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First Income-tax Officer, City Circle V, Madras-34 Vs. M. R. Dhanalakshmi Ammal and Others. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberAppeal No. 206 of 1973
Reported in[1978]112ITR413(Mad)
AppellantFirst Income-tax Officer, City Circle V, Madras-34
RespondentM. R. Dhanalakshmi Ammal and Others.
Cases ReferredThangayi Ammal v. Gurunatha Gounder
Excerpt:
- .....who was the plaintiff in the original action, filed the suit for declaration of her title to the suit properties and declaration that they are not liable to attached in recovery proceedings with regard to the arrears of income-tax due by the third defendant and for costs of suit.the first respondent-plaintiff claimed to be the absolute owner of the suit properties situate in the villages of pudupakkam and kelambakkam by virtue of her purchases made, according to her, out of her own funds, under various sale deeds marked as exibits a-3 to a-10 of the year 1961 to 1965. the plaintiff claimed to be in possession of the said properties ever since the said dates, paying kist, etc. according to her, the defendant has no manner of right to the properties. she would allege that the third.....
Judgment:

RATNAVEL PANDIAN J. - The first defendant in O.S. No. 136 of 1970 on the file of the court of the Subordinate Judge, Chingleput, is the appellant. The first respondent Dhanalakshmi Ammal, who was the plaintiff in the original action, filed the suit for declaration of her title to the suit properties and declaration that they are not liable to attached in recovery proceedings with regard to the arrears of income-tax due by the third defendant and for costs of suit.

The first respondent-plaintiff claimed to be the absolute owner of the suit properties situate in the villages of Pudupakkam and Kelambakkam by virtue of her purchases made, according to her, out of her own funds, under various sale deeds marked as exibits A-3 to A-10 of the year 1961 to 1965. The plaintiff claimed to be in possession of the said properties ever since the said dates, paying kist, etc. According to her, the defendant has no manner of right to the properties. She would allege that the third defendant married one Saraswati Ammal in or about 1936 and the plaintiff is only one of his concubines, the third defendant having some other concubines also, viz., one Baby Ammal, one Jayalakshmi and one Geetha and no marriage has been solemnized between the plaintiff and the third defendant. The said other concubines also individually own separate properties. The plaintiff states that in respect of the arrears of income-tax due by the third defendant, the first defendant (Income-tax Officer) attached the plain schedule properties and applied and to the Tax Recovery Officer, Chingleput (second defendant) to bring the properties to sale under the execution certificate No. 974/K, dated November 5, 1968. Before that, the plaintiff had been served with a notice dated June 26, 1967, addressed to the third defendant intimating that the properties would be sold on August 3, 1967. Immediately after the service of the notice, the plaintiff filed a claim petition in July, 1967, under rule 11 of Schedule II to the Income-tax Act, 1961. Thereafter, the second defendant, after intimation to the first defendant, conducted an enquiry into the claim petition. During the course of the enquiry, the plaintiff filed the original title deeds, kist receipts, receipt issued by the electricity department for payment of electricity charges for pumpsets, etc., in support of her claim. The contention of the first defendant before the second defendant was that the properties were purchased by the third defendant benami in the name of the plaintiff and that the third defendant is the real owner. The first defendant did not adduce any evidence to show that the third defendant was in possession of the properties. The exclusive possession and enjoyment of the plaintiff were not at all questioned. In spite of it, her claim petition was dismissed on the ground that the sale deeds were taken in the name of the plaintiff only benami for the benefit of the third defendant. The plaintiff would state that the scope of the enquiry in a claim petition being limited, the question as to whether the transaction was benami or not should have been gone into by the second defendant. A perusal of the order, according to the plaintiff, would show that the second defendant did not apply his mind judicially to the question involved, and hence the order of the second defendant dismissing her claim is contrary to the provisions of rule 2 of the Schedule II to the Income-tax Act and is one without jurisdiction. Further, the above order, based on the income-tax assessment orders, when the plaintiff was not a party to the proceedings, is totally wrong. The second defendant, it was stated, failed to see that the income-tax department included the income from some other properties in the assessment orders and the income from the suit properties was not questioned before the department. Thus, questioning the action of the second defendant in rejecting the claim of the plaintiff, she filed the suit. In the suit she also pleaded that if really the third defendant wanted to have the beneficial interest in the suit properties, he would not have allowed the properties to stand in the name of the plaintiff who is no other than his concubine, especially when he has got a lawfully wedded wife. The fourth defendant is the official assignee, Madras.

