1970 (12) TMI 12 - HC - Income Tax

Benami transaction - income from properties which are in name of wife which were bought with moneys given by the husband - whether such property belongs to husbands family and whether income from such property can be included in income of family

Issues Involved:
1. Ownership of properties and assets in the name of Shrimati Surajbai.
2. Inclusion of income accrued to or received by Surajbai Daga in the assessee family's total income.

Detailed Analysis:

Issue 1: Ownership of Properties and Assets in the Name of Shrimati Surajbai

The primary question was whether the properties and assets standing in the name of Shrimati Surajbai belonged to the assessee family. The court examined the explanations provided by the assessee, a Hindu undivided family (HUF) represented by its karta, Ramnath Daga, regarding the sources of funds used for these properties and assets.

The assessee claimed that the funds were gifts from the karta to his wife, Surajbai, accumulated over several years from various sources including withdrawals from a firm, gifts from her parents, and savings from household expenses. However, the Income-tax Officer and the Tribunal found these explanations unsatisfactory due to a lack of concrete evidence, such as account books or records of gifts and savings. The Tribunal noted that the explanations were vague and inconsistent, and there was no reliable evidence to support the claim that Surajbai had her own funds.

The court agreed with the Tribunal's view that the explanations provided by the assessee were improbable and lacked sufficient evidence. It was concluded that the properties and assets, including a house at Ganganagar, bank deposits, and shares, were acquired from undisclosed income of the assessee family and not from Surajbai's independent funds.

Issue 2: Inclusion of Income Accrued to or Received by Surajbai Daga in the Assessee Family's Total Income

The second question was whether the Tribunal was right in including the income accrued to or received by Surajbai Daga in the assessee family's total income. The court had to determine if the income from the properties and assets standing in Surajbai's name should be taxed as part of the HUF's income.

For the amount of Rs. 2,00,000, the court found that there was material on record to hold that the properties and assets acquired or invested out of this amount belonged to the assessee family. Consequently, the income arising from these properties and investments was rightly included in the assessee family's total income.

However, regarding the amount of Rs. 1,50,000 used to purchase a house at Nagpur, the court found that this amount was transferred from the karta's capital account as a gift to Surajbai. The court noted that the transaction was recorded in the assessee's account books, and the remaining balance after the purchase was handed over to Surajbai. The court concluded that this amount was genuinely gifted to Surajbai and the house at Nagpur was her property, not a benami transaction for the assessee family. Therefore, the income from the Nagpur property should not be included in the assessee family's total income.

Conclusion:

Answer to Question 1: There is material on record to hold that the properties and assets standing in the name of Surajbai, acquired or invested out of the amount of Rs. 2,00,000, belonged to the assessee family. However, there is no material on record to hold that the Nagpur property standing in the name of Surajbai belonged to the assessee family.

Answer to Question 2: The Tribunal was right in including the income that accrued to or arose in the name of Surajbai Daga out of the property acquired or investments made out of the amount of Rs. 2,00,000. However, the Tribunal was not right in including the income that accrued to or arose in the name of Surajbai Daga out of the Nagpur property standing in her name.

Costs: Since the success is divided, the parties will bear their own costs.

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