(a) Income-tax---

----Income---Finding that assessee's wife was a benamidar for him-- Benami---Burden of proof---Income of wife of assessee was assessable in his hands---Indian Income Tax Act, 1961.

(b) Income-tax

----Reference---Powers of High Court---High Court has no power to admit fresh evidence---Indian Income Tax Act, 1961, S. 256.

The law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. Again in some cases the onus may be heavy, whereas, in other cases it may be nominal. In certain circumstances, the onus can shift from time to time. In the case of a benami transaction where .the ostensible owner is not the real owner, the Court or authority concerned has to apply its mind to the various materials and the evidence available in the case end then to reach a conclusion objectively as to whether it is a case of benami or not. The authorities are entitled to look into the material on record, documents and other surrounding circumstances. Various factors may come into the reckoning of this question including reasonable probabilities and legal inference arising from proved or admitted facts.

The High Court in exercise of its advisory jurisdiction is not competent to consider any fresh evidence which was not a subject-matter of consideration before the Tribunal.

D, the wife of the assessed, had set up her proprietary business FA on April 8, 1970, as dealer of Suvega Motor Cycles, manufactured by Mopeds India Ltd. The capital invested by her was Rs.4,000 only, which she had received as a gift from her father. The books of account for the first time were closed on March 31, 1971, but no return of income was filed, nor was any assessment made. However, for the assessment year 1972-73, an assessment was completed in her hands on an income of Rs.28,767 as the proprietor of FA. In the previous year relevant to the assessment year 1973-74, the business continued as a proprietary business up to May, 1972, and from May 29, 1972, it was converted into a partnership business in which the wife of the assessee had a 40 percent share. In due course while framing the assessment order for the assessment year 1973-74 in the case of the assessee's wife, the Income-tax Officer took the view that she was only a benamidar of her husband who was the real owner of the business FA so long it was a proprietary business and thereafter, it was actually he, who was a partner in the firm through his wife. An amount of Rs.33,495 was brought to tax in the hands of the assessee as income from the business of FA, earned in the name of D---a benami of the assessee. The aforesaid amount included income from both the periods when FA was a proprietary business, and thereafter, the share of profits allocated to the wife of the assessee when that business was taken over on May 29, 1992, by a partnership concern. The aforesaid view taken by the Income-tax Officer was concurrently upheld by the Appellate Assistant Commissioner and thereafter, in second appeal by the Income-tax Appellate Tribunal. It had been held throughout by all the tax authorities and the Income-tax Appellate Tribunal that the wife of the assessee was incapable of either transacting the business, signing the agency agreement or arranging capital to run the business. The authorities held that the entire affairs of FA were managed by the assessed himself, inasmuch as the principals Mopeds India (P.) Ltd. had no information as to who was the proprietor of the business FA or that the business had been taken over subsequently by a partnership concern. It was admitted that D had studied up to Class IV in the Hindi Primary School. With regard to the investment in the business it had come on record that the security deposit amounting to Rs.20,000 made on March 16, 1971, for taking the agency was out of the loan which was arranged by the assessee on the strength of his friendship. Further, the assessee had set up another identical business under the name "S" capital in which was invested by withdrawing funds from FA. The connection between the two concerns was intimate, which suggested that the affairs of the two businesses were being managed by a single individual namely, the assessee. On a reference:

Held, (i) that on behalf of the assessee reliance was placed on a certificate purported to have been issued by D .authorising the assessee to represent her. This document had not been referred to, or relied, upon in any of the orders passed by the Revenue Authorities, or by the Income-tax Appellate Tribunal. It could not be considered by the High Court. Even if it were taken into account, it was clear that the principals had no knowledge of the authority under which the assessed had signed the agreement. On the contrary, the letter of November 18, 1975, sent to the Income-tax Officer by the principal, clearly indicated that they had been kept in the dark about the proprietor of the business FA or that they were dealing with someone else besides the assessee himself. The certificate could not be given any credence.

(ii) That the Tribunal had reached its conclusion on an appreciation of a number of facts established by evidence, and whether the conclusion of the Tribunal was sound or not., had to be judged not by considering the weight to be attached to each single fact, but by assessing the cumulative effect of all the facts in their .setting a whole. The Tribunal was legally correct in holding that D, the wife of the assessee was a benamidar and the business carried on in the name and style of FA really belonged to the assessee. The Tribunal was legally correct in confirming the addition of a sum of Rs.33,495 as the income of the assessee.

