ORDER
S.P. Kapur, Judicial Member
1. All the appeals are by the revenue and the following common grounds for all the assessment years involved have been raised before us :
1 The learned AAC erred in law and on facts in deleting the income earned in the name of U.P. Engines and Machines from the income of the assessee firm.
2. The order of the AAC being erroneous in law and on facts be set aside and ITO’s order restored.
2. The assessment years involved are 1971-72, 1974-75, 1975-76, 1976-77, 1977-78 and 1978-79 with respective accounting periods having ended on 31-3-1971, 31-3-1974, 31-3-1975, 31-3-1976, 31-3-1977 and 31-3-1978. The respondent-assessee has been assessed, for all the years, in the status of resident-registered firm.
3. The speaking order of the learned first appellate authority is for the assessment year 1971-72 and for all the other years the same has been followed, as such, we are disposing of all the appeals at our level by this common order as of necessity and for the sake of convenience. It is also pointed out that the parties have also filed one set of paper book for all the years.
4. For the assessment year 1971-72, in the first innings, the learned AAC upheld the finding of the ITO about the clubbing of income determined in the case of Smt. Manbir Sondhi, proprietor of U.P. Engines & Machines with the income of the assessee-firm holding it to be justified with the reasoning that the said Smt. Manbir Sondhi was none other than the benami of the assessee-firm. For the purpose, in the said order, the learned first appellate authority relied on order dated 9-7-1973 made in relation to the assessment years 1967-68 to 1969-70 in assessee’s own case by the Tribunal, Delhi Bench ‘C’ in Income-tax Appeal Nos. 3993 of 1971-72 and 1531 and 1532 of 1972-73 ; however, since for the same assessment years and in the case of this very assessee, the Tribunal, Delhi Bench ‘D’ vide its order dated 24-6-1975, in Income-tax Appeal Nos. 4412 to 4414 of 1973-74 held on the basis of material on record that ‘as a matter of fact, the explanation given by the assessee was quite convincing and reasonable which pointed out that income from the concern U.P. Engines and Machines (UPEM) belongs to Smt. Manbir Sondhi and it was not a benami concern of the assessee for the assessee-firm. In any view of the matter, in penalty proceedings on behalf of the revenue after rejecting the explanation of the assessee no positive evidence was brought on record to establish that there was concealment of income by the assessee, . . .’, a Special Bench of the Tribunal was constituted to resolve this apparent conflict of views by two Benches of the Tribunal, Delhi Benches at New Delhi, i.e., one in quantum proceedings taking one view and the other in penalty proceedings taking a contra view. The Special Bench of the Tribunal, Delhi Bench ‘A’ vide orders dated 27-4-1982, in the interests of justice and equity observed that since fresh material which has been considered by the Tribunal while disposing of the penalty appeals, should have been considered by the AAC, and then a conclusion arrived at, gave a second innings to the parties and restored the subject-matter to the file of the learned AAC with the directions to consider the entire material and then arrive at a conclusion.
5. The presently impugned order of the learned AAC is in deference to the directions of the Special Bench of the Tribunal dated 27-4-1982 (supra). On behalf of the assessee, at the first appellate stage which appeal for the assessment year 1971-72 has been disposed of by the learned AAC vide orders dated 21-11-1983 (in his appeal file No. 291/B/ 82-83), the following contentions were raised :
1. U.P. Tractors was an HUF concern carrying on business of dealership of Ferguson Tractors up to 1963, with Shri Rahul Sondhi as karta and his mother Smt. Kamala Sondhi being the only other member.
2. In September 1963 the HUF got the dealership of Kirloskar Oil Engines and no security or deposit was paid by HUF at that time.
3. Following a partial partition in the HUF the capital was divided and the business of HUF was converted into firm with Shri Rahul Sondhi 60 per cent and Smt. Kamala Sondhi as 40 per cent partners.
4. Kirloskar Ltd. appointed this new firm as their dealer from 1-4-1964 which continued up to 31-3-1966.
5. From 1-4-1966 on the suggestion of Shri Rahul Sondhi partner the dealership was transferred to Smt. Manbir Sondhi in the business name of U.P. Engines & Machines, Muzaffarnagar.
