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Application No. 9 of 1983, decided on 15th May, 1985.

Ss. 10, 16 (3) & 34‑‑Properties purchased by assessee's wife and two minor sons in their own names‑House properties did not originally belong to assessee and assessee had not transferred said properties directly or indirectly to wife and minor children Assessing officer holding assessee's wife and children as his Benamidars and assessee as real purchaser of property, included income derived for such property in total income of assessee for assessment‑No evidence available on record to show that purchase money for said properties was paid by assessee‑Burden of proof on department-Property at L stood in names of wife and children of assessee-In absence of any evidence that wife and sons of assessee were Benamidars for assessee, such persons, held, would be taken to be real owners.

This was not a case in which the said house properties belonged originally to the assessee and the assessee transferred the same directly or indirectly to the wife and the minor children otherwise than for adequate consideration so as to attract the provisions of section 16 (3) (a)(iii) and (iv) of the Act.

If it so found on evidence, then the income from the said properties will be included in the total income of the assessee. The well‑settled presumption of law is that the apparent state of affairs is real unless the contrary is proved. Therefore, the burden of proving that a transaction is sham or that the person in whose name the property stands is not the real owner but is only Benamidar for another is on the Income‑tax Department.

Where assessment is based on mere suspicion, surmises or conjecturers and in violation of fundamental rule of justice, an issue of law arises. In the instant case the department's case is that the assessee paid the considera tion money and purchased the house properties in question in the names of his wife and two sons. There was not an iota of evidence indicated to the assessment order and the judgment of the Appellate Commissioner as well as of the Appellate 'Tribunal to show that the consideration money was paid by the assessee. Even if it was true that the sons were minors at the time of purchase, from that fact alone it cannot be presumed that the assessee purchased the properties in the Benami of his sons. Merely on the basis of suspicion, conjectures or surmises the department is not justified in holding that the properties in question were purchased by the assessee with his own money in the Benami of his sons and wife. The wife of the assessee from her dower money may have purchased her properties and a host of relations such as grandfather, uncle, etc. of the sons of the assessee and the father etc. of the wife of the assessee may have given the money to the sons and wife of the assessee to purchase these properties. It is curious to note that after stating the legal proposition that mere collection of rent from the house properties by the assessee on behalf of the owners will not make him an owner Eel properties and that the Income‑tax Department is not the forum for deciding the matters of title to land or house property, the Income‑tax Appellate Tribunal without any basis what soever observed that there was a prima facie case for Benami arid shifted the burden to the assessee for proving that he had not purchased it in the Benami of his sons and wife.

A heavy burden lies‑on the taxing authorities to prove that the persons in whose name the property stands are not the real owners but are only Benamidars for another and that the assessee has absolutely no burden to show that the properties purchased from third parties standing in the names of his sons and wife are not his properties. It is to be presumed that owners of these house properties are the so is and wife of the assessee. If the income from each of these properties is taxable, the Department is to notify the owners of these properties and ask them to pay tax in respect of such income arid may also ask them to explain who paid the consideration money.

Where property stands in the names of the wife or sons, in the absence of any evidence that they a. e Benamidars for the assessee, they must be taken to be the real owners.

Pandit Gaya Prasad Tawari v. C. I. T., C. P. & U. P. (Allahabad High Court) (1942) 10 1 T R 308; Madura Knitting Co. v. C.I. T. (1956) 30 I T R 764; Ramkinkar Bajarji v. C.I.T. 1936 I T R 180; Severam Jokhiram v. C.I.T. 1944 I T R 110; Sheo Narain Lal (1954) 26. I T R 249; Dakeswari Cotton Mills Ltd. v. C. I. T: (1954) 26 I T R 775 (S C) and Deraj Lal Gridhari Lal v. C.I.T. 261 T R 736 ref.

Messrs Siddique Ahmed Chawdhury and Mustafa Niaz Muhammad for Petitioner.

A. M. Mahmudur Rahman for Respondent.

This is a reference at the instance of the assessee applicant Messrs E. R. Chowdhury under section 66 (1) of the Income Tax Act, 1922 (hereinafter referred to as the Act) in which the following question has been referred to this Court for its opinion "In the facts and circumstances of the case, rile assessments laving bean completed under section 23 (3) of the income‑tax Act as per applicant's return for business income only, whether the Income‑tax Appellate Tribunal was justified in law to include the impugned property income from the house properties standing in the names of his independent and adult sons and wife under section 9 of the Income‑tax Act without recourse to section 16 (3) of the said Act."

