S.K Jha, J.:— These two references have been made under section 256(1) of the Income-tax Act, 1961 (hereinafter to be referred to as “the Act”), and a case has been stated by the Income-tax Appellate Tribunal, Patna Bench. The following common questions of law with regard to each of the two cases have been referred for opinion to this court:

“Whether, on the facts and in the circumstances of the case,—

(i) the Tribunal was correct in holding that the assessment was to be deemed to be made under section 147(b) of the Income-tax Act, 1961?

(ii) the interest credited to the account of the alleged donees were correctly included in the total income of Sri Jhaverbhai Patel on the ground that the alleged gifts made by him on November 1, 1952, were inchoate and incomplete?

(iii) the Tribunal was correct in coming to the conclusion that the alleged gifts were inchoate and incomplete by the Tribunal in their order dated April 26, 1960, for the assessment year 1954-55?”

2. Tax Case No. 42 of 1969 relates to the assessment year 1958-59, whereas Tax Case No. 23 of 1970 is in respect of the assessment year 1960-61 the assessee being in each of the cases an individual—Shri Jhaverbhai Patel. The corresponding previous years for the aforesaid two assessment years were Diwali, 1957, and Diwali, 1959, respectively.

3. The facts giving rise to these cases are short and simple. The assessee was the partner of a firm, Messrs. J.B and Company, holding eight annas' share in the partnership. One of his sons, Vithalbhai, was also a partner, holding four annas' share. On November 1, 1952, the assessee made three gifts by means of transfer entries in the books of account of the firm aforesaid in the following manner:

(i) Rs. 35,000 being gifted to Shri Bipinchandra Vithalbhai, son of Vithalbhai Patel and grandson of the assessee.

(ii) Rs. 35,000 to Shri Ashok Kumar Vithalbhai, another son of Vithalbhai Patel and grandson of the assessee.

(iii) Rs. 25,000 to Shrimati Savita Ben, wife of Vithalbhai Patel and daughter-in-law of the assessee.

4. The total of these three gifts came to Rs. 95,000. On November 1, 1952, the account books of Messrs. J.B and Co., the extract of which has been marked as annexure “D” to the statement of the case, showed three debit entries regarding the three amounts gifted as aforesaid against the account of Jhaverbhai Patel and the corresponding credit entries in the names of three donees mentioned above. After the gifts were made, interest accruing on the amounts gifted were credited in the accounts of the donees; when a claim for allowance of interest was made for the first time in the assessment year 1954-55, the Income-tax Officer held that the gifts were incomplete. The assessee having preferred appeals before the Appellate Assistant Commissioner of Income-tax and, on failure there, before the Income-tax Appellate Tribunal, the Tribunal, by its order dated April 26, 1960, in respect of the assessment year 1954-55, held that, since no cash had passed on to the donees, the gifts were imperfect and inchoate. The assessee, however, did not pursue the matter further by way of any reference. The assessments in the years 1958-59 and 1960-61, which are the subject-matter of these reference cases, were originally completed in the ordinary course on November 26, 1958, and October 31, 1960, respectively. The Income-tax Officer allowed the interest payments to the donees. Subsequently, however, the Income-tax Officer found that according to the order of the Tribunal dated April 26, 1960, the amounts of interest were actually assessable in the hands of the assessee. So action was initiated under section 147 and the assessee was reassessed under the provision of section 147(a) of the Act in respect of both the years. The total amount of interest in respect of the three donees for the assessment year 1958-59 was Rs. 6,770 and for the assessment year 1960-61, a sum of Rs. 3,647. These sums were accordingly included in the assessable income of the assessee for these two years. The assessee's appeals to the Appellate Assistant Commissioner and the Tribunal failed. The Tribunal held that, since a finding has already been recorded by the Appellate Tribunal in its order dated April 26, 1960, in respect of the assessment year 1954-55, for this very assessee, it was no longer open to the Tribunal to take a different view and feeling bound by the previous decision in respect of an earlier assessment year, the Tribunal dismissed the assessee's appeals. The Tribunal further held that in respect of these two years in question the proper provision of law to be applied would be not section 147(a) but section 147(b) of the Act and, since the proceedings under section 147(b) were not barred by time, the Tribunal treating the reassessments made by the taxing authority below under section 147(a) as being reassessments under section 147(b) rejected the assessee's contention. At the instance of the assessee, the Tribunal has referred these cases:

In its appellate order (annexure “C” to the statement of the case) the Tribunal has taken note of certain facts and features which I may sum up hereinbelow:

(i) The assessee, “according to his own notions and convictions,” made the gifts and considered them as complete when the transfer entries were made in the books of the firm.

