V. Balasubramanian v. Income-tax Officer
[Citation -1984-LL-0730-10]

Citation 1984-LL-0730-10
Appellant Name V. Balasubramanian
Respondent Name Income-tax Officer
Court ITAT-Chennai
Relevant Act Income-tax
Date of Order 30/07/1984
Assessment Year 1980-81
Judgment View Judgment
Keyword Tags benami • benamidar • cost price • house property • income from house property • licence fee • money borrowed • new building • real owner • registered valuer • sale deed • valuation report
Bot Summary: In support of this, the assessee produced an agreement stated to have been entered into between himself and his wife on 16-9-1970, according to which the assessee was to receive the rent from the property purchased in the name of his wife in lieu of interest payable by the assessee's wife on the sum of Rs. 48,000 stated to have been provided for by the assessee by way of loan and, that this arrangement would continue till the repayment of the loan. The assessee has also produced a copy of the corporation receipt according to which the property stood in the name of the assessee's wife Smt. Vatsala. According to the learned counsel for the assessee, if the appellant had intended that the property should belong only to himself and not to his wife, then the appellant would have purchased the property in his own name and there would have been no need to enter into an agreement with his wife on 16-9-1970. The learned counsel for the assessee further pointed out that the officer himself has stated in the assessment order that the evidence produced by the assessee is sufficient before the Court and her connected authorities to prove that the property in question is owned by his wife. Thereafter, the assessee's wife applied for a loan for Rs. 3 lakhs from the Canara Bank on equitable mortgage of the land and building and the said loan was sanctioned on 22-9-1979, From out of the loan so sanctioned by the Canara Bank, a sum of Rs. 54,000 was paid 'by the assessee's wife to her husband in repayment of the loan taken by her. The assessee has filed the sale deed in question, the correspondence between the assessee's wife and the Canara Bank, the agreement dated 16-9-1970 and the letters written by the assessee to the income-tax department, etc. Even the ITO in his order has observed that the evidence produced by the assessee may be sufficient before the Court and other connected authorities to prove that the property in question is owned by the assessee's wife.


This appeal filed by assessee relates to assessment year 1980-81. appeal relates to assessability of income from property at No. 131, Usman Road, Madras-47, as part of income of assessee. According to facts of this case property in question was purchased in name of Smt. B. Vatsala, wife of assessee by document No. 2733 of 1967, dated 5- 10-1967 for consideration of Rs. 48,000. assessee contended that this purchase money was given by him to his wife as loan to her. In support of this, assessee produced agreement stated to have been entered into between himself and his wife on 16-9-1970, according to which assessee was to receive rent from property purchased in name of his wife in lieu of interest payable by assessee's wife on sum of Rs. 48,000 stated to have been provided for by assessee by way of loan and, that this arrangement would continue till repayment of loan. assessee has also produced copy of corporation receipt according to which property stood in name of assessee's wife Smt. Vatsala. It was submitted that income from this property should not be assessed in hands of assessee, since acquisition was by means of borrowal from husband and not by way of gift by husband to wife. assessee submitted that amount borrowed from him had been paid back during year out of loan received from Canara Bank, to whom property was mortgaged and let out. building itself was demolished during year in order to construct new building out of advances received from Canara Bank. According to assessee, whatever be position prior to January 1980, subsequent to January 1980, income should not be included in his hands as loan has been cleared. 2. During assessment proceedings, ITO has noted that assessee while explaining source for acquisition of property in assessment year 1968-69 by his letter addressed to ITO has stated as under: "In above case, I have already filed return of income for assessment year 1968-69 admitting income of Rs. 3,678. Further, I now noticed that I have to include income from house property at No. 25, Usman Road, Madras-17, which I purchased on 5-10-1967 for sum of Rs. 51,900 (Rs. 48,000 cost price plus Rs. 3,900 registration expenses)." ITO has also brought out fact that in assessment year 1971-72, while filing valuation report from registered valuer for property at No. 25, Usman Road, Madras-17, standing in name of Smt. Vatsala and No. 25A, Usman Road, Madras-17, belonging to assessee, there was no mention of any money due from Smt. Vatsala. From these facts, ITO came to conclusion that property in question even though stands in name of Smt. Vatsala, assessee is real owner of property. Accordingly, he included income from property in question in hands of assessee. 