1. This reference has been made by the Income-tax Appellate Tribunal under section 66(2) of the Indian Income-tax Act, 1922, on the requisition made by this court on April 24, 1962, in Income-tax Applications Nos. 40, 41, 43, 44, 45, 46 and 47 of 1961. Two questions have been referred by the tribunal. They are :
'(1) Is there any material on record to hold that the properties and assets standing in the name of Shrimati Surajbai belonged to the assessee family
(2) Was the Tribunal right in including income that accrued to or arose in the name of Surajbai Daga or that was received by Surajbai Daga in the assessee family's total income
2. The assessee in all these cases was the Hindu undivided family represented by Ramnath Daga and the assessments are for the assessment years 1947-48, 1948-49 and 1952-53 to 1956-57. Ramnath Daga was at the material time the karta of the assessee Hindu undivided family and Surajbai is his second wife. Previous to these assessment proceedings, there were assessment proceedings for the assessment year 1945-46 and 1946-47 also. The original assessment for the assessment year 1945-46 was made on March 13, 1946. Subsequently proceedings under section 34 of the Income-tax Act, 1922, were stated against the assessee, Seth Ramnath Daga, and notice under section 34 was served on its karta on March 16, 1954. The notice under section 34 was issued to the assessee as the department considered that the assessee had escaped assessment and it was discovered that the assessee had not in the original assessment disclosed several amounts and particularly those which stood in the name of the karta's wife, Surajbai, either in the shape of shares or deposit in the banks or immovable property, such as house at Ganganagar and a house at Nagpur. The assessee was asked by the department to explain the sources from which the properties were taken in the name of Surajbai and the amounts invested in her name either in the bank or in shares. Several explanations were given by the assessee and it appears that some account books of the assessee as well as of Surajbai were shown to the Income-tax Officer. One of the explanations that was given by the assessee with respect to the house at Ganganagar standing in the name of Surajbai and the investments in the banks and in shares was that during the Samvat years 1987-88 to 1995-96 an amount of Rs. 3,34,589 was withdrawn by the assessee from the firm, R. B. Bansilal Abirchand, Bikaner, most of this amount was made over by the karta to his wife as gifts from him from time to time during that period. An explanation was also given that his wife had also received gifts from her parents and the relations at the time of her marriage and marriages of the relations and on other ceremonies and occasions and the amount was accumulated with the wife. It may be stated at this time that Surajbai is the second wife of Ramnath Daga. He had married on Ratanbai who the daughter of Mathuradas Mohota of Hinganghat. She died in or about November 1937. Surajbai also is the daughter of Mathuradas Mohota and the younger sister of this first wife, Ratanbai. It was also alleged by the assessee that the assessee also withdrew an aggregate amount of Rs. 1,38,142 which were handed over by the karta to his wife for defraying household expenses and out of that sum his wife, according to him must have made some savings. In the year 1939, Surajbai opened her own account books and credited an amount of Rs. 2,00,000 in her account books. It is out of this amount of Rs. 2,00,000 it is alleged that the house at Ganganagar was purchased and the deposits were made in the banks and the shares were purchased. This amount of Rs. 2,00,000 is said to be from these various sources which have been stated earlier. During those proceedings the assessee was given several adjournments to prove his case and the assessee is said to have produced the books of the firm relating to Samvat years 1987-88, 1988-89 and 1995-96 which showed a very small amount of withdrawals as compared to the sum of Rs. 3,34,589. The explanation which was given by the assessee was not accepted by the learned Income-tax Officer for which he gave his own reasons in his order dated 18th January, 1955. To put the reasons in his own words, he says :
'I cannot accept that for years together the assessee was keeping huge idle funds at home which was both uneconomic and risky. The assessee was paying heavy interest to the firm on the withdrawals. The funds could have been deposited in bank and could be source of substantial recurring income. The investments are mostly made during the period of war when merchants related huge profits from different sources. The assessee has huge speculative business. It is also not possible to connect any particular withdrawals with a succeeding investment made in the name of Smt. Surajbai. Moreover, the withdrawals must have been made for some specific purpose and spent over it. There is also no personal account of the lady or any central set of account books to show as to how the amounts withdrawal were expended and how much of the withdrawals remained with the assessee so as to be available for investment in the name of the lady. Even there is no record to show the source of monies alleged to have been received by the lady on ceremonial occasions. As a large sum was alleged to have been received by the lady on different occasions, it should have been possible for the assessee to produce some evidence on the point. There is no evidence to indicate that any gift was made to the lady. This being the case of Hindu undivided family, even the karta could not make any gift out of the Hindu undivided family funds. The withdrawals from the firm were the property of the Hindu undivided family.'
