1996 (2) TMI 116 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was justified in finding that the assessee was only a benamidar and the real owners of the shares were the assessee's father, mother, and brother.
2. Whether the Tribunal was justified in holding that the assessee's declaration of the shares in his wealth-tax return did not contradict his claim of benami ownership.

Detailed Analysis:

Issue 1: Benamidar and Real Ownership of Shares

The Tribunal found that the assessee acted as a benamidar for his father, mother, and brother concerning the shares in Kanthimathy Plantations. The assessee contended that his relatives wanted to purchase the shares but lacked the funds, so he bought them on their behalf, holding the shares temporarily until they could reimburse him. The Tribunal accepted this contention, concluding that the real owners were the relatives and not the assessee, thus negating the application of section 4(1) of the Gift-tax Act.

However, the High Court found that this conclusion was based on a misdirection of law and unsupported by material evidence. The Tribunal's assertion that the lower authorities did not dispute the assessee's submissions was incorrect. Both the assessing authority and the first appellate authority rejected the assessee's claim, citing the lack of evidence for any understanding or arrangement regarding the shares. The High Court emphasized that the Tribunal's findings rested on mere surmises and conjectures, and there was no material to support the claim of benami purchase.

Issue 2: Wealth-tax Return and Misconception of Law

The Tribunal held that the assessee's inclusion of the shares in his wealth-tax return for the assessment year 1978-79 was not a militating factor against his claim of benami ownership, attributing it to a misconception of law. The High Court disagreed, noting that the assessee's actions were inconsistent and contradictory. The declaration of the shares as his own in the wealth-tax return contradicted his claim of benami ownership, suggesting that the assessee's story was an afterthought.

The High Court also addressed the argument that the transfer of shares at cost price constituted adequate consideration under section 4(1)(a) of the Gift-tax Act. The court rejected this argument, reiterating the lack of evidence for any understanding or agreement to transfer the shares at cost price.

Conclusion and Judgment:

The High Court concluded that the Tribunal's findings were not based on material evidence and were the result of a misdirection in law. The court held that the transaction was liable to be dealt with under section 4(1)(a) of the Gift-tax Act. Consequently, the orders of the assessing authority and the first appellate authority were upheld, and the Tribunal's decision was overturned. The two questions referred to the High Court were answered in favor of the Revenue and against the assessee.

The High Court also denied the request for a remand to the Tribunal for further consideration, stating that the available materials were insufficient to support the assessee's case and that a remand would not allow the assessee to improve his position.

Final Order:

The High Court directed that a copy of the judgment be sent to the Income-tax Appellate Tribunal, Cochin Bench, for passing consequential orders, affirming the decisions of the assessing authority and the first appellate authority.