1. This appeal filed by the assessee relates to the assessment year 1980-81. The appeal relates to the assessability of the income from the property at No. 131, Usman Road, Madras-17, as part of the income of the assessee. According to the facts of this case the properly in question was purchased in the name of Smt. B. Vatsala, wife of the assessee by document No. 2733 of 1967, dated 5-10-1967 for a consideration of Rs. 48,000. The assessee contended that this purchase money was given by him to his wife as a loan to her. In support of this, the assessee produced an agreement stated to have been entered into between himself and his wife on 16-9-1970, according to which the assessee was to receive the rent from the property purchased in the name of his wife in lieu of interest payable by the assessee's wife on the sum of Rs. 48,000 stated to have been provided for by the assessee by way of loan and, that this arrangement would continue till the repayment of the loan. The assessee has also produced a copy of the corporation receipt according to which the property stood in the name of the assessee's wife Smt. Vatsala. It was submitted that the income from this property should not be assessed in the hands of the assessee, since the acquisition was by means of a borrowal from the husband and not by way of a gift by the husband to the wife. The assessee submitted that the amount borrowed from him had been paid back during the year out of the loan received from the Canara Bank, to whom the property was mortgaged and let out. The building itself was demolished during the year in order to construct a new building out of advances received from the Canara Bank. According to the assessee, whatever be the position prior to January 1980, subsequent to January 1980, the income should not be included in his hands as the loan has been cleared.
2. During the assessment proceedings, the ITO has noted that the assessee while explaining the source for the acquisition of the property in the assessment year 1968-69 by his letter addressed to the ITO has stated as under : In the above case, I have already filed a return of income for the assessment year 1968-69 admitting an income of Rs. 3,678. Further, I now noticed that I have to include income from house property at No. 25, Usman Road, Madras-17, which I purchased on 5-10-1967 for a sum of Rs. 51,900 (Rs. 48,000 cost price plus Rs. 3,900 registration expenses).
The ITO has also brought out the fact that in the assessment year 1971-72, while filing the valuation report from a registered valuer for the property at No. 25, Usman Road, Madras-17, standing in the name of Smt. Vatsala and No. 25A, Usman Road, Madras-17, belonging to the assessee, there was no mention of any money due from Smt. Vatsala. From these facts, the ITO came to the conclusion that the property in question even though stands in the name of Smt. Vatsala, the assessee is the real owner of the property. Accordingly, he included the income from the property in question in the hands of the assessee.
3. Aggrieved, the assessee filed an appeal before the AAC challenging the order passed by the ITO. Before the AAC, the assessee contended as under : (1) The ITO was wrong in holding that the income from the property bearing door No. 131, Usman Road, Madras-17 was liable to be assessed in the hands of the appellant; (2) The ITO was wrong in holding that although the property stood in the name of Smt. Vatsala, it did not prove that the property was purchased by her ; (3) The ITO having held that the evidence produced was sufficient to sustain before the Court and other connected authorities to prove that the property in question was owned by the appellant's wife, was wrong in holding that the claim that the property was purchased by the appellant's wife was not proved ; (4) The ITO failed to note that in the statement filed either for income-tax or for wealth-tax, no mention was made that the above property had been purchased by the appellant's wife and that the appellant had provided funds by way of loan, as it was neither necessary nor material, this does not meet the substance of the ITO's argument that if as claimed by the appellant that the property belonged to his wife and not to him, he could have very well shown the amount of money due from the said Smt. Vatsala and the interest amount therefor for wealth-tax purposes ; and (5) After the repayment of the alleged loan to the appellant, there is no case at all for assessing the income. However, on considering the facts arising in this case and after hearing the parties, the AAC confirmed the view taken by the ITO.4. Not satisfied with the order passed by the AAC the assessee is in appeal before us. Before us, the learned counsel for the assessee submitted that the AAC was wrong in holding that the property bearing door No. 131, Usman Road, T-Nagar, Madras-17, belonged to the appellant and the assessment of income in the hands of the appellant was correct and was to be upheld. It was submitted that this