3. Before the Income-tax Officer the assessee had produced a book belonging to Surajbai in which the amount of Rs. 2,00,000 was shown to have been credited in the name of Surajbai. The Income-tax Officer, however, did not accept this account book as a reliable one and came to the conclusion that there was nothing to show conclusively that the assessee or Surajbai had an amount of Rs. 2,00,000 in Samvat year 1996 at home as contended by the assessee.
4. A similar notice was issued to the assessee under section 34 of the Income-tax Act with respect to the assessment year 1946-47. During this period another amount of Rs. 1,50,000 also came for consideration. Explanations were given by the assessee in these proceedings also and so far as the amount of Rs. 1,50,000 is concerned, it was contended that this amount was transferred to her from the capital account of the assessee, Seth Ramnath Daga, on Kartik Badi Ashthami 2001, which corresponds to October 9, 1944. With respect to the other amount of Rs. 2,00,000 a similar explanation which was given earlier, was given. For the assessment year 1945-46 an amount of Rs. 30,000 was added as being the income form an undisclosed source. It was found during that year that an investment of Rs. 30,000 was made during that year in the name of Surajbai. This was composed of two amounts, namely Rs. 10,000 on February 13, 1945 and Rs. 20,000 on February 21, 1945. Rs. 10,000 was said to be an amount paid as earnest money of February 13, 1945, for the purpose of a house at Nagpur and the amount of Rs. 20,000 was paid on February 21, 1945, for a similar purpose but during the assessment year 1946-47 an amount of Rs. 1,19,555 was added as income from an undisclosed source. These assessments were confirmed in appeals to the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The Appellate Tribunal proceeded on the basis that the burden of proving the advancement or gift lies on the person alleging that there was advancement or gift and there was no presumption in favour of advancement or gift such as is there in the English law. He found that there was no material on record to show that the karta's wife was possessed of funds of her own to make the impugned investments. The Tribunal referred to the different explanations and the stand taken by the assessee with respect to these investments and also referred to the entries in the account books of the firm and observed that no mention was made of any gift of Rs. 1,50,000 by the karta to his wife out of his capital in the Bikaner books. In view of the explanations given by the assessee which, according to the tribunal were varying and the improbability of the story put forward, the absence of satisfactory explanation for the wife to start an account book all of a sudden in Samvat year 1996 and in the absence of any material to show that the wife of the karta was possessed of funds of her own, the tribunal confirmed the assessment made by the Income-tax Officer as confirmed by the Appellate Assistant Commissioner. Similar view was taken for the assessment year 1946-47 also.
5. So far as the assessments in question are concerned, a similar stand was taken by the assessee and at the stage of appeal before the Tribunal, affidavits of the karta, Ramnath Daga, and his wife were sought to be filed on behalf of the assessee. These affidavits, however, were not admitted by the Tribunal and it not a question referred to us whether the rejection of these affidavits by the tribunal was justified or not. We are not, therefore, called upon to consider the matter regarding rejection of the affidavits and we cannot take those facts into consideration for answering the questions referred to us. We have, therefore, to proceed on the basis of the material which existed in the assessment proceedings up to the stage of the tribunal.
