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Commissioner of Income-tax Vs. Mrs. Hasina Begum (Wife) and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 440 of 1975
Judge
Reported in[1986]158ITR215(Cal)
ActsIncome Tax Act, 1961 - Sections 64, 256(1) and 271(4A)
AppellantCommissioner of Income-tax
RespondentMrs. Hasina Begum (Wife) and ors.
Excerpt:
- .....by the income-tax officer that the story of the assessee advancing a sum of rs. 1,40,000 to his wife as loan was concocted by the assessee subsequently. the tribunal, in itsearlier order, held that the wife must have some savings from agricultural income and this, they estimated at rs. 25,000. accordingly, it held that investment in the property could be considered in the hands of the wife and the husband in the ratio of 30 : 162. the tribunal held that while considering the question of 'benami', it would not be necessary to look into whether the property stood in the name; of the assesses or in the name of the wife. 6. in the departmental appeal in the present case, the revenue contended that the view taken by the tribunal in the earlier order should be followed and the view taken by.....
Judgment:

Ajit Kumar Sengupta, J.

1. For the assessment year 1970-71, the Tribunal has referred the following questions of law under Section 256(1) of the Income-tax Act, 1961 :

' 1. Whether, on the facts and in the circumstances of the case, the Tribunal had evidence to hold that the sum of Rs. 1,40,000 invested by the assessee in the construction of house property at 19/1, Balu Hakak Lane, Calcutta, was advanced by way of a loan to his wife

2. If the answer to question No. one is in the negative, then on a correct interpretation of the provisions of Section 64(iii) of the Income-tax Act, 1961, the Tribunal was justified in holding that the income from property at 19/1, Balu Hakak Lane, was not assessable in the hands of the assessee ?'

2. The facts of this case are stated hereafter. The assessee, since deceased, was a medical practitioner and was attached to Islamia Hospital. He was also employed in Serajuddin & Co. In the proceedings for assessment to tax for the assessment year 1970-71, the Income-tax Officer included the income from a house property standing in the name of the assessee's withSmt. Hasena Begum, at No. 19/3, Balu Hakak Lane, in the total income of the assessee. The two plots of land were acquired at a cost of Rs. 28,000 and Rs. 14.000 in 1956-57, and thus the total cost of land was Rs. 42,000. Smt. Hasina Begum filed a disclosure petition under Section 271(4A) of the Income-tax Act, 1961, stating that she earned the income of Rs. 1,50,000 in the course of several years out of the agricultural properties but offered the same for assessment to income-tax in the absence of conclusive evidence acceptable to the Income-tax Department. Smt. Hasina Begum is a daughter of late Samsul Huda who died in 1920 leaving about 90 bighas of land in the district of Hooghly, containing extensive agricultural land, ponds, etc. Late Samsul Huda had only one son and one daughter. The son died in 1953 and the whole of 90 bighas of agricultural land had devolved upon the assessee's wife who filed details of income earned from the agricultural lands. Besides, she also stated that the construction of the house property was made out of the income earned by her to the extent of Rs. 54,218 of which Rs. 1,127 was earned in 1959, Rs. 8,945 was earned in 1960, Rs. 9,645 was earned in 1961, Rs. 13,501 was earned in 1962 and Rs. 21,000 was earned in 1963. The disclosure petition of the wife was rejected by the Commissioner of Income-tax and the assessee, it has been stated, had to make a disclosure petition stating that the said income was earned by him. In the disclosure petition, the assessee stated that the amount of Rs. 1,40,000 would be assessed in the hands of the assessee. Before the Income-tax Officer, the assessee stated that he advanced a loan of Rs. 1,40,000 to his wife for the construction of the house property but, according to the Income-tax Officer, this was an afterthought. Before the Income-tax Officer, the assessee produced one bound cash book containing 92 pages in which the opening capital was showed at Rs. 16,505. As the opening capital could not be explained, the Income-tax Officer took the view that the cash book was written up with some specific purpose and none else than to support the contention that the loan was given by the assessee to his wife. He thus included the income from house property in the total income of the assessee. When the assessee went in appeal before the Appellate Assistant Commissioner, he excluded this from the total income of the assessee having regard to the earlier decision in Appeals Nos. 601 and 602/III(I)/71-72. The Appellate Assistant Commissioner in his earlier order considered the following evidence to show that the property belonged to his wife :

(1) The deeds of conveyance relating to purchase of the plots showed that the plots were purchased by the appellant's wife.

