M. N. CHANDURKAR C.J.

The two questions which are the subject-matter of these two references, one under section 26(1) of the Gift-tax Act, 1958 (T.C. No. 186 of 1979) and the other under section 256(1) of the Income-tax Act, 1961 (T.C. No. 141 of 1978) arise out of the same set of facts. One Sri Ranga Konar, who was the paternal grandfather of the assessee, executed a will of his property on September 11, 1930, by which he bequeathed his property to five of his sons. After the death of Sri Ranga Konar, the five sons, experiencing some difficulty in partitioning the property according to the will, decided to ignore the will and effected partition by a duly drawn up partition deed dated December 3, 1934. As a result of the partition, Chinna Venkatachala Konar, one of the sons of the deceased, Sri Ranga Konar, received some property in respect of which he executed a will on March 11, 1938, bequeathing his property to his wife and daughter, Smt. Ponnammal, the assessee. Chinna Venkatachala Konar died on March 31, 1955, leaving behind the two legatees, namely, the widow and the daughter. There were some disputes raised by the brothers of the deceased, Chinna Venkatachala Konar, with regard to the property bequeathed by him by the will. They claimed that Chinna Venkatachala Konar had no right to make a will in respect of the property which he got at the partition. The dispute which became the subject-matter of a suit, O. S. No. 294 of 1962 in the Court of the Subordinate judge, Coimbatore, filed by the brothers of the deceased, Chinna Venkatachala Konar, finally came to an end by the decision of the Supreme Court on February 6, 1964, and it was held that Chinna Venkatachala Konar had obtained the property absolutely and was entitled to bequeath the property in favour of his wife and daughter Disputes arose with regard to the property which the assessee received as a result of the will of her father, Chinna Venkatachala Konar. While the assessee claimed absolute title over the property, her sons and daughters claimed that the since the assessee's father had died before the Hindu Succession Act, 1956, came into force, the assessee was entitled only to a limited estate while the assessee claimed that she was the absolute owner of the property which came to her by the will of her father. These rival claims were settled by a family arrangement incorporated in a duly registered document dated December 17, 1971. The family arrangement was made not only in respect of the property which came to the assessee from her father, but also in respect of the property left behind by the husband of the assessee to which she and her sons and daughters were entitled. As a result of this family arrangement, the assessee was given property worth Rs. 1, 00, 000 and the rest of the property was divided between the two sons and the two daughters. One son was a minor at the time when the family arrangement was entered intoThe Income-tax Officer, who was also exercising powers as the Gift-tax Officer, took the view that the family arrangement had resulted in transfer of property as contemplated by section 2 (xxiv) of the Gift-tax Act, and was, therefore, liable to be treated as a gift for purposes of section 4(1)(a) and section 4(2) of the Gift-tax Act. He, therefore, proceeded to make an asessment order and found that there was a transfer of property which was in the nature of a gift as contemplated by the Gift-tax Act, inasmuch as by the family arrangement, the assessee had relinquished her title over some of her absolute properties.

This order of the Gift-tax Officer was set aside by the appellate authority. The Revenue took the matter on appeal to the Income-tax Appellate Tribunal. The Tribunal recorded a finding that a situation of a possible dispute or at least an, apprehension in the mind of the assessee of a possible dispute and disharmony in the family regarding the properties bequeathed to her under the will was created as a result of the c