conclusion is not based on evidence on record and cannot be supported. He further submitted that the authorities below were wrong in their view that the sum of Rs. 4,972 being the income from door No. 131, Usman Road, Madras-17, belonging to the appellant's wife was liable to be assessed in the hands of the appellant. The learned counsel for the assessee further submitted that the AAC was wrong in holding that even at the time of original investment, the property was meant to belong only to the appellant and consequently the assessment of income in the hands of the appellant was correct and was to be upheld. It was submitted that the said conclusion is not based on evidence. According to the learned counsel for the assessee, if the appellant had intended that the property should belong only to himself and not to his wife, then the appellant would have purchased the property in his own name and there would have been no need to enter into an agreement with his wife on 16-9-1970. The learned counsel for the assessee further pointed out that the officer himself has stated in the assessment order that the evidence produced by the assessee is sufficient before the Court and other connected authorities to prove that the property in question is owned by his wife. According to the learned counsel for the assessee, the authorities were wrong in placing reliance on the letter addressed by the appellant to the ITO while explaining the source for the acquisition of the property in 1968-69 for the purpose of arriving at the conclusion that the intention of the appellant was all along to acquire the property for his own benefit though purchased in his wife's name. He further submitted that neither the aforesaid letter nor the statements accompanying the income-tax and wealth-tax returns would support the department's case that the intention of the appellant was to acquire the property in question for his own benefit in his wife's name. According to the learned counsel for the assessee, the agreement dated 16-9-1970 entered into between himself and his wife would amply prove that the real owner of the property is his wife. According to the learned counsel for the assessee, the memorandum filed by the appellant along with his wealth-tax return was under a misconception as to his right vis-a-vis the property. Therefore, it was pleaded that the income from the above property should be excluded from his total income. On the other hand, the learned departmental representative supported the order passed by the AAC.5. We have heard the rival submissions made by the parties. The fact remains that for the assessment year 1980-81 corresponding to the accounting year ending on 31-3-1980, the appellant filed a return of income admitting total income of Rs. 24,890, but in doing so he did not include the income from property bearing door No. 131, Usman Road, Madras-17, on the ground that the said income is to be assessed in the hands of his wife, Smt. Vatsala, in whose name the property stands.
According to the appellant, the consideration of Rs, 48,000 paid for the purchase of the above property under document No. 2733 of 1967 dated 5-10-1967 had been given by the appellant by way of loan to his wife Smt. Vatsala. The appellant also produced an agreement dated 16-9-1970 entered into between himself and his wife under which the appellant was entitled to receive rent from the aforesaid property in lieu of interest as long as the loan was outstanding. In support of the claim, the appellant produced the corporation tax receipts, which were in the name of his wife and the correspondence that had passed between his wife and the Canara Bank, to whom the property had been mortgaged and let out.
6. According to the department although the property was purchased and stood in the name of Smt. Vatsala and the evidence produced by the appellant was sufficient to sustain the claim in a Court of law to prove that the property belonged to or was owned by his wife, it would not be sufficient to prove that the property was purchased by her.
According to the authorities below nowhere in the income-tax and the wealth-tax return statements till the assessment year 1978-79, the appellant had mentioned that he had lent money. The authorities below also pointed out that while explaining the source for the purchase of the above property for the assessment year 1968-69, the appellant had stated that he had purchased the property for a sum of Rs. 51,900 and that this established that the appellant was the real owner. The authorities below have also pointed out that the valuation reports filed after 1971-72 and the statements filed for the income-tax and the wealth-tax purposes did not mention that money was due to the appellant from his wife Smt. Vatsala. The authorities below were also of the view that the appellant had taken this stand to avoid the huge income-tax and wealth-tax that would have become payable in respect of the new building constructed with the loan provided by the Canara Bank.
