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income-tax Officer Vs. Mangal Pd. GuptA. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberI. T. APPEAL NO. 1172 (ALL.) OF 1982 [ASSESSMENT YEAR 1978-79]
Reported in[1986]17ITD646(NULL)
Appellantincome-tax Officer
RespondentMangal Pd. GuptA.
Excerpt:
.....would not necessarily lead to the inference that the investments must have been made by the assessee. (supra) and the decision of the honble allahabad high court in the case of sri krishna (supra) is that such an affidavit can be relied upon as a good evidence of the facts deposed to therein unless the affidavit is self-contradictory or there is something intrinsic therein which discredits it or which renders it untrustworthy. mere suspicion, howsoever strong, can never take the place of proof. in the light of the evidence on the record and the position as discussed above, we are clearly of the view that the learned aac was justified in not upholding the action of the ito in treating the amount of rs. 3,591. the ito considering the fact that the assessee was living in a rented..........was used for the purpose of the residence and business :(i) that the assessees wife was a mere housewife without any independent source of income,(ii) that there was no evidence of any gifts,(iii) that there could be no savings from household as the withdrawals made by the assessee for domestic expenses were only the following :1976-77 rs. 2,250 1977-78 rs. 3,679 1978-79 rs. 3,591(iv) that in the account books of the firm gupta & co. (assessee is a 60 per cent partner therein) a sum of rs. 31,000 was debited in the name of smt. ram kumari gupta which was utilised in house construction, and(v) that after the completion of the first storey the house was let out to gupta & co. at the rate of rs. 500 per month which was being adjusted against debit balance.accordingly, he treated the.....
Judgment:
ORDER

Per Shri V. P. Elhence, Judicial Member - The department is aggrieved of the order dated 20-3-1982 of the learned AAC.

2. The first point involved in this appeal relates to the taxability in the hands of the assessee of the investment in the house property which stands in the name of the assessees wife Smt. Ram Kumar Gupta. The house, which is situated in Mohalla Buxipur in Gorakhpur was purchased on 26-8-1977 from one Viney Bhushan for Rs. 20,000 excluding registration expenses from which were Rs. 2,500. The sale deed stands in the name of Smt. Ram Kumari Gupta. This house was reconstructed and the ground floor was completed in May 1978, whereas the first floor was constructed later. The case of the assessee was that the house did not belong to him but to his wife whose sources of investment consisted of the money which she received from father and other relatives on marriage, her personal savings out of the household and moneys received by her children on different festivals and other ceremonial occasions. However, the ITO was influenced by the following considerations on the basis of which he drew the inference that the assessee was the real owner and in possession of the house which was used for the purpose of the residence and business :

(i) that the assessees wife was a mere housewife without any independent source of income,

(ii) that there was no evidence of any gifts,

(iii) that there could be no savings from household as the withdrawals made by the assessee for domestic expenses were only the following :

1976-77

Rs. 2,250

1977-78

Rs. 3,679

1978-79

Rs. 3,591

(iv) that in the account books of the firm Gupta & Co. (assessee is a 60 per cent partner therein) a sum of Rs. 31,000 was debited in the name of Smt. Ram Kumari Gupta which was utilised in house construction, and

(v) that after the completion of the first storey the house was let out to Gupta & Co. at the rate of Rs. 500 per month which was being adjusted against debit balance.

Accordingly, he treated the investment of Rs. 22,500 as unexplained in the hands of the assessee and assessed the same under section 69 of the Income-tax Act, 1961 (the Act).

3. The assessee, being aggrieved, came up in appeal before the learned AAC. The assessee placed reliance on his own letter and affidavit and the letter and affidavit of his wife. It was pleaded that it was for the department to establish that the transaction was benami. The learned AAC upheld the assessees contention that the onus of proof lay on the department. He observed that since the ITO had chosen not to cross-examine the deponents on their affidavits there was a presumption that he was satisfied with their contents. Reliance was placed by him in this connection on the decision of the Supreme Court in Mehta Parikh & Co. v. CIT [1956] 30 ITR 181. The learned AAC also relied upon the fact that in her affidavit the assessee had stated having taken a loan of Rs. 20,000 from one Mahadeo Prasad and having entered into an agreement dated 5-6-1978 with Gupta & Co. He therefore, took the view that the ITO was not justified in treating the investment of Rs. 22,500 as the unexplained income of the assessee.