The first defendant, who alone contested the suit, filed written statement contending that the suit is not maintainable in law, that the plaintiff is not the owner of the suit properties, that she had no funds of her own nor funds provided by here father and that no part of the consideration for the sale deeds in respect of the properties in her name passed either from her or from her father. The allegations as to possession and enjoyment of the properties are not true. The title deeds and the plaint schedule lands have always been in the possession of the third defendant who alone was in enjoyment of the suit properties. The entire consideration proceeded only from the third defendant who was a chronic tax defaulter and who placed the properties in the name of the plaintiff with the ulterior motive of screening them for the income-tax department and the creditors. The patta and the kist receipts follow the regular pattern of benami and they have no relation with the outlined existing facts. During the enquiry by the second defendant, no evidence was let in about the adequate means of the plaintiff to purchase the suit items, and, therefore, the order of teh second defendant is perfectly valid. There can be no question of advancement by the third defendant in favour of the plaintiff inasmuch as the third defendant himself was in highly embarrassed financial circumstances. The suit for mere declaration without a prayer for setting aside the order of the second defendant is not maintainable. Hence, the suit should be dismissed with costs.

Defendants Nos. 2 to 4 remained absent and were set ex parte.

On the above pleadings, the following issues were framed :

1. Whether the plaintiff has got title to the suit property 2. Whether the third defendant is the owner of the suit property 3. Whether the court fee paid is not correct 4. Whether the suit as framed is not maintainable 5. Whether the suit properties are not liable to be attached for the income-tax dues by the third defendant 6. To want relief, if any, is the plaintiff entitled ?

On the said of the plaintiff, two witnesses were examined including the plaintiff, the plaintiff as P. W. 1 and Ponnuswami, the karnam of Pudupakkam Village, as P. W. 2, exhibits A-1 to A-23 were marked on the side of the plaintiff, while the first defendant marked exhibits B-1 to B-4, No witness was examined on the side of the first defendant.

The learned subordinate judge, on a consideration of the oral and documentary evidence, found on issues Nos. 1, 2 and 5 that the plaintiff has got title to the suit properties, that the third defendant is not the owner of the properties and that the lands are not liable to be attached for the income-tax arrears due by the third defendant, and found issues Nos. 3 and 4 in favour of the plaintiff. Thus, the suit was decreed as prayed for.

Mr. Jayaraman, learned standing counsel for the income-tax department (appellant), challenging the findings of the court below, contends that the lower court erred in recording the finding that the plaintiff was in actual possession and enjoyment of the suit properties basing its conclusion on the kist receipts and other receipts for ancillary items, that the testimony of P. W. 1 is interested and as such no reliance could be place upon it, that the lower court having held that for the purchase of the first two items the third defendant had paid the purchase price and the plaintiff had no source or means to pay the same, nevertheless erred in holding that the plaintiff had utilised the income from the first two items of properties for the rest of items. According to the appellant, it was only the third defendant who had paid to purchase money for all the suit items and as such he is the real owner. The third defendant, it is said, having foreseen the tax liability, was purchasing properties in the plaintiffs name to screen them away for the tax recovery proceedings. It was urged that the circumstances appearing in this case did not in any way support a finding of the real title to the properties in the plaintiff.

The only question that mainly arise in this appeal is whether the plaintiff is only a benamidar for the third defendant and is thus having no exclusive title to the suit properties; in other words, whether the third defendant is the real owner of the properties, and the next point is whether consequentially the properties could be attached for the recovery of the income-tax arrears due by the third defendant.

