JUDGMENT 1. - These are four reference applications under section 256(2) of the Income Tax Act, 1951 by the Commissioner of Income tax, Rajasthan II, Jaipur, for requiring the Income Tax Appellate Tribunal, Jaipur Bench to state a case and refer a certain question of law said to arise from its consolidated order in Income Tax Appeals No. 1050, 1051, 1052, 1092, 1095, 1096, 1097, and 1098 J P 73 71 dated 18.3.1973, to the High Court for its opinion namely:- "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provisions of section 52(2) of the Income Tax Act, 1961 were not attracted in this case and further in directing the Income Tax Officer to compute the capital gains on the basis of the consideration declared by the assessee" ? The Tribunal has by its order dated 10-10-1975 declined to make a reference to the High Court on the ground that no question of law arises therefrom. 2. The circumstances leading to these proceedings may be, briefly, stated : By a registered sale deed dated 31-5-1958 Anandsingh Kachhwaha purchased a valuable plot of land measuring 4500 sq. yards situate on Sans archandra Sen Road, off Mirza Ismail Road at Jaipur, in the names of his two sons Yashwant Singh and Mahendra Singh. The plot was purchased under two sale deeds, one in the name of Yashwant Singh in respect of 2250 sq. yards and the other in the name of Mahendra Singh in respect of 2250 sq. yards. Yashwant Singh, by a registered deed of gift dated July 30, 1969, made gift of 450 sq yards of land out of 2250 sq yards owned by him to Smt. Geeta, wife of his younger brother Mahendrasingh. Mahendrasingh, by a registered deed dated July 29, 1969, made gift of about 749 sq yards each to Smt. Sushiladevi, wife of his elder brother Yashwant Singh and Pradyuman Singh, minor son of Yashwant Singh, Yashwant Singh, Mahendra Singh and Sushila Devi sold the aforesaid land to M/s Balkrishna Cornmercial Co. of Calcutta on August 2, 1959. Yashwant Singh sold land to the said company at Rs. 45/- per sq. yard, Mahendra Singh at Rs. 59/- per sq. yard and Smt. Sushiladevi at Rs. 40/- sq. yard Pradyuman Singh, in whose favour Mahendra Singh had made a gift of 749 sq. of Calcutta on August 2, 1959. Yashwant Singh sold land to the said company at Rs. 45/- per sq. yard, Mahendra Singh at Rs. 59/- per sq. yard and Smt. Sushiladevi at Rs. 40/- sq. yard Pradyuman Singh, in whose favour Mahendra Singh had made a gift of 749 sq. yards of land, also sold this land to the said M/s Balkrishna Commercial Company on 9.4.1970 at Rs. 40/- per sq. yard. In their returns for the assessment year 1970-71, Yashwant Singh Mahendra Singh, Smt. Sushila Devi and Pradyuman Singh disclosed the capital gains made by them as a result of the aforesaid transactions. 3. The Income Tax Officer was of the view that the rates at which the aforesaid assessees had sold their lands were very low as compared to the prevailing market rate in the area in which the land was situated. As pointed out above, the land was on Sansar Chandra Sen Road, off the M.I. Road, which is a commercial area of Jaipur City where offices of leading business houses, banks, cinema etc. were located. In the view of the Income Tax Officer, the land sold by the assessee was in the near vicinity of this important business locality of Jaipur. The Income Tax Officer took into consideration four sale instances relied upon by the Revenue and was prima facie of the view that the rates at which the lands were sold were very low. He, therefore, addressed letters to the assesses disclosing his intention to approach the Inspecting Assistant Commissioner, Jodhpur Range, Jodhpur for his approval for invoking the provisions of section 52(2) of the Income Tax Act, 1961. He called upon the assessee to show cause why he should not take action as proposed by him. 4. The assessees gave identical replies contending that the rates at which they had sold the lands were the prevailing market rates at the relevant time. It was contended that the price of the land could not be compared with land situate on a main road. It was further contended that having regard to the rates at which land was sold in the area in which the land was situated that the rates at which the land was sold were the market rates. The assessees relied on seven site instances in support of their contention. It was further contended that having regard to the rates at which land was sold in the area in which the land was situated that the rates at which the land was sold were the market rates. The assessees relied on seven site instances in support of their contention. In the sale instances cited by the assessees, the rate of land sold varied between Rs. 23/- to Rs. 70/-. 