9911796707
TMI Blog1985 (5) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... out of place to mention at this stage that the issue regarding the nature of ownership first arose in the case of Smt. Alka Chaudhary for the asst. yr. 1977-78. The ITO in that case passed a draft order and referred the matter to the IAC of Income-tax under s. 144B. The IAC collected evidence for the first time in s. 144B proceedings, and on appreciation of the evidence collected by him came to the conclusion that Smt. Alka Chaudhary was merely a benamidar of Dr. Vinayak Chaudhary. Smt. Alka Chaudhary and Dr. Vinayak Chaudhary also filed voluminous evidence in assessment proceedings and also before the IAC. The ITO as per the direction of the IAC under s. 144B proceedings held that Smt. Alka Chaudhary was the benamidar of Dr. Chaudhary in respect of the property in question. He also came to the conclusion that the investment to the extent of Rs. 34,180 remained unexplained and hence he added the same in the case of Mrs. Alka Chaudhary. Against the said order for asst. yr. 1977-78 Smt. Alka Chaudhary filed an appeal before the CIT(A), Nagpur. The CIT(A) considered the entire evidence on record and also the submission, of the assessee. He also considered the valuation report of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y discharged by adducing legal evidence of definite character which would either directly prove the fact of benami or establish circumstances unerringly and reasonably raising an interference of that fact [Jaydayal Poddar vs. Bibi Hazra AIR 1974 SC 171]. (ii) The essence of benami is the intention of the party or parties concerned. The intention is often shrouded in a thick veil which cannot be easily pierced through. But such difficulties do not relieve the person asserting the transaction to be benami of any part of the serious burden that rests on him nor justify the acceptance of mere conjectures and surmises as a substitute of proof (AIR 1974 SC 171). The question whether a purchase in the name of the wife by the husband out of money provided by him is benami for his own benefit would depend upon the intention of the parties at that time of purchase [R. K. Murthi vs. CIT (1961) 42 ITR 379 (Mad)] (iii) The source from which the purchase money came (AIR 1974 SC 171) the source of purchase money is not always decisive of the real ownership of the property though it may prima facie show that he who provides money does not intend to part with the beneficial interest in the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0per cent of the same to the account of Mrs. Alkia Chaudhary in the books of Dr. Chaudhary. Interest upto 31st July, 1981 was equally paid by Dr. Chaudhary and Mrs. Alka Chaudhary, that is each one paid Rs. 5,239 on 1st Aug., 1981. The instalments of premium, interest and ground rent of 1980 and 1981 were equally paid by Dr. Chaudhary and Mrs. Alka Chaudhary on 6th Nov., 1982, that is each one paid Rs. 20,716 on 6th Nov., 1982. Thereafter some further payments of Rs. 1,812 are made by each of them on 17th Dec., 1982. The details of the payments made by the parties have been furnished in tabulated form by the assessee as also in different form by the Department. the assessee has also furnished the copy of account of Mrs. Alka Chaudhary as appearing in his books of account from financial year 1977-78 to 1983-84. In the year 1982-83 Mrs. Alka Chaudhary has made two payments to Dr. Chaudhary, the effect of which is that the account of Mrs. Alka Chaudhary in the books of the assessee, Dr. Chaudhary gets fully squared off and Mrs. Alka Chaudhary has a small credit balance of Rs. 4,169 in the books of Dr. Chaudhary. The contention of the Department is that the instalments of 1974, 1975 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. AAC while dealing with the payments of instalment of NIT plot has observed as follows: "Thus the AR s claim that the lease rent was borne equally by the appellant and his wife after the reallotment in joint names by NIT was made on 29th March, 1976 is not correct." On the basis, he further observed that on adequate consideration flowed from the wife to the husband in respect of the above assignment of part of the leasehold right. The ld. AAC obviously not viewed the situation as a whole. He has only taken into consideration the payment of first few instalment into consideration. He has not taken note of the fact that after Mrs. Alka Chaudhary was taken as a co-allottee, 50per cent of the payment made by Dr. Chaudhary was debited to her account and ultimately Dr. Chaudhary has been reimbursed for the same by Mrs. Alka Chaudhary. He has also not taken note of the instalments actually paid by Mrs. Alka Chaudhary. The mere fact that at earlier stage Dr. Chaudhary alone made that payment of instalments or that at a given point of time the contribution by Dr. Chaudhary was more than that of Mrs. Alka Chaudhary will not lead to the conclusion that