G. SANTHANAM, A.M.: These are appeals preferred by Revenue against order of CIT (A) in having cancelled reassessments made under s. 147(a) in respect of asst. yr. 1971-72 and 1972-73 and under s. 147(b) in respect of asst. yr. 1974- 75. As these appeals involved common issues, they are disposed of in consolidated order for sake of convenience. respondent is one Dr. John De Souza, he purchased agricultural lands bearing Survey Nos. 154, 156,166 and 161 together with structure constructed thereon, admeasuring 17 according, 14 guntas situated at Kandlakoi village, Medchal Taluk, Andhra Pradesh, on 20th Aug., 1970 for sum of Rs. 1,00,000 from Sri Jainarayan Misra who wanted money for financing air-conditioning of Sangeet Theatre. purchase was duly registered with registering authority. On very same day, assessee leased out lands to vendor Sri Jainarayan Misra on monthly rent of Rs. 2,000 for period of 5 years and said lease deed was also registered with registering authority. On very same day, assessee entered into agreement with vendor Sri Jainarayan Misra to reconvey property to him on condition that latter pays to assessee Rs. 1,00,000 within 5 years from 20th Aug., 1970, provided there was no arrear of rent to assessee for four consecutive months by due dates at that point of time. first two documents viz. conveyance deed in favour of assessee and lease deed in favour of Sri Jainarayan Misra were submitted to ITO. third document viz. agreement for reconveyance was not produced before ITO. In part IV of return of income, assessee disclosed lease rent claiming same to be exempt as agricultural income. Assessments were duly completed on that basis for all these years. However, for asst. yr. 1974-75, Special audit party observed as follows:- "2(a) To arrive at gross total income assessee offered and ITO included agricultural income at Rs. 22,000 relating to 11 months lease. assessee was entitled under agreement to lease amount of Rs. 2,000 per mensem. What accrued in accounting year to assessee was Rs. 24,000 and not Rs. 22,000. error arose on account of computation of agricultural income on "Receipt Basis". This may be rectified. (B) genuineness of assessee's ownership of Medical land appears to be set free from suspicion though matter appears to have been enquired into in course of 1971-72 IT Assessment. assessee claimed having leased out land to one J.N. Misra from whom he claimed having purchased it for Rs. 1,05,000 by drawing from his Bank accounts. Reference to 76-77 record would show that assessee reconveyed land "as per agreement" back to J.N. Misra at cost. As agricultural income was not at all taxable in 1970 and only partially taxable for 1974-75 assessment, circumstances of case suggest collusion between parties to deed and warrant further probe as to identity and financial background of J.N. Misra etc. As however transaction amounts to conditional sale in nature of mortgage, so called agricultural lease rent of Rs. 2,000 p.m. really represents assessee's interest receipt includible in total income in full. totality of circumstances viewed as whole against background of so-called rent payable in cash monthly without reference to output, poor quality of land and other attendant factors support this view. Short demand (on under-asst. of Rs. 24,000) comes to Rs. 23,460. As result, assessment was reopened under s. 147 (b) for asst. yr. 1974-75. Likewise, assessments for asst. yr. 1971-72 and 1972-73 were reopened under s. 147(a) for reason that agreement to reconvey property to Sri Jainarayan Misra was not brought to notice of ITO at time of completion of original assessments. Another reason for reopening assessments for these two assessment years under s. 147 (a) is that it came to notice of Department that what assessee derived was not agricultural income but amounted to only interest receipt taxable under head "other sources", in view of fact that lands at Kandlakoi village were only under mortgage by conditional sale as provided for in s. 58(c) of Transfer of Property Act. On this reasoning, it was view by Department that so-called lease rent received by assessee was nothing but interest on amount advanced by assessee to Sri Jainarayan Misra. Therefore, ITO took advanced by assessee to Sri Jainarayan Misra. Therefore, ITO took lease rent under head "other sources" whereas claim of assessee was that lease rent is agricultural income. assessee carried matter in appeal to CIT (A) who was of view that no material was suppressed or withheld from Department by assessee. Therefore, reopenment made under s. 147 (a) for asst. yr. 1971-72 and 1972-73 was held invalid. For asst. yr. 1974-75, CIT (A) applied ratio of decision of Supreme Court in Indian and Eastern Newspaper Society vs. CIT (1979) 12 CTR (SC) 190: (1979) 119 ITR 996 (SC) and held that objections of Audit party on point of law could not amount to "information", enabling ITO to initiate reassessment proceedings under s. 147(b) of IT Act. Sri N. Jainarayan, ld. departmental representative submitted that assessee had not brought to notice of ITO fact that there was agreement to recovery property to Sri Jainarayan Misra and, therefore, action under s. 147 (a) in respect of asst. yr. 1971-72 and 1972-73 was justified. For asst. yr. 1974-75, reopenment was under s. 147 (b). It is not as if audit party had directed ITO to reopen assessment on other hand, like any other person, audit party merely informed ITO about making of certain enquiries regarding genuineness of assessee's ownership of lands in said village. Therefore, it cannot be said that ITO acted on direction of audit party on point of law. He submitted that notice transaction beginning with purchase of land from vendor, leasing back same to vendor and ending with executing agreement to recovery said property to vendor at future date was made on same day which would really suggest that assessee had really financed to Sri Jainarayan Misra sum of Rs. 1,00,000 at 20 per cent interest per annum and l l these documents are make-believe one or cloak to cover up real transaction. In reality transaction is mortgage by conditional sale and s. 58(c) of Transfer of Property Act is attracted and alleged lease rent is certainly in nature of interest and therefore taxable under head "other sources". In context, he relied upon decisions of Supreme Court in Bhaiker Waman Joshi & Ors. vs. Narayan Rombilas Agarwal & Ors. 1960 SC 301, and Bhoju Mandal & Ors. vs. Debath Bhagat & Ors. AIR 1963 SC 1906. Therefore, he submitted that order of CIT (A) should be set aside. None appeared for assessee though notices were served. case is decided on merits. After taking into consideration submissions of ld. departmental representative and materials on record, we have no hesitation in upholding order of CIT (A). assessee had brought to notice of ITO fact of purchase of agricultural lands and also fact of leasing back same to vendor. In part IV of return of income, he disclosed lease rent. No doubt, agreement to reconvey property to vendor after period 5 years on certain terms and conditions was not within knowledge of ITO who completed original assessments. It is Department s contention that omission to bring this document to notice of ITO is serious omission of primary fact having a, material bearing on assessment giving rise to cause of action under s. 147(a). In our opinion agreement to reconvey property does not constitute primary fact having material bearing on assessment. It is not each and every omission of certain facts primary or secondary, which is fatal. It is only those primary facts which have bearing on assessment that have to be disclosed to ITO non-disclosure of which would empower taxing authority to initiate reassessment proceedings under s. 147(a). On cursory examination of agreement to reconvey property entered into by assessee and vendor-cum-lessee Sri Jainarayan Misra, it would be clear that is envisaged in agreement is not outright resale to other party on payment of sum of Rs. 1 lakh at expiry of certain period viz., five years. There are further conditions in it, Clause 4 of agreement of reconveyance is as follows: "Notwithstanding provision in cl. 1 above in event of default by second party in tendering and paying amount of Rs. 1,00,000 (Rs. one lakh only) to first party by due date, or in default of second party paying monthly rent of said property under lease deed for any consecutive months by due dates, or be in default of his paying taxes or rates therefor to Government, Corporation or other bodies, then in any of said events, this agreement shall be inoperative and of no effect and shall be void and unenforceable by second party and first party shall not be liable or bound unenforceable by second party and first party shall not be liable or bound to convey said property." It would be evident from above agreement that if contingencies envisaged in aforesaid clause do not arise in future, assessee is bound to reconvey property, otherwise he is not. Besides, in view of specific provisions of s. 58(c) of Transfer of Property Act, we hold that this document does not partake of nature of primary facts to be