CIT v. A. Abdul Rahim & Co. (1965) 55 ITR 651 (SC) ref.

JUDGMENT

R. K. GULATI, J.---In pursuance of the directions of this Court under section 256(2) of the Income Tax Act, 1961, the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following three questions of law for the opinion of this Court:

"(1)Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally correct in holding that the assessee was a benamidar of his wife, Smt. Durgawati Singh, who had been carrying on the business under the name and style of Friends Automobiles?

(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally correct in holding that the assessee failed to produce any evidence, whatsoever, to show that Smt. Durgawati Singh was the absolute proprietor of Friends Automobiles?

(3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally correct to confirm the addition of a sum of Rs.33,495 as the income of the assessee?"

Briefly, the facts are that for the assessment year 1973-74 for which the previous year ended on March 31, 1973, the assessee, Uijai Bahadur Singh, filed his return of income in the status of ad individual from two sources, viz., (i) salary income as an employee of Friends Automobiles, a partnership concern, in which his, wife, Smt. Durgawati Singh, was a partner, and (ii) income from a proprietary business known as Sanjay Trading Corporation which held an agency from Super Speed (P.) Ltd. for purchase and sale of its products.

Smt: Durgawati Singh, the wife of theassessee, had set up her proprietary business Friends Automobiles on April 8, 1970, as dealer of Suvega Motor Cycles, manufactured by Moped India Ltd,. Coimbatore. The capital invested by her was Rs.4,000 only which she had received as a gift from her father. The books of account for the first time were closed on March 31, 1971, but no return of income was filed, nor any assessment was made. However, for the assessment year 1972-73 an assessment was completed in her hands on an income of Rs.28,767 as the proprietor of Friends Automobiles.

In the previous year relevant to, the assessment year 1973-74 which is' in dispute the said business continued as a proprietary business up to May, 1972, and from May 29, 1972, it was converted into a partnership business in which the wife of the assessee had 40 percent. share.

In due course while framing the assessment order for the assessment year 1973-74 in the case of the assessee's wife, the Income-tax Officer took the view that she was only a benamidar of her husband who was the real owner of the business Friends Automobiles so long it was a proprietary business and thereafter, it was actually he who was a partner in the firm through his wife. The Income-tax Officer further held that the income earned by her will be clubbed in the hands of her husband, namely, the assessee, in this reference. However, the disputed income was also assessed protectively in the hands of Smt. Durgawati Singh with the remarks: "As the return has been filed voluntarily the assessment is made on protective basis".

For the reasons given in his assessment order which the Income-tax Officer framed against the assessee for the assessment year in dispute, he recorded identical findings, viz., the benami character of business, and held that though the wife of the assessee was the ostensible owner of the business Friends Automobiles in reality, the assessee was the owner of that business. As a result of the view expressed in those two sets of assessment orders referred to above, an amount of Rs.33,495 was brought to tax in the hands of the assessee as income from business of Friends Automobiles, earned in the name of Smt. Durgawati Singly--a benami of the assessee. The aforesaid amount included income for both the periods when Friends Automobiles was a proprietary business and thereafter, the share of profits allocated to the wife of the assessee when that business was taken over on May 29, 1992, by a partnership concern.

The aforesaid view taken by the Income-tax Officer was concurrently upheld by the Appellate Assistant Commissioner and, thereafter in second appeal by the Income-tax Appellate Tribunal. It may be observed that against the assessment order the proceedings that followed in the case of the wife of the assessee are the subject-matter of a separate reference at the instance of the Revenue, being Income-tax Reference No. 260 of 1979 which was also heard alongwith this reference and has been decided by a separate order.

From a bare reading of the questions set out earlier and from the facts narrated above, it is apparent that the question that falls for consideration of this Court is whether Smt. Durgawati Singh was a benamidar of the assessee as held by the Income-tax Appellate Tribunal.

