NARASIMHAM J. - This reference under section 66(2) of the Indian Income-tax Act raises the questions :
'(1) Whether, on the facts and in the circumstances of the case, there is any material to hold that the applicant is the owner of the money-lending business carried on by Srimathi Chandramathi and whether the assessment as upheld by the Appellate Tribunal was legal and
(2) On whom does the burden lie to establish the benami nature of the transaction and whether the burden has been discharged in this case ?'
The facts relevant to these questions are these :
The assessee is one Kurella Pullayya, a businessman of Masulipatam, Krishna District. The assessments relate to assessment years 1943-44 to 1948-49. The assessments have been made by the Income-tax Officer, Masulipatam Circle, under section 13, proviso, of the Indian Income-tax Act in respect of the income relating to the business of money-lending which the Income-tax Officer found as belonging to him, though he carried on the said business in the name of his wife, Srimathi Chandramathi. The assessee contended that he had nothing to do with the said business, that it was his wifes own, that the income was hers and that she alone should be assessed. This contention was rejected by the Income-tax Officer. On appeal, the Appellate Assistant Commissioner of Income-tax confirmed the finding of the Income-tax Officer and the assessment orders, with certain modifications. The Income-tax Appellate Tribunal agreed with the Appellate Assistant Commissioner, rejected the contention of the assessee and has submitted the case and the question involved as set out supra.
The assessee was a member of a Hindu undivided family which carried on business in cloth and money-lending under the name and style of Kurella Brahmayya & Sons. The assessee was a junior member of the family being the youngest of the four sons of the said Brahmayya. The family became divided on May 29, 1948, by a deed. Thereafter the assessee was assessed as an individual. The assessees first wife was one Rajyalakshmi who died in 1929. Thereafter, he married Srimathi Chandramathi in March, 1930. Her father was one Tadikonda Ramakrishna Rao, a Taluk Shroff. Srimathi Chandramathi was one of a family of five sons and six daughters. Her father was in affluent circumstances when she was married to the assessee. It does not appear that he paid any dowry.
The income-tax authorities came to know that the assessee was carrying on extensive money-lending business in the name of his wife, Srimathi Chandramathi, by advancing loans mostly to bus operators and cinema proprietors among others at high rates of interest. The authorities made detailed enquiries, and while so Srimathi Chandramathi filed voluntary returns of income for the six years commencing from 1943-44. Thereupon, notices were issued under section 23(2) of the Act, calling upon the assessees wife to produce the accounts and such other evidence as were relied on in support of her returns. She did not produce any cash book but produced only the following :
(1) A ledger otherwise known as 'Talapeeti' book opened on April 12, 1957;
(2) a note book containing advance of a loan of Rs. 3,000 to the assessees late father, Kurella Brahmayya, on May 7, 1924, at 9 per cent. relating to the assessees first wife, Rajyalakshmi; and
(3) a note book containing a list of persons from whom presents were alleged to have been received on the occasion of her marriage with the assessee.
The said amounts aggregating Rs. 14,703 were claimed as belonging to Srimathi Chandramathi and formed the nucleus for the loans and the money-lending outstandings, which stood at Rs. 53,319 on April 1, 1942. The income-tax authorities and the Appellate Tribunal rejected the plea of the assessee that the said amounts which were alleged to be the nucleus of the money-lending business belonged to Srimathi Chandramathi. They rejected the plea that the wedding presents aggregating Rs. 6,954 were received by Srimathi Chandramathi, and found that the entire sum of Rs. 53,319 belonged to the assessee on April 1, 1942, and that his wife was only his benamidar.'
Sri Ranganathacharis contentions before us on behalf of the assessee are two-fold : firstly, that the fact that the alleged nucleus did not belong to his wife, did not establish that it was provided by the assessee (husband of Srimathi Chandramathi) and that he had the income as the beneficial owner; and secondly, that it is improbable that the nucleus of Rs. 14,703 could have swelled to Rs. 53,319 by 1942.
We consider that the Income-tax Appellate Tribunal is right to finding that the nucleus of Rs. 14,703 belonged to the assessee himself for these reasons.
The said amount is comprised of three main items :
(1) Rs. 1,774 :- The assessee had advanced Rs. 3,000 which belonged to his first wife to the family business on May 7, 1924, carrying interest at 9% per annum and credited in her name (1st wifes name) with her father as guardian. The amount was transferred to the assessees account in March, 1930, after his wifes death. The balance on her account on September 16, 1936, was Rs. 1,773-10-0. This amount purported to be transferred to the account of Srimathi Chandramathi, the second wife of the assessee.
