(a) Income‑tax‑‑‑

‑‑‑‑Benami transactions‑‑‑Property‑‑‑Ownership of property ‑‑‑Benami purchase of property‑‑‑Burden of proof on Revenue to. establish benami nature of purchase‑‑‑No proof that property had been purchased benami‑‑‑Income from property was not assessable in hands of alleged benami purchaser‑‑‑Indian Income Tax Act, 1961, S. 22.

(b) Income‑tax‑‑‑

‑‑‑‑General principles ‑‑‑Benami transactions‑‑‑Burden of proving that a transaction was benami "is on Revenue" ‑‑‑Criteria for determining whether transaction was benami.

The ordinary presumption of law is that the apparent state of facts is real unless the contrary is proved and, therefore, the burden of proving that ‑a transaction is sham or that the person in whose name the property stands is not the real owner but is only a benamidar for another, is on the taxing authorities. For determining the question no absolute formulae uniformly applicable to all situations can be laid down. Yet, in weighing the probabilities Courts are usually guided by the following circumstances: (1) the source from which the purchase money came; (2) the nature and possession of the property after purchase; (3) the motive, if any, for giving the transaction a benami colour; (4) the position of the parties and the relationship, if any, between the alleged real owner and benamidar; (5) 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 efficacy varies according to the facts of each case.

The Assessing Officer held that the assessee had purchased a property in benami names and subsequently constructed a compound wall at an estimated cost of Rs. 40,000. Accordingly, a sum of Rs. 40,000 was added as income from undisclosed sources and the rental income from the property for the subsequent years was brought to tax in his hands. The Tribunal held that the Revenue had failed to establish the benami nature of the transaction. On a reference:

Held, that the burden of proving the nature of a sham or a benami transaction was on the taxing authorities. It was not enough to show circumstances which might create suspicion because the Court could not decide on the basis of such suspicions. It had to act on legal grounds established by evidence. Unless it was established that the conclusions of the Tribunal were perverse and based on surmises and conjectures the order could not be interfered with. The Tribunal was justified in deleting the addition of Rs.40,000 relating to the improvement of the property in the year 1972‑73 and the addition of Rs.15,000 for the assessment years 1973‑74, 1976‑77 to 1979‑80 and 1981‑82 to 1983‑84 as the income from the said property.

Karishananand Agnighotri v. State of M.P. (1977) AIR 1977 SC 796 and Jaydayal Poddar v. Mst. Bibi Hazra (1974) AIR 1974 SC 171 ref.

P.K.R. Menon for the Commissioner.

JUDGMENT

ARIJIT PASAYAT, C.J.‑‑‑Heard.

All the I. T. Rs. are disposed of by this common judgment as the dispute is common. It relates to the levy of tax on certain incomes from house property. The assessee was assessed to tax under the Income Tax Act, 1961, in short "the Act"). The Assessing Officer was of the view that the assessee derived property income from the building let out on rent treating the income to be from an asset owned by the assessee. The Assessing Officer held that the assessee had purchased a property for a consideration of Rs. 80,000 in the names of Sri Abdul Rahiman, Sri K. Abdullah Kunhi and Sri K.P. Abdullah. After purchasing the property in their names, the assessee constructed a compound wall at an estimated cost of Rs. 40,000. The assessee took the stand that he had nothing to do with either the purchase of the property or construction of a compound wall. This plea was not 'accepted. A sum of Rs. 40,000 was added to the income of the assessee as income from undisclosed sources for the assessment year 1972‑73 relating to investment in the construction of the boundary wall. The rental income was added and tax was levied for the rest of the years involved that is 1973‑74, 1976‑77 to 1979‑80 and 1981‑82 to 1983‑84. So far as the assessment year, 1972‑73 is concerned, the Income‑tax Appellate Tribunal. Cochin Bench (In short the Tribunal"), observed that the Revenue have failed to establish that the property in question belonged to the assessee, disbelieving the stand of benami purchase taken by the Revenue. In view of the finding recorded in the assessment year 1972‑73, in the subsequent periods the rental income included in the assessable income of the assessee was directed to be deleted. On the basis. of the direction given by this Court in several original petitions under section 256(2) of the Act, the following common question has been referred for opinion:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in deleting the addition of R.s.40,000 relating to the improvement of the Mangalore property, in "the year 1972‑73 and the addition of Rs.15,000 for the assessment years 1973‑74, 1976‑77 to 1979‑80 and 1981‑82 to 1'983‑84 as the income from the said property?"

According to learned counsel for the Revenue, the Tribunal failed to appreciate the factual aspects in their proper perspective and the conclusions are perverse. The assessee's stand is that the question of benmai is one of fact, giving rise to no question of law.

On consideration of the factual aspects, the Tribunal observed that there was no material to show that the assessee made investment for the property in question and/or regarding the benami nature of the transactions. Certain factual aspects were highlighted by the Revenue, which were analyzed in detail by the Tribunal to conclude that the Revenue had failed to prove that the assessee was the real owner of the concerned properties. The Tribunal considered the relevant factual aspects. In the case at hand the ordinary presumption of law is that the apparent state of facts is real unless the contrary is proved, and therefore, the burden of proving that a transaction is sham or that the person in whose name the property stands is to the real owner but is only a benamidar for another, is on the taxing authorities. For determining the question no absolute formulae or acid test, uniformly applicable to all situations can be laid down. Yet, in weighing the probabilities and for gathering the relevant indicia, Courts are usually guided by the following circumstances:‑‑

(1)The source from which the purchase money came, (2) the nature and possession of the property after 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 alleged real owner and benamidar, (5) custody of the title deeds after the sale, and (6) conduct of the parties concerned in dealing with the property after the sale. The above indicia are not exhaustive efficacy varies according to the facts of each case. Reference was made to the statements of various persons who claimed to be in possession of the property for the purpose of show in that they were the real owners.

The conclusions arrived at by the Tribunal are factual. It kept in mind the principles relating to the benami nature of transactions and has recorded a finding to the effect that the same was not established. The decision whether a benami transaction was involved is one of fact. The burden of showing that a particular transaction is benarni 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 resale-ably raising an inference of that fact. The essence of benami is the intention of the parties, and not un-often, 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 (See Krishnanand Agniholri v. State of M.P. AIR 1977 SC 796 and Jaydayal Poddar v Mst. Bibi Hazra AIR 1974 SC 171). .No question of law arises unless the conclusions are perverse and based on surmises and conjectures. The case at hand does not belong to that category. The question referred is answered in the affirmative, in favour of the assessee and against the Revenue.

M.B.A./681/FC

Reference answered.