Income-tax Officer had erred in not making proper inquiry into the matter. The result of not making this inquiry was that the order, which was ultimately passed by the Income-tax Officer, worked to the prejudice of the revenue.

20. So far as the deduction of Rs. 1,45,000 is concerned, the patent facts, which were on the record before <ORG>, were that the assessee itself had valued the superstructure at Rs. 1,45,000 but had credited only the amount of Rs. 2018.50, being the scrap value of this superstructure. Even as against those credit of Rs. 2,018.50 no details were revealed by the assessee. These facts by themselves were sufficient to induce <ORG> to make further probe into the matter. But here also <ORG> failed to make proper inquiry at the time of the original assessment and, therefore, he not only committed an error but also acted against the interests of the revenue.

21. These facts, therefore, clearly reveal that at the time of the initiation of action by Commissioner under section 263 , the Commissioner had sufficient materials with him to consider that the order passed by the Income-tax Officer was erroneous and had resulted in prejudice to the interests of the revenue.

22. Now, if in the light of these facts we consider the provisions of section 263 , we find that the order passed by the Commissioner setting aside the original assessment and directing the fresh assessment by the Income-tax Officer is completely in conformity with the provisions of the section. Sub-section (1) of section 263 , which is relevant for our purpose, is in the following terms :

"(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment."

23. A bare perusal of this section shows that before the Commissioner initiates action under it, he should not only call for and examine the record of the assessment but should consider, (1) that the order passed by the Income-tax Officer is erroneous, and (2) that it is prejudicial to the interest of the revenue. Therefore, unless these three conditions are satisfied, namely, (1) that he should call for and examine the record of the proceedings in question, (2) he should consider that the order passed by the Income-tax Officer is erroneous and (3) that the order passed by the Income-tax Officer is prejudicial to the interests of the revenue, the Commissioner has no jurisdiction to initiate any revisional proceedings. Up to this stage, the Commissioner is not expected to issue any show-cause notice or to hear the concerned assessee. The section contemplates that it is the "consideration" of the Commissioner, which is relevant for initiating the action. Of course this consideration cannot be mala fide or arbitrary but the fact remains that it is the consideration of the Commissioner and none else. It should further be noted that a mere finding of the Commissioner that the order passed by the Income-tax Officer is erroneous may not in all cases result in the conclusion that that erroneous order is prejudicial to the interests of the revenue. There would be cases where the order passed by the Income-tax Officer would be erroneous and yet that order would not result in any prejudice to the interests of the revenue. As to what is meant by the expression "prejudicial to the interests of the revenue", The High court of Calcutta has explained as under <CITATION>  31 ITR 872 at page 881 :

"The words, `prejudicial to the interests of the revenue', have not been defined, but it must mean that the orders or assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. It can mean nothing else."

24. We respectfully agree with these observations.

25. Now, applying this test to the facts of the present case, it is obvious that not only the Income-tax Officer had committed an error in not making any further inquiry into the details as regards both the deductions but also that want of this inquiry has resulted in prejudice to the interest of the revenue. We, therefore, conclude that the initiation of action taken by the Commissioner under section 263 was quite proper.

26. Second step which is contemplated by section 263 is to issue show-cause notice. There is no dispute about this step, because it is an admitted position that the assessee has been given an opportunity of being heard and the final order which is passed by the Commissioner was passed only after hearing it.