(ii) This legal position had not been accepted by the taxing authority which held that the gifts were inchoate and incomplete because no cash had actually passed on to the donees on the date when the gifts were purported to be made.

(iii) Almost all the High Courts in India have upheld the view that such gifts are complete and, therefore, it was a question of difference of opinion only.

(iv) It was not the duty of the assessee to include the interest in his return, “which, in its opinion—and justifiably so—was the income of the donees”.

(v) The donees had withdrawn the gifts and in the previous years gift-tax was levied on the amounts at the time they were withdrawn by the donees.

(vi) This confirmed the Tribunal's view that the assessee was under a bona fide and genuine impression that the gifts had already been made and completed and it was not a case of mere intention to make the gifts.

5. In spite of so many factors having been taken note of, the Tribunal was not well instructed to come to the conclusion that only because it has taken a different view with regard to the inchoate or imperfect nature of the gifts in relation to an earlier assessment year, it could not take a different view despite circumstances favourable to the assessee having come to light since after that decision dated April 26, 1960. On such a view of the nature of the gifts in question the Tribunal, although it held that the failure to include the amounts of interest in the assessee's return would not amount to omission or concealment under section 147(a) of the Act, treated it as a case of escapement of assessment of the income which could be reassessed on the ground of subsequent information having come to the hands of the taxing authority. And, presumably, the Tribunal's previous order in respect of the assessment year 1954-55, which was passed on April 26, 1960, was taken to be the requisite information for holding that the assessee's income assessable to tax had escaped such assessment.

6. Having stated all the relevant facts and points at issue, I think the questions as framed by the Tribunal do not fully bring out the points of law arising out of the order of the Tribunal and I would accordingly reframe the questions as follows:

“1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in coming to the conclusion that the alleged gifts were inchoate and incomplete only on the ground that this question of fact was concluded by an earlier order of the Tribunal dated April 26, 1960, for the assessment year 1954-55?

2. Whether the interest credited to the account of the donees was correctly included in the total income of Shri Jhaverbhai Patel, the assessee, on the ground that the gifts made on November 1, 1952, were incomplete since no cash had passed on to the donees on that day and transference had been made only through book entries?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee was liable to reassessment under section 147(b) of the Income-tax Act, 1961?”

7. From the analysis of facts as noticed by the Tribunal, which I have already recapitulated earlier, it is clear that the Tribunal has felt coerced by its earlier decision on the question regarding the nature of the gifts. There, I must say, the Tribunal was not well instructed in law, for, it is well-settled that the fact that in the earlier proceedings the Tribunal took a different view of the gifts was not a conclusive circumstance, the decision of the Tribunal reached in those proceedings did not and could not, in law, operate as res judicata. Reference in this connection may be made to a decision of the Supreme Court in the case of Commissioner of Income-tax v. Brij Lal Lohia [1972] 84 ITR 273 SC.. Decisions may be multiplied but the principle of law is so well settled that I do not see any necessity for it. I have thus no hesitation in answering the first question as reframed in the negative as it must be held that the Tribunal was not correct in coming to the conclusion that the gifts were inchoate and incomplete only on the ground that this question was concluded by the Tribunal's previous order in relation to the assessment year 1954-55.