Mrs. Alka Chaudhary was merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanctioned on 5th June, 1975. The revised plan was for hospital building. However, subsequently the plans as per actual construction were submitted by Dr. Chaudhary and Mrs. Alka Chaudhary on 10th Sept., 1977 and the same was sanctioned thereafter. Thus the position as it finally stands is that the plan is sanctioned in the names of Dr. Chaudhary and Mrs. Alka Chaudhary. It is submitted by the assessee that Mrs. Alka Chaudhary made the following investments: (1) Rs. 14,000 Invested partly in cash and partly deposited in account No. 134 with U. B. I. (2) Rs. 2,10,0000 Loan from Vijaya Bank in the joint names of Dr. Chaudhary and Mrs. Chaudhary. (3) Rs. 12,000 Loan from Professor Mahure received on 4th Jan., 1977. (4) Rs. 15,000 Loan from Mr. A. R. Phalak by Demand Draft dt. 8th Feb., 1977 given to Mrs. Alka Chaudhary. (5) Rs. 10,000 Loan from Vijaya Bank for construction of strong room in the building. Rs. 2,61,000 . It was contended that the investment as made by Dr. Chaudhary in the construction of the building was as follows: "(1) Rs. 10,000 Cash deposited in account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had pointed out various mistakes committed by the IAC in holding that no cash was available with Mrs. Alka Chaudhary. Even in the proceedings before the CIT (A) in the case of Mrs. Alka Chaudhary, it was pointed out that learned IAC instead of treating cash flow statement as a whole picked up few items of receipts omitting various other items and proceeded to hold that these receipts, as picked up by him were exhausted in other investments and that the assessee was not left with any cash. Some of the errors committed by the IAC were pointed out in the written statement filed by Smt. Alka Chaudary on 15th May, 1982 before the CIT (A). The AAC agreed with the contentions of the assessee regarding cash flow statement. However, he reconstructed the cash flow statement in his order and on that basis came to the conclusion that the cash available with Smt. Alka Chaudhary amounted to Rs. 13,132 only. The AAC however, observed that in the first statement filed by Smt. Alka Chaudhary in explaining the source of investment, she had not referred to the initial investment of Rs. 14,000. The cash flow statement, according to him, was filed on the second date of hearing to explain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stimate at Rs. 3,78,664, the assessee showed an initial investment of Rs. 14000 to suit the new estimate of cost of construction, does not appear to be sound. It is to be noted that Dr. Chaudhary and Mrs. Alka Chaudhary have not maintained any regular books of account for construction. The question of explaining the investment arose only at the time of assessment proceedings and in the said proceedings they collected the information from various sources and submitted their replies. If a mention of particular item is left out at first stage, it does not necessarily mean that it is an after thought. The availability of cash of about Rs. 14,000 with Mrs. Alka Chaudhary for investment in construction of the building has been satisfactorily established, on totality of the facts and circumstances of the case as a whole. On the basis of the working submitted by the Department, the case available with Mrs. Alka Chaudhary would be Rs. 36,604 on 29th Dec., 1975 when the construction was going on and this will further strengthen the case of Mrs. Alka Chaudhary that she made investment in construction of the house property in question. In any event it has to be accepted on the evidence and mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the security offered was the land and building on completion of the premises. The purpose of the loan is stated to be the construction of the premises for Vijaya Bank and the terms of payment is stated to be out of the rent payable in respect of the said premises. In the said application the Branch Manager of the Bank has given on opinion that or Chaudhary is a reputed consulting surgeon of the locality. He is also having another consulting room at Dharampeth and that he desires to have a nursing home on the 2nd floor. He has stated that the loan would be utilised for repaying the existing loan of UBI and the balance for completion of the premises for the bank. The loan will be adjusted against the rent and it will be cleared off in 7 years. The premises in question will be mortgaged with the bank and the bank will also be taken as co-allottee with NIT in respect of the plot till the loan is fully repaid and hence the Manager has recommended for sanction of the loan at 15per cent per annum. the purpose of the loan was stated to be not only the construction of the house but also repayment of loan over draft taken by Dr. Chaudhary. It was submitted by the Department that Dr. Chaud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not offered as security. Referring