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Chimanlal Umaji Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 218 of 1976 (old No. 479 of 1973)
Judge
Reported in[1980]121ITR507(MP)
ActsIncome Tax Act, 1961 - Sections 147 and 256
AppellantChimanlal Umaji
RespondentCommissioner of Income-tax
Appellant AdvocateChaphekar, Adv.
Respondent AdvocateA.M. Mathur, Adv.
Excerpt:
- - the available records clearly show that it is chimanlal, the assessee, who has put up laxmiben as a partner in the new firm, otherwise there is no justifiable reason as to why she should get the highest percentage of profit, namely, 38%. it was contended on behalf of the assessee that because chimanlal was giving his whole-time attention to the business, he was getting commission under an agreement, but from a consideration of the entire evidence placed on record, we are satisfied that smt. 4. having heard the learned counsel, we are satisfied that no question of law arises on the findings reached by the tribunal......were three partners in this firm, namely, hemchand tarachand, pratapchand laxmichand and smt. laxmiben. laxmiben is the wife of the assessee, chimanlal. minor gulabchand was also admitted to the benefits of the partnership. the first two partners are outsiders. the firm applied for registration which was granted and the firm was held to be genuine. the proceedings relating to the registration of the firm terminated by order of the tribunal dated 7th february, 1970. the tribunal in that order did not go into the question whether laxmiben was merely a benamidar for the assessee. the assessee in his returns did not show any income as partner of the firm, gulabchand chimanlal. the assessments were, however, re-opened under section 147 of the act on the finding that laxmiben was merely a.....
Judgment:

G.P. Singh, C.J.

1. This order shall also dispose of Miscellaneous Civil Cases Nos. 219, 220, 221, 222, 237, 238 and 239, all of 1976. These are all applications made by the assessee under Section 256(2) of the I.T. Act, 1961,

2. For the assessment years 1961-62 to 1968-69, the assessee was assessed as an individual. The facts, briefly stated, are that the assessee was previously a partner of the firm, M/s. Chimanlal Umaji & Sons. This firm consisted of the assessee and his two major sons. His minor son, Gulabchand, was admitted to the benefits of the partnership. According to the case of the assessee, this firm was dissolved in the previous year corresponding to the assessment year 1961-62 and a new firm, by name M/s. Gulabchand Chimanlal was constituted. There were three partners in this firm, namely, Hemchand Tarachand, Pratapchand Laxmichand and Smt. Laxmiben. Laxmiben is the wife of the assessee, Chimanlal. Minor Gulabchand was also admitted to the benefits of the partnership. The first two partners are outsiders. The firm applied for registration which was granted and the firm was held to be genuine. The proceedings relating to the registration of the firm terminated by order of the Tribunal dated 7th February, 1970. The Tribunal in that order did not go into the question whether Laxmiben was merely a benamidar for the assessee. The assessee in his returns did not show any income as partner of the firm, Gulabchand Chimanlal. The assessments were, however, re-opened under Section 147 of the Act on the finding that Laxmiben was merely a benamidar for the assessee in the firm of Gulabchand Chimanlal. This was the question which was raised before the ITO, the AAC and the Tribunal. All these authorities held against the assessee. The concurrent finding of all these authorities is that Laxmiben was merely a benamidar for the assessee. In deciding this question, the Tribunal referred to the arguments of both the parties and the relevant material on the said question and observed as follows :

'It will be seen from the evidence placed on record by the authorities below that Mrs. Laxmiben has not much experience in the line of business carried on by the firm of M/s. Gulabchand Chimanlal. The small capital contributed has also been provided by the assessee himself. There is no evidence worth the name to support the contention advanced on behalf of the assessee that it is out of her stridhan that she made the capital contribution. The magnitude of the business running into crores of rupees is such that it is impossible to accept the contention advanced on behalf of the assessee that two outside partners, Hemchand and Pratapchand, contributing between themselves the paltry capital of Rs. 3,500 only and the lady, Laxmiben, would be in a position to carry on the affairs of this firm, M/s. Gulabchand Chimanlal, in their own right. It appears from the evidence of Chimanlal himself that he was managing the affairs of the firm, booking orders, keeping the check on the sales and also on the accounts and that he alone is the moving spirit behind the entire work of this firm and Mrs. Laxmiben is only a veil behind which the real person working is the assessee himself. The business premises continued to be the same as were being used by Chimanlal Umaji and Sons. The available records clearly show that it is Chimanlal, the assessee, who has put up Laxmiben as a partner in the new firm, otherwise there is no justifiable reason as to why she should get the highest percentage of profit, namely, 38%. It was contended on behalf of the assessee that because Chimanlal was giving his whole-time attention to the business, he was getting commission under an agreement, but from a consideration of the entire evidence placed on record, we are satisfied that Smt. Laxmiben is only a benamidar of the assessee and the income of the share of profit earned in the name of Mrs. Laxmiben has rightly been taxed in the hands of' the assessee. In view of this finding that the income earned in the name of Mrs. Laxmiben is really the income of the assessee, the ITO was justified in initiating reassessment proceedings under Section 147(a) of the Income-tax Act, 1961. Therefore, so far as the quantum appeal is concerned, we confirm the order of the AAC and dismiss the assessee's appeal.'

3. On the applications made by the assessee for referring the question whether the finding that Laxmiben was a benamidar for the assessee is valid or not, the Tribunal held that no question of law was involved and rejected the reference applications.

4. Having heard the learned counsel, we are satisfied that no question of law arises on the findings reached by the Tribunal. The share capital invested by Laxmiben in the firm was Rs. 11,500. The assessee's case was that this amount was the personal property of Laxmiben. The finding, however, is that this amount was invested by the assessee himself. Laxmiben was entitled to 38 per cent. as share in the profits of the firm. The minor, Gulabchand, was admitted to the benefits of the firm to the extent of 25 per cent. As observed by the Tribunal, the entire business running into crores of rupees was managed by the assessee and he was the moving spirit behind the entire business of the firm. The inference that Laxmiben was a mere benamidar for the assessee, in our opinion, in the circumstances of the case, does not involve the application of any principle of law, and the Tribunal cannot be directed to refer a question on that point.

5. In Sree Meenakshi Mills Ltd. v. CIT : [1957]31ITR28(SC) , the Supreme Court held that an inference from the facts of a case that a transaction is a benami transaction does not involve the application of any principle of law to the facts established in the case and is a pure question of fact which cannot be made the subject of reference under the I.T. Act. It is true that there is no direct evidence that Laxmiben was a benamidar for the assessee; but direct evidence in such cases is impossible unless the parties themselves admit the benami character of the transaction. The finding that Laxmiben was inducted as a benamidar for the assessee is a finding of fact even though it is a finding based on inferences drawn from other facts. In Meenakshi Mills' case : [1957]31ITR28(SC) , the Supreme Court observed that 'when the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact.' In Rai Bahadur Mohan Singh Oberoi v. CIT : [1973]88ITR53(SC) , the Supreme Court again observed that the finding recorded by the Tribunal on the point whether a purchase was made benami or not is one of fact and that such a finding based upon some evidence would have to be accepted by the High Court. Having regard to the facts and circumstances of the case, it cannot be said that the finding reached by the Tribunal in the instant case is such which no reasonable Tribunal would have reached or that the finding is perverse or is based on no evidence. In our opinion, as the finding reached by the Tribunal is a pure finding of fact based on evidence, no question of law arises and the Tribunal cannot be directed to state a case and refer that question.

6. The applications are dismissed. There shall, however, be no order as to costs.


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