1980 PLP 48 (PTD)

(2) Mazhar Weaving Factory. (3) Ishfaq Weaving Factory. (4) Haneef Weaving Factory, (5) Azhar Weaving Factory." The Income‑tax Officer called upon the assessee to explain as to why the income from the power‑looms held in the names of Messrs Ishfaq Weaving Factory, Haneef Weaving Factory and Azhar Weaving Factory was not disclosed. The assessee denied that the business run under the name belonged to him. The Income‑tax Officer recorded the statements of Muhammad Haneef Ishfaq Hussain and Azhar Hussain, but for cogent reasons disbelieved their assertion that these factories were run by them. From the scrutiny of the account books it transpired that the sale as well as the production of all the concerns was controlled by Messrs Moulvi Brothers, the stock for all the twenty power‑looms was obtained jointly; the consumption of the spare parts was also of the same pattern; the daily production of all units was progressively carried on from day‑to‑day and the same gate passes showed the exit of the goods from the factory premises. On the basis of this material the Income‑tax Officer by his three separate orders dated 30‑6‑1973, passed in respect of each assessment year, treated the business run in the name of aforesaid concerns as 6enand" for the assessee and clubbed the income thereof in the hands of the petitioner. The registration of the firm under section 26‑A of Income‑tax Act was also refused by him.

5. In appeal the Income‑tax Appellate Tribunal dealt with this case comprehensively and while upholding the assessment made by the Income tax Officer by order dated 23‑4‑1974 it maintained that: "It appears that the whole arrangement was designed with a view to aid proper incidence of the central excise duties, the sales‑tax and income‑tax. It was will known that units of 4 power looms were exempt from the payment of excise duty and sales tax. Therefore, the appellant embarked upon the present device, whereby the two partners of this firm started their 4 power‑looms units under the style of Mazhar Weaving Factory and Munir Weaving Factory while the other 12 looms were installed under the names of Ishfaque Weaving Factory, Hanif Weaving Factory and Azhar Weaving Factory to make the complete economic unit of 20 power‑looms. The Income‑tax Officer rightly suspected the installation of the three "BENAMI" factories and proceeding logically, he was able to discover the truth. The spot inquiries lead to the discovery of the documents which show that the entire yarn purchase was being jointly consumed for all these 5 weaving factories. Similarly, the spare parts were jointly purchased and jointly consumed. The production of the factories were jointly recorded. There was no doubt that the production of each individual unit is also available separately, but that loses all its importance when we find that these productions are ultimately combined in one combined set of books wherein the progressive totals of the entire production were made and carried on and on. If these factories belonged to different parties as the ostensible arrangements lead to show, there was no reason, at least, to carry forward these totals of the entire production over a number of days and over a number of months. Therefore even if all the arguments of the appellant are to be ignored, the recording of joint consumption and joint sharing of the expenses and combined accounting of production remains unexplained for independent units. The accounting of the production of jointly and progressive totalling clearly reveal the true state of affairs."

6. It is under these circumstances that the following question of law said to be arising out of the Tribunal's order, has been referred to us by the assessee: ‑ "Q.‑Whether the Income‑tax Appellate Tribunal was justified on the basis of the material on record to hold that the entire production business of power‑looms belonged to the assessee Firm and could be assessed in its hands as income of the Firm."

7. The learned counsel for the assessee vehemently argued that Muhammad Haneef, Ashfaq Hussain and Azhar Hussain held separate licenses from the Excise and Taxation Department in their names, long before the assessment years in question there was no evidence on the record that they were name lenders and that the assesses, got these licenses issued in their names. It was urged that each one of them owned four power‑looms and was also assessed individually for the income accruing to him by operation thereof under the distinct business name. The learned counsel further submitted that each factory had a separate ‑ electric metre and paid its bill for the consumption of the electricity. It was also pointed out that an entry dated 15‑7‑1969 existing in the assessee's books of account did not relate to the purchase of power‑looms for the `benamidar,' but it pertained to intangibles added on account of Martial Law declaration filed by the assessee.

8. The propriety of the impugned order holding the three concerns as `benami' for the assessee was also assailed on the ground that for determination of `benami' nature of a transaction, payment of consideration is an important factor, but in the instant case, it was not proved that the capital for the three factories was invested by the assessee. It was forcefully contended that all these factors were ignored by the authorities below, which militated against the inferences drawn by the tribunal. Relying on Messrs Mian Abdul Rahim & Sons v. Commissioner of Income‑tax, Rawalpindi P L D 1973 Lah. 416 the learned counsel argued that the question whether the three factories are `benami' for the assessee, is a question of law, as it involves application of legal principles. He referred to the rule that the apparent should be accepted as real unless proved otherwise and further submitted that burden lay heavily on the Department to establish that the three concerns were `benamidar' but the onus was wrongly placed on the assessee; that there was no evidence in support of the conclusions reached by the tribunal. In support of these submissions, the learned counsel relied on Naryan Chundra Baidia v. Commissioner of Income‑tax (1951) 20 I T R 287, S. N. Ganguly v. Commissioner of Income‑tax, Behar (1953) 24 I T R 16, Sovaram Jokhiram v. Commissioner of Income‑tax, Bihar and Orissa (1944) I T R 110, Ramkinkar Banerji v. Commissioner of Income‑tax Bihar and Orissa (1936) 4 I T R 108 and Madura Knitting Company v. Commissioner of Income‑tax and Excess Profits Tax, Madras (1956) 30 I T R

