Benami inference and tribunal fact-finding can fail where findings rest on conjecture and ignore material evidence.

Findings of the income-tax appellate tribunal may be interfered with where they rest on no evidence, irrelevant material, conjecture, or a misreading or disregard of relevant evidence. On the facts discussed, the record showed serious infirmities in the tribunal's approach, including reliance on unproved letters, unsupported assumptions about bank transactions, and failure to consider material circumstances bearing on custody of the shares and movement of funds. A benami arrangement may be inferred from the cumulative surrounding circumstances, including absence of financial capacity, cash payment, non-production of the ostensible purchaser, continued possession of the shares by the assessee's concern, and routing of sale proceeds through an employee.

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Issues: (i) whether the Tribunal's findings that the purchase of shares by the Rana was not a benami transaction and that the investment of Rs. 10,80,000 was not the assessee's income from undisclosed sources were liable to be interfered with; (ii) whether the department had established that the Rana was a mere name-lender and benamidar for the assessee.

Issue (i): Whether the Tribunal's findings that the purchase of shares by the Rana was not a benami transaction and that the investment of Rs. 10,80,000 was not the assessee's income from undisclosed sources were liable to be interfered with.

Analysis: Findings of fact of the Tribunal can be disturbed where they are based on no evidence, on irrelevant material, on conjectures or surmises, or where relevant evidence has been ignored or misread. The record showed serious infirmities in the Tribunal's approach, including reliance on unproved letters, unsupported assumptions about the bank transaction, disregard of the surrounding probabilities, and failure to consider material evidence bearing on the custody of the shares, the conduct of the Rana, and the movement of funds.

Conclusion: The Tribunal's findings were vitiated and could not be sustained.

Issue (ii): Whether the department had established that the Rana was a mere name-lender and benamidar for the assessee.

Analysis: The surrounding circumstances pointed to the Rana being a name-lender: absence of proof of financial capacity, failure to produce the Rana, cash payment of a very large price, no correspondence or brokers, unexplained role of the bank manager, continued possession of the shares by a concern of the assessee, delay in transfer and dividend collection, and the manner in which the sale proceeds were routed through an employee of the assessee's concern. These facts supported the inference that the real purchaser was the assessee and that the loan story was fictitious.

Conclusion: The department had established that the Rana was a mere name-lender and benamidar for the assessee.

Final Conclusion: The questions referred were answered against the assessee, and the addition of Rs. 10,80,000 as income from undisclosed sources was upheld.

Ratio Decidendi: A finding of the income-tax appellate tribunal may be set aside where it is founded on inadmissible or irrelevant material, ignores relevant evidence, or rests on conjecture, and a benami arrangement may be inferred from the cumulative effect of surrounding circumstances showing that the ostensible purchaser was only a name-lender for the assessee.

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