1972 (9) TMI 10 - SC - Income Tax

Purchase of shares held benami on evidence review; Rs. 10,80,000 added to assessee's income upheld

Whether the Tribunal rightly held that the purchase of shares was not a benami transaction: the Court examined the legal tests for benami ... Whether Tribunal's finding that the purchase of the shares by the Rana was not a benami transaction was legally valid - Whether Tribunal was justified in deleting the sum of Rs. 10,80,000 from the total income of the assessee by holding that the Rana was not the benamidar of the assessee - Questions are answreeed in favour of the revenue Issues: (i) Whether the Tribunal's and High Court's finding that the purchase of shares by Rana was not a benami transaction and that Rs. 10,80,000 was not assessee's income from undisclosed sources was legally valid; (ii) Whether the Tribunal was justified in law in declining to treat the materials and inferences relied upon by the Income-tax Officer and Appellate Assistant Commissioner so as to warrant displacing their conclusions that Rana was a mere name-lender for the assessee.Issue (i): Whether the Tribunal's and High Court's finding that the purchase by Rana was not benami and Rs. 10,80,000 was not assessable as assessee's undisclosed income was legally valid.Analysis: The Court examined whether the Tribunal's factual findings were sustainable in law, applying established principles limiting interference with tribunal findings but permitting interference where findings are based on no evidence, are perverse, rest on conjectures or surmises, or ignore relevant material. The Court reviewed the record and concluded the Tribunal failed to consider material adverse evidence (including improbability of cash payments, absence of bank records, non-production or unreliability of key letters, possession of share scrips by an assessee-controlled concern, contradictory and retracted statements of third parties, non-examination of Rana, patterns of withdrawals and bearer cheque practices, and other circumstances pointing to a sham transaction). The Tribunal also relied on inadmissible evidence and engaged in speculation rather than judicial appraisal of probabilities and primary facts.Conclusion: The Tribunal's and High Court's finding that the purchase by Rana was genuine is vitiated; on the material the Court concludes the purchase was a sham and Rana was a benamidar, so Rs. 10,80,000 is taxable as the assessee's income from undisclosed sources. This conclusion is in favour of the revenue.Issue (ii): Whether the Tribunal was justified in law in rejecting or not giving weight to the Income-tax Officer's and Appellate Assistant Commissioner's findings that Rana was a name-lender for the assessee.Analysis: The Court assessed whether the Tribunal properly considered and weighed the Income-tax Officer's and Appellate Assistant Commissioner's findings and the supporting material. It found that those authorities had drawn reasonable inferences from cogent circumstances (lack of evidence of Rana's means, improbable cash payments, unexplained role of bank official, custody of share scrips with assessee's concern, retracted/conflicting statements of intermediaries, and documentary and testimonial links between Rana and assessee's associates). The Tribunal omitted or misread significant evidence, relied on inadmissible documents, and substituted speculation for proper evaluation of probabilities and primary facts.Conclusion: The Tribunal was not justified in displacing the Income-tax Officer's and Appellate Assistant Commissioner's conclusions. The Court answers this issue in favour of the revenue.Final Conclusion: The material on record, properly appraised, supports treating the transactions as sham and the Rana as a benamidar for the assessee; the Tribunal's and High Court's contrary conclusions are set aside and the revenue's position is accepted, resulting in allowance of the appeal.Ratio Decidendi: A court may set aside a tribunal's factual findings where they are unsupported by evidence, are perverse or contrary to the only reasonable conclusion from the materials, or rest on conjecture or inadmissible evidence; applying that principle, transactions shown to be sham and resulting in undisclosed income may be treated as assessable to the person for whose benefit the benami arrangement was executed.