ASHOKA MOTOR FINANCE CO. VS INCOME-TAX OFFICER
1999 P T D 1969
[226 I T R 595]
[Allahabad High Court (India)]
Before P. K. Mukherjee and M. C. Agarwal, JJ
ASHOKA MOTOR FINANCE CO.
Versus
INCOME-TAX OFFICER
Civil Miscellaneous Writ Petition No. 160 of 1982, decided on 03/09/1996.
Income-tax---
----Firm---Registration---Cancellation of registration---Partner A investing funds as his capital in firm ---I.T.O. issuing notice under S.185 and holding that funds belonged to V, father of A, and A only benamidar of V---Father has social obligation to establish his son in business or profession and also to provide funds---By father merely providing funds, son did not automatically become benamidar of father---Notice issued by I.T.O. not valid---Indian Income Tax Act, 1961, S.185.
The petitioner was a partnership firm in which one of the partners was A. A invested certain funds as his capital in the firm and explained that a part thereof was received by him from his uncle, H. The explanation of A was not believed by the Department and the Department assumed that the funds actually came from V, the father of A. The Assessing Officer issued a notice under section 185 of the Income Tax Act, 1961, to the firm stating that the funds actually belonged to V and there was reason to believe that A was a benamidar of V and called upon the firm, to show-cause why the registration of the firm for the assessment years 1974-75 to 1979-80 should not be cancelled. A supplementary affidavit was filed by the petitioner-firm to show that the additions that were made to the income of V on account of the investment of A in the petitioner-firm had been deleted by the Tribunal holding that H from whom A claimed to have received the amounts as gifts had the source of gifting the money to him. In the supplementary counter affidavit filed to the supplementary affidavit it had been stated that there were three additions of Rs.17,000, Rs.5,000 and Rs.3,000 out of which the first and the third only had been deleted by the Tribunal and the second one of Rs.5,000 had not been considered by it. On a writ petition challenging the issue of the notice under section 185 of the Act:
Held, allowing the petition, that A was the son of V and, therefore, even if it was assumed that the father provided the funds to the son for investment as his capital in the partnership firm, it could not be assumed that the son was the benamidar of the father. For holding the son to be the benamidar of the father, several other things would have had to be shown to establish that the father was the real recipient of the income from the partnership firm. The notice did not indicate any circumstance leading to that conclusion and did not even mention that A was not the real beneficiary of the partnership firm. It was the social obligation of the father to establish his son in business or profession and, if necessary, to provide funds there for. If V provided funds to his son A, the latter did not automatically become a benamidar. The notice issued under section 185 was not valid.
Vikram Gulati for Petitioner.
Ashok Kumar for Respondent.
JUDGMENT
M. C. AGARWAL, J.---By this petition under Article 226 of the Constitution of India, the petitioner, a partnership firm, registered under the Income Tax Act, 1961 (hereinafter referred to as "the Act"), challenges a notice, dated February 3, 1982, a copy of which is Annexure "15" to the writ petition, issued by the Assessing Officer, namely, the Income-tax Officer, Budaum, under section 185 of the Act requiring the petitioner to show-cause why its registration for the assessment years 1974-75 to 1979-80 be not cancelled.
We have heard Sri Vikram Gulati, learned counsel for the petitioner, and Sri Ashok Kumar, learned standing counsel for the respondent. The petitioner, as stated above, is a partnership firm in which one of the partners is Sri Arvind Kumar Gupta. He invested certain funds in the firm as his capital and explained that a part thereof was received by him from his uncle, Sri Harsh Nandan Gupta. This explanation was not believed and it was assumed by the Department that the funds actually came from Sri Virendra Pal Gupta, the father of the said Arvind Kumar Gupta. The impugned notice was issued by the Assessing Officer stating that the funds actually belonged to Virendra Pal Gupta and there was reason to believe that Arvind Kumar Gupta was benamidar of Virendra Pal Gupta. The petitioner filed this writ petition and by an order, dated March 17, 1982, this court stayed further proceedings in pursuance of the impugned notice, dated February 3, 1982.
No counter-affidavit has been filed.
A supplementary affidavit was filed by the petitioner annexing there with a copy of the Tribunal's order for the assessment years 1973-74 and 1974-75-to show that the additions that were made to the income of Virendra Pal Gupta on account of the investment by Arvind Kumar Gupta in the petitioner firm have been deleted by the Tribunal holding that Harsh Nandan Gupta from whom Arvind Kumar Gupta claimed to have received the amounts as gifts had the source of gifting the money to him.
In the supplementary counter-affidavit filed to the supplementary affidavit it has been stated that there were three additions of Rs.17,000, Rs.5,000 and Rs.3,000 out of which the first and the third only have been deleted by the Tribunal and the second one of Rs.5,000 has not been considered by it.
As stated above, Arvind Kumar Gupta is the son of Virendra Pal Gupta and, therefore, even if it be assumed that the father provided the funds to the son for investment as his capital in the partnership firm, it cannot be assumed that the son is a benamidar of the father. For holding the son to be a benamidar, several other things would have had to be shown to establish that the father was the real recipient of the income from the partnership firm. The impugned notice does not indicate any circumstance whatsoever leading to that conclusion and does not even mention that Arvind Kumar Gupta is not the real beneficiary of the partnership firm. It is the social obligation of a father to establish his son in business or profession and, if necessary, to provide funds there for. If Virendra Pal Gupta provided the funds to his son, Arvind Kumar Gupta, the latter does not automatically become a benamidar. The view taken by the Assessing Officer was perverse and mala fide and the impugned notice cannot be sustained.
We may mention that although the notice in question related only to the assessment years 1974-75 to 1979-80 and it is only the proceedings in pursuance of the impugned notice 'that were stayed, the Assessing Officer is not shown to have initiated any such action for any subsequent year though he could do so under the provisions of section 185 of the Act, and in the supplementary counter-affidavit filed to the supplementary affidavit which has been sworn very recently on April 2, 1996, the respondent has not stated that any such action was initiated for any subsequent year and Arvind Kumar Gupta has been found to be a benamidar of Virendra Pal Gupta.
For the above reasons, the writ petition is allowed and the impugned notice, dated February 3, 1982, a copy of which is Annexure "15" to the writ petition, is hereby quashed. The petitioner will get its costs of this writ petition from the respondents that we assess at Rs.1,500.
M.B.A./1937/FCPetition allowed