7. On the other hand, the case of the appellant was that the property in question was purchased by the assessee's wife by sale deed dated 5-10-1967 for a consideration of Rs. 48,000. According to the assessee, this amount was lent to his wife by way of loan and the loan was repaid on 15-1-1980 by cheque drawn by Smt. Vatsala in favour of the appellant. During the time when the loan was in existence, there was an agreement between the assessee and his wife dated 16-9-1970, according to which, the appellant was entitled to collect the rent from the said property in lieu of interest. Thereafter, Smt. Vatsala became entitled to collect the rent from the above property in her own right as the owner of the property. It was also mentioned that the building which was already in existence was demolished by Smt. Vatsala in or about December 1979. After the demolition of the building, Smt. Vatsala applied to the Corporation of Madras for sanction of the construction of a new building. The sanction was accorded on payment of licence fee of Rs. 4,200 on 23-11-1979. It was also the case of the assessee that the new building was built up by Smt. Vatsala out of the money borrowed from Canara Bank and the said Canara Bank is now occupying the said building as a tenant.
8. Thus, the case of the department was that the property in question even though stands in the name of the assessee's wife, the real owner of the property is the assessee. The ordinary rule is that the apparent state of affairs is real unless the contrary is proved. The burden of proving that a transaction is benami and the owner is not the real owner always rests on the person asserting it to be so and this burden has to be strictly discharged by adducing legal evidence of a definite character which would either directly prove the fact of benami or establish circumstances unerringly and reasonably raising an inference of that fact. The essence of benami is the intention of the parties and not unoften, such intention is shrouded in a thick veil which cannot be easily pierced through. But such difficulties do not relieve the person asserting the transaction to be benami of the serious onus that rests on him, nor justify the acceptance of mere conjectures or surmises as a substitute for proof. It is not enough merely to show circumstances which might create suspicion, because the Court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence-Krishnanand Agnihotri v. State of MP AIR 1977 SC 796, Jaydayal Poddar v. Mst. Bibi Hazra AIR 1974 SC 171 and Raj Ballav Das v.Haripada Das AIR 1985 Cal. 2.
9. It is for the department to prove that a house standing in the name of the wife--Ramkinkar Banerji v. CIT  4 ITR 108 (Pat.), Sovaram Jokhiram v. CIT  12 ITR 110 (Pat.), L. Sheo Narain Lal In re.
 26 ITR 249 (All.) or an amount standing in the name of the wife-S.N. Gangly v. CIT  24 ITR 16 (Pat.), or that a business carried on in the name of the wife-Kurella Pullayya v. CIT  45 ITR 364 (AP) and y. Rajan v. ITO  77 ITR 839 (AP) or shares purchased in the name of the wife-R.K. Murthi v. CIT  42 ITR 379 (Mad.), F. Ramaswami Naidu v. CIT  93 ITR 341 (Mad.) belong not to her but to her husband. Though an apparent must be considered real until it was shown that there were reasons to believe that the apparent was not the real, in a case where a party relied on self-serving recitals in documents, it was for that party to establish the truth of those recitals. The taxing authorities were entitled to look into the surrounding circumstances to find out the reality of recitals. For determining this question, no absolute formulae or acid test, uniformly applicable in all situations, can be laid down, yet in weighing the probabilities and for gathering the relevant indicia, the Courts are usually guided by these circumstances : (1) the source from which the purchase money came ; (2) the nature and possession of the property after the purchase ; (3) motive, if any, for giving the transaction a benami colour ; (4) the position of the parties and the relationship, if any, between the claimant and the alleged benamidar ; (5) the custody of the title deeds after the sale; and (6) the conduct of the parties concerned in dealing with the property after the sale. The above indicia are not exhaustive and their efficiency varies according to the facts of each case-Jaydayal Poddar's case (supra). Also see Vidyadhar Krishnarao Mungi v. Usman Gani Saheb Konkani AIR 1974 SC 658, Bibi Siddique Fatima v. Saiyed Mohammad Mahmood Hasan AIR 1978 SC 1362, Kanakarathanammal v. V.S. Loganatha Mudaliar AIR 1965 SC 271, Prakash Narain v. CIT  134 ITR 364 (All.), First ITO v. M.R. Dhanalakshmi Ammal  112 ITR 413 (Mad.), Ponnuswamy Nadar v. Narayanan Nadar AIR 1977 Mad. 19, Smt. Manohari Devi v. Choudhury Sibanava Das AIR 1983 Ori. 135 and Rajvir Singh v. Sarla Pratap AIR 1983 (NOC) 101 (All.).
