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TMI Blog1984 (2) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying on a trade in sale and purchase of paper. Another firm, M/s. Jai and Co., has four partners who are all ladies; the husbands of these ladies are partners in the assessee-firm. When this firm, M/s. Jai and Co., applied for registration under section 185 of the Income-tax Act, 1961, the Income-tax Officer came to the conclusion that the said firm was a benamidar of the assessee-firm and so registration was refused. The income of M/s. Jai and Co. was included in the income of the assessee-firm. Appeals filed by M/s. Jai and Co. failed up to the Tribunal. On account of alleged concealment of income for not including the income of M/s. Jai and Co. in its disclosed income, the Income-tax Officer initiated penalty proceedings, which were re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances for including the income of M/s. Jai Co. in the income of the assessee-company can now be summarised. (1) Both firms were operating at the same business place. (2) M/s. Jai Co. had only lady partners who apparently knew nothing of the business which was really run and controlled by Ajit Prasad. (3) The finance and skill was provided by the assessee-firm and particularly Ajit Prasad, one of its partners. (4) It was through Ajit Prasad that an agency had been procured from M/s. Straw Products Ltd., which gave M/s. Jai Co. its main source of income. (5) The finances invested in M/s. Jai Co. were the result of some cross-gifts to the ladies in question from other members of the family. It was on the sum total of the above f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not so in the case of the present set of gifts. Similarly, the fact that Ajit Prasad looked after the business run by his wife along with other ladies does not necessarily lead to the inference that it is benami. Of course, clubbed together, all the facts may lead to an inference that there is benami income. We are not to decide that question in this case, but we only indicate that the facts show that this was a borderline case even for coming to the conclusion that the income of M/s. Jai Co. was the benami income of the assessee-firm. Turning now to the question of penalty, it has been urged before us that once the income is treated as the benami income of the assessee-firm, the same conclusion should follow in the penalty proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould easily lead to the opposite conclusion, i. e., that the income was not that of the assessee-firm but was of M/s. Jai Co., a separate firm. To the same effect is another Supreme Court's judgment, namely, Anantharam Veerasinghaiah Co. v. CIT [1980] 123 ITR 457. In that case, Anwar Ali's case [1970] 76 ITR 696 (SC) was adopted to L different set of facts and it was reiterated that the burden in a penalty case lies on the Revenue to establish that the amount in question does disclose the income of the assessee. In another judgment of the Supreme Court CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369, the same position was reiterated. In that case, the Tribunal had stated that there might be justification for making additions in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, even if this was so, there seems very little possibility of holding that the income is the benami income of the firm. Even if the four partners who are husbands of these four ladies had formed the firm, it could not be treated as the benami income of the assessee-firm. At best, it could be treated as a benami firm of those four husbands. A partnership is a relationship between individuals which is treated as an entity for income-tax purposes. But the income is to be apportioned to the relevant partners. We fail to understand how the income of M/s. Jai Co. can be treated as the benami income of the assessee-firm. At best, the partners can be treated benami for their husbands. This is one aspect of the matter. However, the most ..... X X X X Extracts X X X X X X X X Extracts X X X X
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