We have heard learned counsel for the parties. The only submission urged by learned counsel for the assessee was that the findings recorded by the Income-tax Appellate Tribunal and other tax authorities that the wife of the assessee was benamidar for him were vitiated in law, inasmuch as, the Revenue had not produced any cogent evidence in support of its case on the basis of which any such finding could have been recorded. In continuation of that contention it was urged that the Revenue had failed to discharge its burden that the apparent was not real and under these circumstances there was no justification to bring to tax the amount in dispute in the hands of the assessee.

We have considered these submissions carefully. It may be observed that the agency agreement with the manufacturer of Suvega Motor Cycles, viz., Mopeds India (P.) Ltd., was signed by the assessee. There is no dispute on this factual position. Probe intro the matter about the ownership of the business in the name of Friends Automobiles came to be made for the first time in the course of the assessment proceedings in the case of the assessee s wife in the assessment year 1973-74. At the time of the assessment for the immediately preceding assessment year, the said agreement was not produced before the assessing authority. The findings of benami came to be recorded by the tax authorities as well as by the Income-tax Appellate Tribunal considering the facts of the case and the other material which was gathered during the course of the enquiry by the Income-tax Officer. We would revert to those findings and the material referred to therein shortly at an appropriate place.

It cannot be doubted that the onus of establishing the benami character of the business is on the person ascertaining the benami nature of the transaction. In other words, the apparent must be real until it is shown that there are reasons to believe otherwise. The question whether an ostensible owner is the real owner of the business or as to whether it is held as benami for another person, has to be considered on a conspectus of all the facts and circumstances of the case. It is largely a question of fact. There is no acid test uniformly applicable. The question depends predominantly on the intention of the parties amongst other factors. Where the income-tax authorities are confronted with the situation to find out the reality in a given case they are entitled to look into the material on record, documents and other surrounding circumstances various factors may come into the reckoning of this question including reasonable probabilities and legal inferences arising from proved or admitted facts. This is what exactly has happened in the instant case.

The complaint made by learned counsel on behalf of the assessee that the findings of benami had been recorded without any cogent reason or basis, cannot be accepted. It has been held throughout concurrently by all the tax authorities and the' Income-tax Appellate Tribunal that the wife of the assessee was incapable of either transacting the business, signing the agency agreement or arranging capital to run the business. The authorities have held that the entire affairs of Friends Automobiles were managed by the assessee himself, inasmuch as the principals Mopeds India (P.) Ltd. had no information as to who was the proprietor of the business Friends Automobiles or that the business had been taken over subsequently by a partnership concern. This picture clearly emerges from the reply of Mopeds India (P.) Ltd., dated November 18, 1975, sent to the Income-tax Officer which reads as under:

"We acknowledge receipt of your Letter No. C. No. 120-D, dated 28th October, 1975, and would like to inform you that the dealership agreement referred to in our letter was signed by Mr. V. Singh '(Vijay Singh) for and on behalf of the proprietor and witnessed by Mr. A.N. Singh son of Ram Nardan Singh, Parsipur, Rameshwar, Varanasi (manager of the company). We do not have the details of the proprietor in our records and we have not received any intimation regarding the change of constitution of the firm. "

We have already observed that the agreement with the principals was signed by the assessee. On whose behalf that agreement was signed, if not for, himself, the assessee or his wife placed no material on record before the tax authorities.

Learned counsel for the assessee, however, placed reliance on a certificate, dated February 23, 1970, a copy of which is contained in Annexure 6 to the statement of the case submitted by the Income-tax Appellate Tribunal, to this Court. The said certificate is titled "TO WHOM IT MAY CONCERN".The certificate recites, inter alia, that Sri Vijai Bahadur Singh (the assessee in this reference), our senior representative is fully authorised to represent ourselves with the Government Department, Semi-Government Department, public and/or private sectors and to take such action or actions which he considers, would be in the interest of the company. The said certificate was purported to have been signed by Smt. Durgawati Singh for Friends Automobiles as proprietor.