5. The Income Tax Officer found the sale instances relied on by the assessees were sales made in private. They were according to the Income Tax Officer, "closed door affairs". He further held that the sale instances were not comparable because they were in respect of smaller plots of land. He, therefore, discarded the sale instances relied on by the assessee. He relied on the three sale instances relied upon by the Revenue and held that the fair market value of the land in question was Rs. 160 per sq. yard. One of the sale instances relied on by him was in respect of a land sold in the Govt. auction in January 1969 at the rate of Rs. 160/- per sq. yard. The second sale instance was in respect of a plot of land on the M/I. Road purchased by Dr. (Mrs) Sonu B. Vyas at 100/- per sq. yard in 1964. The third instance was in respect of plot on M.I. Road purchased by one Khanna in November, 164 at the rate of Rs. 107/- per sq. yard. The Income Tax Officer also relied on the instance of mortgage of land by one Jagdish Prasad of M/s. Laxmi Motor Co., M.I. Road, Jaipur in favour of M/s Rajasthan Finance Corporation. According to the Income Tax Officer, the mortgaged land has valued at Rs. 150/- per seq. yard in 1967. The Income tax Officer observed that the price of land has considerably risen and it was very high in No. 9. According to the Income Tax Officer, the prices of land has gone up in 1969 on account of the disturbed conditions in the State of West Bengal. Relying on the above sale instance the Income Tax Officer was of the view that the market value of the land in question, at the time when it was sold, was Rs. 160/- per sq. yard. Relying on the above sale instance the Income Tax Officer was of the view that the market value of the land in question, at the time when it was sold, was Rs. 160/- per sq. yard. He, therefore, adopted that value with the approval of the learned Inspecting Assistant Commissioner of Income Tax Jodhpur Range, Jodhpur and computed the capital gains. 6. The Income Tax Officer further held that the aforesaid gifts made by Yashwant Singh and Mahendra Singh were cross-gifts covered by section 64(iii) of the Act. Therefore, relying on the decision of the Supreme Court in Commissioner of Income Tax v. C.M. Kothari, 1963 (49) ITR 107 , he held that the aforesaid gifts were interconnected and parts of the same transaction. He held that the assessees Yashwant Singh and Mahendra Singh had adopted a device of making gifts as aforesaid to evade application of provisions of section 64 (iii) of the Act. In his view, the gifts were covered by section 64(iii) of the Act. In this view of matter, he taxed the capital gains earned on sale of 450 sq. yards of land in he hands of Yashwant Singh and the capital gains made on sale of 749 sq. yards of land in the hands of Mahendra Singh. 7. On appeal the Appellate Assistant Commissioner allowed the appeals of the assessees partly and reduced the fair market value of the plot sold from 160/- per sq. yards to Rs. 100/- per sq yard, for purposes of computation of capital gains. He held that looking to the fact that the plots in question are situated at a distance of about 100 yards from M.I. Road on Sansarchandra Sen Road which though not declared de jure as commercial road, was being used de facto as such &, therefore, the price shown by the assessees was definitely low. He further held that in the circumstances, the provisions of section 52(2) of the Act were attracted. There was, however, nothing in the order of the Appellant Assistant Commissioner to indicate as to the basis for holding the fair market value of the land to be Rs. 100/- per sq. yard. 8. Both the assessees & the Income Tax Officer went in appeal before the Tribunal. There was, however, nothing in the order of the Appellant Assistant Commissioner to indicate as to the basis for holding the fair market value of the land to be Rs. 100/- per sq. yard. 8. Both the assessees & the Income Tax Officer went in appeal before the Tribunal. The Tribunal held that the three transactions of sale relied upon by the Revenue did not represent comparable sales and, therefore, could not form the basis holding that the fair market value of the capital asset on the date of transfer exceeded the full value of the consideration by not less than 15% of the value so declared. It further held that the sale-deeds relied upon by the assessees were also not relevant as the transactions were not comparable sales. The Tribunal has not come to any definite finding as to what was the fair market value of the capital asset on the date of transfer. The Tribunal held that the burden of proving that the assessee had not sold the land at the fair market value lay on the Revenue. It was for the Revenue and, therefore, the failure of the assessees to prove that the aforesaid sale deeds did not represent comparable sales was of no avail. It also held that the Revenue had failed to establish that the fair market value of the land exceeded 15% of the considerations stated by the assessees. 