2. Mr. Siddique Ahmed Chowdhury, the learned Advocate for the assessee applicant submits that this means that his question is whether the Income‑tax Appellate Tribunal was justified in law within the meaning of section 9 of the Act treating the assessee as the owner of house properties, standing in the names of the wife acid son: arid which are admittedly pur chased from third parties.

3. The facts of the case, in short are that the assessee submitted a return for his income from business under section 10 of the Act for the assessment year 1969‑70 regarding the accounting period ending on 30‑6‑1969 in response to notice under section 3.4 of the Act. The Deputy Commissioner Taxes, Survey Circle 11, Chittagong not only included the assessee's income from his dealings in tea business but also included the income from house properties in his total income. The property at 74, Jubilee Road was pur chased from a third party in 1955. 'The purchaser's naive in the Kabala for the said property is Mahmudul Hoque Chowdhury who is son of the assessee Mr. E. R. Chowdhury. Property at feringhee Bazar was purchased in 1954 from a third party. In the Kabala cot the said property purchaser is Mozharul Haque Chowdhury who is the son of assessee. The properties at Bahaddarhat and Arakan Road were purchased from third parties. In, the kabala for these properties tilt, naive of Mrs. Roushan Ara Begum wife of the assessee appears as the purchaser. On the basis of departmental Inspector s report the Deputy Commissioner of Taxes took the view that Mahmudul Hoque Chowdhury and Mazharul Hoque Chowdhury were at the time of purchase minors with no ostensible source of income. The Deputy Commissioner of Taxes while adding to the total income the income from the house properties standing in the names of the two sons and wife held the assessee thus had income from house properties let out at Bahaddarhat, Arakan road feringhee bazar and jubilee road

4. Being aggrieved by the said order of assessment dated 2‑4‑1976 made by the Deputy Commissioner of Taxes the assessee preferred. I. T. A. No. 10‑Surv/2/76‑77 before the Appellate Joint Commissioner of Taxes I3‑Mange. Chittagong. The Appellate Joint Commissioner of Taxes affirmed the order of assessment with respect to income from house properties in the names of assessee on a finding that Mahmudul Hoque Chowdhury and Mazharul Hoque Chowdhury, Here below 15 years at the time of purchase of the properties at Jubilee Road and Feringhee Bazar in 1955 anti 1954 respective. He opined that he was convinced that the assessee himself acquired and constructed properties at Feringhee Bazar jubilee Road Bahaddarhat and Arakan Road in the names of his4ife and minor soils and. that though the wife and sons of the assessee are recorded in official papers as the owners of the said properties, he was of the view that the said pro perties belonged to the assessee and that the properties are Benami properties of the assessee.

5. Being aggrieved by the said judgment and order dated 20‑8‑1977 passed by the Appellate Joint Commissioner of Taxes the assessed preferred 1. T. A. No. 942 of 1977‑78 before the Income‑tax Appellate Tribunal. Chittagong Bench. The Income‑tax Appellate Tribunal heard this appeal alongwith three other appeals being Appeal No. 943 of 1977‑78 for the assess ment year 1970‑71, 1. T. A. No. 944 of 1977‑78 for the assessment year 1971‑72, and I. T. A. No. 945/1977‑78 for the assessment year 1972‑73 and disposed of all the four appeals by one judgment on 9‑3‑1982. The Income tax Appellate Tribunal held that the Kabalas in respect of the properties in question stand in the names of said sons and wife of the assessee and that the said sons were minors at the time of purchase of the property. The Appellate Tribunal further observed:

"It is true that the Kabalas stand in the names of the sons of the assessee and the mere fact of collecting rent by the assessed will not make him the owner and income‑tax office is not the forum for deciding matters of title to land. But for the purpose of assessment, this office must necessarily come to a finding of prima facie ownership of such property. Here there was prima facie case for Benami, though the Kabalas stand in the names of the sons of the assessed. Same is the case with the properties at Bahaddarhat. The Kabala stands in the name of the wife of the assessed."