6. Later on Smt. Manbir Sondhi joined as a partner in the firm U.P. Engines & Machines from 1-6-1973 and the other partner was Shri Rahul Sondhi representing his smaller HUF.
7. Tractors & Farms Equipments Ltd. don’t allow their dealer to have the dealership or agency of any other principals.
8. When the appellant-firm found that the dealership of Kirloskar was going out of its hands it tried to pass it on to their near ones.
9. The dealership of Kirloskar is not given to anyone on the basis of technical qualifications as is clear from the fact that Kirloskars gave the dealership when it was a HUF and then a firm with Shri Rahul Sondhi as the only male partner. The other partner was his mother who contributed only capital.
10. Smt. Manbir Sondhi is an educated lady and had gained business expenses with her husband and was actively supervising her business and helped by Shri Rahul Sondhi her husband as manager.
11. She contributed capital in the concern U.P. Engines & Machines.
12. The business of dealership was later on transferred by Kirloskar Ltd. from that firm to a limited company which is accepted by the department.
13. The Income-tax Officer in the original proceedings for 1967-68 gave a show-cause notice under Section 64 that why the income be not added under Section 64 but in the assessment proceedings he held the concern to be its benami business of the appellant-firm. Section 64 does not cover the case of a firm.
14. Smt. Manbir Sondhi is being assessed in wealth-tax and she owns immovable properties too out of the same income and they are assessed in her hands.
The learned A AC in a very detailed order and after careful consideration of material on record held that the finding of the ITO as also conclusion drawn by the ITO were not correct, since the ITO did not consider all the material on record as also the contention raised on behalf of the assessee, but relied on the order of the Tribunal made for the assessment years 1967-68 to 1969-70. He also held that business of UPEM carried on by Smt. Manbir Sondhi as proprietor was not the business of the assessee-firm. The reasoning of the learned AAC is to the following effect:
I have examined the ITO’s records, for assessment year 1967-68 the AAC’s file and carefully considered the evidence produced by the appellant-firm in penalty appeals for 1967-68 to 1969-70, before the ITAT. I have also examined the various aspects and facts of the case and the arguments laid by Shri Rahul Sondhi and his learned counsel Shri R.C. Chhabra and feel that the finding of the ITO that the business of U.P. Engines & Machines did not belong to Smt. Manbir Sondhi, but to the appellant-firm, are not in order. For coming to this conclusion I rely on the following facts :
1. The appellant-firm is a genuine firm accepted by the ITO and duly constituted on 1-4-1969 and is registered with Registrar of Firms.
2. The firm has nowhere declared that the business of Smt. Manbir Sondhi was its business. It is proved from the ITO’s record that the income earned by the lady was never claimed to be its income by the appellant-firm nor the income was utilised by the firm for its business.
3. The appointment by Kirloskar was ‘dealership’ and not agency and no security or deposit was made and the transactions .were from principal to principal.
4. The principals Kirloskar never treated the lady’s business as that of a firm and had all their future dealings with the new concern owned by the lady.
5. The business in question was later on converted into a firm with effect from 1-6-1973 with Smt. Manbir Sondhi and Shri Rahul Sondhi as partners.
6. The above firm then transferred the dealership to a private limited company of the family which is not disputed or doubted by the ITO.
7. The dealership of the Kirloskar did not require any technical qualifications by the partners or proprietor and were renewed on the basis of performance. In the first year it was given for a year and renewed after that.
8. Shri Rahul Sondhi the partner is not technically qualified and has read only up to Matric and failed in Intermediate but had capital and business experience only.
9. There is nothing wrong if a lady invests her funds and does business.
10. There is nothing wrong that the business was run by Shri Rahul Sondhi husband as manager and he did not charge any remuneration due to marital relationship.
11. The ITO has not brought out any material on record, to show that the income of the lady was directly or indirectly ever enjoyed by the appellant-firm or its partners up to this time.
12. On the contrary, I find that the lady is assessed to wealth-tax and owns the residential house newly constructed by her, out of those profits.
13. That when the business of dealership was acquired by the private limited company the lady got paid up shares of the company which are not disputed or doubted by the ITO and there is no evidence on record that these were considered by the ITO in the assessment of the firm or its partners.
