ORDER
CHANDER SINGH, A.M. :
These five appeals by two different assessees for asst. yrs. 1982-83, 1983-84, 1986-87, 1987-88 and 1988-89 rotate round the same issue and are, therefore, disposed of by a common order. The brief facts of the case are as under.
2. The appellants are two different firms which took contracts in earth works and dam works at Boggulavagu in Karimnagar District, Yeleswaram in East Godavari District and Kothur in Chddapah District of Andhra Pradesh and some contracts were also undertaken in the State of Madhya Pradesh. The contract works at Boggulavagu and Yeleswaram were given by the appellants to sub-contractors on a royalty of 1% of the gross bills. The main contention of the appellants is against rejection of the appellants claim that they had given the works at Boggulavagu and Yeleswaram to sub-contractors on royalty of 1% of the gross bills. This claim was rejected by the Assessing Officer and the income of the sub-contractors was assessed in the hands of the appellants. In other words, the sub-contractors were treated by the Assessing Officer as benamidars of the appellants. The Assessing Officer was of the view that this arrangement was entered into by the appellants with a view to reduce the incidence of taxation. The Assessing Officer was also of the view that the entire profit of the contract works at Boggulavagu and Yeleswaram belongs to the appellants. This finding of the Assessing Officer was based on books of account, documents and other materials seized from one Sri A. Suryanarayana on 27th July, 1984 from Room No. 51, Tajmahal Hotel, Abids Road, Hyderabad. The said room in the hotel was registered in the name of Sri A. Suryanarayana. On the basis of the books of account, documents and other materials seized, the Assessing Officer came to the conclusion that these books of account, though maintained in the name of sub-contractors, in fact belonged to the appellants. He accordingly made various additions in the case of the appellants.
3. In the case of M/s. Prasad & Co., the present appeal is against the assessment for asst. yr. 1982-83. The assessment for the said year was originally completed by the Assessing Officer on 17th March, 1983 under S. 143(1). The ITO, however, took recourse to S. 147 and he made the reassessment on 30th March, 1990. The said assessment was set aside by the CIT(A) against which the appellant has come up before us.
4. In the case of M/s. Prasad Construction & Co., the issue is the same. The genuineness or otherwise of the sub-contractor firms is in dispute. In this case, for asst. yr. 1983-84, the assessment was originally completed under S. 143(1) on 31st March, 1984. However, the Assessing Officer took recourse to S. 147 and issued notice under S. 148 on 27th March, 1989. The assessment was reopened as a consequence to search and seizure under S. 132 at the hotel room occupied by Sri A. Suryanarayana. For asst. yrs. 1986-87, 1987-88 and 1988-89, the Assessing Officer had completed the assessments under S. 143(3) respectively on 23rd March, 1989, 24th Nov., 1989 and 19th Jan., 1990. In all these assessments, the Assessing Officer had followed the reassessment order passed for asst. yr. 1983-84. These orders of the Assessing Officer were also set aside by the first appellate authority.
5. While setting aside the orders of the Assessing Officer, the CIT(A) had mentioned :
“I do not agree with the plea of the Counsel for the appellant. Firstly, the learned Members of the Tribunal have deleted the additions made on the evidence available in the seized books, on technical grounds. The Department should now once again find to fill up the gaps that have been omitted by the Assessing Officer at the time of making the assessment in the case of the appellant viz. M/s. Prasad Constructions & Co. I am of the opinion that the various points mentioned above by the learned Members of the Tribunal can be overcome if further investigation is made. Therefore, I direct the Assessing Officer to make the following investigation as mentioned below :
… … … …”
Accordingly, the CIT(A) set aside the assessments and directed the Assessing Officer to re-do the same de novo. The CIT(A) did not follow the order of the Tribunal in ITA Nos. 1076/Hyd/1988, 523/Hyd/1989 and 279/Hyd/1990 dt. 30th July, 1991 in appellants own cases. Though the matter adjudicated by the Tribunal is identical, yet, the CIT(A), without following the said order, issued certain directions to the Assessing Officer to re-examine the issue afresh.