It should be noted that this is not a case in which the said house pro perties belonged originally to the assessee and the assessed transferred the same directly or indirectly to the wife and the minor children otherwise than for adequate consideration so as to attract the provisions of section 16 (3)(a) (iii) and (iv) of the Act which are as follows

"(3) In computing the total income of any individual for the purpose of assessment, there shall be included‑

(a) so much of the income of the spouse or minor child of such indivi dual as arises directly or indirectly‑

(i) - -- - --- - -- - - - -- -- - - - -- --- -- - -- - --- - - - -

(iii) from assets transferred directly or indirectly to spouse otherwise than for adequate consideration or in connection with ‑ an agreement to live apart ;

(iv) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate consideration ; and"

6. Mr. A. M. Mahmudur Rahman, the learned Advocate for the respon dent (Revenue) refers to a solitary and stray decision in the case of Pandit Gaya Prasad Tawari v. C.I.T. C. P. and U. P. (Allahabad High Court) ((1942) 101. T R 308), and argues that if the department can show that the house properties were purchased by the assessed in the names of his wife and sons with his own money otherwise than for a adequate consideration, the income from the said properties will be included in the total income of the assessee within the meaning of section 16 (3) (a) (iii) and (iv) of the Act. It is not the case of the department that the consideration paid for the said properties were inadequate. So, section 16 (3) (a) of the Act has no manner of application. The question is whether the Appellate Tribunal was justified in law in holding in the facts and circumstances of the case that the properties are held by the assessee in the Benami of his two sons and wife. If it is so found on evidence, then the income from the said properties will be included in the total income of the assessed. The well‑settled presumption of law is that the apparent state of affairs is real unless the contrary is proved. Therefore, the burden of proving that a transaction is sham or that the person in whose name the property stands is not the real owner but is only Benamidar for another is on the Income‑tax Department. (See Madura Knitting Co. v. C.I.T., ((1956) 30 I T R 764), Ramkinkar Bajarji v. C.LT. ((1936) I T R 180) Sevaram Jokhiram v. C.I.T. (1944 I T R 110) and Sheo Narain Lal ((954) 26 I T R 649). Where property stands in the names of the wife or sons, in the absence of any evidence that they are Benamidars for the assessed, they must be taken to be the real owners. In the case of Dakeswari Cotton Mills Ltd. v. C. I. T. ((954) 26 I T R 775 (S C)) and Deraj Lal Gridhari Lal (16 1 T R 736) the Indian Supreme Court has held that where assessment is based on mere suspicion, surmises or conjectures and in violation of fundamental rule of justice, an issue of law arises. In the instant case the department's case is that the assessed paid the consideration money and purchased the house pro perties in question in the names of his wife and two sons. There is not an iota of evidence indicated in the assessment order and the judgment of the Appellate Joint Commissioner as well as of the Appellate Tribunal to show that the consideration money was paid by the assessed. Even if it is true that the sons were minors at the time of purchase, from the fact alone it cannot be presumed that the assessee purchased the properties in the Benami of his sons. Merely on the basis of suspicion, conjectures or surmises the department is not justified in holding that the properties in question were purchased by the asses cc with his own money in the Benami of his son' and wife. The wife of the assessed from her dower money may have purchased her properties and a host of relations such as grandfather, uncle, etc. of the sores of the assessed and the father, etc. of the wife of the assessee may have given the money to the sons and wife of the assessed to purchase these properties. It is curious to note that after stating the legal proposition that, mere collection of rent from the house properties by the assessed on behalf; of the owners will not make him an owner of properties and that the' Income‑tax Department is not the forum for deciding the matters of title to land or house property, the Income‑tax Appellate Tribunal without any basis whatsoever observed that there was a Prima facie case for Benami and shifted the burden to the assessee for proving that he had not purchased it in the Benami of his sons and wife.

7. We have already stated that it is a well‑settled principle of law that a heavy burden lies on the taxing authorities to prove that the persons it whose name the property stands are not the real owners but are only Benamidars for another and that the assessee has absolutely no burden to show that the properties purchased from third parties standing in the name of his sons and wife are not his properties. It is to be presumed that owners of these house properties are the sons and wife of the assessee. If the income from each of these properties is taxable, the Department is to notify the owners of these properties and ask them to pay tax in respect of such income and may also ask them to explain who paid the considera tion money.

8. In this view of the matter we find that the Appellate Tribunal was not justified in law in affirming the order of Appellate Joint Commissioner of the wife and sons of the assessee including the income from the aforesaid house properties in the total income of the assesses:

The answer to the question referred in this application is in the negative (in favour of the assesses).

The reference is, therefore, allowed. The parties will bear their respec tive costs. The prayer for certificate under section 16‑A (2) of the Income tax is refused.

M. B. A. Reference answered in negative.

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