27. The third step is as regards an inquiry as the Commissioner "deems necessary". It is with regard to this step that <NAME> vehemently contended that the Commissioner had committed an error in not allowing the assessee to cross-examine Dr. <NAME>, whose affidavit dated March 10, 1971, was very material. Now, after reading the relevant portion of sub-section (1) of section 263 , we do not find any justification for the view that in every case the Commissioner is expected to make an inquiry before passing the final order. The concluding portion of this sub-section (1) of section 263 shows that the Commissioner can pass various orders such as enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. If the Commissioner in this case had enhanced or modified the assessment, then looking to the facts of the present case, <NAME> would have been justified in contending that, before passing the final order of enhancement or modification of the assessment, the assessee ought to have been given an opportunity to cross-examine Dr. <NAME>. But here the Commissioner has not himself passed any final order as regards the assessment. What he has done is to cancel the original assessment and to direct a fresh assessment by the Income-tax Officer with a further direction to the Income-tax Officer to give proper opportunity to the assessee to substantiate its pleas as well as to cross-examine Dr. <NAME>. Therefore, the question is whether it is obligatory on the Commissioner acting under section 263 to enter into a regular inquiry in all cases before the original assessment order is cancelled and the Income-tax Officer is directed to make a fresh assessment. There is nothing in the section itself which would justify such a view, because, on the question of inquiry, the section specifically says that that inquiry should be as "deemed necessary" by the Commissioner. In this connection, we may profitably refer to some of the observations of <ORG> in <CITATION>  67 ITR 84. In that case, the order which was passed by the Commissioner mentioned some facts which were not indicted or intimated to the assessee and which the assessee had no opportunity of meeting. The assessee made a grievance of this but <ORG> disposed of the contention raised by the assessee by observing that all the additional material, on which the Commissioner had relied upon, was supporting material and did not constitute the basic ground on which the order under section 33B (of the Act of 1922) was passed. <ORG> further observed that even if the facts, which the Commissioner introduced regarding the inquiries made by him, had been indicated to the assessee, the result would have been the same, because the assessee had not in any way suffered from the failure of the Commissioner to indicate the results of the inquiries. <ORG> ultimately held that in such a case the assessee would have full opportunity of showing to the Income-tax Officer whether the income assessed in the assessment orders which were originally passed was correct or not, and, therefore, the assessee could not be said to have been denied an opportunity of showing cause against the grounds and materials and the rules of natural justice were not violated. <CITATION>  78 ITR 728, <ORG> held that there was no violation of the principles of natural justice on the question of opportunity being given to the assessee. That opportunity was reasonably given, by stating the basic grounds on which the Commissioner thought that the Income-tax Officer's order was erroneous and giving a reasonable opportunity to the assessee even to produce evidence along with facts of that case, the High court further observed that all that the Commissioner did was to cancel the assessment and ask the Income-tax Officer to make a fresh assessment according law after making proper enquiries and investigations with regard to the jurisdiction, carrying on the business, possession of initial capital and the sources of moneys invested in the name of the assessee and, therefore, the assessee would again get full opportunity to produce evidence, if any, in support of her case.

28. In view of this, we find that considering the facts of this case, the Commissioner was not bound to make any inquiry before passing the final order and that in substance no prejudice is caused to the assessee by failure of the Commissioner to give it any opportunity to cross-examine Dr. <NAME>.

29. Next question is whether at the time of passing the final order, the Commissioner was bound to record final conclusion. Now, even on this question, we find that there is nothing in section 263(1) to show that before passing the final order under that section, the Commissioner must necessarily and in all cases record final conclusions about the points in controversy before him. As already noted by us above, we would have expected him to record final conclusions, which he thought proper if he was to settle the assessment finally but since he has not settled the assessment finally but since he was not settled the assessment finally, and has preferred to direct the Income-tax Officer to make an order for fresh assessment, it was proper that he did not express any final conclusions and recorded only prima facie conclusions at which he had arrived with reference to the facts of the case. Here it should be noted that, as the assessment was to be freshly made by the Income-tax Officer, the only proper course for the Commissioner was not to express any final opinion as regards the controversial points.

