Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transactions relating to purchases and sales of 1,765 tins of oil yielding a profit of Rs. 16,633 had been carried out by the assessee himself in the name of his son, Shri Sukhraj Mehta, and in upholding the assessment of Rs. 16,633 in the hands of the assessee ?

High Court Of Rajasthan

Parasmal Kanaji vs. CIT

Section 4

Asst. Year 1976-77

J. S. Verma, C.J. & Milap Chandra Jain, J.

D. B. IT Ref. No. 7 of 1982

27th April, 1988

Counsel Appeared

K. C. Bandari, for the Assessee : B. R. Arora, for the Revenue

J. S. VERMA, C.J.:

This reference under s. 256(1) of the IT Act, 1961, is at the instance of the assessee, to answer the following question of law, namely: “Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transactions relating to purchases and sales of 1,765 tins of oil yielding a profit of Rs. 16,633 had been carried out by the assessee himself in the name of his son, Shri Sukhraj Mehta, and in upholding the assessment of Rs. 16,633 in the hands of the assessee ? “

The relevant assessment year is 1976-77. The assessee, Parasmal Kanaji, is a selling agent of M/s Shri Radha Krishna Oil Mill. Sukhraj Mehta is the son of the assessee, Parasmal Kanaji. During the relevant period, four transactions of purchase and sale of oil were made in which the assessee, Parasmal Kanaji, was involved and they were shown to be made in the name of his son, Sukhraj Mehta. The profit that accrued from these transactions amounted to Rs. 16,633. The assessee claimed that these transactions in the name of his son, Sukhraj Mehta, were real so that the profit earned thereon was not earned by the assessee, Parasmal Kanaji. The ITO rejected the assessee’s contention and held that these transactions were really of the assessee himself and his son, Sukhraj Mehta, was a mere benamidar. Accordingly, this amount of profit was included in the income of the assessee. The AAC and thereafter the Tribunal have affirmed this conclusion. Hence, this reference at the instance of the assessee. It is obvious that the question of benami is essentially one of fact and unless the finding thereon is based on no evidence or has been reached on the basis of extraneous circumstances by applying incorrect principles, the ultimate conclusion is also one of fact. It is, therefore, to be seen whether the finding on the question of benami in the present case is vitiated in any manner so as to permit reopening of the same treating it as a mixed question of law and fact.

The inference of benami drawn by the Tribunal is based on several circumstances. The main circumstances relied on to support the conclusion are the following, namely : 1. No funds were invested by the assessee’s son, Sukhraj Mehta, to make these purchases which transactions were made entirely by the assessee.2. The assessee’s son, Sukhraj Mehta, did not in any manner participate in the transactions either of purchase or sale thereafter and the entire transaction was made by Sumermal, a munim of the assessee, in the name of the assessee’s son, Sukhraj Mehta. There was no evidence to show the participation of the assessee’s son, Sukhraj Mehta. During the relevant accounting year, apart from these transactions, there were no other transactions of this kind made by the assessee’s son, Sukhraj Mehta.

On the basis of the above main circumstances and taking an overall view of the material present, the Tribunal held that the Revenue has discharged its onus of proving that the transactions were benami which have been made by the assessee in the name of his son, Sukhraj Mehta. It cannot, therefore, be said that the conclusion reached by the Tribunal is based on no evidence. It is also clear that none of these circumstances relied on for drawing the inference that the transactions were benami is extraneous. It is also clear that the correct test or principle has been applied for reaching the conclusion of benami by placing reliance only on relevant circumstances which are material for this purpose. The finding of the Tribunal on this point is, therefore, not vitiated in any manner.

Consequently, the reference is answered in the affirmative, against the assessee and in favour of the Revenue by holding that the Tribunal’s view is justified.

No costs.

[Citation : 172 ITR 568]

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