3. Aggrieved, assessee filed appeal before AAC challenging order passed by ITO. Before AAC, assessee contended as under: (1) ITO was wrong in holding that income from property bearing door No. 131, Usman Road, Madras-17 was liable to be assessed in hands of appellant; (2) ITO was wrong in holding that although property stood in name of Smt. Vatsala, it did not prove that property was purchased by her; (3) ITO having held that evidence produced was sufficient to sustain before Court and other connected authorities to prove that property in question was owned by appellant's wife, was wrong in holding that claim that property was purchased by appellant's wife was not proved; (4) ITO failed to note that in statement filed either for income-tax or for wealth- tax, no mention was made that above property had been purchased by appellant's wife and that appellant had provided funds by way of loan, as it was neither necessary nor material, this does not meet substance of ITO's argument that if as claimed by appellant that property belonged to his wife and not to him, he could have very well shown amount of money due from said Smt. Vatsala and interest amount therefor for wealth-tax purposes; and (5) After repayment of alleged loan to appellant, there is no case at all for assessing income. However, on considering facts arising in this case and after hearing parties, AAC confirmed view taken by ITO. 4. Not satisfied with order passed by AAC assessee is in appeal before us. Before us, learned counsel for assessee submitted that AAC was wrong in holding that property bearing door No. 131, Usman Road, T-Nagar, Madras-17, belonged to appellant and assessment of income in hands of appellant was correct and was to be upheld. It was submitted that this conclusion is not based on evidence on record and cannot be supported. He further submitted that authorities below were wrong in their view that sum of Rs. 4,972 being income from door No. 131, Usman Road, Madras-17, belonging to appellant's wife was liable to be assessed in hands of appellant. learned counsel for assessee further submitted that AAC was wrong in holding that even at time of original investment, property was meant to belong only to appellant and consequently assessment of income in hands of appellant was correct and was to be upheld. It was submitted that said conclusion is not based on evidence. According to learned counsel for assessee, if appellant had intended that property should belong only to himself and not to his wife, then appellant would have purchased property in his own name and there would have been no need to enter into agreement with his wife on 16-9-1970. learned counsel for assessee further pointed out that officer himself has stated in assessment order that evidence produced by assessee is sufficient before Court and her connected authorities to prove that property in question is owned by his wife. According to learned counsel for assessee, authorities were wrong in placing reliance on letter addressed by appellant to ITO while explaining source for acquisition of property in 1968-69 for purpose of arriving at conclusion that intention of appellant was all along to acquire property for his own benefit though purchased in his wife's name. He further submitted that neither aforesaid letter nor statements accompanying income-tax and wealth- tax returns would support department's case that intention of appellant was to acquire property in question for his own benefit in his wife's name. According to learned counsel for assessee, agreement dated 16-9-1970 entered into between himself and his wife would amply prove that real owner of property is his wife. According to learned counsel for assessee, memorandum filed by appellant along with his wealth-tax return was under misconception as to his right vis-a-vis property. Therefore, it was pleaded that income from above property should be excluded from his total income. On other hand, learned departmental representative supported order passed by AAC. 5. We have heard rival submissions made by parties. fact remains that for assessment year 1980-81 corresponding to accounting year ending on 31-3-1980, appellant filed return of income admitting total income of Rs. 24,890, but in doing so he did not include income from property bearing door No. 131, Usman Road, Madras- 17, on ground that said income is to be assessed in hands of his wife, Smt. Vatsala, in whose name property stands. According to appellant, consideration of Rs. 48,000 paid for purchase of above property under document No. 2733 of 1967 dated 5-10-1967 had been given by appellant by way of loan to his wife