30. <NAME> heavily relied upon the <ORG> decision in <CITATION>  111 ITR 326 (All) for the proposition that it was obligatory on the Commissioner to examine the merits of the objections raised by the assessee and, therefore, it was not proper to "delegate" that power to the Income-tax Officer by setting aside the assessment order and directing him to make fresh assessment. The facts of that case were that the only ground upon which action was taken by the Commissioner under section 33B (of the Act of 1922) was that the Income-tax Officer did not apply his mind to the claim of the assessee as contained in part D of the return. The court found that the Commissioner himself did not apply his mind to the merits of claim and, in fact, he specifically refrained from going into the merits. In view of this, the court held that the finding that the order of the Income-tax Officer was erroneous, was by itself not enough to given jurisdiction to the Commissioner, because it was necessary to be shown further that the order was prejudicial to the interests of the revenue. Since, in the opinion of <ORG>, the Commissioner failed in finding that the erroneous order passed by the Income-tax Officer was against the interest of the revenue, <ORG> concluded that the order passed by the Commissioner in setting aside the original assessment was wrong. This case is easily distinguishable on facts because, so far as the case under consideration is concerned, it is evident that the failure of the Income-tax Officer to make proper inquiry with regard to both the deductions during the course of his original assessment was clearly prejudicial to the revenue, because the deductions in question were quite substantial in nature. In our opinion, therefore, the decision relied upon by <NAME> is of no help to the respondent-assessee.

31. In view of what is stated above, we are of the opinion that the <ORG> was not justified in law in setting aside the order of the Additional Commissioner of Income-tax under section 263 on the ground that the Additional Commissioner had not come to a firm conclusion that the order passed by the Income-tax Officer was erroneous. In other words, our answer to the question referred to us is in the negative, i.e., in favour of the revenue and against the assessee. The respondent-assessee shall bear the costs of the revenue of this reference.


JUDGMENT

1. This is an appeal from an award of the District Judge of Madura in certain Land Acquisition proceedings and the preliminary question is whether Article 156 of the Limitation Act applies. The court fees were paid on the memo of appeal one year and 149 days out of time, and if Article 156 applies the appeal would be barred, The question is of first impression and cannot be said to be quite free from difficulty The Land Acquisition Act gives a right to appeal by Section 54 which lays down," subject to the provisions of the Code of Civil Procedure applicable to appeals from original decrees, an appeal shall lie to the High court from the award or from any part of the award of the court in any proceedings under that act." There is no special period of limitation provided in the Land Acquisition Act , nor is there any allusion, unless it be by implication of this very section, to the Limitation Act . Article 156 of the Limitation Act provides a period of 90 days for ' Appeal under the Code of Civil Procedure, .1908, to <ORG>, except in the cases provided for by Article 151 and Article 153' the time to run from 'the date of decree or order appealed from.' The argument on behalf of the appellant is that you must read the 1st column of the article as meaning that the appeals provided for here are those the right to which is conferred by the Code of Civil Procedure, and it is contended that this interpretation is strengthened by the language of column 3. There is no direct authority on the point. There is however a ruling of the Calcutt<ORG> in <CITATION> (1886) I.L.R 13 C. 221 the reasoning of the decision in which seems to apply to the present question. There the objection was raised with reference to an appeal provided for under the Burma Courts Act, XVII of 1875. Section 49 of that Act provided for an appeal to <ORG> in cases where the amount of value of the subject matter exceeded Rs. 3000 and was less than Rs. 10,000. <NAME> and <ORG>, interpreted the words 'Appeals under the Code of Civil procedure' in Article 156 of the Limitation Act as meaning appeals the procedure in respect of which is governed by the Civil Procedure Code. They say, " The Limitation Act , Schedule II, Article 156 , when it speaks of the 'Civil Procedure Code is, on the face of it, speaking of a Code which relates to procedure and does not ordinarily deal with substantive rights; and the natural meaning of an appeal under the Civil Procedure Code appears to us to be an appeal governed by the Code of Civil Procedure so far as procedure is concerned.' It seems to us that this is the correct interpretation of Article 156. There seems to be no good reason for saying that an appeal under the Civil Procedure Code means only an appeal the right to prefer which is conferred by the Code itself. On the other hand it would not be straining the language of the article too much to hold that an appeal the procedure with respect to which from its inception to its disposal is governed by the Civil Procedure Code, may rightly be spoken of as an appeal under the Code : this interpretation seems to us to be strengthened by the reference, in Article 156 itself to Article 151 of the same schedule. Article 15 , provides for appeals from a decree or order of <ORG> in the exercise of its original jurisdiction. Now though the right to appeal from such decrees or orders is not given by the Code of Civil Procedure, but by the Letters Patent yet Article 166 speaks of such appeals as appeals under the Civil Procedure Code. That also tends to show that what is meant by the legislature is appeals the hearing and disposal of which, is governed by the rules of procedure laid down in the Civil Procedure Code.