9. Feeling aggrieved, the Commissioner of Income-tax unsuccessfully applied to the Tribunal to have the aforesaid question of law arising out of the order of the Tribunal, referred to the High Court for its opinion. The Tribunal, however, declined to make a reference stating that the finding of the tribunal that the Revenue failed to prove that the price received by the assessees did not represent the fair market value of the land was purely a finding of fact. We are afraid, the Tribunal was not justified in refusing to make a reference under section 256 (1) of the Act:. 10. Reading the order of the Appellate Tribunal as a whole, it appears to us that the Tribunal has proceeded on unwarranted conjectures and mere surmises. We are afraid, the Tribunal was not justified in refusing to make a reference under section 256 (1) of the Act:. 10. Reading the order of the Appellate Tribunal as a whole, it appears to us that the Tribunal has proceeded on unwarranted conjectures and mere surmises. The opinion of the Income Tax Officer that the fair market value of the capital assets on the date of transfer, exceeded the full value of the considerations stated by the assessees in respect of the transfer by not less than 15% of the value so declared, was formed on a consideration of all the attendant facts and circumstances. It was not based on any isolated transaction alone. The Income Tax Officer was of the opinion that the sale was deliberately undervalued to escape from the tax on capital gains. In that situation, the full value of the consideration was rightly taken with the approval of the Inspecting Assistant Commissioner of Income Tax, to be the mortgage value for computation of capital gains under section 52(2) of the Act. 11. The order of the Income Tax Officer shows that he took the following circumstance into account viz: (1) The plot was originally purchased by Anand Singh Kachhwaha in the year 1958 in the names of his two sons Yashwantsingh and Mahendra Singh who were minors at that time. The total area of the plot was 4500 sq yards. The actual sale was made on 8 8.1969, but the negotiations for sale were going on between M/s Balkrishna Commercial Co. of Calcutta on the one hand and Kachhwaha Group on the other. In fact, the negotiations were not individual to individual but between group to group. (2) The prices had risen considerably and they were at their optimum in the year 1969, when the plot was sold by the assessee. The rise in price of land for commercial purposes was due to the disturbed conditions in West Bengal in 1968-69. (3) The plots were divided and gifted to close relations on 29/30th July, 1969 i.e. only a couple of days before the sale to M/s Balkrishna Commercial Company of Calcutta. The legal ownership on the day of sale vested in the donees no doubt, but the transaction was between the Kachhwaha Group & M/s Balkrishna Commercial Company of Calcutta. (4) At the time of the sale, the whole plot of 4500 sq. The legal ownership on the day of sale vested in the donees no doubt, but the transaction was between the Kachhwaha Group & M/s Balkrishna Commercial Company of Calcutta. (4) At the time of the sale, the whole plot of 4500 sq. yards was the subject-matter of the sale and not the bifurcated plots as appeared after the gift deeds dated 29/30th July, 1969. (5) The purchaser company converted the whole plot into a commercial one. (6) The assesseee contention that they had no interest in raising construction on the plot and hence sold it out at Jaipur at throw away price was hardly convincing. (7) The fact that a plot of land which lies on M.I. Road connecting Sansarchandra Sen Road with Station Road was purchased in Government auction in January 1969 at the rate of Rs. 160/-. per sq. yard clearly indicated the prevailing rates of land in the near vicinity. On this plot a building named "Kalyan Bhawan" had been constructed. This was a case from which constructed need to be made because the purchase had been made in the Government auction. (8) The instance of mortgage of nearby lard by one Jagdish Prasad of M/s Laxmi Motor Co. in favour of M/s Rajasthan Finance Corporation at the rate of Rs. 150/- per sq. yard in 1967, near the Govt. Hostel and at a distance of 400 yards from the plot which the assessee had sold, shows that its fair market value was much more. The value shown in the mortgage deed at the rate of Rs. 100/- per sq yard did not, in