Smt. Vatsala. appellant also produced agreement dated 16-9-1970 entered into between himself and his wife under which appellant was entitled to receive rent from aforesaid property in lieu of interest as long as loan was outstanding. In support of claim, appellant produced corporation tax receipts, which were in name of his wife and correspondence that had passed between his wife and Canara Bank, to whom property had been mortgaged and let out. 6. According to department although property was purchased and stood in name of Smt. Vatsala and evidence produced by appellant was sufficient to sustain claim in Court of law to prove that property belonged to or was owned by his wife, it would not be sufficient to prove that property was purchased by her. According to authorities below nowhere in income-tax and wealth-tax return statements till assessment year 1978-79, appellant had mentioned that he had lent money. authorities below also pointed out that while explaining source for purchase of above property for assessment year 1968-69, appellant had stated that he had purchased property for sum of Rs. 51,900 and that this established that appellant was real owner. authorities below have also pointed out that valuation reports filed after 1971-72 and statements filed for income-tax and wealth-tax purposes did not mention that money was due to appellant from his wife Smt. Vatsala. authorities below were also of the appellant from his wife Smt. Vatsala. authorities below were also of view that appellant had taken this stand to avoid huge income-tax and wealth-tax that would have become payable in respect of new building constructed with loan provided by Canara Bank. 7. On other hand, case of appellant was that property in question was purchased by assessee's wife by sale deed dated 5-10-1967 for consideration of Rs. 48,000. According to assessee, this amount was lent to his wife by way of loan and loan was repaid on 15-1-1980 by cheque drawn by Smt. Vatsala in favour of appellant. During time when loan was in existence, there was agreement between assessee and his wife dated 16-9-1970, according to which, appellant was entitled to collect rent from said property in lieu of interest. Thereafter, Smt. Vatsala became entitled to collect rent from above property in her own right as owner of property. It was also mentioned that building which was already in existence was demolished by Smt. Vatsala in or about December 1979. After demolition of building, Smt. Vatsala applied to Corporation of Madras for sanction of construction of new building. sanction was accorded on payment of licence fee of Rs. 4,200 on 23-11-1979. It was also case of assessee that new building was built up by Smt. Vatsala out of money borrowed from Canara Bank and said Canara Bank is now occupying said building as tenant. 8. Thus, case of department was that property in question even though stands in name of assessee's wife, real owner of property is assessee. ordinary rule is that apparent state of affairs is real unless contrary is proved. burden of proving that transaction is benami and owner is not real owner always rests on person asserting it to be so and this burden has to be strictly discharged by adducing legal evidence of definite character which would either directly prove fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. essence of benami is intention of parties and not unoften, such intention is shrouded in thick veil which cannot be easily pierced through. But such difficulties do not relieve person asserting transaction to be benami of serious onus that rests on him, nor justify acceptance of mere conjectures or surmises as substitute for proof. It is not enough merely to show circumstances which might create suspicion, because Court cannot decide on basis of suspicion. It has to act on legal grounds established by evidence- Krishnanand Agnihotri v. State of MP AIR 1977 SC 796, Jaydayal Poddar v. Mst. Bibi Hazra AIR 1974 SC 171 and Raj Ballav Das v. Haripada Das AIR 1985 Cal. 2. 9. It is for department to prove that house standing in name of wife-Ramkinkar Banerji v. CIT [1936] 4 ITR 108 (Pat.), Sovaram Jokhiram v. CIT [1944] 12 ITR 110 (Pat.), L. Sheo Narain Lal In re. [1954] 26 ITR 249 (All.) or amount standing in name of wife-S.N. Ganguly v. CIT [1953] 24 ITR 16 (Pat.), or that business carried on in name of wife-Kurella Pullayya v. CIT [1962] 45 ITR 364 (AP) and Y. Rajan v. ITO [1970] 77 ITR 839 (AP) or shares purchased in name of wife-R.K. Murthi v. CIT [1961] 42 ITR 379 (Mad.), V. Ramaswami Naidu v. CIT [1974] 93 ITR 341 (Mad.) belong not to her but to her husband. Though apparent must be considered real until it was shown that there were reasons to believe that apparent was not real, in case where party relied on self-serving recitals in documents, it was for that party to establish truth of those recitals. taxing authorities were entitled to look