4. In the appeal before us, Shri Satya Prakash, the learned departmental representative placed reliance on the order of the ITO. He referred to the decision of Honble Allahabad High Court in Sri Krishna v. CIT : [1983]142ITR618(All) for the proposition that it is neither a rule of prudence nor a rule of law that the statements made in the affidavit which remains uncontroverted must invariably he accepted as true and reliable. Relying upon the well known observations of the Supreme Court in the case of CIT v. Durga Prasad More : [1971]82ITR540(SC) , he submitted that the recitals in the affidavits were self-serving and that it was for the assessee to establish the truth thereof. Referring to the tests laid down by the Supreme Court in the case of Jaydayal Poddar v. Mst. Bibi Hazra : [1974]2SCR90 , Shri Satya Prakash submitted that the transaction in question was a benami one. He relied upon another decision of the Supreme Court in the case of Union of India v. Mokesh Builders & Financiers Ltd. [1978] UPTC 75 for the proposition that abstract considerations of onus are out of place and that the source whence consideration came and as to who actually enjoyed the benefits of the transfer were the real tests. He submitted that on the basis of these tests and in view of the want of evidence on the record, the inferences drawn by the ITO were supportable. On the other hand, Shri R. K. Gulati, the learned counsel for the assessee strongly supported the order of the learned AAC. He referred to the decision of the Honble Allahabad High Court in the case of L. Sheo Narain Lal, In re : [1954]26ITR249(All) in which it was held that if a house stands in the name of the wife, the presumption is that she is the owner thereof and that it is for the person alleging that she is a mere benamidar for her husband to prove the allegations by direct or circumstantial evidence. Referring to the decision of Assam High Court in Tolaram Daga v. CIT , he pointed out that the mere fact that the party purchasing the house was the assessees wife did not ipso facto make the assessee come into the knowledge of the sources from which the money was got. He also submitted on the basis of decision of the Supreme Court in CIT v. Daulat Ram Rawatmull : [1973]87ITR349(SC) that even if the explanation was to be rejected a finding could not be reached that the amount belonged to the assessee. Lastly, on the basis of the decision of the Honble Allahabad High Court in Prakash Narain v. CIT [1981] UPTC 255, he submitted that the motive for benami purchase was an important criterion and in the absence of any suggestion of a motive, the transaction could not be held to be benami.

5. We have considered the rival submissions as also the various decisions referred to above. The first point to be noticed is that the sale deed of the house property in question stands in the name of the assessees wife and the agreement dated 5-6-1978 executed with Gupta & Co. stands in her name. Thus, primarily the burden of proving that the apparent state of things was not the real state of things was on the party who says so namely the department. In other words, the department had to establish that the sale deed was obtained by the assessee in his wifes name benami even though the investment was actually made by him. This position would clearly follow on general principles and particularly because it was specifically so recognised by the Honble Allahabad High Court in the case of L. Sheo Narain Lal (supra) and no exception was held to be recognisable in the case of a husband and wife as in the present case. The Assam High Court also recognised the same proposition in the case of Tolaram Daga (supra) from the standpoint of section 106 of the Indian Evidence Act, 1872 which is to the effect that the burden of proving a fact is on one in whose special knowledge that fact is. The High Court held that the assessee cannot be presumed to have special knowledge of the sources from which his wife got the money. No doubt, when evidence has been led, the question of burden of proof loses its importance and we have only to see the source whence the investment was made. This is what the decision of the Supreme Court in the case of Mokesh Builders & Financiers Ltd. (supra) would come to with reference to the facts of the present case. No doubt, the question whether the transaction was benami requires to be examined in the light of the tests laid down by the Supreme Court in the case of Jaydayal Poddar (supra) and wherein the most important test laid down is as to who made the investment. The next point which requires to be notices, is that even if for the sake of argument the assessees wife failed to give a complete or satisfactory explanation of the sources of the investment, such a failure would not necessarily lead to the inference that the investments must have been made by the assessee. It is a different matter that in her own assessment it can be considered whether any addition can be made by way of unexplained investment. The decision of the Supreme Court in the case of Daulat Ram Rawatmull (supra) is relevant in this connection. Thus, the source or sources of investment have to be traced to the assessee and only such liability can be foisted on the assessee as is established to be ascribable to the assessee. Next, we come to the value to be attached to an affidavit on which no cross-examination is carried out by the ITO. The position which emerges from the decision of the Supreme Court in the case of Mehta Parikh & Co. (supra) and the decision of the Honble Allahabad High Court in the case of Sri Krishna (supra) is that such an affidavit can be relied upon as a good evidence of the facts deposed to therein unless the affidavit is self-contradictory or there is something intrinsic therein which discredits it or which renders it untrustworthy.

