1977 (6) TMI 65 - AT - Income Tax

Summary

Issues Involved:
1. Determination of the real ownership of the property.
2. Validity of the investments made by the wives.
3. Inclusion of property income in the assessment of the husbands.
4. Evaluation of unexplained investments in the property.

Detailed Analysis:

1. Determination of the Real Ownership of the Property:
The primary issue was whether the properties registered in the names of Smt. Bhagwati Devi Jalan and Smt. Gita Devi Jalan were genuinely owned by them or were benami properties held for their husbands, Shri Bhagwati Prasad Jalan and Shri Ganesh Prasad Jalan. The Income-tax Officer (ITO) argued that the wives were mere benamidars, with the real owners being their husbands, based on the financial incapacity of the wives and discrepancies in their statements. The ITO pointed out that the wives had no independent sources of income and the funds for the property purchase and construction were withdrawn from the firm where the husbands were partners.

2. Validity of the Investments Made by the Wives:
The ITO questioned the source of the funds used by the wives for purchasing the plot and constructing the building. The wives claimed that the funds were withdrawn from their accounts in the firm and included gifts and disclosed amounts under the Voluntary Disclosure Scheme. The ITO found discrepancies in their statements and doubted the credibility of the claimed sources, especially the gifts and disclosed amounts. The Appellate Assistant Commissioner (AAC), however, found that the ITO had not brought any conclusive evidence to prove that the funds belonged to the husbands and noted that the firm's accounts had not been disputed by the department.

3. Inclusion of Property Income in the Assessment of the Husbands:
The ITO included half of the property income in the hands of each husband, arguing that the property was used and managed by them. The AAC, however, held that the ITO had not conclusively proved that the property was benami and thus excluded the property income from the assessments of the husbands. The AAC emphasized that the apparent ownership by the wives should be accepted unless disproved by substantial evidence, which the ITO failed to provide.

4. Evaluation of Unexplained Investments in the Property:
The ITO estimated the cost of construction to be higher than what was shown in the books and included the difference as unexplained investment in the assessments of the husbands. The AAC agreed with the ITO's estimated cost but held that the difference could not be added to the husbands' assessments as there was no material evidence showing that the husbands provided the additional funds. The AAC pointed out that the unexplained investment should not be considered in the hands of the husbands without concrete proof.

Conclusion:
The Tribunal upheld the AAC's decision, agreeing that the ITO had not provided sufficient evidence to prove that the properties were benami and that the investments came from the husbands. The Tribunal emphasized that the burden of proof was on the department to establish the benami nature of the transactions, which was not discharged. Consequently, the income from the property and the unexplained investments were excluded from the assessments of the husbands. The departmental appeals were dismissed, and the cross-objections filed by the assessee, which merely supported the AAC's orders, were also dismissed.