to the loan application and the letter of sanction also it appears that the security offered was in the form of immovable property consisting of plot No. 93-94 and the house property standing thereon. The counsel for he Department contended that the bank could not have given loan to Mrs. Alka Chaudhary as she had no paying capacity. According to him, the bank had given loan looking to the fact that Dr. Chaudhary was a reputed surgeon and looking to his application only, the bank sanctioned the loan. The loan was initially applied for by Dr. Chaudhary alone and hence the loan must be deemed to have been sanctioned only to Dr. Chaudhary. It is difficult to accept the aforesaid contention of the Department in view of the fact that the sanction letter of the bank filed by the Department itself shows that the loan of Rs. 2,10,000 has been sanctioned to Dr. Chaudhary and Mrs. Alka Chaudhary. Further the bank has time and again certified that they have granted loan to Dr. Chaudhary and Mrs. Chaudhary against security of their rented property. In view of these documents it is difficult to accept the contention of the Department that the loan must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be transferred in favour of Mrs. Alka Chaudhary alone. However, the position at the relevant time was that the loan was in favour of Dr. Chaudhary and Mrs. Alka Chaudhary. In any event it is difficult to accept the contention of the Department that the loan was granted only to Dr. Chaudhary and not jointly to Dr. Chaudhary and Mrs. Chaudhary. Further the assessee has filed a copy of account of Vijay Bank. The said account is a joint account of Dr. Vinayak Chaudhary and Mrs. Alka Chaudhary and the loan of Rs. 2,10,000 is debited in the said joint account on 6th July, 1976 and this loan is being adjusted from the rent payable by the bank in respect of the said premises. The reference to the professional loan of Rs. 70,000 and Rs. 30,000 granted by United Bank of India to Dr. Chaudhary is irrelevant for consideration of the fact as to whom the loan of Rs. 2,10,000 was granted by Vijay Bank because admittedly the loan of Rs. 70,000 and Rs. 30,000 is granted by UBI to Dr. Chaudhary alone and in fact there is no dispute about the same. the maintenance of account with UBI for construction is for the sake of convenience and most of he contribution whether by way of loans from UBI or Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . there should be thus no hesitation in holding that Smt. Alka Chaudhary has established the contribution of Rs. 12,000 for construction of the house property in question. the observation of the AAC that the said contribution is negligible also cannot be appreciated. If the said contribution is viewed in isolation then it may be said it is negligible or small but if we look to the contribution from all sources it cannot be said so. the aforesaid contribution along with other contribution has gone for construction of the house property. In the same way the loan of Rs. 15,000 to Smt. Alka Chaudhary from her father Shri Phalak has also been duly established and the same is utilised for construction. In fact there is no contest by the Department in respect of this amount and its utilisation by Smt. Alka Chaudhary for construction of house property in question. 12. After having considered the question regarding sources of money of investment in plot No. 93-94 and in construction for house property, it is necessary to consider other relevant facts and circumstance of the case and apply the well recognised tests referred to earlier for determining the question whether a particular perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date on the same. On all the bills Mrs. Alka Chaudhary has put the date of receipt of bill by her. However, the contractors have not put the date. It may be stated that all these bills were produced before the taxing authorities at the earliest stage and the genuineness of he bills has never been doubted by any of the authorities below. Further as and when the part payments are made separate receipts have been invariably taken by Mrs. Alka Chaudhary and Dr. Vinahak Chaudhary and such vouchers, receipts always contained the date. The payments are also made by cheques. The running bills also mention the details of work carried out by contractors and the same appears to have been checked by Mrs. Chaudhary and has put her initial after verification of the bills. The contractors have not been examined by the Department nor any question has been put to Dr. Chaudhary or Mrs. Chaudhary in respect of these bills and receipts in the course of their examination. In its view of he matter it is difficult to doubt the genuineness of the bills in question, especially when none of the authorities below have ever doubted it genuineness. All these running bills and receipts only go to show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the accounts between them and