2. As regards column 3 there can be no doubt after the decision of <ORG> in <ORG> v. The Collector Rangoon (1912) I.L.R. 40 C. 21 that an award under the Land Acquisition Act is not a decree passed in the ordinary jurisdiction of <ORG>. But their Lordships themselves point out in that case that appeals from awards as provided for in Section 54 of the Land Acquisition Act are governed as to their procedure from the date of the filing of the appeal to its disposal by the rules provided for in the Civil Procedure Code : and in a Letters Patent Appeal in this Court in <CITATION> (1918) I.L.R. 41 M. 948 it has been held that Section 98 of the Civil Procedure Code applies. Though the award of the Land Acquisition Judge is not a decree or order for purposes of further appeal from the decision of <ORG> in appeal nevertheless, the procedure laid down in the Civil Procedure Code with reference to appeals from original decrees which are also made applicable to appeals from Orders by Rule 2 of Order XLIII, Civil Procedure Code, governs appeals under Section 54 of the Land Acquisition Act, although in the rules the word "decree" is used. It is to be pointed out that the provisions of the Civil Procedure Code regarding procedure to be followed in appeals from original decrees are incorporated in the Land Acquisition Act by virtue of Section 54 . If the 1st column of Article 156 includes, as we hold, appeals provided for by Section 54 of the Land Acquisition Act there is really no difficulty created by the use of the words "decree or order " in the 3rd column. Then we think it rightly pointed out in <CITATION> (1912) I.L.R. 34 A. 496 at 504 that there are several acts, for example, the Succession Act , the Probate and Administration Act and the Land Acquisition Act , which make the Code of Civil Procedure applicable to the proceedings under the Act, and give a right of appeal to <ORG>, but do not prescribe any period of limitation for the appeal. It has always been assumed probably rightly, that such appeals are under the Code of Civil Procedure governed by what is now Article 156 of Schedule 1 to the Limitation Act and by the general provisions of the Act also.

3. Our attention has been drawn by Mr. <NAME>, to certain especial Acts, such as, the Calcutta Improvement Act and the Bombay Improvement Act, in which special rules of limitation are provided for. That, to our mind, does not affect the question. It might have been perhaps better if the legislature enacting the Land Acquisition Act had also provided some special provision or made an express and direct reference to the provisions of the Limitation Act . But that is another question.

4. We hold upon a proper construction of Article 156 that it applies to appeals provided for by Section 54 of the Land Acquisition Act.