8. This then brings us to the next question as to whether the amounts of interest credited to the account of the donees could be treated as being parts of the assessable income of the assessee on the ground that the gifts in question could not be treated as complete merely because no cash had passed on to the donees, the Tribunal has held that there was sufficient justification for the assessee not to include the amounts of interest in his return, for, he had rightly treated it as a case of completed gifts and not a case of mere intention to make the gifts. In view of the fact that the donees had withdrawn the amounts gifted in the previous years and gift-tax was levied on the amounts in the years of withdrawal, it cannot but be said that there was absolutely no material on the basis of which it could be held that the assessee held any domain or control over the amounts transferred to the donees. It is too well settled that in order to complete a gift of cash actual physical delivery of currency notes to the donee is not essential. Where a donor having an account with a third party, for example, the firm in which he is a partner, instructs the firm to debit his account and credit the donee's account and such entries are effected with the consent of the donee, the gift is complete irrespective of the question whether cash has actually been paid to the donee on that date or not. The income thereafter which accrues from such gifted amounts accrues to the donee. The question of delivery is not a sine qua non of the matter, for delivery in such cases is always deemed to be symbolical. What is essential is that there should be sufficient assets in the hands of the third party, namely, the firm, to the credit of the partner, who is making the gifts, to cover such transactions. That position is not in dispute in the instant cases. That being so, the fact that the firm did not have sufficient cash balance on the date of the gifts would not afford any indication of the incapacity of the firm to make such cash payments if so demanded. The question as to how far the possession of the thing gifted can be given physically to the donee must depend upon the nature of the subject-matter of the gift. In the circumstances obtaining in the present cases, the Tribunal has actually, indirectly held that the gifts were given effect to, for, they were subjected to gift-tax as and when the amounts were withdrawn by the donees. On such finding of facts, any inference that, since no such cash had passed on to the donees, no acceptance by the donees can be held to have taken effect, must be held to be perverse. The Judicial Member of the Tribunal holds in his supplementary order that the assessee had not intermeddled with the subject-matter of the gifts. No funds were withdrawn by him nor were any interests received by him. In that view of the matter, the law as settled by the Supreme Court in the cases of Controller of Estate Duty v. C.R Ramachandra Gounder and in Commissioner of Income-tax and Controller of Estate Duty v. N.R Ramarathnam [1973] 91 ITR 1 SC. approving some of the earlier decisions of different High Courts must come into full play regarding the gifts. The case of N.R Ramarathnam arose out of an assessment of estate duty. Section 10 of the Estate Duty Act deals with the matter of gifts made by a deceased whose estate is sought to be taxed. The construction of section 10 which entails the validity of gifts made by the deceased came up for consideration by the Supreme Court and in that case Hegde J., speaking for the court, held that where a person who constituted a partnership with his sons and daughters transferred certain sums from his account in the partnership to the account of his sons and daughters, the sums so transferred could not be deemed to have passed on to the donees on the death of the deceased even though the sums so transferred remained in the partnership business and were utilised for the partnership business. The reasoning of Jaganmohan Reddy J., who spoke for the court, in the case of C.R Ramachandra Gounder was adopted. In Gounder's case their Lordships of the Supreme Court held that in cases of such gifts the donor retains no benefit or interest in the property gifted, Even though some benefit may indirectly accrue to the donor after the gift was given effect to by making entries in the firm's books of account, such a benefit accrued to the person concerned not qua donor but by virtue of his being a partner in the firm and the benefit, therefore, was not referable to his own property but to the firms property. It is thus obvious that on the facts discussed by the Tribunal the only irresistible conclusion that can be arrived at was that the gifts made by the assessee to his two grandsons and daughter-in-law by directing the firm to debit the amounts so gifted to the assessee's account and credit the same to the corresponding account of the three donees which the firm did on November 1, 1952, were fully effective as thereafter interests were also entered to their credit. The donees had subsequently withdrawn from their credit the amount with the firm. In such circumstances, merely because the cash had not passed on to the donees on the date the gifts were purported to be made will not in any way detract either from the validity or from the perfection of the gifts in question. On the facts and in the circumstances detailed above the Tribunal was not justified in holding that the gifts were imperfect and remained inchoate on November 1, 1952. The second question as reframed must, therefore, also be answered in favour of the assessee and against the revenue.

9. Since I have already held that the Tribunal was not correct in holding that the gifts were inchoate and incomplete either on the ground that the point was concluded by an earlier order dated April 21, 1960, passed by the Tribunal in relation to the assessment year 1954-55 or even on merits, the third question must, as a necessary corollary, be answered in favour of the assessee. Section 147 of the Act deals with income escaping assessment. It is absolutely immaterial whether section 147(a) or section 147(b) could be said to be applicable to the facts of the present case, for, none of the two clauses of section 147 would apply to a case where no income has escaped assessment. As I have already held above, this is not a case of escapement of assessment of any income. As such, the assessee was not liable to reassessment even under section 147(b) of the Act. It is not necessary to go into the question as to whether the original proceeding having been initiated under section 147(a), the Tribunal could legally convert it into a proceeding under section 147(b).

10. In the result, therefore, all the questions as reframed are answered in the negative, in favour of the assessee and against the department and it is held that the assessee was not liable to any reassessment under section 147(b) of the Act. The assessee shall be entitled to the costs of these references. A consolidated hearing fee of Rs. 150 is assessed.

S.N.P Singh, C.J:— I agree.