6. For the assessment year 1945-46 an amount of Rs. 30,000 was added to the income of the assessee as being an income from undisclosed sources as in the opinion of the Tribunal there was no material to show that the karta's wife was possessed of funds of her own and in its opinion the wife was the benamidar for the Hindu undivided family. This amount of Rs. 30,000 represented the earnest money paid for the purchase of the house at Nagpur. Similarly for the assessment year 1946-47 an amount of Rs. 1,19,555 was added to the income of the assessee as being from an undisclosed source as according to the income-tax authorities the investments remained unexplained. The total investments in the name of the wife were to the tune of Rs. 2,89,667 during the period 20th November, 1944, to 31st March, 1946. Out of this amount, Rs. 1,50,000 which was transferred from the Bikaner books of Surajbai, an amount of Rs. 30,000 being the renewal of two fixed deposits of Rs. 15,000 each made on September 4, 1945, was deducted and the balance amounting to Rs. 1,19,555 was held to be an income from an undisclosed source.
7. On the basis of these two assessments for the years 1945-46 and 1946-47, it was contended that these findings of the Income-tax tribunal, so far as these amounts are concerned, operated as res judicata and these questions could not be aggregated in the subsequent assessment proceedings of the same assessee. The question of res judicata need not detain us long, as there is plethora of decisions which hold that the income-tax authority is not a court and the decision on an income-tax authority in a prior year does not operate as res judicata in the assessment proceedings of the subsequent years. To quote a few, they are : Perianna Pillai v. Commissioner of Income-tax, Kaniram Ganpat Rai v. Commissioner of Income tax, Tejmal Bhojraj v. Commissioner of Income-tax, Omar Salay Mohammed Sait v. Commissioner of Income-tax, Abdul Caffor Trust v. Commissioner of Income-tax, Colombo and Joint family of Udayan Chinubhai, etc. v. Commissioner of Income-tax. In Kaniram Ganpat Rai v. Commissioner of Income-tax, it was held by the High Court of Patna that the Income-tax Officer is not bound by the rule of res judicata or estoppel and he can reopen the assessment if fresh facts came to light which on investigation would entitle the officer to come to a conclusion different from that of his predecessor. Similarly, in Tejmal Bhojraj v. Commissioner of Income-tax, it has been held that the principle of res judicata or estoppel by record has no application and the previous finding or decision may be reopened by the department when the previous decision has not been arrived at after due enquiry, the said decision is arbitrary or fresh facts come to light. In view of this, if the assessee in a subsequent year is able to satisfy the income-tax authority that the previous finding is not correct either because it was not arrived at after due enquiry or because it is arbitrary or if the assessee put forth before the income-tax authority fresh facts from which a different conclusion can be arrived at, then it that case the income-tax authority would be justified in arriving at a different conclusion than what was arrived at in the previous proceeding. In the assessments in question, however, so far as the amount of Rs. 2,00,000 is concerned, it does not appear that any fresh evidence or facts were brought to light than what was placed before the two income-tax authorities in the previous years in the assessment years 1945-46 and 1946-47. In fact, the learned counsel who appeared before the Appellate Assistant Commissioner in the assessment proceedings for the year 1947-48 has stated before him at the time of the hearing that the assessee did not have any fresh evidence or material to adduce in connection with this issue than what was stated or produced before the Appellate Tribunal in the course of the earlier appeals 1945-46 and 1946-47. Apart from that, it has not also been shown during these proceedings that the previous decision arrived at was in any way erroneous or not binding.
8. The question referred has to be considered in two parts. There are two amounts : one of Rs. 2,00,000 and the other of Rs. 1,50,000 which according to the income tax authorities, is the undisclosed income of the assessee and the income of the properties either purchases or invested out of these two income of the properties either purchased or invested out of these two items must be taken to be the income of the assessee and must be brought to tax. So far as the amount of Rs. 2,00,000 is concerned, we have already seen the explanations offered by the assessee from time to time. The amounts are said to have accumulated during the course of years from 1931 to 1939 major part of which is said to be during the period 1931 to November 1936, when the karta's first wife died. There are no account books of the karta's first wife during that period. The maintaining her own account books from the year 1939. The source of this amount with the karta's wife, Surajbai, is said to be in the first instance the accumulations said to have been made by the karta's first wife during the period 1931 to 1936 out of the withdrawals of Rs. 3,34,589 by the assessee, most of which, according to the assessee, was made over to and remained with the karta's wife as gifts from the assessee from time to time during that period. This statement is quite vague and does not lead one anywhere. It is not known for what purpose, these amounts withdrawal were spent by the assessee. In fact, the assessee's agent, one Durgaprasad Rao, had stated before the Income-tax Officer that 'it was not possible to furnish evidence and prove how the borrowings from R. B. Bansilal Abirchand Firm were spent by the assessee. They must have been partly on private account and partly for business purposes'. If an explanation with respect to a particular item of amount is given by the assessee, then that explanation must be substantiated by satisfactory evidence. This explanation given by the assessee is so vague and general that it is not possible to accept the said explanation and to come to a conclusion that out of this amount, a large amount or any amount must have been given by the karta to his wife as gifts from time to time.