5. This appeal must be dismissed with costs.


PETITIONER: RAM GOPAL REDDY Vs. RESPONDENT: ADDITIONAL CUSTODIAN EVACUEE PROPERTY,HYDERABAD DATE OF JUDGMENT: 06/01/1966 BENCH: <NAME>, K.N. BENCH: <NAME>, K.N. GAJENDRAGADKAR, P.B. (CJ) <NAME>, M. <NAME>, V. SATYANARAYANARAJU, P. CITATION: 1966 AIR 1438 1966 SCR (3) 214 CITATOR INFO : RF 1968 SC 169 (8) ACT: Administration of Evacuee Property Act  s. 46 , and Transfer of Propety Act  s. 53 A- Land purchased in 1946--Vendor declared evacuee in 1949 and land declared evacuee property--suit by purchaser for declaration of ownership whether lies. HEADNOTE: The appellant purchased certain land from one A in 1946. Although the land was valued at more than Rs. 100 no registered deed of sale was executed. In 1949, A was declared an evacuee and the appellant was given notice by the Deputy Custodian of Evacuee Property to show cause why the land should not be declared evacuee property. No appearance was put in by the appellant in answer to the notice and the land was declared evacuee property. The appellant represented to the departmental authorities that he had become owner of the land before the Evacuee Property law came into force. The Custodian did not accept the plea and observed that if the appellant was aggrieved by the decision he could obtain a declaration of his rights from a competent court. The appellant therefore filed a suit which was contested by the department on the ground that s. 46 of the Administration of Evacuee Property Act was a bar. The subordinate Judge held that the court had jurisdiction because of s. 53A disagreed with the Subordinate Judge and reversed his decision. The appellant then came to this Court by special leave. HELD : The scheme of the Evacuee Property Act clearly is that when the property admittedly belongs to the evacuee any person claiming the property or any interest or right therein has, on receipt of a notice under s. 7(1) , to appear before the authorities entitled to deal with the matter under the Act. Any person aggrieved by an order of such an authority made under 3. 7 has the right to appeal under s. 24 and if necessary to go in revision under s. 27 . The Act thus provides a complete machinery for a person interested in any property to put forward his claims before the competent authorities. Having provided this machinery the Act by s. 46 bars the jurisdiction of civil and revenue courts to entertain or adjudicate upon any question whether any property or any right or interest in any property is or is not evacuee property. Any transferee from an evacuee claiming the property or any right or interest therein has to avail of the remedies under the Act and cannot go to a civil court. The fact that in the present case the Custodian in his order said that the appellant could go to a competent court could not confer jurisdiction on the Court. Nor could it be said on the facts found that the appellant had become the owner of the property before 1947, for, admittedly the property was worth more than Rs. 100 and without a registered sale deed it was not possible for the title to pass. It way be that if A tried to get back the property s. 53-A of the Transfer of Property Act would come to the aid of the appellant in de- 215 fence. But the present suit had been filed to establish the right of the appellant as owner of the property and in such a suit the appellant could not take the benefit of s. 53-A . [217 B-218 B] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 885 of 1963. Appeal from the judgment and decree, dated April 8, 1960 of <ORG> in Appeal No. 21/1 of 1956. <NAME>, for the appellant.

<NAME> and <NAME>, for the respondent. The Judgment of the Court was delivered by <NAME>, J. The only question raised in this appeal on a certificate granted by <ORG> is whether the suit brought by the appellant is barred under s. 46 of the Administration of Evacuee Property Act, No. 31 of 1950, (hereinafter referred to as the Act). The facts are not in dispute and may be briefly narrated.

On November 15, 1946, the appellant claimed to have pur- chased certain patta lands from one <NAME> and paid him Rs. 6,127/8/- in Osmania Sicca. The appellant got possession of the land and thereafter in June 1949 <NAME> applied in the <NAME> office for the transfer of the patta in the name of the appellant. Before, however, any transfer was made, <NAME> seemed to have migrated to Pakistan. Consequently, the Deputy Custodian took steps to declare <NAME> an evacuee. In that connection the appellant received notice from the Deputy Custodian in December 1950 under s. 7 of the Act asking him to show cause why the land should not be declared evacuee property. Though the appellant's case was that he engaged a counsel to appear on his behalf before the Deputy Custodian, no one seems to have appeared on his behalf, and in consequence, the Deputy Custodian declared the property to be evacuee property. Thereafter the appellant was given a notice requiring him to surrender possession of the land to the <NAME>dar. The appellant then made representation before the Deputy Custodian that he had purchased the property from <NAME> in 1946 and was the owner thereof from before the Evacuee Property Law came into force. The Deputy Custodian called upon him to produce evidence and thereafter recommended to the Custodian that the property might be declared not to be evacuee property. The Custodian did not accept this recommendation on the ground that there was no registered sale deed duly executed by <NAME> in favour of the appellant and no transfer of property could therefore be said to have taken place in 1946, and ordered that the declaration of the property as evacuee property should stand and further said that if the appellant was aggrieved by this decision he could obtain a declaration of his rights from a competent court. In consequence, the appellant filed the suit out of which the present appeal has arisen in the court of the Subordinate Judge, Nizamabad and prayed that a declaration be made that he was the owner of the property and in possession thereof and that the Custodian be ordered to execute and register a sale deed thereof in his favour. The suit was resisted by the Custodian and the main contention raised on his behalf was that the suit was barred under s. 46 of the Act. The Subordinate Judge however held that the appellant was entitled to the benefit of S. 53-A of the Transfer of Property Act (No. 4 of 1882) and that the civil court had jurisdiction inasmuch as the sale had taken place before 1947.