6. The appellants are aggrieved. The learned counsel for the appellants, Sri A. Satyanarayana, attended and argued that the CIT(A) erred in setting aside the assessments to be re-done de novo by investigating the case in the manner suggested by the CIT(A). Instead, he should have followed the order of the Tribunal which squarely covers the issue, and should have deleted the additions made by the Assessing Officer. The CIT(A) further erred in not following the findings of the Tribunal in appellants own case on the same facts for asst. yr. 1983-84 to the effect that the appellant had nothing to do with the books seized from Sri A. Suryanarayana, that the appellant had given away the contract on sub-lease, to the sub-contractors separately and that the appellant had earned only 1% royalty from the sub-contractors on the gross bills receipts. In the opinion of the learned counsel, the CIT(A) is bound by the findings of the Tribunal which is the final fact-finding authority under the IT Act and the decision of the CIT(A) in setting aside the assessments for further investigation on the same facts would be tantamount to violation of judicial discipline. The learned counsel has also drawn our attention to the finding of the CIT(A) in para 5(ii) of his order which reads as under :
“From the facts of the case it looks as though Sri A. Suryanarayana is also the GPA holder of the various sub-contractor firms. From the method adopted by Sri A. Suryanarayana, it is clear that he has purchased the right to execute the contract from M/s. Prasad & Co. and M/s. Prasad Constructions by paying a royalty of 1% and in turn executed the contracts through the alleged sub-contractor concerns to distribute the profits earned by him in the various sub-contractors firms. This possibility has not been investigated by the Assessing Officer;”
The observations of the CIT(A), he urges, clearly demonstrate that Sri A. Suryanarayana was only a GPA-holder of the various sub-contractor firms and the appellants got the contracts executed through him on the receipt of royalty at the rate of 1%. The order of the CIT(A) in setting aside the orders of the Assessing Officer, therefore, goes against his own finding.
7. The learned counsel continues and urges that the CIT(A) erred in observing that the Tribunal deleted the additions on technical grounds and that the Department should now once again try to fill up the gaps that have been omitted by the Assessing Officer at the time of making the assessments. The CIT(A) failed to note that the Tribunal did not delete the additions on technical grounds but the said decision was rendered by the Tribunal on appreciation of evidence on record which established beyond any shadow of doubt that the assessee did not work the contracts himself but got them executed by the sub-contractor firms with which Sri A. Suryanarayana was connected.
8. It is also argued that the CIT(A) ought to have noted that the genuineness of the sub-contractor firms was accepted by the Department, not merely because the Department made assessments on them on the basis of their income-tax returns, but also on the basis of other evidence on record, viz., statements of Sri A. Suryanarayana, statements of other GPA-holders of the assessee-firms in respect of other contracts, constitution of the sub-contractor firms, books of account of the sub-contractor firms, receipt of bills amounts by them less royalty due to the assessee-firms, etc., and there was no evidence whatsoever on record to indicate that the sub-contractor firms were bogus and put up as a front for the appellants. He also points out that the appeals in the case of the sub-contractor firms came up for decision before the Tribunal. The Tribunal, following its decision in the case of Prasad & Co., and Prasad Construction & Co., vide its order dt. 30th July, 1991, held that the sub-contractor firms were genuine. In this regard, the order of the Tribunal in ITA Nos. 2778, 2780 & 2783/Hyd/1988 and 2779, 2781 & 2782/Hyd/1988, dt. 31st Dec., 1991, has been placed before us for our consideration. In the said appellate order, the sub-contractor firms were held to be genuine firms and doing the business on their own without having any connection with the appellants before us. On these facts, the CIT(A) was not legally correct in setting aside the assessments and directing the Assessing Officer to do further investigation to displace the findings of the Tribunal arrived at on the basis of evidence on record which was considered and discussed by the Assessing Officer in his assessment orders. The learned counsel, therefore, concludes that the orders of the CIT(A) are without any justification and should be vacated.