fact, represent the real value, but was only a tentative value of the security. (9) The purchase of a plot of land on MI Road by Mrs. Sonu B. Vyas at Rs. 100/- per sq yard in 1964 shows that the prices had risen considerably. This land was at a distance of 500 yards from the plot which the assessee had sold. The objective determination of the Income Tax Officer as to the applicability of section 52(2) of the Act, was, therefore, based on a consideration, of the material on record which the Tribunal appears to have ignored. There was no basis whatever for the Tribunal to have come to a contrary conclusion. The objective determination of the Income Tax Officer as to the applicability of section 52(2) of the Act, was, therefore, based on a consideration, of the material on record which the Tribunal appears to have ignored. There was no basis whatever for the Tribunal to have come to a contrary conclusion. Mahajan, J., delivering the judgment of the Supreme Court in Dhiraj Lal Girdhari Lal v. Commissioner of Income Tax, Bombay (1954) 26 ITR 736 ) observed: "When a court of facts acts on material, partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arises." These principles have been recently reaffirmed by the Supreme Court in CIT (Central) Calcutta v. Daulatram Rawatmal, (1973) 87 ITR 349 . 12. Learned counsel for the assessees has opposed the application for reference not because that no question of law arises, but on the ground that no reference can be had of the question as framed. According to him, the proper question should have been: "Whether the conclusion arrived at by the Tribunal that the value of the plot in question at the time of sale was not such as was determined by the Income Tax Officer to entitle him to invoke section 52(2) of the Income Tax Act, 1961 ?" We are afraid, it is not the form but the substance which matters. The question as framed by the Commissioner of Income-tax is quite proper. 13. A large number of decisions were cited by the learned counsel for the assessees showing that the question must be expressly raised under section 256(l) of the Act, that the Court cannot go behind the Tribunal's finding of fact, that all questions of fact are for the Tribunal to decide and that a finding based on inference from other facts involves a question of fact vide. India Cements Ltd., v. Commissioner of Income Tax Madras (1966) 60 ITR 52 ; Bombay City, I v. Greaves Cotton and Co. Ltd., (1968) 68 ITR 200 ; Aluminium Corporation of India Ltd v. Commissioner of Income Tax West Bengal, (1972) 86 ITR 11 and CIT Poona v. Manna Ramji and Co., (1972) 86 ITR 29 ) . India Cements Ltd., v. Commissioner of Income Tax Madras (1966) 60 ITR 52 ; Bombay City, I v. Greaves Cotton and Co. Ltd., (1968) 68 ITR 200 ; Aluminium Corporation of India Ltd v. Commissioner of Income Tax West Bengal, (1972) 86 ITR 11 and CIT Poona v. Manna Ramji and Co., (1972) 86 ITR 29 ) . There is no quarrel with any of these propositions. These considerations may arise at the stage when the Tribunal states a case under section 256(2). There can be no doubt that the question whether section 52(2) of the Act applies to the facts and circumstances of the case, is a question of law. The tribunal in its order states that the important question which arises for consideration in the appeals was as to what was the fair market value of the land at the relevant date. Yet the Tribunal has left the question undetermined. The Tribunal acted on mere surmises and conjectures in assuming that the sales relied upon by the Revenue there not comparable sales or that the Income Tax Officer's order was based upon a particular sale which had no relevance. It is a matter of common knowledge that there is a spiral rise in the prices of land rear and accused M.I. Road which is the most important commercial centre of the picturesque city of Jaipur. The land in question though situated on Sansarchandra Sen Road, is in the near vicinity of M.I. Road.The Income Tax Officer had taken several matters into consideration in coming to conclusion that the fair market value of the land in question exceeded more than 15% of the consideration stated. No other conclusion is possible than the one reached. It was preposterous for the Tribunal to think that a plot of land which could be put to commercial use can be had at the rate of Rs. 5/- per sq. ft. in the great city of Jaipur. 14. The applications filed by the Commissioner of Income Tax under section 256 (2) of the Income Tax Act, 1961 are accordingly allowed. The Tribunal is directed to draw up a statement of the case are refer the question formulated above to the High Court for its opinion. There shall to no order as to costs.Application allowed. *******