TMI Blog1986 (4) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... mon order as of necessity and for the sake of convenience. It is also pointed out that the parties have also filed one set of paper book for all the years. 4. For the assessment year 1971-72, in the first innings, the learned AAC upheld the finding of the ITO about the clubbing of income determined in the case of Smt. Manbir Sondhi, proprietor of U.P. Engines Machines with the income of the assessee-firm holding it to be justified with the reasoning that the said Smt. Manbir Sondhi was none other than the benami of the assessee-firm. For the purpose, in the said order, the learned first appellate authority relied on order dated 9-7-1973 made in relation to the assessment years 1967-68 to 1969-70 in assessee's own case by the Tribunal, Delhi Bench 'C' in Income-tax Appeal Nos. 3993 of 1971-72 and 1531 and 1532 of 1972-73 ; however, since for the same assessment years and in the case of this very assessee, the Tribunal, Delhi Bench 'D' vide its order dated 24-6-1975, in Income-tax Appeal Nos. 4412 to 4414 of 1973-74 held on the basis of material on record that 'as a matter of fact, the explanation given by the assessee was quite convincing and reasonable which pointed out that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi joined as a partner in the firm U.P. Engines Machines from 1-6-1973 and the other partner was Shri Rahul Sondhi representing his smaller HUF. 7. Tractors Farms Equipments Ltd. don't allow their dealer to have the dealership or agency of any other principals. 8. When the appellant-firm found that the dealership of Kirloskar was going out of its hands it tried to pass it on to their near ones. 9. The dealership of Kirloskar is not given to anyone on the basis of technical qualifications as is clear from the fact that Kirloskars gave the dealership when it was a HUF and then a firm with Shri Rahul Sondhi as the only male partner. The other partner was his mother who contributed only capital. 10. Smt. Manbir Sondhi is an educated lady and had gained business expenses with her husband and was actively supervising her business and helped by Shri Rahul Sondhi her husband as manager. 11. She contributed capital in the concern U.P. Engines Machines. 12. The business of dealership was later on transferred by Kirloskar Ltd. from that firm to a limited company which is accepted by the department. 13. The Income-tax Officer in the original proceedings for 1967-68 gave a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Rahul Sondhi as partners. 6. The above firm then transferred the dealership to a private limited company of the family which is not disputed or doubted by the ITO. 7. The dealership of the Kirloskar did not require any technical qualifications by the partners or proprietor and were renewed on the basis of performance. In the first year it was given for a year and renewed after that. 8. Shri Rahul Sondhi the partner is not technically qualified and has read only up to Matric and failed in Intermediate but had capital and business experience only. 9. There is nothing wrong if a lady invests her funds and does business. 10. There is nothing wrong that the business was run by Shri Rahul Sondhi husband as manager and he did not charge any remuneration due to marital relationship. 11. The ITO has not brought out any material on record, to show that the income of the lady was directly or indirectly ever enjoyed by the appellant-firm or its partners up to this time. 12. On the contrary, I find that the lady is assessed to wealth-tax and owns the residential house newly constructed by her, out of those profits. 13. That when the business of dealership was acquired by the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny time. It is also not disputed that for acquiring this dealership any technical qualifications were necessary. It is not doubted or disputed that Smt. Manbir Sondhi made investments of her own in that business. The ITO has not brought any material to show that the appellant-firm invested any amount directly or indirectly in that concern. There is no material or evidence to show that the profits earned by the lady were ever enjoyed by the appellant-firm or any of its partners. On the contrary, there is ample evidence on account of subsequent evidence of the appellant-firm's income-tax record and the lady's income-tax records, that she is the actual owner of that business and the firm or its partners, had no interference in the ownership of beneficial enjoyments of the business of Smt. Manbir Sondhi. The two businesses carried on by the appellant-firm and the lady are different and the principals of both the businesses are different. In the affidavits filed before the IAC in penalty proceedings for 1967-68 to 1969-70 the partners and the lady have deposed all these facts and the ITO has not considered them in 1971-72 nor he has cross-examined them and neither discussed and brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm or is to be treated as the income of the lady---Smt. Manbir Sondhi; (x) That the lady had made originally a token investment as has been referred to by the Tribunal in paragraph 14 of its order made in quantum assessment for the assessment years 1967-68 to 1969-70; (xi) That there was no fresh evidence either before the learned first appellate authority in relation to the assessment years under appeals or else before the Tribunal while deciding the penalty appeals of the assessee since the three affidavits referred to by the Tribunal in the penalty proceedings are self-serving statements which are not affidavits, but