TMI Blog1994 (11) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... e passed in relation to the reopened assessment for 1972-73 and the assessments for 1973-74, 1976-77 to 1979-80 and 1981-82 to 1983-84. The order for 1972-73 also formed the basis of the decision in respect of the wealth-tax assessments on the assessee for the years 1976-77 and 1977-78. These orders have given rise to the original petitions to compel reference of certain questions of law arising out of the orders of the Tribunal, of which Original Petitions Nos. 7282 of 1991 and 216 of 1992 relate to the wealth-tax assessments and the others to the income-tax assessments. We shall deal with Income-tax References Nos. 193 and 200 of 1988 in the first instance, as the proceedings for 1972-73 form the basis of assessment for all the subsequent years. 1972-73 : An addition of Rs. 88,000 was made to the income returned by the assessee as income from undisclosed sources on the ground that he had not explained the source of investment for the purchase of a property in Mangalore under three documents in the names of three persons, K. Abdul Rahiman and K. Abdulla Kunhi, both of Udma village to which the assessee belongs, and K. P. Abdullah of Hara Village. The assessee appears to be a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed sources. The assessee had purchased a property for Rs. 1,82,000 for which he alleged he had taken loans, inter alia, from two persons, P. M. Mohammed Kunhi and M. Hassainar, of Rs. 10,000 each. The Income-tax Officer did not accept these credits as genuine and added this amount, amongst others, to the assessee's income under the head "Other sources". The assessee challenged these additions amongst others in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner called for a remand report from the Income-tax Officer with opportunity to the assessee to cross-examine certain persons as also to put him on notice of various pieces of evidence relied on. The Appellate Assistant Commissioner thereafter passed the order confirming the additions made of Rs. 88,000 and Rs. 19,52,190 mentioned earlier, but deleting the addition of Rs. 20,000 obtained from P. M. Mohammed Kunhi and M. Hassainar. The Revenue appealed to the Tribunal against this deletion and the assessee appealed on the confirmation of the other two additions. The Tribunal held that the Revenue had not established the benami nature of the transactions of purchase of the Mangalore p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier order of the Tribunal relating to the very same year, wherein the Tribunal had held that the benami nature of the transactions had not been established. The Tribunal affirmed the Appellate Assistant Commissioner's view because of its earlier decision. Original Petition No. 12169 of 1991 is filed to compel reference of the question of law arising out of this order of the Tribunal. The assessee was also subject to assessments under the Wealth-tax Act for the years 1976-77 and 1977-78. For these years the value of the Mangalore property assessed at Rs. 1,48,000 as also the value of the contraband articles of Rs. 19,52,190 were added to the assessee's wealth. These additions were deleted by the Commissioner (Appeals) following the decision of the Tribunal in the income-tax appeal relating to the year 1972-73. The order of the Commissioner was affirmed by the Tribunal and the Commissioner has sought reference of the questions arising therefrom which are similar to the ones raised in the income-tax matters for the opinion of this court under section 27(3) of the Wealth-tax Act. Those applications are Original Petitions Nos. 7282 of 1991 and 216 of 1992. In Income-tax Reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not find our way to interfere with the decision of the Tribunal. The question referred in Income-tax Reference No. 193 of 1988 has, therefore, to be answered in favour of the Revenue and against the assessee. We do so. We shall now take up the question relating to the addition of Rs. 19,52,190 which forms the subject of one of the questions referred in Income-tax Reference No. 200 of 1988. We have already mentioned the circumstances in which this addition was made by the Income-tax Officer. The Appellate Assistant Commissioner also concurred with him. Statements had been recorded from the drivers of the two lorries at the time of the seizure. The statement of one of those drivers, namely, K. M. Ahammed alias Ahammed Kunhi has been extracted in the orders of the Income-tax Officer as also of the Tribunal. He has detailed the circumstances in which he and N. A. Aboobacker took the lorries to Manki Village so as to transport these smuggled goods to Bangalore. The assessee and one Mohammed Kunhi who is an associate and relative of the assessee met him at the designated petrol bunk at about 5 p.m. on December 30, 1971. They promised to remunerate the drivers suitably for the work to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmed alias Ahammed Kunhi. The contents of the statement made by the other driver, N. A. Aboobacker, has not been scrutinised or appraised at all, apart from a bare general reference to it. The Tribunal itself has noted that the statement of Ahammed alias Ahammed Kunhi indicated some connection between the assessee and the smuggled goods. The Tribunal has not analysed the evidence of the two drivers as also the other materials before arriving at the conclusion that there was nothing to indicate that the assessee was the owner of the goods. The fact that the assessee and his associate Mohammed