(2) Rs. 5,124 :- The gold ornaments and silver ware belonging to the assessees first wife, Rajyalakshmi, were not returned by her father after her demise; but in lieu thereof he agreed to pay the assessee a sum of Rs. 5,124-7-0. This amount was repaid in instalments by late Rajyalakshmis father by March, 1942. This amount undoubtedly belonged to the assessee as the heir of his deceased wife, Rajyalakshmi, and the amount purported to be transferred to his second wife, Chandramathi on May 21, 1937.
(3) Rs. 6,954 :- This amount comprised the wedding presents alleged to have been made to Srimathi Chandramathi. Apart from the fact that the account of the alleged presents was unacceptable, the presents of that value was rendered improbable by the fact that srimathi Chandramathi came of a family with limited means and that she married a widower Presents of that value could only have been made to the assessee.
Apart from these main items, sundry items of the value of Rs. 851 were added, making up a total of Rs. 14,703.
It is, therefore, convincingly shown that the nucleus aggregating Rs. 14,703 belonged to the assessee himself and that the transfers of items 1 and 2 purported to have been effected were only a make-believe. The finding of the Appellate Tribunal in this regard is therefore founded on adequate and convincing material and is unexceptionable.
We are also in agreement with the view expressed by the Appellate Tribunal that the nature of the money-lending business carried on on an extensive scale in such that is could not have been carried on by Srimathi Chandramathi on her own. The Tribunal has referred to the assessees sworn statement. When questioned about the management and control over the money lending business carried on in the name of his wife, Srimathi Chandramathi, he stated that he was in over-all management and control of the said business assisted by one Venkata Subba Rao and his clerks for the joint family business.
The departmental authorities had before them definite evidence of the loans advanced by the assessee. The authorities had examined the witnesses who had given evidence that they borrowed money from the assessee and not from his wife, that the moneys belonged to the assessee, that they were compelled to execute the pronotes in the name of Srimathi Chandramathi and that the discharged pronotes were destroyed by him.
There is, therefore, no doubt that the said nucleus was the assessees and that the money-lending business was carried on by him in reality and that his wife is a mere name lender.
The next contention of Sri Ranganathachari that possibly this nucleus of Rs. 14,703 could not have swelled to Rs. 53,319 cannot be acceded to.
There is evidence that loans were advanced by the assessee in the name of his wife at high rates of interest. It may also be mentioned that it was the case set up before the authorities that an amount of Rs. 6,954 claimed by the assessees wife as her own being the value of the presents alleged to have been received by her had swelled to Rs. 37,900 by February 24, 1941. This shows the untenability of the contention that the nucleus could not have swelled to Rs. 53,319 by April 1, 1942. We have already referred to the evidence tendered before the income-tax authorities in regard to the loans at high rates of interest. It does not appear also that this contention was advanced before the Appellate Tribunal. However, we find that this contention is bereft of merit.
The first question is, therefore, answered in the affirmative, viz., that there is material to hold that the assessee is the owner of the money-lending business carried on by his wife, Srimathi Chandramathi, and that the assessment as upheld by the Appellate Tribunal is legal.
Question No. 2 of the Reference :- It is settled law that the burden of establishing benami is on the party who alleges; so that in this case the burden does lie on the income-tax authorities to establish that the business carried on in the name of Srimathi Chandramathi is in fact the business of the assessee and that his wife is only a name lender.
We find that this burden has been discharged by the income-tax authorities. We refer to the material discussed by us supra in answering question No. 1 of the reference. We have also to notice that the material comprises of the information furnished by the assessee himself in part and the other evidence gathered by the income-tax authorities.
The question of onus, however, does not present any difficulty as it would appear that it was not disputed before the Appellate Tribunal that the sum of Rs. 53,319 representing the aggregate loans and investments as on April 1, 1942, in the name of Srimathi Chandramathi, assessees wife, did not belong to her.
A bench of this court has ruled in Raghava Reddi v. Commissioner of Income-tax :
'The assessee is certainly in a better position than the Income-tax Officer to know the particular source from which he derives the income. Section 106 of the Indian Evidence Act lays down that, when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. It has, therefore, been held by all courts, without any dissenting note, that the burden of proving that a particular income has its origin in capital source lies upon the assessee, for it is within his particular knowledge to know that fact.'
We have referred to this only to show that the assessee is bound to place the information regarding the particular sources of income.
We are in respectful agreement with the view expressed in the said decision. We find that as discussed in answer to question No. (1) of the Reference, there is ample material for the assessment as upheld by the Appellate Tribunal.
No other points are urged before us.
The reference is answered as above. The applicant will pay the costs of the respondent, Rs. 150.
Reference answered accordingly.