argumentative paraphrases; (xii) That despite the directions of the Tribunal (Special Bench) the ITO has not been heard by the learned first appellate authority and paragraph 18 of the impugned order of the learned first appellate authority supports this; (xiii) That strong reliance is placed on the order of the Tribunal made in quantum assessment for the assessment years 1967-68 to 1969-70 where benami issue was decided against the assessee. The learned departmental representative placed strong reliance on copies of letters as contained in assessee's pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal that it was not a case of benami. He further contended that the test of benami must rest on the following factors: (i) Source of investment; (ii) Enjoyment of income as also title to the fruits; and (iii) Ownership of the business and the assets as also control thereof. 8. He has also contended that the income, the subject matter of these appeals resulted to UPEM i.e. the proprietor, Smt. Manbir Sondhi, not on account of the act of her husband, Shri Rahul Sondhi, but on account of the willingness of the principals, Kirloskars, since the creater of the source of income is not the husband, but the principals. He placed strong reliance on the observations and finding of the Special Bench of the Tribunal as also on the fact that income resulting to Smt. Manbir Sondhi and turned into net wealth has been assessed as such, i.e., as net wealth belonging to the said lady in her hands and if the income as net wealth accrued belongs to Smt. Manbir Sondhi, then the same must be held to be income of Smt. Manbir Sondhi and no one else. Shri Sharma also contended that Shri Rahul Sondhi was acting as manager of Smt. Manbir Sondhi, since he happens to be the husband of the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Kirloskar Oil Engines Ltd., thus, given up by the assessee, was taken up by Smt. Manbir Sondhi the wife of the assessee, was an individual and was carried on in that capacity. The business of Ferguson Tractors was being carried on in partnership by the assessee consisting of himself and his mother Smt. Kamla Sondhi. The view of the department was that this was an arrangement brought about by the assessee deliberately so that the income derived from the carrying on of the Kirloskar agency could be diverted, and that, therefore, that business was the benami of the assessee-firm. After going through the relevant materials on record after considering the arguments addressed to us, that was patently clear is, that certain fresh materials come to be considered by the Bench, which heard the penalty appeals, tested on which the conclusion reached in the quantum appeals was doubted. This additional material was not considered by the AAC while disposing of the appeals for subsequent years. The learned counsel for the assessee, Shri C.P. Chhabra, appearing before us, fairly submitted that there was no categorical finding recorded by the Tribunal in the penalty appeals that the finding giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered by the AAC and then a conclusion arrived at." 10. The Special Bench of the Tribunal, Delhi Bench 'A' has, as such, held that there was fresh material before the Tribunal while disposing of penalty appeals of the assessee and accordingly it directed the learned first appellate authority to redecide the matter for the assessment year 1971-72 after considering that 'fresh material'. The presently impugned orders of the learned first appellate authority for all the years under appeal (the speaking order is only for the assessment year 1971-72) have, thus, been made accordingly and justifiably on facts the learned AAC has held the issue in favour of the assessee. The Hon'ble Allahabad High Court (Jurisdictional High Court in this case) has, in the case of Prakash Narain v. CIT [1982] 134 ITR 364 had considered the issue of benami in the above case and their Lordships in a classic decision of theirs in the case of Prakash Narain considered the ratio of the decision of the following cases: Bhuban Mohini Dasi v. Kumud Bala Dasi AIR 1924 Cal. 467, CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), CIT v. Daya Chand Jain Vaidya [1975] 98 ITR 280 (All.), CIT v. Durga Prasad Mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss with U.P. Tractors but it has been originally a business of the joint family. The said dealership of Kirloskar products was initially with the joint family, then with the assessee and at the relevant time, i.e. vis-a-vis the accounting periods in relation to the assessment years under appeal with Smt. Manbir Sondhi---UPEM. The Special Bench in paragraph 2 of the above order has also given the background as to the said dealership having had to be with different entities at different times and there is also no controversy on this issue vis-a-vis the parties that the source of investment in UPEM was made by the lady, viz., Smt. Manbir Sondhi, that nature and possession of the dealership as also Kirloskar products, the sale proceeds, the resultant income has always remained with the lady, Smt. Manbir Sondhi, and further that the said income accumulation resulting in net wealth in terms of assets as house property, etc., have been assessed in the hands of the lady Smt. Manbir Sondhi as her net wealth by the revenue department ; that vis-a-vis the assessee-firm and the said lady Smt. Manbir Sondhi, there is no relationship although Shri Rahul Sondhi is a partner in the assessee-firm a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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