In our considered opinion, the said certificate is of no assistance to the assessee for more than one reason. In the first instance, the said document has not been referred to or relied upon in any of the orders passed by the Revenue Authorities, or by the Income-tax Appellate Tribunal. There is nothing in the statement of the case or elsewhere in the paper book filed in this reference to indicate that the said certificate was ever placed on record during the course of the assessment or appellate proceedings or was relied upon at any stage. It is settled that this Court in exercise of its advisory jurisdiction, is not competent to consider any fresh evidence which was not a subject-matter of consideration before the Tribunal. Secondly, the reply of the principals, dated November 18, 1975, to which reference has been made earlier, clearly goes to show that the principals had no knowledge of the authority under which the assessee had signed the agreement. On the contrary, the letter of November 18, 1975, sent to the Income-tax Officer by the principals, clearly indicates that they had been kept in the dark about the proprietor of the business Friends Automobiles or that they were dealing with someone else-besides the assessee himself. The certificate relied upon by learned counsel for the assessee, in these circumstances, cannot be given any credence in these proceedings.

The matter does not end there The Appellate Assistant Commissioner in his order has observed:

"Another point which is noteworthy is that though the appellant has filed a copy of the agreement which is in the file, the name of the person entering into the contract is conspicuously absent there from. It is admitted before me that the lady has read up to class IV of the Hindi Primary School. Thus, even the educational qualifications of the lady did not make her capable of running a business."

There is no indication from the record of this case nor any material was brought to our notice which may indicate that the lady had, in any manner, engaged herself in the affairs of the business. On the contrary, the Tribunal in its order has recorded its finding in the following manner while commenting upon the reply, dated November 18, 1975, sent by Mopeds India (P.) Ltd:

"A perusal of the above letter shows that it was the assessee only who was dealing with the principals on behalf of the benami concern of Friends Automobiles and that the principals do not know the details of the alleged proprietor who happens to be the wife of the assessee, the agreement with Mopeds India Ltd., also does not indicate the name of the proprietor and the said agreement also had not been signed by the lady though she is alleged to be the proprietor of the Friends Automobiles."

With regard to the investment in the business it has come on record that the security deposit amounting to rupees twenty thousand (Rs.20,000) made on March 16, 1971, for taking the agency was out of the loan which was arranged by the assessee on the strength of his friendship. Further, the assessee had set up another identical business under the name "Sanjay Trading Corporation" the capital in which, was invested by withdrawing funds from Friends Automobiles. The connection between two concerns was too intimate, which adequately suggested that the affairs of the two businesses were being managed by a single individual, namely, the assessee. In this connection, the Appellate Assistant Commissioner in its order observed as under:

. . the security deposit amounting to Rs.20,000 made on March 16, 1971, for taking the agency was out of loans taken from various parties. From the confirmatory letters available on the file it is seen that all the loans have been given on the strength of friendship with Shri Vijai Bahadur Singh. Thus, the lady has neither contributed the labour nor the acumen nor the capital to run the business. It will be pertinent to note that Shri Vijai Bahadur Singh was an employee of D. L. W. and most of the loans are from D. L. W. parties or people with whom Shri Vijai Bahadur Singh came in contact while working there. Even the agreement for distributorship has not been signed by the lady and the manufacturers have been kept in the dark about the proprietorship of this business. It may also be worth mentioning here that a loan of Rs.20,000 taken by Friends Automobiles when it was a proprietorship concern has been passed on to Shri Vijai BahadurSingh when he started another business in the name of Sanjay Trading Corporation. It is also noteworthy in this connection that the appellant has also started, a similar business, i.e., agency of Super Speed (Pvt.) Ltd., the capital in which was invested by withdrawing Rs.20,000 from Friends Automobiles before it became a partnership concern. All these facts clearly show that there is not an iota of evidence to support the appellant's case that it was the lady who was carrying on the business of Friends Automobiles and was a partner in the firm. Friends Automobiles, whenit became a partnership concern. On the other hand, all these facts lead to the irresistible conclusion that it was Shri Vijai Babadur Singh, who ware carrying on the business as a proprietor and later on as a partner in Friends Automobiles and the lady was only his benamidar"

The view expressed by the Appellate Assistant Commissioner was upheld by the income-tax Appellate Tribunal, and the ultimate finding recorded by the Income-tax Appellate Tribunal, was as under:

"Thus, in view of the fact that the lady having been found to be wholly incapable of either transacting the business, signing the agency agreement or arranging capital to run the business, the only inference that could be drawn would be that the entire affairs of Friends Automobiles were monag6d,by the assessee himself. In view of this, the order of the Appellate Assistant Commissioner is confirmed."