(2) Receipts given by the Calcutta Corporation in respect of payment of the local taxes, which are all in the name of the appellant's wife.

(3) Counter foils of rent receipts granted to the tenants are in the name of the assessee's wife.

(4) Note book maintained by the assessee's wife from January 1, 1954, showing realisations of monthly rent from the tenants and the disbursements out of the same.

3. The Appellate Assistant Commissioner also noticed from the note book maintained by the wife that several amounts were paid back to the assesses by his wife by way of return of loan given by him.

4. The Appellate Assistant Commissioner also noticed that a note book had been maintained by the assessee showing the details of money repaid by his wife by way of return of the loans given by him. He also found that some of these payments were made by account payee cheques and that from the total wealth statement of the assessee's wife, a sum of Rs. 53,339 was received as loan outstanding from her to the assessee and that an affidavit had been filed by the assessee's wife making gift of half portion of the property to her son. It was stated by the assessee, before the Appellate Assistant Commissioner that no interest had been charged from the wife because it was sin to charge interest from anyone, according to the principles of Islam. From this, he came to the conclusion that the wife was the legal and beneficial owner and not the assessee, that there was no adequate material by which the Income-tax Officer had come to the conclusion that the house property income should be included in the total income of the assessee. The Appellate Assistant Commissioner excluded the income from house property from the total income of the assessee. Earlier Bench of the Tribunal reversed the decision of the Appellate Assistant Commissioner in I.T.A. Nos. 2607 to 2614 (Cal) of 1972-73. The Tribunal therein took note of the fact that ultimately a settlement was made by the assessee with the Commissioner and that the assessee admitted before the Commissioner that out of total investments of Rs. 1,92,000, a sum of Rs. 1,40,000 represented the concealed income of the assessee. The Tribunal noted the fact that the assessee agreed to spread over Rs. 1,40,000 in the course of six assessment years between 1959-60 and 1964-65. It thus held:

'It appears that the concealed income of Rs. 1,40,000 out of the total investment of Rs. 1,92,000 was arrived at by allowing Rs. 27,000 as having come out of the wife's agricultural savings and another sum of Rs. 27,000 representing the rental incomes received during the said years from the property.'

5. The Tribunal accepted the view taken by the Income-tax Officer that the story of the assessee advancing a sum of Rs. 1,40,000 to his wife as loan was concocted by the assessee subsequently. The Tribunal, in itsearlier order, held that the wife must have some savings from agricultural income and this, they estimated at Rs. 25,000. Accordingly, it held that investment in the property could be considered in the hands of the wife and the husband in the ratio of 30 : 162. The Tribunal held that while considering the question of 'benami', it would not be necessary to look into whether the property stood in the name; of the assesses or in the name of the wife.

6. In the departmental appeal in the present case, the Revenue contended that the view taken by the Tribunal in the earlier order should be followed and the view taken by the Appellate Assistant Commissioner in the year under reference was wrong, The assessee himself appeared and argued the case. He stated that the Tribunal did not appreciate the facts of the case properly and did not adjudicate the issue in proper perspective, that the assessee never stated before the Income-tax Officer that the very fact that funds had been contributed by the assessee would go to the finding that the property income belonged to the assessee, that the assessee had already contended that a loan had been given by the assessee to his wife and that the assessee's books of account and the assessee's wife's books of account also corroborate the position that the loan had been advanced by the assessee to his wife and that repayment of the loans in some cases had been made by cheques which could not be denied by the income-tax authorities and this piece of evidence is vital and may lead to the conclusion that the finding given by the Tribunal in the earlier years is not correct and that the case requires reconsideration. It was further stated that the assessee had no other option but to disclose the amount in his own name only to buy peace, as the matter was dragging for a long time. It was also submitted by the assessee that the matter relating to disclosure could not be settled by the Department, unless the assessee agreed to the position that the amounts utilised in the construction of the house property was made by the assessee himself. The assessee referred to the terms of the settlement as contained in the letter of the Income-tax Officer, Special Investigation Branch, Calcutta, dated August 28, 1970:

