Andhra Pradesh H.C : Whether, on the facts and in the circumstances of the case, the assessee was the owner within the meaning of s. 22 of the IT Act, 1961, relating to the properties sold to outsiders in respect of which full sale consideration was received and possession was handed over but formal deeds of conveyance executed subsequent to the accounting year relevant to the assessment year under consideration ?

Counsel Appeared

Y. Ratnakar, for the Assessee : M. Suryanarayana Murthy, for the Revenue

B.P. JEEVAN REDDY, J.:

The following two questions are referred under s. 256(1) of the IT Act : ” 1. Whether, on the facts and in the circumstances of the case, the assessee was the owner within the meaning of s. 22 of the IT Act, 1961, relating to the properties sold to outsiders in respect of which full sale consideration was received and possession was handed over but formal deeds of conveyance executed subsequent to the accounting year relevant to the assessment year under consideration ? 2. Whether, on the facts and in the circumstances of the case, the assessee was liable to be taxed as owner under s. 22 of the IT Act in respect of the properties handed over to various Sahebzadas by firmans without executing proper deeds of conveyance ? “

The assessment years concerned here are 1975-76 and 1976-77. It is brought to our notice by learned standing counsel for the Revenue-and, in fact, this fact is also found stated in the order of the Tribunal-that identical questions were referred earlier for the opinion of this Court for the asst. yrs. 1959-60 to 1963- 64 in the case of this very assessee with respect to the same property. Both these questions were answered against the assessee and in favour of the Revenue by a Bench of this Court in R. C. No. 20 of 1971, disposed of on January 30, 1973 (reported in (1974) Tax LR 90).

Sri Ratnakar, learned counsel for the assessee, however, sought to persuade us to take a different view and answer the questions referred in favour of the assessee on the following reasoning. Even by the asst. yr. 1959-60, the properties mentioned in the first question were in the possession of the purchasers who were holding the same under the agreements of sale in their favour. If so, it is argued, that by the asst. yr. 1975- 76, such persons would have become owners by operation of law, i.e., on account of the provisions contained in s. 27 of the Limitation Act r/w Arts. 64 and 65. It is submitted that a person entitled to invoke the doctrine of part performance contained in s. 53A of the Transfer of Property Act must be deemed to be in possession adversely to the owner and would, therefore, become the owner after 12 years. So far as the properties in the second question are concerned, it is submitted that the said properties are in the possession of third parties under firmans which are nothing but invalid deeds of transfer. A purchaser in possession under an invalid deed of transfer must be deemed to be holding adversely to the owner and on that basis the persons concerned have become owners of the properties mentioned in question No. 2 by adverse possession for more than 12 years. In other words, even if it is assumed that their adverse possession commenced in the accounting year 1959-60, the prescribed period would be over prior to the commencement of the accounting year relevant to the asst. yr. 197576.

So far as the first question urged by learned counsel is concerned, we are not satisfied about the correctness of the proposition. No clear decision has been brought to our notice that a purchaser under an agreement of sale, entitled to invoke the doctrine of part performance, must be held to be holding adversely to the owner and that at the end of 12 years of his possession, he becomes the owner of such property by adverse possession. After giving our earnest consideration to the matter, we are not satisfied that the proposition urged can be accepted straightaway. It

requires further investigation and argument which we do think is called for in the facts and circumstances of this case inasmuch as an identical question relating to these very properties was answered against the assessee as mentioned above. It is also brought to our notice that an appeal is now pending in the Supreme Court against that decision. However, we are of the opinion that the legal position with respect to the properties concerned in the second question is slightly different. It is well-settled by several decisions of the Courts in this country that a person in possession under an invalid deed of transfer must be deemed to be holding adversely to the vendor. The firmans are really documents purporting to transfer the title in the concerned properties in favour of third parties. These firmans can, therefore, be treated as invalid documents of transfer and, if so, the possession of the purchaser thereunder would be adverse to the owners. These firmans are said to have been issued in the year prior to the assessment year relevant to 1959-60. It is evident that the purchasers thereunder have become owners by adverse possession by and before the commencement of the accounting year relevant to the asst. yr. 1975-76. For this reason, we answer the second point in favour of the assessee and against the Revenue, though this question was answered against the assessee in the decision referred to above. Because of the interregnum and the interval between the assessment years concerned in that case and this case and because of the change in the legal position brought about by operation of law, the second question is liable to be answered in favour of the assessee and it is accordingly answered.

We may also mention that learned counsel for the assessee tried to persuade us to take a view different from that expressed by this Court on the first question with reference to a recent Bench decision of this Court in CIT vs. Sahney Steel & Press Works (P.) Ltd. (1987) 64 CTR (Pat) 260 : (1987) 168 ITR 811. But, for the reasons stated above, we are not inclined to re- examine the said question. We may also mention that the decision in CIT vs. Sahney Steel & Press Works (P.) Ltd. (supra) does neither pertain to this assessee nor to these properties. Only the principle of that decision is sought to be relied upon. When there is a direct decision of this Court with respect to the very same properties and the very same assessee and more particularly when the appeal against the said decision is pending in the Supreme Court, we do not think it advisable and proper to reconsider the correctness of the view expressed in CIT vs. Nawab Mir Barkat Ali Khan (1974) Tax LR 90.

For the above reasons, question No. 1 is answered in the affirmative and against the assessee and question No. 2 is answered in the negative, i.e., in favour of the assessee and against the Revenue. No costs.

Sri Y. Ratnakar, learned counsel for the assessee, makes an oral request for grant of a certificate under s. 261 of the IT Act with respect to our opinion on the first question. Inasmuch as the appeal is already pending against the decision in CIT vs. Nawab Mir Barkat Ali Khan (supra) following which we have answered the said question against the assessee, we are inclined to grant a certificate to the assessee in so far as the first question referred is concerned.

[Citation : 171 ITR 541]