1974 (5) TMI 23 - HC - Income Tax

Summary

Issues Involved:
1. Material on record for the Appellate Tribunal's finding regarding the sum of Rs. 12,000 received by the assessee's wife.
2. Material on which the Appellate Tribunal could hold that Rs. 12,000 of the Rs. 20,000 cost price of the property was provided by the assessee and the assessability of three-fifths of the income from the property under section 64(iii) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Material on Record for the Appellate Tribunal's Finding Regarding Rs. 12,000:
The Tribunal found that the amount of Rs. 12,000 received by the assessee's wife was paid by her father as consideration for the assessee discontinuing the use of the name "Baluja" for his shoe business. This finding was based on the evidence including affidavits from the assessee's father-in-law, his sons, and the assessee's wife, as well as the cross-examination of the assessee's wife. The Tribunal did not disbelieve this evidence but inferred that the amount was received by the wife on account of the assessee, hence the title to this amount vested in the assessee. However, the court noted that the Tribunal misunderstood the statutory language of section 64(iii) of the Act. The evidence showed a connection between the payment and the discontinuance of the name "Baluja," but did not support that the consideration proceeded from the assessee or that the title vested with him. The payment was part of a family arrangement and not an indirect transfer by the assessee to his wife.

2. Material on Which the Appellate Tribunal Could Hold Rs. 12,000 as Provided by the Assessee and Assessability Under Section 64(iii):
The Tribunal's assessment that Rs. 12,000 of the Rs. 20,000 cost price of the property was provided by the assessee was based on the deposit of this amount in the assessee's bank account and its subsequent investment in his name. The Tribunal also noted that the lease deed was executed in the assessee's name and the rent was credited to his account, suggesting the property was purchased benami. However, the court clarified that section 64(iii) applies to real transactions and not to sham or nominal ones. The Tribunal's approach was erroneous as it examined the material from the standpoint of a benami transaction rather than a genuine transfer. The evidence did not justify the inference that the amount belonged to the assessee. The deposit and investment of the amount in the assessee's name were consistent with the ownership remaining with the wife, especially considering the close relationship between the parties. The Tribunal's findings were based on an erroneous construction of section 64(iii), inconsistent with relevant evidence, partly on irrelevant evidence, and on conjectures and surmises.

Conclusion:
The court concluded that the Tribunal's findings were vitiated by misunderstanding the statutory language and relying on irrelevant evidence. Both questions referred to the court were answered in the negative, in favor of the assessee and against the revenue. The assessee was entitled to the costs of the proceedings with counsel's fee fixed at Rs. 250.