into surrounding circumstances to find out reality of recitals. For determining this question, no absolute formulae or acid test, uniformly applicable in all situations, can be laid down, yet in weighing probabilities and for gathering relevant indicia, Courts are usually guided by these circumstances: (1) source from which purchase money came; (2) nature and possession-of property after purchase; (3) motive, if any, for giving transaction benami colour; (4) position of parties and relationship, if any, between claimant and alleged benamidar; (5) custody of title deeds after sale; and (6) conduct of parties concerned in dealing with property after sale. above indicia are not exhaustive and their efficiency varies according to facts of each case- Jaydayal Poddar's case (supra), Also see Vidyadhar Krishnarao Mungi v. Usman Gani Saheb Konkani AIR 1974 SC 658, Bibi Siddique Fatima v. Saiyed Mohammad Mahmood Hasan AIR 1978 SC 1362, Kanakarathanammal v. V.S. Loganatha Mudaliar AIR 1965 SC 271, Prakash Narain v. CIT [1982] 134 ITR 364 (All.), First ITO v. M.R. Dhanalakshmi Ammal [1978] 112 ITR 413 (Mad.), Ponnuswamy Nadar v. Narayanan Nadar AIR 1977 Mad. 19, Smt. Manohari Devi v. Choudhury Sibanava Das AIR 1983 Ori. 135 and Rajvir Singh v. Sarla Pratap AIR 1983 (NOC) 101 (All.), 10. genesis of concept of benami is that consideration for transfer must flow from one person and transfer is taken in name of another person and consideration so flowing for transfer was not intended to be gift in favour of person in whose name transfer is taken- Syed Abdul Khader v. Rami Reddy AIR 1979 SC 553. At same time, where husband purchased property in name of his wife with intention to benefit her and to make her owner of that property, subsequent change of intention of husband would not divest wife of title acquired by her under sale deed-Ammaponnammal v. Shanmugam Pillai AIR 1971 Mad. 370. 11. We have already set out test laid down by Supreme Court in matter of determining benami transaction. We have already seen from facts of present case that property in question was purchased by wife of assessee by sale deed dated 5-10-1967 for consideration of Rs. 48,000. This amount was said to be given as loan by assessee to his wife. There was agreement between husband and wife dated 16-9-1970, according to which assessee was to receive rent from property purchased in lieu of interest payable by assessee's wife on sum of Rs. 48,000. This loan was repaid on 15-1-1980 by cheque drawn by Smt. Vatsala in favour of appellant. Thereafter, assessee's wife applied for loan for Rs. 3 lakhs from Canara Bank on equitable mortgage of land and building and said loan was sanctioned on 22-9-1979, From out of loan so sanctioned by Canara Bank, sum of Rs. 54,000 was paid 'by assessee's wife to her husband in repayment of loan taken by her. After demolishing existing building, assessee's wife applied to Corporation of Madras for sanctioning construction of new building and it was sanctioned on payment of licence fee of Rs. 4,200 on 23-11-1979. corporation tax receipts are in name of assessee's wife. assessee's wife let out new building to Canara Bank and she is collecting rent. assessee has filed sale Canara Bank and she is collecting rent. assessee has filed sale deed in question, correspondence between assessee's wife and Canara Bank, agreement dated 16-9-1970 and letters written by assessee to income-tax department, etc., for our perusal. We have gone through said documents. We have also seen that in memorandum filed by appellant along with wealth-tax return for 1979-80, he has stated that aforesaid property was being included in his wealth-tax return in lieu of loan given to Smt. Vatsala for purchase of house until loan was returned. According to learned counsel for assessee, this statement was made by appellant since he was under misconception as to his right vis-a- vis property. It was also pointed out that in assessment year 1968-69, assessee in his letter addressed to ITO has stated that he has purchased property in question on 5-10-1967. But this statement of assessee is in contravention of what is contained in sale deed dated 5-10-1967. Thus on t h e face of documentary evidence obtained in this case, statements made by assessee before department will be of no consequence. Even ITO in his order has observed that evidence produced by assessee may be sufficient before Court and other connected authorities to prove that property in question is owned by assessee's wife. Thus, by applying test prescribed by Supreme Court cited supra to facts of this case we are of opinion that department has not discharged onus placed upon it in matter of proving benami transaction. Accordingly, we set aside order passed by first appellate authority on this point and allow appeal filed by assessee. *** V. Balasubramanian v. Income-tax Officer
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