The plaintiffs case is that she is only one of the consubines of the third defendant and that she has herself purchased the properties out of her own funds and as such the third defendant has no right whatsoever over the properties. The detailed in the plaint schedule are situate in Pudupakkam and Kelambakkam Villages of Chingleput District. The sale deeds in respect of these properties are marked as exhibits A-3 to A-10. Under the registered sale deed, exhibit A-3 dated June 14, 1961, the plaintiff purchased item 1 of plaint schedule extending to 12 acres 59 cents of nanja land in Pudupakkam Village for Rs. 16,500 from one Malaya Pillai and his wife, Ramayi Ammal. Under exhibit A-4 dated April 17, 1962, she has purchased item 2 of an extent of 4 acres 25 cents of punja land in Kelambakkam Village for a sum of Rs. 7,000 from one Veerabhadra Mudaliar. Likewise, she has purchased under exhibits A-5 to A-10, items Nos. 3 to 8 of the plaint schedule properties from various persons for a total sum of Rs. 6,650 made up of Rs. 650, Rs. 500, Rs. 1,500, Rs. 1,500, Rs. 1,000 and Rs. 1,500 respectively. Ever since the said purchases, the plaintiff claims to be in continuous enjoyment and physical possession of the properties. In support of her case, the plaintiff has deposed that she purchased these items of properties under exhibits A-3 to A-10, that the sale deeds remained with her from the dates of purchase and that she has been in enjoyment of the lands by paying the kist under exhibits A-11 to A-13, the kist receipts for Faslis 1376 and 1377. In her evidence she testifies to the fact that she has installed two electric motor pumpsets in the two wells in the first item of property and she has been paying the charges for the consumption of energy. Exhibits A-14 to A-16 are the bills for the current charges for the said pumpsets. Exhibits A-17 and A-18 are the receipts showing payment of current charges by her. Exhibit A-19 dated April 3, 1967, is a application given by the plaintiff, with the recommendation of the Rationing Officer, Saidapet Zone, and the statement of the village munsif of Pudupakkam. Exhibit A-20 is the application given by the plaintiff for transport of rice from an outside district to Madras City for personal consumption. P. W. 1 states that she has been in the habit of having paddy cultivated in the suit lands for her personal consumption by applying to the Civil Supplies department. Exhibits A-21 and A-22 are the permissions granted by the Deputy Commissioner for Civil Supplies for the transport of paddy to Madras. It is her further evidence that there is a small house in the first item of the petitioner in which she would stay on her visit to the land. The panchayat has been levying tax for the said house. Exhibit A-23 is the house tax receipt standing in her name. Thus, she has demonstratively proved not only by her oral testimony but also by the documentary evidence besides the sale deeds in her name, that she has been in absolute possession and enjoyment of the same. P. W. 2 is the karnam of Pudupakkam Village, where some of the suit items are situate. He states that he was the scribe of exhibits A-7 and A-10 and that P. W. 1 is in enjoyment of the lands purchased by her, paying the kist an personally cultivating the lands with the aid of coolies. With regard to the ands purchased under exhibits A-5 and A-6 in Pudupakkam Village and the land purchased under exhibit A-4 in Kelambakkam, P. W. 2 says that the plaintiff is in possession of these lands also by paying kist, etc. Thus, the evidence of P. W. 2 amply corroborates the evidence of P. W. 1. As a matter of fact, the first defendant, appellant, who is the sole contestant, does not dispute the fact the sale deeds are standing in the name of the plaintiff and as such the ostensible title rests with her. But the first defendant contends that despite the sale deeds standing in the name of the plaintiff, the third defendant is the real wonder of the suit properties and has taken the sale deeds benami in the name of the plaintiff who is his concubine. According to him, the sale deeds were thus taken benami in the name of the plaintiff by the third defendant only to defeat the claim of the income-tax department, to which the third defendant owes a huge sum running to more than a lakh of rupees by way of tax arrears. The contention of the plaintiff is that in case of benami transaction, the burden of proof leis heavily on the person who claims against the tenor of the deed, i.e., the alleged beneficiary, to show that the ostensible owner was a mere name-lender for another person and that the property was in fact purchased only for the benefit of the said other person and in this case the first defendant, appellant, has not discharged that burden of proof by adducing adequate and acceptable evidence. A Bench of this court consisting of both of us in Ponnuswami Nadar v. Narayanan Nadar [1976] MLJ 1 had the opportunity of examining the burden of proof to be discharged by the party who sets up the case of benami nature of transaction. We, in that case, pointed out that the burden would be discharged by satisfying the following well-known criteria, viz., (1) the source of purchase relating to the transaction, (2) possession of property, (3) position of the parties and their relationship to one another, (4) circumstances, pecuniary or otherwise, m of the alleged transfer, (5) the motive for the transaction, (6) the custody and production of the title deeds, and (7) the previous and subsequent conduct of the parties and that each of the abovesaid circumstances taken by itself is of no particular value and affords no conclusive proof of the intention to transfer the ownership from one person to the other; but a combination of some or all of them and a proper weighing and appreciation of their value would go a long way towards indicating whether the ownership has been really transferred or whether the real title lies. We have also held that in every benami transaction the intention of the parties is the essence, that is to say, the true test to determine whether the transaction is benami or not is to look into the intention of the parties, viz., whether it was intended to operate as such or whether it was meant to be colourable; if colourable, the transaction is benami, otherwise, the transaction is not benami, and that this issue cannot be displaced by mere conjecture or suspicion as to the various circumstances surrounding the transaction since the very object of the benami transaction is secrecy.