764. Fur the proposition that a judgment resting on wrong assumption as to burden of proof is liable to be set aside, he referred to Piara Ram and another v. Sohawa and others 109 IC

561. Though the correctness of the Tribunal's findings regarding the maintenance of joint books of account and the jointness of purchases, production, sale and repair expenses was not questioned yet according to the learned counsel the legal effect of these facts was that the business belonged to the "Association of Persons" and not that it was `benami' for the assessee.

9. The learned counsel for the Revenue on the other hand, supported the findings of the tribunal and contended that the question as to whether the business belongs to the assessee is a question of fact, on which after careful consideration of all the relevant facts and evidence, findings were returned by the tribunal against the assessee and that, therefore, no question of law arose out of the tribunal's order to sustain the instant reference applications.

10. There are certain admitted facts, namely, that, the yarn and the spare parts were purchased and consumed jointly by all the factories. Similarly the, production and sales were also recorded jointly and a combined set of books of accounts maintained by the assessee for the five units. Mr. Javid Hashmi was quite fair in conceding that these factors march with the hypothesis that the five concerns constituted joint business. His objection, however, was that despite the existence of these facts, some other cogent evidence was needed to positively establish the `benami' character of the business and that it was for the departmental authorities to have mustered such evidence, but they failed to do so. In his submission, in the absence of such evidence, the inferences drawn by the Tribunal cannot be sustained. We are unable to agree with the learned counsel. It was not refuted that four power‑looms were exempt from the payment of excise duty and sales tax. After appreciation of all the relevant material the tribunal took the view that the assessee ran a economic unit of 20 looms but in order to avoid the levy, he adopted the device of shoving 4 power looms in the names of each of the two partners, and the remaining 12 looms were claimed to be owned by 3 other factories. In the 'benami' transactions, the ostensible is cautiously painted as real and the arrangement is so notoriously designed and carefully carried out that it becomes very difficult to unveil the truth. Particularly in a case where the `benamidar' in collusion with the principal it is too much to expect the Department to adduce direct and express evidence to unravel the assessee's arrangement. In such like cases the soundness of the findings given by the tribunal must be determined by appreciation of the accumulative effect of various bits of evidence collected by the Department, in the light of the surrounding circumstances. In this respect, Lord Radcliffs in Edwards (Inspector of Taxes) v. Bairstow (1953) 28 I T R 597 held: ‑ . I think that it is rather misleading to speak of there being no evidence to support a conclusion when in cases such as these many of the facts are likely to be neutral in themselves, and only to take their colour from the combination of circumstances in which they are found to occur."

11. We feel that the entries in the assessee's books of account, installation five units in the same premises, his control over they entire business the stage of procurement of raw material till the disposal of manufactured cloth and realization of profits, coupled with exemption of four power looms from the excise duty and sales tax constitute sufficient evidence to support the findings of the tribunal that Haneef Weaving Factor and Azhar Weaving Factory and Azhar Weaving Factory were `benamidars' for the assessee.

12. We have examined the precedents cited by the petitioner's learned counsel. In Narayan Chandra Baidia s case the tribunal ‑did not delete an addition to the assessee's income of a sum of Rs. 7,629, which had ostensibly accrued to his son as partnership income from a rice mill, but the High Court declined to uphold this addition and took the view that the assessee was not of the material on which the Income‑tax Officer lead come the conclusion that the assessee's son was his `benamidar'. In the case of S. N. Ganguly v. Commissioner of Income‑tax the High Coin Patna; while answering the reference on the issue whether there was any material to justify the assessment of Rs. 15,000 in the hands the assessee, which he pleaded as belonging to his wife, upheld the tribunal s judgment to the extent of addition of Rs. 4,000, but as regards the remaining Rs. 11,000 it came to the conclusion that there was no material before the Income‑tax Authority to defend the addition, as this amount represented the high denomination notes, encashed in the name of the assessee's wife. In the third case of Sovaram Jokhiram v. Commissioner of Income‑tax, Bihar & Orissa, the Patna High Court did not approve the addition in the husband's income, of the property income accruing to his wife, who also held the title deeds and observed that the onus was on the Department to show that the tile was not with the lady. In the case Ramkinkar Banerji v. Commissioner of Income tax, the assessee, who had an interest in a colliery paid a sum of Rs. 15,408‑14‑0 as royalty to his wife who had acquired the interest of the superior landlord; the income‑tax authorities refused to allow this deduction to the assessee; but the Patna High. Court maintained that as the property stood in the name of lady, unless there was an evidence to the contrary, she must be taken as owner thereof. In the last case oil Madura Knitting Company v. The Commissioner of income‑tax etc., the income accruing to a partnership by the name of `Ambal `Store which was registered by the Income‑tax Department, under section 26-A of the Income‑tax Act, comprising four partners who were daughters of the Managing Partner of the assessee firm, namely, Madura Knitting Company was assessment in the hands of the assessee. The assessment was not upheld by the Madras High Court. While observing that the apparent was to be treated as real unless proved otherwise, the Court held: " . . . There was no evidence at all to prove that any of that monies accumulated by Ambal Stores found its way to the Madura Knitting Company; nor was there anything to show that the Madura Knitting Company could lay a legal claim to the profits made by the Ambal Stores." We are firmly of the view that these precedents have no bearing on the instant case and the observations made therein are qualified by the peculiar facts of these cases.