'I am directed to refer to your letter dated July 13, 1970, in which you have requested the Commissioner of Income-tax, West Bengal-I, Calcutta, to intimate the Income-tax Officer, G-Ward, Dist. III(I), to assess you as per your return filed immediately after the settlement and to say that the subject-matter of the settlement was the concealed income with which the property was constructed. The settlement was that the entire concealed income should be assessed in your hands and no part of the same would be considered for assessment in the hands of your wife. Both you and your wife filed your returns on this basis so far as the amount ofconcealed income was concerned. In this context, it was said in this office letter of even No. dated June 30, 1970, that you and your wife have filed returns for the relevant years strictly on the basis of the terms of the settlement because the whole of the concealed income was shown by you in your returns and no part of the same was shown in the returns filed by your wife.'

7. The assessee especially emphasised upon this part of the statement 'the subject-matter of the settlement was the concealed income with which the property was constructed' and stated that this did not mean that no loan was advanced by the assessee to the wife and no loan was taken by her. It was also argued that no evidence was brought on record that loan was advanced and that no repayment had been made. The Tribunal upheld the view of the Appellate Assistant Commissioner. Before the Tribunal, it was contended by the assessee that in the earlier order, the Tribunal did not consider the question of loan in proper perspective and the repayment of loan was also made by cheque. It was also submitted that the finding of the Appellate Assistant Commissioner regarding the genuineness of the books maintained by the assessee or his wife should not be brushed aside lightly. The Tribunal held that the matter regarding the assessee's advancing a loan to the wife was an important one. The Tribunal observed as follows:

'The Tribunal in the earlier order stated that it should have been disclosed by the assessee to the Department as to who really out of the husband and the wife owned the property in question. It was stated that, as regards the purchase of land, it has been accepted that the assessee's wife had land, that she had agricultural income and that she could purchase the land but she had been given the benefit of only Rs. 25,000. There is no direct nexus between the husband's money and balance amount with regard to the purchase of land and as such the evidence goes to indicate that the lands belonged to the wife. In order to see whether a transaction is benami or not, three factors have to be considered. Firstly, who contributed the money for the purchase of land and for the construction of the property; secondly, who managed the property and, thirdly, who enjoyed the usufruct of the property. In the circumstances, we find that management of the property was with the wife and usufruct of the property was enjoyed by the wife also. In the earlier order, the Tribunal did not accept the affidavit because it was given before the Appellate Assistant Commissioner. But this affidavit is already before the revenue authorities. By cross-examining the lady, the contents of the affidavit had not been controverted and, as such, according to the decision in Mehta Parikh and Co. v. CIT [1956] 30 ITR 181 , the contents of the affidavit are to be acceptedas correct. Secondly, for an ordinary middle class assessee, property is acquired for the benefit of the wife and his children and not for the assessee. Viewed from this standpoint, the provision of Section 64 has been introduced. This aspect of the matter has not been considered by the Tribunal at all. Even assuming that the funds have been contributed by the assessee in the year under appeal, the property income cannot be added to the total income of the assessee in view of the ratio of the decision of the Bombay High Court in Popatlal Bhikamchand v. CIT : [1959]36ITR577(Bom) . Applying the ratio of the decision to the instant case, it could reasonably be held that subsequent income from property which was acquired out of the rental income is not assets transferred by the assessee, and that income cannot be regarded as arising even indirectly, from the assets transferred by the assessee. Parliament has not sought to tax in the hands of the assessee income arising from accretion to assets transferred by the assessee to his wife.'