9. It was also sought to be explained that the karta's wife had received gifts from her parents and other relations at their marriage and marriages of their brothers and relatives in the father's family fan ceremonial occasions. With respect to this also except a bare statement to his effect no details have been furnished as to how much amount was dealt with. It may be, as contended on behalf of the assessee, that the karta's father-in-law was a rich person and presents might have been given by him to his daughters from time to time of different occasions but if that was so, that must have been entered in the account books of the assessee's father-in-law who is a businessman and undoubtedly has maintained account books. The best evidence which could have been produced in the case has not been produced, and, in the absence of that, the bare explanation cannot be taken as truthful. It is no doubt true that if a person alleges that a particular transaction in benami, the burden is on that person to prove the allegations and, normally if a property stands in the name of a person, it would be presumed that that person is the real owner of that property. It is possible to establish the nature of the transaction either by direct evidence or circumstantial evidence. But when it is between persons who are in fiduciary relationship with each other it is often difficult to prove the nature of the transaction by direct or positive evidence to establish the nature of the transaction. The transaction and its nature of the transaction could be brought to surface. The evidence to prove the nature of the transaction could be direct by the person who challenges its nature or it could also be proved on the evidence which has come forward on behalf of the persons between whom that transaction takes place. In this case explanations have been given from time to time on behalf of the assessee and on behalf of the assessee's wife in whose name the property stands. Several circumstances have been brought out which have been discussed by the income-tax authorities. One of the circumstances and the major circumstance, is the varying explanations which have been given by the assessee from time to time. Then there is the omission to explain the details of the amounts said to have been received by the assessee's wife. Then there are other improbabilities in the case and the conduct of the assessee and his wife which cannot be termed to be a normal prudent conduct.
10. These are the various circumstances which could be taken into consideration to find out the nature of the transaction. Even with regard to the amount for household expenses said to have been given by the karta to his wife, Surajbai, the same thing can be said. It is alleged by the assessee that an amount of Rs. 1,38,142 was incurred and spent through the assessee's wife for household expenses and only an assertion has been made that out of this amount his wife must have made some saving. This again is too vague a statement to be accepted. If the household expenses are being incurred through the instrumentality of the wife, it cannot be said, in the first instance, that there must have been some savings out of the same. It is not the case of the assessee that every month or periodically a fixed amount was given to the wife for meeting the household exposes and whatever remained at the end of the period after meeting the household expenses was to remain with the wife and the assessee would not ask for any account of the household expenses and the savings. It could as well be that though actual spending of the amount for the household was through the wife, the amount was given by the karta to his wife as and when demanded for the said purpose. No figure has been given as to the amount alleged to have been saved by the wife this manner. We also do not find even in the account book which was started in the year 1939 as to what was the amount she had saved from the household expenses given to her and what were the amounts which she had received on account of presents on several occasions and what was the amount which she has received as a left-over from the first wife. It is not enough to make only a bald statement regarding these matters. Further, it appears from the case of the assessee that out of this amount of Rs. 2,00,000, which was credited for the first time in the account of Surajbai in the year 1939, as major part of it had come from the accumulations of the first wife, Ratanbai. We cannot see how the accumulations alleged to have been made by Ratanbai could, in the normal course, come to the second wife, Surajbai. From the first wife the karta had two sons and on the death of the first wife if there are any accumulations made by her and they could be said to belong her as a stridhan property, then that must go to her sons after her death who we minors and that would also be the normal course of conduct. If there are any such accumulations, the assessee would leave them to his minor sons and if he is a very rich person, as made out to be and has a mind to give something to his second wife or to make provision for her, he could give any property to the second wife by may of a gift out of the family's capital assets. This circumstance naturally leads one to believe that the explanation which has been given by the assessee for the amount said to be with Surajbai is one which cannot be accepted. These are some of the circumstances which, coupled with the circumstances enumerated by the income-tax authorities, could lead to an inference that the said accumulation with Surajbai was not her own property and accumulated in the manner suggested, but were out of an undisclosed source of which the assessee would be taken to be the author. This was, therefore, the material before the income-tax authorities to arrive at their findings. On this material which was taken into consideration by the income-tax authorities they could reasonably come to the conclusion which they have reached. It cannot, therefore, be said that this was a case where there was no material to hold that the amount of Rs. 2,00,000, which was subsequently invested in purchasing a house at Ganganagar and put in fixed deposits in the banks or invested in the shares, belonged to the assessee-family.