6. The evidence on the record now remains to be appreciated and assessed in the light of the above. Firstly, there is the letter and affidavit of the assessees wife in which the following sources are given for the purchase of the house :

(i) money received from father and relatives on marriage,

(ii) savings out of money received for domestic expenses, and

(iii) moneys received by children on different festivals and other ceremonial occasions.

Thus, the fact that she had no independent source of income loses its significance. Even with the withdrawals by the assessee of Rs. 2,250, Rs. 3,670 and Rs. 3,591 for the assessment years 1976-77 to 1978-79 the contention regarding savings cannot be ruled out as the savings were alleged for a long period of time. The assessee filed his own letter and affidavit to the same effect. These affidavits are clear and there is not contradiction pointed out on behalf of the department therein nor is there any intrinsic defect in them which may warrant their being treated as unworthy of belief. In case the ITO had any doubts he could have cross-examined the assessee and his wife on these affidavits to get at the details. The nature of the sources of investment as disclosed by the assessees wife, are such that documentary evidence thereof was not essential. As against these affidavits, there was no material before the ITO to show that the investment would have been made by the assessee himself. We agree with the observation of the learned AAC that the ITO had acted in this regard on the basis of mere conjectures and surmises. Mere suspicion, howsoever strong, can never take the place of proof. The accounting period relevant to the assessment year in question being 1-4-1977 to 31-3-1978 it is not necessary to examine the nature and source of the investment in the construction which took place after 31-3-1978. The accounting period relevant to the assessment year being 1-4-1977 to 31-3-1978 it is not necessary to examine the nature and source of the investment in the construction which took place after 31-3-1978. The assessment order shows that the plan of costruction was passed in January 1978. The assessment order also shows that the only investment considered by the ITO as taxable in the hands of the assessee was a sum of Rs. 22,500 representing the price of Rs. 20,000 and registration expenses of Rs. 2,500 and not any investment in the constructions up to 1-4-1978. It is, therefore, not necessary to examine the nature and source of the investment which is not relevant to the assessment year in question or which though relevant to the assessment year in question, does not relate to the purchase of the house property in question. In the light of the evidence on the record and the position as discussed above, we are clearly of the view that the learned AAC was justified in not upholding the action of the ITO in treating the amount of Rs. 22,500 as the assessees unexplained investment in the purchase of the house property.

7. The only other point involved in this appeal relates to the addition of Rs. 5,409 made by the ITO for low household expenses. The withdrawals made by the assessee for household expenses for the assessment year in question amounted to Rs. 3,591. The ITO considering the fact that the assessee was living in a rented house and that he was maintaining a good standard, estimated the household expenses at Rs. 9,000 and accordingly made an addition of Rs. 5,409. The assessee pointed out before the learned AAC in appeal that he had only returned for the assessment year in question an income of Rs. 7,162 and there was no material to show that the assessee was maintaining a good standard of living. The learned AAC accepted these submissions and deleted the addition. Before us, Shri Gulati additionally pointed out that the assessees family consisted of himself and his wife. After considering the rival submissions, we are of the view that in view of the above facts and circumstances, there was no jurisdiction for the ITO to make any addition. We, therefore, uphold the order of the learned AAC in this regard.

8. In the result, the departments appeal fails and is dismissed.


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