9. On the other hand, the learned Senior Departmental Representative, Smt. K. Mythili Rani, strongly supported the orders of the CIT(A) and contended that it is within the power of the CIT(A) to direct the Assessing Officer to investigate the case further and plug certain loopholes which the Assessing Officer had left at the time of completion of the original assessments. The Assessing Officer is also legally empowered to investigate the case further and find out whether the sub-contractor firms were in fact genuine or merely benamidars of the assessees. The CIT(A) has acted within his powers which should not be questioned by the appellants. She, therefore, prays that the orders of the CIT(A) should be upheld.
10. We have heard the parties to the dispute. The identical issue had been examined by us in the case of Prasad & Co. and Prasad Construction & Co., in our order dt. 30th July, 1991 which is placed at pages 32 to 41 of the material papers. On identical facts we have given a finding that the sub-contractor firms were independent and had no connection with the appellant-firms. We feel it essential to reproduce our finding on this issue :
“We have heard rival submissions in the light of material placed before us. We have also gone through the paper books and other relevant documents and material filed at the time of hearing. There is no dispute that Shri Suryanarayana Raju was holding general power of attorney on behalf of the assessee-firms. We have also gone through the depositions and statements recorded in course of the inquiry. It transpires from the perusal of the same that they belong to Shri Suryanarayana Raju. There was no dispute that the books of the assessee-firms of the sub-contractors were written by the same person. The person was stated to be Shri P. V. Rangaiah, who was initially with the assessee-firm but resigned and joined Shri Suryanarayana Raju in September, 1983. This fact was also not disputed. Shri A. Suryanarayana Raju categorically stated that the assessee-firms did not execute any part of the works of Boggulavagu and Yeleswaram Projects and they were executed by various sub-contractors and they were given only 1 per cent royalty. All the sub-contractor firms were assessed to income-tax and their genuineness was accepted by the Revenue authorities. In regard to the production of basic records, we have noted that basic record for 1985-86 and 1986-87 as submitted by Shri A. Suryanarayana Raju was stated to be lost along with the earlier years records in floods which occurred in October, 1983. (Paper Book A-138). R-24 of the seized material shows the existence of sub-contractors. We have also noticed that investment has been accepted by the Department in the hands of the sub-contractor. Now, what the Department has sought to assess is only the profit earned by the firm. Department has also not proved the beneficial ownership. There is no evidence to show that the profits earned by the sub-contractor has come to the appellant as such. The ordinary rule is that the apparent state of affairs is real unless the contrary is proved. Onus probandi apropos the transaction said to have been sham is on those who assert it. This is in consonance with the well known dictum incumbit probatio qui dicit, non qui negat. It means burden lies upon one who alleges not upon one who deny. The burden of showing that a particular transaction is benami and owner is not the real owner always rests on the person asserting it to be so, and this burden has to be strictly discharged by adducing legal evidence of a defence character which would either directly prove the fact of benami or establish circumstances unravelling and reasonably raising an inference of that fact. The essence of benami is the intention of the parties. Such intention is shrouded in a thick steel which cannot be easily pierced through. But such difficulties do not release the person asserting the transaction to be benami of the serious onus that rests on him, nor justify the acceptance of mere conjectures or surmises as a substitute for proof. It is not enough merely to show circumstances which might create suspicion because judicial body cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. Since the books were found in the possession of Shri Suryanarayana Raju, his statement in regard to the same is most relevant. He categorically denied association of the assessee-firm with the books impounded. The mere fact that books were written by the same person is not a material aliunde to which it could be concluded that there exist a nexus. Besides, it is also pertinent to note that statement of assessee-firms that Shri Rangaiah, accountant left the job and joined Shri Suryanarayana Raju was not disputed by the Department. In these circumstances, the statement of the assessee appears to be plausible. The involvement of Shri Suryanarayana Raju with the affairs of the firms was not denied by the assessee-firm. He was holding general power of attorney and was looking after the interest of the firm. Shri Suryanarayana Raju also stated that I execute the work on 1 per cent royalty basis. The royalty is given to the main firm and they do not have to do anything for him. He also admitted that he was a partner in sub-contractor firms, including M/s. Madhura Meenakshi Constructions. Having regard to the facts and circumstances of the case, we are of the opinion that the Department has failed to prove that sub-contractor firms were not genuine and books found in the possession of Shri Suryanarayana Raju have got any nexus with the accounts of the assessee-firms. In view of this, assessment made on the basis of those books in contrary to the canons of law. We, therefore direct the Assessing Officer to delete the additions made on the basis of seized books.”