In the light of the above observations, let us analyse the evidence and documents in this case. The first defendant, appellant, has not chose to let in any oral evidence to show that he land have been purchased in the name of the plaintiff for the benefit of the third defendant. The plaintiff as P. W. 1 would say in the cross-examination that for the past 15 years, she and the third defendant are not in talking terms and there is no connection whatsoever between them and that her father gave her Rs. 7,000 on one occasion and Rs. 3,000 on a subsequent occasion, in the presence of her mother, and that her mother got this amount from her and lent it for interest and about 25 days prior to her mothers death, the mother gave all the amounts to her, and thus the plaintiff purchased the lands only from out of the amounts given to her by her father. Three years after the death of her father, she would depose that her brothers gave Rs. 12,000 to Rs. 15,000 to her share out of the amount got by selling their family properties. In re-examination she states that from the first item of property she was getting an income of Rs. 3,000 per year and from the second item she got Rs. 3,000 by selling the casuarina trees thereon. The trial judge, finding that the earliest purchase under exhibit A-3 was on June 14, 1961, for a sum of Rs. 16,500 held that the version of P. W. 1 about the funds given by her father and kept with her mother and that the funds handed over to her by her mother just 25 days prior to her death facilitated her to purchase the property, could not be true, and that since the third defendant was a famous cine actor earning large sum, it was reasonable to conclude that the consideration for exhibit A-3 should have been got only from the third defendant. Similarly, the learned judge has found that the purchase money for exhibit A-4 also should have been provided only by the third defendant. In other words, the lower court has pointed out that the sale price for exhibits A-3 and A-4 should have been got by the plaintiff only from the third defendant; but as regards the subsequent purchases, viz., under exhibits A-5 and A-6 they bare only for a pittance of a Rs. 650 and Rs. 600. The purchases under the exhibits A-7, A-8 and A-10 are for Rs. 1,500 each. The purchase under exhibit A-9 is for Rs. 1,000. The trial judge observed that the plaintiff should have been getting an income of not less than Rs. 3,000 from the land covered by exhibit A-3 and Rs. 2,000 from the land covered by exhibit A-4 in the next year, and so she should have considerable income for the purchase of the other items of properties under exhibits A-5 to A-10, and, therefore, these items cannot be said to have been purchased by the third defendant benami in the name of the plaintiff. However, the learned judge, in para. 9 of his judgment, has accepted the contention of the plaintiff that exhibit A-3 has been taken on June 14, 1961, when there has not been any huge arrears of tax payable by the third defendant, and, therefore there was no necessity for the third defendant to create a benami sale deed in favour of the plaintiff. Exhibit B-2 is a copy of the petition in I. P. No. 33 of 1967 on the file of this court, wherein the claim of the income-tax department was that the arrears of tax for 1955-56 was Rs. 75 for which demand has been made on July 27, 1959, and the next demand notice has been sent only on March 14,1966, for the arrears for the assessment year 1956-57 for a sum of Rs.1,208.09. The arrears amounted to huge sums only during the period 1961-62, for which the demand notice has been issued in March, 1966. This demand is long after the execution of exhibits A-3 and A-4. Therefore, the lower court is justified in coming to the conclusion that the sale deeds, exhibits A-3 and A-4, in the name of the plaintiff cannot be said to be benami, created in order to defeat the demand of the income-tax arrears, and that the case of benami cannot be accepted.

Coming to the question of the source of consideration, even though it was held that the sale price for the purchase of the lands under exhibits A-3 and A-4 was met by the third defendant, the surrounding circumstances indicate that the amounts should have been paid by the third defendant to the plaintiff only with the intention of benefiting his concubine and that c-ircumstance would justify the finding of title in favour of the plaintiff. Reliance is placed on the decision of this court in Thangayi Ammal v. Gurunatha Gounder [1963] 2 MLJ 151, wherein it was held that if the surrounding circumstances indicate that payment of consideration, though by the husband or by a paramour, was with the intention of benefiting the wife or concubine, as the case may be, that would justify a finding of title in favour of the plaintiff even if the plaintiffs plea that she paid the consideration has not been proved. We fully agree with the above observation and hled that this proposition on all fours applies to the facts of the present case, especially with regard to the provisions made under exhibits A-3 and A-4. The plaintiff has proved the possession of the titled deeds and the property not only by her oral evidence, but also by decided oncumentary evidence. The pattas are in her name. The kist and electricity charges are paid by her. In such circumstances, we hold that th first defendant has not discharged the burden of proof cast upon him in establishing the fact than these properties were taken benami in the name of the plaintiff by the third defendant with the object of defeating the claim of the income-tax department towards the arrears of tax due from him. On the other hand, there is clinching evidence, both oral and documentary, on the side of the plaintiff, which goes to prove that she is the real owner of the properties with goods title and that she is in absolute enjoyment thereof. Accordingly, we confirm the finding of the court below that the suit properties cannot be made liable of the income-tax arrears due by the third defendant.

The first defendant, appellant, has not challenged the findings of the court below on issues Nos. 3 and 4.

In the result, the appeal is dismissed but without costs.


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