8. The Tribunal further held as follows: 'In the instant case, when the land was purchased, it cannot be held that the intention of the parties was that the consideration money must come from the assessee. In the instant case, on the contrary, the Tribunal accepted the position that some consideration came from the assessee's wife. Besides, we have held that there was no nexus between the transfer of money by the assessee towards the purchase of land and the purchase of land by the assessee's wife. The assessee stated that he and his wife were permanent natives of West Bengal and are living in West Bengal for centuries, that the wife had land in the district of Hooghly which she received on the death of her father and that the land was enjoyed by her absolutely on the death of her father. It was also stated that an enquiry was made by the Income-tax Inspector of Hooghly Charge as to whether the assessee's wife had agricultural land and income from agriculture and it is on the basis of this enquiry, the Income-tax Department came to the conclusion that the assessee's wife had some money with reference to income from agriculture. This would indicate that there is no necessity of having a declaration at the time of settlement by the assessee and the assessee's wife to divest the assessee himself from the ownership of the money and to transfer the same to his wife as a loan. No document is necessary to transfer movable property. Besides it is against the marital relationship that there should be an agreement between the wife and the husband to transfer money. If such an agreement is made, it would go to indicate that it is against ordinary conduct of human life and such agreement was a contrivance to evade tax. Thus when the wife acquires the property out of the funds transferred by the husband, having regard to the meaning of 'disposition' as found in Stroud's Judicial Dictionary and having regard to the ratio of a decision ofthe Madras High Court, mentioned supra, it could be held that this was a loan given by the assessee to the wife which could be found from the fact that both of them maintained accounts and they have been accepted by the higher fact-finding authority, the Appellate Assistant Commissioner. The affidavit filed by the lady would also indicate that the property was for the benefit of the assessee and his son. Loans have been taken and repaid and there had been repayment by cheques. In such circumstances, it can be treated as transfer of money between the assessee and the wife and the amount could be regarded as loan given by the assessee to the wife.'

9. It has been contended by the learned advocate for the Revenue that there is no evidence before the Tribunal to come to the conclusion that the assessee gave the loan to the wife for the purpose of the construction of the house property in question. He has also submitted that the inference drawn by the Tribunal is without any basis at all. He has also criticised the various observations made in the appellate order of the Tribunal. He has submitted that the Tribunal should not have brushed aside the earlier order of the Tribunal to come to a contrary finding. We are, however, not concerned in this case with the observations of the Tribunal nor are we concerned with any principles of law. None of the findings of the Tribunal has been challenged. The contentions raised by the Revenue are not covered by the question referred to us. The question before us is whether there was any evidence for the finding that a sum of Rs. 1,40,000 invested by the assessee was advanced by way of a loan to his wife. The admitted fact is that the assessee's wife had agricultural land and agricultural income. In the earlier order, the Tribunal had accepted that a part of the consideration for the purchase of the land on which the house property in question was constructed came from the assessee's wife. An affidavit was filed by the assessee's wife before the Appellate Assistant Commissioner and, accordingly, the said affidavit was not considered by the Tribunal in its earlier order. Though this affidavit was before the revenue authorities, they did not consider the said affidavit at all. The statements made in the said affidavit remained uncontroverted. The Tribunal, in its earlier order, held that the assessee had agricultural income and a part of the consideration for the land on which the house property was constructed came from the assessee's wife and, therefore, a part of the said house property belonged to the assessee. If the assessee's wife is admittedly a part owner of the house property as held by the Tribunal in its order, a part of the rental income would necessarily belong to the assessee's wife. The statement was made by the assessee and the assessee's wife that the money which had been advanced by the assessee to his wife was by way of loan. This statement of the assessee's wife was not disputed nor was the assessee's wife cross-examined by the Income-taxOfficer. When the statement is not controverted nor was sought to be denied on behalf of the Revence, such a statement is evidence, and the finding is based on the admitted statement of the assessee's wife believed by the Tribunal. The Tribunal also accepted the genuineness of the account books produced by the assessee showing the accounts maintained by the assessee and his wife. It was found as a fact by the Tribunal that the assessee's wife had made repayment of the loan partly by cheques. This finding has not been challenged. It was also found that the assessee's wife had rental income from the house property in question and the rent receipts were issued by the assessee's wife. The loan was repaid out of her rental income. Where the assessee's wife had independent income and a part of the consideration for the land on which the house property is constructed comes from the wife and the wife as owner of the house property realises the rents and profits thereof and repays the money advanced by the husband out of her income, the conclusion that the husband advanced the money as and by way of loan to the wife is a possible and reasonable conclusion. The quantum and the quality of the evidence adduced or materials before the Tribunal are not at issue. On the facts and circumstances of the case, we are of the view that the Tribunal had evidence to hold that the sum of Rs. 1,40,000 advanced by the assessee to his wife was by way of loan. In the premises, we answer the first question in the affirmative and in favour of the assessee. In view of our answer to the first question in the affirmative, the second question does not call for any answer. We, therefore, decline to answer the second question.

10. There will be no order as to costs.

Dipak Kumar Sen, J.

11. I agree.


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