From the above, it is clear that the issue in the present appeals is squarely covered by our decision which we respectfully follow.
11. Judicial propriety demands that the order of the Tribunal should not only be respected but it should be followed by a lower authority. If the authority subordinate to the Tribunal is allowed to pick up holes, gaps or some infirmities or is of the view that different line of thinking is possible, then there will be a judicial chaos and there will not be any finality to litigation. This process, if permitted, will lead to unnecessary harassment to the taxpayer which is not envisaged by the statute. A careful reading of order of the CIT(A) shows that his directions to the Assessing Officer are to “fill up the gaps” and to “overcome” the decision of the Tribunal. This, in our view, is not permitted by law. In our considered opinion, the CIT(A) is duty-bound to follow the decision of the Tribunal. This issue has been settled by the apex Court in the case of Union of India vs. Kamalakshi Finance Corpn. Ltd. (1991) 55 ELT 433 (SC). Since the decision of the Supreme Court is not reported in ITR, we reproduce the required portion of it :
“The learned Additional Solicitor-General submits that the learned Judges have erred in passing severe strictures [(1990) 47 ELT 231 (Bom)] against the two Asstt. Collectors who had dealt with the matter. He submitted that these officers had given reasons for classifying the goods under Heading 39.19 and not 85.46 and could do no more. He submitted that they acted bona fide in the interest of revenue in not accepting a claim which, they felt, was not tenable. Sri Reddy is perhaps right in saying that the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted, the revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusion or of any factual mala fides but with the fact that the officers, in reaching their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (A) and the other of the Tribunal. The High Court has, in our view, rightly criticised this conduct of the Asstt. Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate heirarchy. The impression or anxiety of the Asstt. Collector that, if he accepted the assessees contention, the Department would lose revenue and would also have no remedy to have the matter rectified is also incorrect. Sec. 35E confers adequate powers on the Department in this regard. In the light of these amended provisions, there can be no justification for any Asstt. Collector or Collector refusing to follow the order of the Appellate Collector or the Appellate Tribunal, as the case may be, even where he may have some reservations on its correctness. He has to follow the order of the higher appellate authority. This may instantly cause some prejudice to the Revenue but the remedy is also in the hands of the same officer. He has only to bring the matter to the notice of the Board or the Collector so as to enable appropriate proceedings being taken under S. 35E(1) or (2) to keep the interests of the Department alive. If the officers view is the correct one, it will no doubt be finally upheld and the Revenue will get the duty, though after some delay which such procedure would entail. It is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matter which, if allowed to become widespread, could result in considerable harassment to the assessee-public without any benefit to the Revenue. We would like to say that the Department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them.”
In view of the decision of the Supreme Court (supra), it is settled that the decision of a higher authority is binding on a lower authority in the judicial heirarchy. The CIT(A) is, therefore, bound by the decision of the Tribunal. He should have followed the Tribunals decision and should not have set aside the assessment orders of the Assessing Officer with a direction to make certain investigations.
12. We may, however, mention that under the IT Act, the Assessing Officer is not precluded from making further investigation. However, he has to make the investigation, if required, by reopening the assessment under S. 147 if he is of the view that income chargeable to tax had escaped assessment. If he has material to legally invoke the provisions of S. 147, then there is no bar for him to investigate the matter further. But, when a decision has been rendered by the Tribunal on identical facts, the first appellate authority or the Assessing Officer is bound to follow it and cannot fill up the gaps or overcome the decision of the Tribunal by further investigation. The remedy for the Department perhaps lies elsewhere by a reference application against the order of the Tribunal.
13. On the facts of the case, therefore, we are of the view that the decision of the Tribunal is binding on the Revenue authorities which they should scrupulously follow. We, therefore, vacate the orders of the CIT(A). Consequently, the additions made by the Assessing Officer do not survive and, as such, stand deleted.
14. In the result, the appeals are allowed.