11. The second part relates to an amount of Rs. 1,50,000 out of which a house at Nagpur has been purchases and the balance of Rs. 22,399-12-9 is said to have been paid in cash to the karta's wife, Surajbai. It is the assessee's case that an amount of Rs. 1,50,000 was transferred by the karta from the capital account on Kartik Badi 8, Samvat year 2001, corresponding to October 9, 1944, to his wife, Surajbai. It appears that this transfer entry was made by the assessee in his account books and was carried forward in the ledger of the year 1944-45, Samvat year 2001-2002. This amount does not seem to have been actually handed over by the assessee to Surajbai on October 9, 1944, but having transferred the said amount to her it was kept with him and later out of this amount the house property at Nagpur was purchased in the name of Surajbai. The karta shows the several items of amounts spent for the purchase of the house which includes Rs. 30,000 on account of earnest money, Rs. 3,500 on account of general stamp for the deed of sale and Rs. 90,000 as the balance of purchase price and Rs. 2,400 on account of the brokerage to the broker, Harnarayan Lakhani. There are other small items in connection with the maintenance of the said house and the balance of Rs. 22,399-12-9 was then handed over to Surajbai. Now this amount being from the capita account of the assessee is from a disclosed sources and it cannot be aid that this represents any secret income said to have been made by the assessee and out of which the property has been purchased in the name of his wife. It is also not the department's case that the assessee was not in a position to spare this amount and to make a gift of this amount to his wife or purchase property for her benefit. It is, however, alleged that as this amount has come from the assessee from the capita account, the property, though purchased in the name of the wife, belongs to the assessee and the assessee alone and not to the wife and the wife is only a benamidar for the assessee. In order to prove the benami nature of the transaction the two things are : (1) the source from which the amount of the consideration for the transaction has come, and (2) the intention as to whether the transaction is meant to be for the person in whose name it has been made or whether the transaction in that person's name is only nominal, the real owner being somebody else. Here, there is no question that the purchase money for the sale transaction has come out of the funds belonging to the assessee. If nothing was known then the person in whose name the transaction would be on the department to establish that though the transaction stands in the name of Surajbai, the owner is the assessee himself. Here the matter does not rest at that. It has been found, and cannot be disputed, that the amount has come from the assessee's funds and, therefore, the only question that remains to be seen is whether the assessee gifted this amount to his wife for her benefit and whether it is from that amount that the property has been purchased also for her benefit.