14. There are innumerable cases where businesses are carried on by the ladies, who are even illiterates and the business is run and managed by husbands. Even the ladies are admitted as partners in firms and their profit share are considerable as compared to the capital invested by them (ladies).
15. The A AC in assessment year 1967-68 had held that the business of the lady was her own and not benami of the appellant-firm.
16. The ITAT D-Bench in penalty proceedings for the assessment years 1967-68, 1968-69 and 1969-70 held that the business was not a benami of firm but owned by Smt. Manbir Sondhi herself.
17. Smt. Manbir Sondhi is a fairly educated lady who has read up to Senior Cambridge and invested her own funds in the business and the dealership was in her own name.
18. The Commissioner (Appeals) Meerut in assessment year 1976-77 held in appeal that the lady’s business was neither a benami business of the firm or its branch. He, therefore, deleted the additions of Rs. 2,47,360. He also directed to grant registration to the firm with Smt. Manbir Sondhi and Shri Rahul Sondhi as partners.
A variety of circumstances are relevant in examining the benami character of a transaction. They are :
(a) The source of consideration for acquisition of the properties.
(b) The possession of properties.
(c) The conduct of the parties in relation to it.
(d) The custody of title deeds ; (e) and so on.
The most important fact, however, is the source of money, but the other facts also play varying parts. The facts to be applied to find out a benami transaction are fully established by judicial decisions are :
(a) Mot we of the alleged benami transaction.
(b) Relationship between the parties.
(c) Possession of the property in question.
(d) Custody of title deed.
(e) The payment of the consideration which is the most important.
In the instant case, it is undisputed that there was no agency of Kirloskar Ltd. with the appellant-firm. It was a dealership on principal to principal basis and no security or deposit was necessary. It was a dealership on the basis of performance only and could be terminated by the principals any time. It is also not disputed that for acquiring this dealership any technical qualifications were necessary. It is not doubted or disputed that Smt. Manbir Sondhi made investments of her own in that business. The ITO has not brought any material to show that the appellant-firm invested any amount directly or indirectly in that concern. There is no material or evidence to show that the profits earned by the lady were ever enjoyed by the appellant-firm or any of its partners. On the contrary, there is ample evidence on account of subsequent evidence of the appellant-firm’s income-tax record and the lady’s income-tax records, that she is the actual owner of that business and the firm or its partners, had no interference in the ownership of beneficial enjoyments of the business of Smt. Manbir Sondhi. The two businesses carried on by the appellant-firm and the lady are different and the principals of both the businesses are different. In the affidavits filed before the I AC in penalty proceedings for 1967-68 to ] 969-70 the partners and the lady have deposed all these facts and the ITO has not considered them in 1971-72 nor he has cross-examined them and neither discussed and brought any consent material on record to show that the affidavits were false and incorrect.
6. This time the revenue is aggrieved and we have heard the parties at length. Orders of the learned lower authorities have been duly noted as also the contents of the parties’ paper books. On behalf of the revenue, the learned departmental representative, Shri Gujjar Mal, has made the following points :
(i) That the business premises of the assessee as also that of UPEM remain the same as also the employees of both the concerns were also common ;
(ii) Major sales by UPEM were to the assessee-firm and further that sales transacted by UPEM (allegedly) were first credited in the account books of the assessee and later on transferred to UPEM and similar is the position about salaries and employees ;
(iii) The business of UPEM is managed by Shri Rahul Sondhi and that way it can be held that the business of UPEM is being managed by the assessee-firm, since in effect and in actuality Shri Rahul Sondhi is the man behind the scenes ;
(iv) The bank account of UPEM was being operated by Shri Rahul Sondhi as manager and virtually Shri Rahul Sondhi is conducting the business for and on behalf of UPEM as also for the assessee-firm ;
(v) The assessee is also a sub-dealer of UPEM ;
(vi) That the agreement on behalf of UPEM with Kirloskar was also signed by Shri Rahul Sondhi, as manager ;
