1972 (9) TMI 41 - HC - Income Tax

Real owner of deposits and shares - When there is evidence to show that deposits and shares in the name of assessee s wife were actually belonging to the wife - Whether interest and dividend from these assets can be included in the husband s assessment - Suffice it for us to say that the evidence on record did not establish that either the purchase in the name of the minor of the lands or the deposit of Rs. 25,000 in the name of Laxmi Ammal was benami for the assessee. As this sum of Rs. 25,000 formed the source for the purchase of shares and the other deposit which yielded the dividends and interest, the income therefrom is not liable to be included in the assessee s income.

Issues Involved:
1. Justification of additions to the income returned by the assessee.
2. Inclusion of dividends and interest credited to the account of the assessee's wife in the assessee's income.
3. Validity of the reference under section 66(1) or section 66(2) of the Indian Income-tax Act, 1922.

Detailed Analysis:

1. Justification of Additions to the Income Returned by the Assessee:
Questions Involved: 1, 3, 6

The Income-tax Officer (ITO) considered the personal expense drawings of the assessee for the assessment years 1950-51, 1952-53, and 1953-54 as too low given the assessee's status and standard of living. The ITO estimated that the assessee's personal expenses should have been Rs. 12,000 per year, leading to an addition of Rs. 10,000 for 1950-51 and 1952-53, and Rs. 8,000 for 1953-54. The Tribunal, considering the possibility of savings from agricultural income, provided relief by reducing these additions to Rs. 5,000 for 1950-51 and 1952-53, and Rs. 3,000 for 1953-54.

The High Court upheld the Tribunal's decision, stating, "We are of opinion that the addition to the income returned on the basis of a finding that the assessee must have made some amount towards his personal expenses from undisclosed income was justified on the materials."

2. Inclusion of Dividends and Interest Credited to the Account of the Assessee's Wife in the Assessee's Income:
Questions Involved: 4, 5, 7, 8, 9, 10, 11, 12, 13

The ITO found credits in the account of the assessee's wife, Laxmi Ammal, which included deposits of Rs. 20,000 and Rs. 5,000. The ITO treated the dividends and interest from these deposits as the income of the assessee, a finding upheld by the Appellate Assistant Commissioner (AAC) and the Tribunal.

The High Court, however, found that the department did not discharge its burden of proof to show that the real owner was the assessee. The Court noted, "The amount is credited in the accounts of Krishna & Company in the name of Laxmi Ammal and the natural presumption is that it belonged to Laxmi Ammal." The Court further stated, "There is no material on which we could conclude that the purchase in the name of the minor was benami for the assessee or that the amount standing to the credit of Laxmi Ammal belonged to the assessee."

The High Court concluded that the income from the deposits and shares should not be included in the assessee's income, answering questions 4, 5, 7 to 13 in the negative and against the revenue.

3. Validity of the Reference Under Section 66(1) or Section 66(2) of the Indian Income-tax Act, 1922:
Question Involved: 2

The High Court observed that question No. 2, relating to the sum of Rs. 1,719, was not included in the reference under section 66(1) or section 66(2) of the Act. Therefore, this question does not arise for consideration in this reference.

Conclusion:
- Questions 1, 3, and 6 were answered in the affirmative and against the assessee, justifying the additions to the income returned.
- Questions 4, 5, 7 to 13 were answered in the negative and against the revenue, stating that the income from the deposits and shares credited to Laxmi Ammal should not be included in the assessee's income.
- Question 2 does not arise for consideration as it was not included in the reference.

The High Court thus provided a balanced judgment, upholding certain additions while rejecting others based on the evidence and legal principles involved.

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