12. For this purpose, heavy reliance has been placed on behalf of the assessee on four factors : (1) The house property at Nagpur has been purchased in the name of Surajbai. (2) The transaction was entered into through her father who in fact had paid the earnest money of Rs. 30,000 by two cheques of Rs. 10,000 and Rs. 20,000, which was ultimately reimbursed on his drawing a hundi for that amount. (3) There is an entry made in the account books of the assessee wherein this amount of Rs. 1,50,000 is shown to have been transferred to Surajbai and it is out of this amount that the payment has been made towards the consideration of the sale of the Nagpur house, and (4) The balance that was left out of that amount of Rs. 1,50,000 after the payment of the consideration was handed over to Surajbai. It is urged that if the transaction was not a real one in favour of the karta's wife but was only a benami one, the real owner being the assessee itself, the amount of Rs. 22,000 and odd would not have been paid over to Surajbai and further Surajbai's father, Mathuradas Mohota, would not have paid the earnest money of Rs. 30,000. These are in fact strong points in favour of the assessee's contention that Surajbai is the real owner of the property and the transaction is not benami. It is, however, shown on behalf of the department that those circumstances are also compatible with the transaction being benami and it was urged that if this story was true, then the amount of Rs. 1,50,000 should have been credited in the account books of Surajbai which she had opened from 1939 and the entry should have found a place on October 9, 1944, when the amount is alleged to have been transfer to her. This contention cannot be accepted and the absence of the credit entry in the account books of Surajbai would not lead to the inference that the amount of Rs. 1,50,000 was not given to her as a gift.
13. Another contention which was raised on behalf of the department was that there is no mention whatsoever of the word 'gift' in the entry with respect to this amount of Rs. 1,50,000. It is true that the word 'gift' has not been specifically used, but when the entry says that the amount has been transferred to Surajbai, it means that the ownership of this amount has been transferred to Surajbai. It would amount to a gift and no other meaning could be given to this entry except that it is an out and out gift to Surajbai and the said amount could be used for her own benefit. The absence of a credit entry in the account books of Surajbai is on account of the fact that on October 9, 1944, the amount was not handed over to Surajbai in specie, but was only credited to her in her account in the assessee's account books to be utilised for her purpose subsequently and it is out of this amount which was set apart by the assessee for the benefit of Surajbai that the house property was purchased in her name and the remaining amount which was left over was handed over to her. From these facts, coupled with the entry in the account books, the only conclusion that could be reached would be that the amount of Rs. 1,50,000 was given by the assessee out of its capital account as a gift to Surajbai to be utilised by her or for her and for her own benefit. The approach to the case by the income-tax authorities was not justified and they could not come to the conclusion that this amount of Rs. 1,50,000 was not given to Surajbai, but remained the amount of the assessee and the property was purchased out of this amount for the benefit of the assessee and not for Surajbai. Due effect has not been given by the income-tax authorities to the entry in the account books and to the other circumstances which are stated above. In the light of the discussions made above, we do not think that there was any material in record so far as the house property at Nagpur is concerned to hod that though it stood in the name of Surajbai, it belonged to the assessee-family. As per the above discussion, it would follow that, so far as the house property at Ganganagar and the bank deposits as well as the shares are concerned, there is material on record to hold that they belonged to the assessee-family. So far as the house at Nagpur is concerned, there is no material on record to hold that it belonged to the assessee-family. On the findings given with respect to the first question, it follows on the second question that the Tribunal was right in including the income that accrued to or arose in the name of Surajbai Daga out of the amount of Rs. 2,00,000 said to be out of the accumulations in the assessee-family's total income, but was not right in including the income in the assessee-family's total that accrued to or arose in the name of Surajbai Daga so far as the Nagpur property standing in the name of Surajbai is concerned.
14. Accordingly we answer the questions referred to us as under :
Answer to question No. 1 :- There is material on record to hold that the properties and assets standing in the name of Surajbai which are acquired or invested out of the amount of Rs. 2,00,000 said to have been accumulated belonged to the assessee-family, but there is no material on record to hold that the Nagpur property standing in the name of Surajbai belonged to the assessee-family.
Answer to question No. 2 :- The Tribunal was right in including the income that accrued to or arose in the name of Surajbai Daga out of the property acquired or investments made out of the amount of Rs. 2,00,000 said to have been the accumulations; but the Tribunal was not right in including the income that accrued to or arose in the name of Surajbai Daga out of the Nagpur property standing in her name.
15. Since the success is divided, the parties will bear their own costs.