Income-Tax Officer vs Satish Kumar.
1989 Latest Caselaw 583 Del

ORDER

Per D. N. Sharma - This Departmental appeal is directed against the order dated 12-8-86 passed by the CIT (A) for the asst. year 1980-81. The ITO computed income from house property No. H-171, Ashok Vihar, Delhi at Rs. 10,580 and subjected it to tax in the hands of the assessed, an individual, under the head Income from other sources. The assesseds contention before the ITO was that he was not the owner of the property which was owned by his wife Smt. Asha Rani. The ITO has mentioned in the asst. order that in the case of Smt. Asha Rani the assessment for the asst. year 1979- 80 was completed on 30-3-1982 wherein on the basis of the facts gathered and the investigation made, she has held to be the benamidar of her husband in respect of the income declared by her from the business of knitting and stitching and income from the aforesaid property. The assessed was asked by the ITO to give details regarding the acquisition and investment made in the house property. The facts stated in the asst. order in respect of the acquisition of the said property and the investment made are as follows :

(i) That Smt. Asha Rani wife of the assessed acquired plot No. H/171, Phase No. 1 Ashok Vihar, Delhi measuring 204.852 sq. meters from Shri S. M. Kapoor by an agreement to sell dated 2-9-1975 for a sum of Rs. 37,500.

(ii) That the entire amount of Rs. 37,500 was paid by the assessed from his capital account in the proprietary concern M/s. Satish & Co.

(iii) That Shri Satish Kumar was appointed as his General Attorney by Shri S. M. Kapoor in respect of the above plot vide General Power of Attorney dated 2-9-1975.

(iv) That the construction was started in January, 1977 and completed in November, 1977 at total cost of Rs. 1,97,497.

(v) The sources for the funds have been explained as under :-

(a) Loan from Shri Satish Kumar

Rs. 1,62,850

(b) Rent received

Rs. 12,000

(c) Sale of gold

Rs. 11,225

(d) Personal savings

Rs. 11,422

Rs. 1,97,497

(vi) Personal savings have been declared by Smt. Asha Rani from savings from business of knitting and stitching which she has failed to establish as discussed above and in her assessment order.

(vii) That the above rent receipts of Rs. 12,000 pertain to rental income in respect of first floor which was completed and let out from January, 1979.

2. From the above facts the ITO deduced that Smt. Asha Rani was the benamidar of her husband, namely, the assessed in respect of the investment made for acquisition of property No. H-171, Ashok Vihar, Delhi, as almost all the investments made came from the assessed. Thus the ITO was of the view that the income from the said property was assessable in the hands of the assessed and since and property has been acquired through an agreement to sell, income there from was assessed under the head Income from other sources.

3. The assessed appealed to the CIT (A) who while disposing of the appeal also took into consideration the statement of Smt. Asha Rani recorded by the ITO as also the asst. order made in her case. He referred to the statement made by Smt. Asha Rani, according to which she had income from knitting. The statement of Smt. Asha Rani recorded on 16-3-82 has been reproduced by the CIT (A) in his impugned order. The CIT (A) concluded that the ITO failed to prove that the property in question actually belonged to the assessed and not to his wife in whose name it stood registered. Aggrieved, the Department has come up in appeal before the Tribunal.

4. The learned Departmental Representative has highlighted before us facts stated in the asst. order. It was further submitted that though the land was purchased in the name of Smt. Asha Rani vide agreement to sell dated 2- 9-75, consideration for purchase of the land was paid by the assessed himself. The plot in question was purchased for Rs. 37,500 and it was pointed out on behalf of the Department that the entire sum of Rs. 37,500 was paid by the assessed from his capital account in the proprietary concern, M/s. Satish & Co. It was also contended that the assessed had taken loans from the three parties namely, M/s. N. B. Textiles, M/s. Shakti Trading Co. and M/s. Jagdish Weaving Industries and after receiving loans from these parties the same were transferred by the assessed to his wife and from there the amounts were invested in the construction of the house property. According to the learned Departmental Representative, the facts of the case clearly indicated that the entire investment in the acquisition of the property in question was in fact made by the assessed himself though it was acquired in the name of his wife Smt. Asha Rani. Thus, according to the learned Departmental Representative the assessed was the real owner of the property in question though it has been held benami by his wife on his behalf.

5. The learned authorised representative for the assessed, on the other hand, fully supported the impugned order of the CIT (A). It was contended that source of investment of Rs. 1,97,497 in the construction which was started in January 1977 and was completed in November, 1977 was fully explained according to which Smt. Asha Rani had taken loans aggregating to Rs. 1,82,650 from her husband namely, the assessed. All these loans were duly accounted for in the assesseds books of account. It was further submitted that out of the loans taken by Smt. Asha Rani from her husband, she has already repaid part of the loans to the extent of Rs. 42,000. It was pointed out that details of the payments made by Smt. Asha Rani to her husband are given at page 41 of the paper book filed by the assessed. It was further pointed out that part of the loans were repaid by cheques by Smt. Asha Rani which was also indicative of the fact that the investments were in fact made by Smt. Asha Rani and not by the assessed. It was then submitted that the occupancy certificate was issued in the name of Smt. Asha Rani and property tax bills were also raised in her name. It was then contended that it was for the ITO to prove that the assessed was the real owner of the property and that it was acquired by him benami in the name of his wife Smt. Asha Rani. It was also submitted before us that all the investments made in the acquisition of the property were duly explained which clearly showed that the investments were made by Smt. Asha Rani from the loans taken from her husband aggregating to Rs. 1,62,850, rent received is respect of house property amounting to Rs. 12,000, sale of gold and her personal savings amounting to Rs. 11,422. Sale proceeds in respect of gold amounted to Rs. 11,225. In this way, according to the assessed, the investment of Rs. 1,97,497 in the construction of the property was fully explained. It was also contended that in view of the decision of the Supreme Court in Mithilesh Kumari v. Prem Behari Khare [1989] 177 ITR 87 Smt. Asha Rani must be held to be the real owner of the property and, therefore, income from the property could not be assessed in the hands of the assessed.