such inaction would lead one to believe that this agreement was merely a make believe. It has to be observed that this agreement has been signed and executed by parties and is duly witnessed by the witnesses. Both the executants of the agreements viz. Dr. Chaudhary and Mrs. Chaudhary have been examined extensively on various aspects but nothing has come out in the said deposition which would lead one to believe that the agreement in question was not genuine or was not executed on the date stated in the agreement itself. Further it is seen that thought the agreement has been witnessed by two witnesses, none of the witnesses have been examined by the Department. If the Department had any doubt about the genuineness of the said agreement it should have examined the said witnesses. 14. Another important point that is to be noted at this stage is that the agreement is executed at a time when no enquiry of any nature was pending against them nor any enquiry was started by IT Department. As per cl. 2 of the said agreement the ground floor and first floor have been allotted to Mrs. Chaudhary and the second floor etc. Have been allotted to Dr. Chaudhary. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter it cannot be said that the agreement is an after thought or make believe. The said agreement is binding on both of them and it validly determined their right inter se. Looking to the totality of all the facts and circumstances of the case and on appreciation of voluminous evidence brought on record by both the parties, it cannot be said the Mrs. Chaudhary is merely a benamidar Dr. Chaudhary in respect of the ground floor and first floor of the house property standing on Plot No. 93-94 on Central Avenue Road, Nagpur. 15. The ld. counsel for the assessee relied upon a number of authorities. Main reliance was placed on Jaydayal Poddar vs. Bibi Hazra AIR 1947 SC 171, wherein their Lordships have laid down the following dictum in para 6 of the judgment: "It is well settled that the burden of proving that a particular sale is benami and the apparent purchaser is not the real owner, always rests on the person asserting it to be so. This burden has to be discharged by legal evidence of a definite character which would either directly character which would either directly prove the facts of benami or establish circumstance unerringly and reasonably raising an inference of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. (iii) The assessees wife was the only issue of her parents, and (iv) The assessee was not honest as he had admittedly purchased a house property benami, in name of his wife. The High Court applied the various tests laid down by the Supreme Court in AIR 1974 SC 171 and CIT vs. Daulat Ram Rawat Mull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC) and held as follows: "Held, that the mere fact the statement of B that he had cash amounting to Rs. 1,00,000 was not accepted by the Tribunal would not lead to the inference that the properties in question were purchased benami by the assessee himself. The assessee s mother-in-law had stated that she had in her possession jewellery worth Rs. 15,000 and cash of Rs. 5,000 the Tribunal had not stated that this statement was not acceptable or was being rejected and, unless it were rejected, the Tribunal could not enter a finding that both the father-in-law and mother-in-law of the assessee were dependent on him. The fact that the assessee s wife was the only child of her parents could not lead to the conclusion that the purchases of the properties were financed not by her parents but by the assessee. In India benami transactions wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eimbursed her husband in respect of the amount paid by him out of the dividends which she received from the said company on those 2,098 shares. the Department sought to include the entire dividend income received by the assessee s wife in the total income of the assessee, whereas the Tribunal held that as Rs. 20,000 have come out of he assessee s fund in the first instance for the purchase of shares at least 5/6th of the divined income should be included in the assessee s total income. the contentions raised by the Department are: (i) That assessee s wife was merely a benamidar of the assessee; and (i) There was transfer of asset by the assessee to his wife indirectly within the meaning of s. 16(3) (a) (iii) or IT Act, 1922. The Department in that case relied on the following circumstances to show that the transaction was benami (i) That the transaction was brought about by the husband. (ii) The payment towards the pronote was made by him. (iii) The false case was put forward to connect receipts issued by Mr. Jackson to Mr. Murty as evidencing to actual payment towards the pronote and that the amount paid to Jackson by the assessee s only temporary accommodation, and (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how that Mr. Murthi did grant a loan to his