disclosed to ITO. We also notice that letter dt. 27th Dec., 1982 assessee s advocate Sri Venkatasubramanian had drawn attention of ITO to sale deed dt. 20th Aug, 1970 by virtue of which assessee purchased lands from Sri Jainarayan Misra and also lease deed by virtue of which very same lands were leased back to vendor. He had also enclosed copies of these two documents. He had contended that what assessee received from lessee on monthly basis was agricultural income which is not taxable. He had also eited in support of contention case of K. Simrathmull vs. CIT (1967) 64 I T R 166 (Mad). On basis of these facts original assessments were completed by ITO for asst. yrs. 1971-72, 1972-73 and 1974-75. In fact, these two documents viz, purchase of agricultural land by assessee and leasing back same to vendor, definitely constitute primary facts which should have been disclosed to ITO and as matter of fact these have been disclosed. For contention of assessee that lease income was only in nature of agricultural income, he had relied on decision of Madras High Court cited (supra) Having completed assessments on this basis, we do not find any justification for ITO to revise his opinion on alleged failure of assessee to inform taxing authority about existence of agreement to reconvey said property to vendor Sri Jainarayan Misra. In our opinion this agreement reconvey property to vendor upon fulfillment of certain terms and conditions as adumbrated in said agreement dt. 28th Aug., 1970 does not constitute primary fact non-disclosure of which is fatal to assessee. In fact, Department was informed by audit party on point of law in course of audit for asst. yr. 1974-75. CIT (A) had extracted that part of audit objection in para 10 of his order para 2(b) already extracted in this order and has held that reasons for reopening of assessment as per order-sheet entry exactly tallied with language of audit objection mentioned above. Therefore, he held that reassessment under s. 147(b) for asst. yr. 1974-75 was launched exclusively on basis of above audit objection. Applying ratio of decision of Supreme Court in Indian and Eastern Newspaper Society vs. CIT (1979) 12 CTR (SC) 190: (1979) 119 ITR 996 (SC) he held that opinion of audit party on point of law could not be regarded as information enabling ITO to initiate reassessment proceedings under s. 147(b). Thus, he cancelled reassessment proceedings for asst. yr. 1974-75. We are in complete agreement with him on this. We uphold his order. For earlier assessment years viz., 1971-72 and 1972-73, proposals for reassessment proceedings were sent on 13th July, 1978 and this was after receipt of audit objections, date of audit being 15th Oct., 1977. Therefore, taking into account sequence of dates, we conclude that reassessments for 1971-72 and 1972-73 were triggered off by audit objections, though these audit objections relate to asst. yr. 1974-75. It was because there was no power for ITO to reopen assessment under s. 147(b) in respect of years 1971-72 and 1972-73, proceedings under s. 147(a) were resorted to while for asst. yr. 1974-75, there was ample time for ITO to take proceedings under s. 147(b). Therefore, conclusion is inescapable that audit objections formed basis for these reassessment proceedings. By very nature of audit objections, it will be evident that audit party has given its views on question of law and that cannot be basis for reopenment in ratio of decision of Supreme Court cited (supra). It is necessary for us to examine whether all these documents, viz., sale deed by virtue of which assessee purchased lands, lease deed by virtue of which lands were leased back to vendor on monthly rent of Rs. 2,000, and agreement to reconvey property at future date upon fulfillment of certain conditions would all constitute single transaction of mortgage by conditional sale. We have to examine this aspect of matter in order to find out whether failure to produce any one of these documents order to find out whether failure to produce any one of these documents before taxing authority would amount to suppression of primary facts. Sec. 58(c) of Transfer of Property Act is as follows: "Where mortgagor ostensibly sells this mortgaged property- on condition that on default of payment of mortgage-money on certain date sale shall become absolute, or on condition that on such payment being made sale shall become void, or on condition that on such payment being made buyer shall transfer property to seller, transaction is called mortgage by conditional sale and mortgagee mortgagee by conditional