Benami ownership of business upheld where control, funding, and borrower dealings showed the spouse was only a name lender.

In a tax reference concerning alleged benami ownership of a money-lending business carried on in a spouse's name, the Court held that the revenue could establish real ownership through direct and circumstantial evidence showing that the funds originated with the assessee, the assessee controlled the business, and borrowers dealt with him rather than the ostensible owner. Applying the principle that the party asserting benami must prove it, and noting that facts within the assessee's special knowledge attracted section 106 of the Evidence Act, the Court found the burden discharged. The wife was treated as only a name lender, and the assessment was sustained as legal.

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Issues: (i) Whether there was material to hold that the assessee was the owner of the money-lending business carried on in his wife's name and that the assessment was legal. (ii) On whom the burden lay to establish the benami nature of the transaction and whether that burden was discharged.

Issue (i): Whether there was material to hold that the assessee was the owner of the money-lending business carried on in his wife's name and that the assessment was legal.

Analysis: The nucleus said to belong to the wife was found, on the evidence, to consist substantially of amounts traceable to the assessee himself, including amounts standing in the name of the first wife and amounts representing alleged wedding presents that were not credible on the facts. The business was also of such an extensive nature that it was not probable that it was carried on independently by the wife. The assessee's own statement showed his overall management and control, and the departmental evidence indicated that borrowers dealt with the assessee and not with his wife. The material was therefore adequate to support the finding that the wife was only a benamidar.

Conclusion: The issue was answered in the affirmative and against the assessee; the assessment as upheld was held to be legal.

Issue (ii): On whom the burden lay to establish the benami nature of the transaction and whether that burden was discharged.

Analysis: The burden to prove benami lies on the party asserting it, and in the tax setting the revenue had to show that the business in the wife's name belonged to the assessee. That burden was held to have been discharged by the combined effect of the assessee's own admissions, the origin of the funds, the surrounding circumstances, and the evidence of borrowers and other witnesses. The Court also noted that facts especially within the assessee's knowledge attracted the principle embodied in section 106 of the Indian Evidence Act.

Conclusion: The burden was held to lie on the revenue, and it was found to have been discharged.

Final Conclusion: The reference failed on both questions, and the assessment based on the finding that the wife was only a name lender was sustained.

Ratio Decidendi: In a tax reference involving alleged benami ownership of a business, the revenue may discharge its burden by proving, through direct and circumstantial evidence, that the funds and control belonged to the assessee and that the ostensible owner was only a name lender.

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