The Custodian then went in appeal to <ORG>, and the only question raised there was that the suit was barred under s. 46 of the Act. <ORG> reversed the decision of the Subordinate Judge and held that the appellant had been given notice under S. 7 of the Act in December 1950 and did not appear before the Deputy Custodian with the result that the property was declared as evacuee property. <ORG> further held that after this declaration the appellant's remedy was to proceed by way of appeal or revision under the Act and that a suit was barred in view of s. 46 thereof. The appellant's contention that as he was a third party he was entitled to maintain the suit was negatived by <ORG>. In consequence <ORG> dismissed the suit but directed the parties to bear their own costs. The appellant then obtained a certificate from <ORG> to appeal to this Court, and that is how the matter has come up before us.

We are of opinion that there is no force in this appeal. It is unnecessary to consider the cases cited at the bar on behalf of the appellant for whatever may be the position of law where the title of the evacuee himself is in dispute, as to which we express no opinion, there can be no doubt that where the property admittedly belonged to the evacuee and the person filing the suit claims to be a transferee from the evacuee, the suit would certainly be barred in view of s. 46 of the Act. Section 46 inter alia lays down that "save as otherwise expressly provided in this Act, no civil or revenue court shall have jurisdiction to entertain or adjudicate upon any question whether any property or any right to or interest in any property is or is not evacuee property." It is admitted that the appellant had received notice from the Deputy Custodian under s. 7(1) of the Act but had neglected to appear before him and it was in those circumstances that the Deputy Custodian declared the property to be evacuee property. That order of the Deputy Custodian could be taken in appeal under s. 24 by the appellant to the authorities provided under the Act, and if necessary the appellant could also go in revision to the Custodian General under s. 27 . The scheme of the Act clearly is that where the property admittedly belongs to the evacuee any person claiming the property or any interest or right therein has on receipt of a notice under s. 7(1) to appear before the authorities entitled to deal with the matter under the Act. Any person aggrieved by an order of such an authority made under s. 7 has the right to appeal under s. 24 and if necessary to go in revision under s. 27 . The Act thus provides a complete machinery for a person interested in any property to put forward his claims before the authorities competent to deal with the question and to go in appeal and in revision if the person interested feels aggrieved. Having provided this complete machinery for adjudication of all claims with respect to evacuee property, the Act, by s. 46 , bars the jurisdiction of civil or revenue courts to entertain or adjudicate upon any question whether any property or any right to or interest in any property is or is not evacuee property. Where therefore the property or any right to or interest in any property undoubtedly belonged to the evacuee and any transferee from the evacuee claims the property or any right to or interest therein he has to avail of the remedies provided under the Act. If he fails to do so he cannot file a suit in the civil or revenue court to have the question whether any property or any right to or any interest therein is or is not evacuee property decided in view of the clear provision of s. 46 (a) of the Act. The fact that the Custodian in his order said that the appellant could go and establish his right in a competent court is of no assistance to the appellant, for if the law bars the jurisdiction of civil and revenue courts the Custodian's observation that the party before him could go to a competent court to establish his right will not confer jurisdiction on a civil or revenue court. Nor can it be said on the facts found in the present case that the appellant had become the owner of the property before 1947, for, admittedly the property was worth more than Rs. 100 and it is not disputed that a registered sale deed was necessary to pass title from <NAME> to the appellant. No registered sale deed was executed in this case and therefore the property did not pass from <NAME> to the appellant even up to the time when <NAME> became an evacuee. It may be that if <NAME> had tried to get back the property, s. 53-A of the Transfer of Property Act would come to the aid of the appellant in defence. But the present suit has been filed to establish the right of the appellant as owner of the property and in such a suit the appellant cannot take the benefit of s. 53-A of the Transfer of Property Act. We, therefore, hold in agreement with <ORG> that the suit is clearly barred under s. 46 (a) of the Act.

The appeal therefore fails and is hereby dismissed. In the circumstances we pass no order as to costs.

<ORG> Appeal dismissed.