1985 (3) TMI 125 - AT - Income Tax

Summary

Issues Involved:
1. Assessability of the income from the property.
2. Ownership of the property.
3. Benami transaction allegations.
4. Repayment of the loan.
5. Inclusion of property in wealth-tax returns.

Detailed Analysis:

1. Assessability of the Income from the Property:
The primary issue in this case was whether the income from the property at No. 131, Usman Road, Madras-17, should be assessed as part of the assessee's income. The property was purchased in the name of the assessee's wife, Smt. Vatsala, for Rs. 48,000. The assessee claimed that this amount was given as a loan to his wife, and he was entitled to receive rent in lieu of interest until the loan was repaid. The Income Tax Officer (ITO) included the income from this property in the assessee's hands, concluding that the assessee was the real owner.

2. Ownership of the Property:
The assessee contended that the property was purchased by his wife and that the loan provided by him had been repaid. He produced an agreement dated 16-9-1970, corporation tax receipts, and correspondence with the Canara Bank to support his claim. However, the ITO and the Assistant Appellate Commissioner (AAC) held that the property, although standing in the name of Smt. Vatsala, was effectively owned by the assessee. The AAC upheld the ITO's decision, leading to the present appeal.

3. Benami Transaction Allegations:
The department argued that the transaction was benami, meaning the real owner was the assessee despite the property being in his wife's name. The burden of proving a benami transaction lies with the party asserting it. The department relied on the assessee's statements in previous tax returns and valuation reports, which did not mention any loan to his wife. The court referenced several cases, including Krishnanand Agnihotri v. State of MP and Jaydayal Poddar v. Mst. Bibi Hazra, emphasizing that mere suspicion is insufficient to prove a benami transaction.

4. Repayment of the Loan:
The assessee claimed that the loan was repaid by his wife on 15-1-1980, and he produced a cheque to substantiate this. The AAC and ITO questioned the timing and authenticity of the repayment, suggesting it was a strategy to avoid higher taxes. The court examined the evidence, including the agreement and the cheque, and found that the repayment was genuine.

5. Inclusion of Property in Wealth-Tax Returns:
The department noted that the assessee had included the property in his wealth-tax returns, which contradicted his claim that it belonged to his wife. The assessee argued that this inclusion was due to a misconception about his rights. The court found that the documentary evidence, including the sale deed and the agreement, supported the assessee's claim that the property was owned by his wife.

Conclusion:
The court concluded that the department had not discharged the onus of proving that the transaction was benami. The evidence provided by the assessee, including the sale deed, agreement, and repayment of the loan, was sufficient to establish that the property belonged to his wife. The court set aside the AAC's order and allowed the appeal filed by the assessee, excluding the income from the property from his total income.