6. We have considered the rival submissions as also the facts of the case and have also perused the paper book filed by the assessed containing 42 pages. Plot No. H-171 measuring 204.852 sq. mtrs. was acquired by an agreement to sell dated 2-9-75 for a sum of Rs. 37,500 in the name of Smt. Asha Rani. A copy of the said agreement is included in the paper book filed by the assessed. Here it may also be pointed out that the assessed is the proprietor of the concern M/s. Satish & Co. The ITO found as a fact that entire sale consideration of Rs. 37,500 for the purchase of the sail plot was paid by the assessed from his capital account in the proprietary concern M/s. Satish & Co. Not only this, the assessed took loans from three parties, namely, M/s. N. B. Textiles, M/s. Shakti Trading Co. and M/s. Jagdish Weaving Industries. All these loans were invested in the construction of the house property. This fact clearly goes to show that the assessed had obtained loans from the said parties for the purpose of investment in the construction of the house property. According to the assessed, he had advanced loans to his wife aggregating to Rs. 1,62,850 for investing in the construction of the property. According to the assessed, out of the loans advanced by him to his wife she had returned Rs. 42,000 by means of cheques on different dates, details of these payments appear at page 41 of the paper book. However, the assessed has not been able to show that Smt. Asha Rani had any source of income out of which she was able to make deposits in her bank account. According to the assessed Smt. Asha Rani carried on the business of knitting and stitching and she was able to make investment in the construction of the property. The impugned order of the CIT (A) shows that Smt. Asha Rani was examined by the ITO in the course of assessment proceedings relating to her assessment. According to her statement she had income from knitting and stitching. Smt. Asha Rani being the wife of the assessed is a highly interested witness. Her testimony in the absence of any independent corroborative evidence does not inspire confidence and cannot be, therefore, accepted. There is nothing on record to show as to how much income Smt. Asha Rani has been deriving from her alleged business of knitting and stitching. It is not, therefore, possible to hold on the facts of the case and the state of evidence available on the record, that Smt. Asha Rani had any income of her own. So the question of her making any investment in the acquisition and construction of the property did notarise. Substantial loans were raised by the assessed for the purpose of making investment in the construction of the property. It was the assessed who had paid the sale consideration for the purchase of the land. Rental income of Rs. 12,000 were received in respect of a portion of the house property. Once it is found that the property in question was acquired by the assessed benami in the name of his wife, it would necessarily lead to the conclusion that whatever rental income was received in respect of the property belonged to the assessed and not to his wife. While considering the question whether Smt. Asha Rani had any source of income, we have also taken into consideration the details of her personal savings as given at page 34 of the paper book filed by the assessed. According to the assessed, Smt. Asha Rani sold gold and the sale proceeds from the sale of gold amounting of Rs. 11,225 were also invested in the construction of the property. It will be seen that this amount is only a small portion of the total investment made in the acquisition/construction of the property. Taking into consideration the entirety of the facts and circumstances of the case, the materials and evidence produced before us and the submissions made on behalf of the parties, we hold that since the investment in acquisition/construction of the property in question was made by the assessed himself, he is the real owner of the property though it is held benami in the name of his wife Smt. Asha Rani. Since the property stood in the name of Smt. Asha Rani occupancy certificate in respect thereof as also the property tax bill were issued in her name. These papers cannot, therefore, go to show that the real owner of the property was Smt. Asha Rani and not the assessed.

7. The decision of the Supreme Court in the case of Mithilesh Kumari (supra) is of no help to the assessed. In that case the respondent had filed a suit in 1971 for recovery of property held in the name of the first appellant as benami property. The trial court decreed the suit holding that she held the property benami for the respondent. The first appellate court dismissed her appeal in 1974 and the High Court affirmed the decision of the lower courts in 1978. The appellant filed a petition for special leave to appeal to the Supreme Court and obtained special leave on 15-11-1978. Pending the appeal arising out of the special leave petition, the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988 was promulgated on May 19, 1988. This Ordinance was replaced by the Benami Transactions (Prohibition) Act, 1988, which was deemed to have into force on May 19, 1988. Before the Supreme Court it was contended on behalf of the appellant that even if the property was held by the appellant benami, the subsequent legislation had put a complete bar to the respondents suit in respect of the property. It was held by the Supreme Court that when the law nullified the defenses available to the real owner in recovering benami property from the benamidar, the law applied irrespective of the time of the benami transaction and that the respondents action or suit could not be decreed under the law and the decree passed by the lower courts was annihilated.

8. Section 3 of the said Act prohibits benami transactions and section 4 prohibits the right to recover property held benami. None of these provisions operates to debar the Income-tax authorities from subjecting to tax the income from property in the hands of its real owner. In our opinion, therefore, the said Act does not create a bar to or prohibit inclusion of income from houses property in the hands of the real owner.

9. In view of what has been said above, we set aside the impugned order of the CIT (A) on the points under consideration and restore that of the ITO.

10. The appeal accordingly succeeds and is hereby allowed.