1999 (10) TMI 45 - HC - Income Tax

Rental income from property amid benami ownership claims and alleged improvements across multiple years; tax additions deleted on proof failure

The dominant issue was whether rental income from a property could be assessed as the assessee's income on the footing that the apparent ownership was ... Levy of tax on certain incomes from house property - Benami Transaction - derived property income from the building let out on rent treating the income to be from an asset owned by the assessee - Whether, the Appellate Tribunal was justified in deleting the addition relating to the improvement of the Mangalore property, in the year 1972-73 and the addition for the assessment years 1973-74, 1976-77 to 1979-80 and 1981-82 to 1983-84 as the income from the said property ? - HELD THAT:- 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 benami 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 reasonably raising an inference of that fact. The essence of benami is the intention of the parties, and not unoften, 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. 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. Issues involved: The judgment relates to the levy of tax on certain incomes from house property, specifically addressing the ownership of property, benami transactions, and the burden of proof in establishing benami ownership.Ownership of Property: The Assessing Officer assessed the assessee to tax under the Income-tax Act, 1961, based on the belief that the assessee derived property income from a building let out on rent. The dispute arose from the purchase of a property in the names of others, with the assessee denying involvement in the purchase or construction of a compound wall. The Tribunal found that the Revenue failed to establish the property belonged to the assessee, leading to the deletion of rental income in subsequent years.Benami Transactions and Burden of Proof: The Tribunal analyzed factual aspects and highlighted the burden on taxing authorities to prove benami ownership. Various circumstances, such as the source of purchase money, nature of possession post-purchase, motives, relationships between parties, custody of title deeds, and post-sale property dealings, were considered. The Tribunal concluded that the benami nature of transactions was not proven, emphasizing the burden of proof on the party asserting benami ownership. The judgment stressed the importance of legal evidence to establish benami transactions and cautioned against relying on mere suspicions or conjectures.Conclusion: The Tribunal's findings were deemed factual, considering the principles of benami transactions and the burden of proof. The judgment affirmed that no question of law arises unless conclusions are based on surmises and conjectures, which was not the case here. Therefore, the question posed was answered in favor of the assessee, highlighting the importance of legal evidence in establishing benami ownership and the burden of proof resting on the asserting party.