1997 (3) TMI 152

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....n and Punglia Brothers as benami concerns of the assessee-company. 2. The assessee is a Limited Company engaged in the manufacture of woollen yarn and guar-gum-powder. Quite some time before the years under consideration the assessee-company had been incurring losses. Its production had almost ceased and hence it started doing job work for many concerns including Kankaria Finance Company and Punglia Brothers. Since some of the partners of these two firms were either directors or relatives of the directors of the assessee-company and/or substantial shareholders in the assessee-company, the AO treated these two firms as benami of the assessee. The AO further computed the alleged diversion of profits to these two firms at Rs. 35,98,256 for ....

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....Jodhpur. The most important aspect, it was submitted, was that since the assessee-company was running into heavy losses, there was no motive to reduce the tax liability by the alleged diversion of profits. The burden was on the Department to prove that apparent is not real, and that it had failed to prove so. For his submissions, the learned counsel relied on the decisions CIT vs. Daulat Ram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC); Madura Knitting Co. vs. CIT & CEPT (1956) 30 ITR 764 (Mad) and CIT vs. Gokaldas Hukam Chand (1943) 11 ITR 462 (Bom). 5. Shri S.S. Rana, the learned Departmental Representative, submitted that only two firms were picked up out of about forty firms because only these two were found to be benami of t....

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....ances: (1) the source from which the purchase money came; (2) the nature and possession of the property, after the purchase; (3) motive, if any, for giving the transaction a benami colour; (4) the position of the parties and the relationship, if any, between the claimant and the alleged benamidar; (5) the custody of the title deeds after the sale; and (6) the conduct of the parties concerned in dealing with the property after the sale." 7.1 The Supreme Court also observed in the above case that the above indicia are not exhaustive and their efficacy varies according to the facts of each case. Nevertheless, the first index, viz. the source whence the purchase money came, is by far the most important test for determining whether the sale s....