Kunhi had made arrangements for the transport of the smuggled goods from Manki Village to Bangalore agreeing to bear the expenses thereof cannot be disputed in the light of the original statements made by the drivers, which has been accepted by the Tribunal. In that event, the Tribunal should have enquired why these two persons had associated themselves with the transport, if really the assessee was not the owner of the goods. The Tribunal should have examined the evidence of both the drivers instead of resting content with looking into the evidence of one of the drivers and ignoring the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t alleged to have been made by the assessee in the Mangalore property and the addition of income therefrom to the assessee's taxable income. The Income-tax Officer has held that the purchase of the property by the assessee was with his own funds, though the deeds of purchase stood in the names of three persons mentioned earlier. He rendered this finding based on various facts and circumstances gathered by him on enquiry. This was affirmed by the Appellate Assistant Commissioner. But the Tribunal accepted the contention of the assessee that the Revenue on whom the burden lay to establish the benami nature of the transactions has failed to establish it. In support of this conclusion, the Tribunal stated that the Revenue had failed to establish that the consideration for the transfer proceeded from the assessee. It also held that though the municipal tax was paid by the assessee, that will not establish that he was the real owner of the property. So also it ignored the fact of installation of the telephone in the building, as according to it, the assessee has explained it as referable to one of his employees taking the building on rent. Execution of the deed of sale for 13 cents was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at these three agriculturists from a remote villages near Kanhangad would have joined together and purchased urban properties in Mangalore. The question whether an ostensible owner is the real owner of the property or whether it is held benami for another person has to be considered on a conspectus of all the facts and circumstances of the case. No doubt, the onus of establishing that the transaction is benami is on the person asserting the benami nature of the transaction. The source whence the consideration came is a crucial test in deciding this question. But that is not conclusive of the issue. It may not always be possible for the person asserting the benami nature to establish that the consideration did proceed from another person. When it is not possible to obtain evidence which conclusively establishes the source of consideration the case must be dealt with on reasonable probabilities and legal inferences arising from proved or admitted facts. Various factors come into the reckoning of this question. The court or the authority concerned has to apply its mind to the various materials and the evidence available in the case and reach a conclusion objectively as to whether it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, that the question of real ownership of the Mangalore property was outside the purview of consideration in view of the provisions contained in the Benami Transactions (Prohibition) Act 45 of 1988. According to him, no plea of benami can be entertained or considered after the enactment of this Act even for tax purposes. We find ourselves unable to accept this contention. The relevant sections of the Act are sections 3 and 4. Section 3 prohibits a person from entering into any benami transaction except purchase of property in the name of his wife or unmarried daughter. The section further imposes punishment on a person entering into benami transactions. Section 4, which is the one mainly relied on, provides firstly that no suit, claim or action to enforce any right in respect of a property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of the person claiming to be the real owner of the property. Secondly, the section provides that no defence based on any right in respect of any property held benami, against the person in whose name the property is held or against any other person, shall lie in any suit, claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal was justified in deleting the addition of Rs. 40,000 from the revised assessment for the year 1972-73 and of Rs. 15,000 from the assessments for each of the subsequent years. So far as the wealth-tax assessments are concerned, the questions sought are referable and there will be a direction accordingly. We dispose of the references and the original petitions as follows : (a) The question referred in Income-tax Reference No. 193 of 1988 is answered against the assessee and in favour of the Revenue. (b) We decline to answer the questions referred in Income-tax References Nos. 187, 188, 197 and 200 of 1988 and direct the Appellate Tribunal to deal with the matter afresh in accordance with law and in the light of the observations contained hereinabove. (c) In Original Petitions Nos. 12168 and 12169 of 1991, 13251 of 1992, 12790, 13297, 14909 and 16632 of 1993 and 738 and 998 of 1994, the Income-tax Appellate Tribunal, Cochin Bench, is directed to state a case and refer the following question of law for the determination of this court under section 256(2) of the Income-tax Act, 1961, namely : " Whether, on the facts and in the circumstances of the case, the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X
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