sale, Provided that no such transaction shall be deemed to be mortgage, unless condition is embodied in document which effects or purports to effect sale". proviso to s. 58 (c) is very significant. According to said proviso, unless condition for retransfer is embodied in document which effects or purports to effects sale said document cannot be considered as mortgage by conditional sale. In this context, Sri Santhanam wanted us to lift veil and look into substance of transaction. Certainly in certain situations Courts are empowered to look for substance of transactions. In order to enable us to lift veil, Department must by cogent evidence prove that transaction is really in nature of mortgage with all trappings of ostensible sale and reconveyance. Here again one has to look into provisions of document. This is not case in which property purchased by assessee was simply conveyed back to vendor. This is case in which property initially purchased by assessee was conveyed to some other person at instance of vendor. From perusal of deed of conveyance registered as document No. 129 of 1976 Book 1 Vol. 533 pages 21 to 26 it is found that vendor No- 1 is Jainarayan Misra, vendor No. 2 is assessee and real purchaser is third person by name Smt. Uma Arun Shah wife of Sri Arun Kumar Shah, Hyderabad. purchase consideration was not Rs. 1 lakh as was agreed to in agreement of reconveyance dt. 20th Aug., 1970 but it was Rs. 2 lakh at time of conveyance to said Uma Arun Shah though assessee received only Rs. 1 lakh due to him. In mortgage by conditional sale, normally property is reconveyed to mortgagor. This has not happened in this case, nor has Department brought evidence to show that ultimate purchaser is in any way connected with Sri Jainarayan Misra. In circumstance, how is it possible for us to brush aside realities of life in our endeavour to look into substance of transaction. Therefore we reject contention of Sri Santhanam in this behalf. Another reason for our rejection is that according to s. 58(c) of Transfer of Property Act, unless conditions of reconveyance and other related conditions are embodied in initial sale document it is not possible for us to hold that all three documents referred to by Revenue would constitute mortgage by conditional sale. In this view of matter we hold that there was absolutely no basis for view entertained by audit party that entire transaction is one coming within preview of s. 58(c) of Transfer of Property Act. reassessment induced by such audit objection must fail for want of jurisdiction. We have already indicated that reassessments for asst. yrs. 1971- 7 2 and 1972-73 were in way influenced by audit objections for later year 1974-75 on narrow view of provisions of s. 58(c) of Transfer of Property Act, and on that ground also, proceedings under s. 147 (a) must fail. Besides, in view of specific provisions of s. 58(c) of Transfer of Property Act, we hold that agreement to reconvey property entered into on 23rd Aug., 1970 was not primary fact having material bearing on assessment. Therefore, we uphold order of CIT (A) in having set aside reassessment proceedings under s. 147(a) for asst. yrs. 1971-72 and 1972- 73. Sri Santhanam relied on case of Bhoju Mandal & Ors. vs. Debnath Bhagat & Ors. AIR 1963 SC 1906. This was case concerning transaction done on 2nd Feb., 1924 and at that point of time, proviso to s. 58(c) of Transfer of Property Act was not there in statute. In fact proviso was Transfer of Property Act was not there in statute. In fact proviso was added by Act 20 of 1929 and, therefore, Supreme Court had no occasion to consider effect of transaction in light of proviso which was added subsequently. other case relied on by him viz., Bhaskar Waman Joshi and Ors. vs. Shri Naroyan Rambilas Agarwal and Ors. AIR 1960 SC 301 is not on all fours with case before us. In that case it was observed by Shah, J, as follows: "The proviso to this clause i.e. cl. (c) of s. 38 of Transfer of Property Act was added by Act 20 of 1929. Prior to amendment there was conflict of decisions on question whether condition contained in separate deed could be taken into account in ascertaining whether mortgage was intended by principal deed. legislature resolved this conflict by enacting that transaction shall not be deemed to be mortgage unless condition referred to in clause is embodied in document which effects or purpose to effects sale." Therefore this case also does not come to assistance of Revenue. In result appeals of Department fail and are dismissed. *** INCOME TAX OFFICER v. JOHN DE SOUZA