10. The genesis of the concept of benami is that consideration for a transfer must flow from one person and the transfer is taken in the name of another person and the consideration so flowing for the transfer was not intended to be a gift in favour of the person in whose name the transfer is taken-Syed Abdul Khader v. Kami Reddy AIR 1979 SC 553. At the same time, where the husband purchased the property in the name of his wife with the intention t0 benefit her and to make her the owner of that property, subsequent change of intention of the husband would not divest the wife of the title acquired by her under the sale deed-Ammaponnammal v. Shanmugam Piliai AIR 1971 Mad. 370.
11. We have already set out the test laid down by the Supreme Court in the matter of determining the benami transaction. We have already seen from the facts of the present case that the property in question was purchased by the wife of the assessee by sale deed dated 5-10-1967 for a consideration of Rs. 48,000. This amount was said to be given as a loan by the assessee to his wife. There was an agreement between the husband and wife dated 16-9-1970, according to which the assessee was to receive the rent from the property purchased in lieu of interest payable by the assessee's wife on the sum of Rs. 48,000. This loan was repaid on 15-1-1980 by cheque drawn by Smt. Vatsala in favour of the appellant. Thereafter, the assessee's wife applied for a loan for Rs. 3 lakhs from the Canara Bank on equitable mortgage of the land and building and the said loan was sanctioned on 22-9-1979. From out of the loan so sanctioned by the Canara Bank, a sum of Rs. 54,000 was paid by the assessee's wife to her husband in repayment of the loan taken by her. After demolishing the existing building, the assessee's wife applied to the Corporation of Madras for sanctioning the construction of a new building and it was sanctioned on payment of licence fee of Rs. 4,200 on 23-11-1979. The corporation tax receipts are in the name of the assessee's wife. The assessee's wife let out the new building to the Canara Bank and she is collecting the rent. The assessee has filed the sale deed in question, the correspondence between the assessee's wife and the Canara Bank, the agreement dated 16-9-1970 and the letters written by the assessee to the income-tax department, etc., for our perusal. We have gone through the said documents. We have also seen that in the memorandum filed by the appellant along with the wealth-tax return for 1979-80, he has stated that the aforesaid property was being included in his wealth-tax return in lieu of the loan given to Smt.
Vatsala for the purchase of the house until the loan was returned.
According to the learned counsel for the assessee, this statement was made by the appellant since he was under a misconception as to his right vis-a-vis the property. It was also pointed out that in the assessment year 1968-69, the assessee in his letter addressed to the ITO has stated that he has purchased the property in question on 5-10-1967. But this statement of the assessee is in contravention of what is contained in the sale deed dated 5-10-1967. Thus on the face of the documentary evidence obtained in this case, the statements made by the assessee before the department will be of no consequence. Even the ITO in his order has observed that the evidence produced by the assessee may be sufficient before the Court and other connected authorities to prove that the property in question is owned by the assessee's wife. Thus, by applying the test prescribed by the Supreme Court cited supra to the facts of this case we are of the opinion that the department has not discharged the onus placed upon it in the matter of proving the benami transaction. Accordingly, we set aside the order passed by the first appellate authority on this point and allow the appeal filed by the assessee.