13. The fact that Muhammad Haneef, Ashfaq Hussain and Azhar Hussain held licenses in their names from the Excise and Taxation Authorities and were also individually assessed by the Department in the circumstances of this case, is of no significance. We are inclined to hold that it was a part of the arrangement put up by the assessee to confer independent status on the `benamidars'. The other argument that separate electric metres were installed for each unit, was duly considered by the tribunal, and in our opinion does not dislodge the tribunal's determinations. With regard to the submissions resting on the entry dated 15‑7‑1969 in the assessee's Books of Account, it is to be noticed that this point was not raised before the tribunal and requires investigation. In exercise of special jurisdiction under section 66, it is not possible for us to scan the correctness of this submission requiring a further inquiry and examination of the assessee's books of account.

14. We are fully conscious that the question of consideration is very relevant point for ascertaining the `benami' nature of a transaction, but we do not find any merit in the contention that the Revenue had failed to prove that the capital investment for the units was made by the assessee. In our opinion, in the face of overwhelming evidence of jointness of business, strict proof of initial capital investment of the three units is not necessary. In this connection in Sree Meenakshi Mills Ltd., Madurai v. Commissioner of Income‑tax, Madras A I R 1957 S C 49, the Supreme Court of India was of the view: "It is a most unreal question to raise of firms and companies whose only business consists of sham transactions as to who found the capital for them or who was running them." A reference to Gangadara Ayyar and others v. Subramania Sastrigal and others AIR 1949 FC88 will further provide:‑ ...It is also well established that in a case where it is asserted that an assignment in the name of one person is in reality for the benefit of another, the real test is the source whence the consideration came and that when it is not possible to obtain evidence which conclusively establishes or rebuts the allegation, the case must dealt with on reasonable probabilities and legal inferences arising from proved or admitted facts."

15. The argument founded on the question of burden of proof is also without substance. In Piara Ram v. Sohava, Jai Lal, J., held that a judgment based on wrong assumption as to burden of proof cannot be upheld in second appeal. We do not think that in the instant case, the onus of proof was placed on the assessee. In any case it is quite clear to us that on consideration of entire material a positive finding of fact has been given up by the tribunal. In such circumstances the question of burden of proof becomes immaterial. It is not disputed that the assessee was given sufficient opportunity by the Income‑tax Officer to adduce proof in support of his stand, In Muhammad Anwarullah Mazumdar v. Tamina Bibi and others 1971SCMR94 it was held that misplacing of' onus of proof is of no importance, after evidence has been led by both the parties In Robins v. National Trust Company Ltd. 1927AC515 it has been stated: " . . . But onus as a determining factor of the whole case can only arise if the tribunal finds the evidence pro and con so evenly balanced that it can come to no such conclusion. Then the onus will determine the matter. But if the tribunal, after hearing and weighing the evidence, comes to a determinate conclusion, the onus has nothing to do with it, and need not be further considered."

16. The plea that as legal effect of the various elements signifying the jointness of business, an assessment should have been made on A.O.P. of five persons, has been exhaustively dealt with in the impugned order and we have no reason to differ with the reasoning given by the tribunal in rejecting the assessee's this contention.

17. The objection of the respondent's learned counsel for the Department that no question of law leas arisen out of the tribunal's order may now be taken up. The main issue decided by the tribunal is that the business shown to be owned by three persons, namely, Muhammad Haneef, Ishfaq Hussain and Azhar Hussain in reality belongs to the assessee. This is essentially a finding of fact and does not involve applicability of any' principle of law. The learned counsel for the assessee could not point out as to which principle of law required application to such a finding of fact. In Mian Abdul Rahim do Sons v. Commissioner of Income-tax P L D 1973 Lah. 416 referred to by the learned counsel for the petitioner, a Division Bench of this Court, quoted with approval, an extract from Shree Meenakshi Mills, case wherein it was maintained: ‑‑ But where the final determination of the issue equally with the finding or ascertainment of the basic facts doss cot involve application of any principle of law, an inference from the facts cannot be regarded as one of law." Normally a finding that a transaction is `benami, is one of fact. Such finding can, however, be assailed if onus is misplaced or a wrong principle of law is applied by the tribunal or its finding is not supported by an material or is grounded on irrelevant evidence. None of these eventualities obtain in this case. We are, therefore, inclined to agree with the respondent's learned counsel that the impugned order does not give rise to any question of law.

18. For the foregoing reasons, we hold that these reference application ire not maintainable and dismiss the same with costs. Applications dismissed.