wife, and that the payment of the wife s obligations to the vendor amounted to a transfer to assets to enable her to obtain the shares, such transfer should be held to be one for consideration, as the monies were ultimately repaid, presumably in pursuance of the original undertaking between the parties. The provision of s. 16(3) would not, therefore, apply to the case. The learned counsel for the assessee further relied upon the decision of the Allahabad High Court reported in Sheo Narain Lal vs. CIT (1954) 26 ITR 249 (All). The assessee draw our attention to the following extract in the report: "If a house stands in the name of the wife, the presumption is that she is the owner thereof. It is for the persons alleging that she is a mere benamidar for her husband to prove the allegations either by direct or circumstantial evidence. The question whether a property belongs to the assessee or to his wife will be a question of fact. In respect of house purchased by the assessee s wife it was established that half the sale price was provided by her. As regards the source of he other half, the Tribunal disbelieved her statement that she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally when the transaction is between the persons who are in fiduciary relationship. The transaction in its nature is known only to the parties and it is only by placing before the Court several circumstance that real nature of the transaction can betterment. In the present case as stated above voluminous evidence has been placed on record and none of the parties have held back any evidence or material. Therefore, as stated by the High Court the only way to ascertain the true nature of the transaction is by appreciation of the evidence on record and by applying various tests laid down by the Courts. 17. Another case on which the reliance was placed by the Revenue is CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC). The facts in that case are that purporting to act as trustee of a trust created by his wife, the assessee purchased on 30th Sept., 1940, certain house property for Rs. 1,85,000. During the assessment for the asst. yr. 1942-43 the assessee claimed that the income from the property should not be brought to tax in his hands and in support thereof produce the deed of conveyance in his favour and the deed of trust executed by his wife nearly a year therea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, after objecting to its in the year 1942-43, was a circumstance which the taxing authorities were entitled to take into consideration, in the absence of any satisfactory explanation; (v) that no question of law arose out of the order of the Tribunal and that the Tribunal was right in holding that the house property was not trust property." It is true that the taxing authorities are not bound to blindly follow the recitals made in the documents. They are entitled to look into the surrounding circumstance of find out the reality of the recitals made in those documents. There can be no exception to the said proposition laid down by the Supreme Court. In fact while appreciating the agreement dt. 25th Aug., 1976 executed between Dr. Chaudhary and Mrs. Chaudhary, these aspects have been kept in view and the agreement has been appreciated clause by clause and keeping in view the surrounding circumstances and also other evidence and material to see if the same has been implemented. On appreciation of the facts and circumstances of the case and other evidence it has been found that the said agreement dt. 25th Aug., 1979 is a genuine one and has been entered into at a time when no enqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The said case has no application to the facts of the present case. In this case Mrs. Chaudhary contributed half the price for the plot in course of time. She reimbursed Dr. Chaudhary in respect of some of the instalments paid by Dr. Chaudhary. Thus this was not a case of gift or transfer without consideration. In fact the case of the Mardas High Court reported in B. K. Murthi vs. CIT (1961) 42 ITR 379 (Mad) squarely applies to the facts of this case and s. 64 of the Act has no application to the facts of this case. We, therefore, hold that Mrs. Alka Chaudhary is not the benamidar of Dr. Chaudhary in respect of ground floor and first floor of the house property standing on NIT Plot No. 93-94 on Central Avenue Road, Nagpur. She is the owner of half share in the said plot and ground floor and first floor of the building in her own right. Thus the income by way of rent arising from her portion of property cannot be included in the total income of Dr. Chaudhary. We further hold that the provisions of s. 64 of the Act are not applicable to the facts of he case and that the income accruing to Mrs. Alka Chaudhary by way of rent from Vijaya Bank is not liable to be included in the income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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