Despite our repeated questioning learned cowl forthe assessee could not refer to us any material which may go to establish that Smt. Durgawati Singh the wife of the assessee, was in reality the proprietor of the business, Friends Automobiles. The contention that the Revenue has failed to discharge its onus to prove the benami character of the business on the facts of the case cannot be accepted. The law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. Again in some cases the onus may be heavy whereas, in other cases it may be nominal. In certain circumstances, the onus can shift from time to time.

In a case of benami transaction where an ostensible owner is not the real owner, the Court or authority concerned has to apply its mind to the various material and the evidence available in the case and then to reach a conclusion objectively as to whether it is a case of benami or not. We have already *referred to the circumstances which have weighed with the Tribunal and the other authorities in, arriving at their findings. Each one of the circumstances of which a mention is made in the order passed by the appellate authorities, is important by itself to indicate that it was the assessee who was running the business and arranging finances, etc. It is not open to this Court to embark upon the reappraisal of evidence and to come to a difference conclusion, particularly, when the findings of the Tribunal have not been challenged as being perverse or arbitrary and that. too, in the absence of any specific question in that behalf.

As pointed out earlier, the Tribunal has reached its conclusion on an appreciation of a number of facts established by evidence, and whether the conclusion of the Tribunal is 'sound or not, has to be judged not by considering the weight to be attached to each single fact, as, learned counsel for the assessee attempted to argue, but by assessing the cumulative effect of all the fads in their setting as a whole. Considering the totality of the circumstances, we are not prepared to say that the Tribunal in reaching its conclusion, has missed or misapplied the basic relevant principles of law. We find no infirmity in the view taken by the Tribunal that on the facts and circumstances of thecase, the business carried on by the wife of the assessee, in reality, belonged to the assessee.

It is noteworthy to mention that in the orders passed by the Tax Authorities and that by theIncome-tax Appellate Tribunal, there is no discussion about the benami character of the assessee's wife as a partner of the firm when' the business of Friends Automobiles was converted into a partnership business. Indeed no arguments were addressed before this Court by learned counsel for the assessee on the above aspect of the matter. From the partnership deed which has been placed on the records of the case, it is clear that out of the four partners who constituted the firm, the assessee s wife and Jai Narain Singh under the terms of the agreement were required to contribute Rs.20,000 and Rs.5,000 towards the capital of the firm and were allotted 40 percent. and 30 percent. share, respectively, in the profits and losses in the partnership business. The remaining two partners were taken only as working partners and were not obliged to contribute any capital and had given 15 percent. each as their share in the profits of the partnership business. The firm had taken over the running business of Friends Automobiles which hitherto was a proprietary concern. The stock which was in existence as on the date of change-over, was taken over by the firm.

Learned counsel for the assessee was unable to say that the -capital which had been invested in the partnership business-in the name of the wife of the assessee had not come out of the business Friends Automobiles when it was a proprietary concern. Further, the assessee himself looked after the affaires of the partnership business though allegedly as an employee of the firm.

In CIT v. A. Abdul Rahim & Co. (1965) 55 ITR 651, the Supreme Court has observed as under (head note):

". . . if any partner is only a benamidar for another, it can only mean that he is accountable to the real owner for the profit earned by him from and out of the partnership. Therefore, a benamidar is a mere trustee of the real owner and he has no beneficial interest in the property or the business of the real owner. But, in law, just as in the case of a trustee, he can also enter into a partnership with other. . . If a benamidar possesses the legal character to enter into a partnership with another, the fact that he is accountable for his profits to, and has the right to be indemnified for his loses by, a third party or even by one of the partners does not disgorge him of the said character. "

Although the aforesaid observations were made in a different context while deciding a question about the grant or refusal of registration to the firm, in our opinion, those observations will equally govern the situation when the real owner of an income is sought to be assessed earned through a benamidar partner in a firm.

In view of the aforesaid discussion, we answer question No. 1 in favour of the Revenue and against the assessee by saying that the Income-tax Appellate Tribunal was legally correct, in holding that Smt. Durgawati, the wife of the assessee, was a benamidar and the business carried on in the name and style of Friends Automobiles really belonged to the assessee.

Questions Nos. 2 and 3 are answered in the affirmative, in favour of the Revenue and against the assessee.

The reference is answered accordingly, No orders as to costs.

M.B.A./3288/FCReference answered.