1972 (9) TMI 10 - SC - Income Tax

Whether Tribunal's finding that the purchase of the shares by the Rana was not a benami transaction was legally valid - Whether Tribunal was justified in deleting the sum of Rs. 10,80,000 from the total income of the assessee by holding that the Rana was not the benamidar of the assessee - Questions are answreeed in favour of the revenue

Summary

Issues Involved:
1. Admissibility of documents as evidence.
2. Legality of the Tribunal's finding on the benami transaction.
3. Justification for deleting the sum of Rs. 10,80,000 from the assessee's total income.

Issue-wise Detailed Analysis:

1. Admissibility of Documents as Evidence:
The Tribunal declined to consider certain documents that the department wanted to adduce as evidence. The High Court confirmed the Tribunal's conclusions, finding no error in the Tribunal's approach.

2. Legality of the Tribunal's Finding on the Benami Transaction:
The Tribunal concluded that the purchase of shares by Rana was not a benami transaction and was legally valid. However, the Supreme Court found that the Tribunal had misread evidence, indulged in conjectures and surmises, and failed to consider relevant material. The Tribunal's reliance on letters from Mr. J.F. Wood, General Manager of the Allahabad Bank, was particularly criticized as these letters were not proved and lacked official records. The Tribunal also failed to account for the improbability of the transactions, such as the absence of any correspondence or broker involvement, and the unexplained presence of share scrips with Ashoka Marketing Ltd. The Supreme Court concluded that the Tribunal's findings were vitiated and that Rana was a mere name-lender.

3. Justification for Deleting the Sum of Rs. 10,80,000 from the Assessee's Total Income:
The Tribunal deleted the sum of Rs. 10,80,000 from the assessee's total income, holding that the Rana was not the benamidar of the assessee. The Supreme Court found that the Tribunal failed to consider the close association between the assessee and Rana, the improbability of the cash transactions, and the lack of evidence of Rana's financial capacity. The Supreme Court concluded that the Rana was a benamidar for the assessee, and the amount of Rs. 10,80,000 was indeed the assessee's income from undisclosed sources.

Conclusion:
The Supreme Court found that the Tribunal had erred in its findings and that the High Court had failed to adequately scrutinize the Tribunal's conclusions. The Supreme Court overturned the Tribunal's decision and held that the amount of Rs. 10,80,000 was the assessee's income from undisclosed sources. The appeal was allowed with costs both in the Supreme Court and the High Court.