(vii) That, on the facts of the case, the assessee being a sub-dealer of UPEM vis-a-vis Kirloskar products, it cannot be said that agreement entered into by Shri Rahul Sondhi as manager on behalf of UPEM was either necessitated by some pressure or else by any other compulsion, since the assessee is a sub-dealer of UPEM and there is no pressure by Kirloskars instead it can safely be held that it was a voluntary action of Shri Rahul Sondhi, partner of the assessee-firm and manager of UPEM to have diverted the arrangements with Kirloskars which was originally with the assessee-firm, later on to UPEM ;
(viii) That on the facts and in the circumstances the lady Smt. Manbir Sondhi is labelled as proprietor of UPEM as a device for the diversion of the income of the assessee-firm to effect reduction in tax instance ;
(ix) That the case of the revenue is as to includibility of the income of UPEM vis-a-vis in whose hands it has to be, i.e., whether the income is includible in the hands of the assessee-firm or is to be treated as the income of the lady-Smt. Manbir Sondhi ;
(x) That the lady had made originally a token investment as has been referred to by the Tribunal in paragraph 14 of its order made in quantum assessment for the assessment years 1967-68 to 1969-70 ;
(xi) That there was no fresh evidence either before the learned first appellate authority in relation to the assessment years under appeals or else before the Tribunal while deciding the penalty appeals of the assessee since the three affidavits referred to by the Tribunal in the penalty proceedings are self-serving statements which are not affidavits, but argumentative paraphrases ;
(xii) That despite the directions of the Tribunal (Special Bench) the ITO has not been heard by the learned first appellate authority and paragraph 18 of the impugned order of the learned first appellate authority supports this ;
(xiii) That strong reliance is placed on the order of the Tribunal made in quantum assessment for the assessment years 1967-68 to 1969-70 where benami issue was decided against the assessee.
The learned departmental representative placed strong reliance on copies of letters as contained in assessee’s paper book pages 53, 39-40-48, 50-51 and 92. Reliance was also placed on the decisions in Workmen of Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1986] 157 ITR 77 (SC), Sri Krishna v. CIT [1983] 142 ITR 618 (All.), CIT v. Durga Prasad More [l911] 82 ITR 540 (SC), Lachminarayan Madan Lal v. CIT [1972] 86 ITR 439 (SC), CIT v. U.G. Krishnaswami Naidu [1972] 86 ITR 239 (Mad.), South Asia Industries (P.) Ltd. v. CIT [1985] 155 ITR 392 (Delhi), Harinarayan Jamnadas Lakhani v. CIT [1984] 147 ITR 576 (Bom.), Madhowji Dharamshi Mfg. Co. Ltd. v. CIT [1970] 78 ITR 62 (SC), M.D. Narayan v. Agrl. ITO [1974] 95 ITR 452 (Mys.), Juggilal Kamlapat v. CIT [1969] 73 ITR 702 (SC), CIT v. Associated Electrical Industries (India) (P.) Ltd. [1986] 157 ITR 72 (SC), McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 (SC), Chowkchand Balabux v. CIT [1961] 41 ITR 465 at page 470 (Assam), Kanhaiya Lal Umrao Singh v. CIT [1941] 9 ITR 225 (Oudh) and Chaturbhuj v. CIT [1941] 9 ITR 286 (Oudh). Finally it has been contended by the learned departmental representative that the impugned orders of the learned first appellate authority are based on surmises and conjectures and also that the learned first appellate authority has not met the case of the ITO. He has also contended that if we go by the substance then Shri Rahul Sondhi the partner of the assessee-firm is the man behind the scenes and he got the arrangements for the sale of Kirloskar products, originally with the assessee-firm, transferred to UPEM, not under any pressure or compulsion, but of his own free will and volition and accordingly in substance the income of UPEM is the income of the assessee-firm and it is a pure and simple case where income of UPEM is includible in the hands of the assessee since it was a pure and simple voluntary act of diversion of income as a device for reduction in tax instance. Finally he assailed the impugned orders and prayed that the orders of the assessing officer be restored relying forcefully on the decision of the Tribunal in quantum appeals made for three assessment years referred to above.
7. On his part, Shri G.C. Sharma, the learned senior advocate, took us through the impugned orders of the learned first appellate authority and while supporting the same, he relied upon the order of the Tribunal made in the case of the assessee in penalty appeals and highlighted the finding of the Tribunal that it was not a case of benami. He further contended that the test of benami must rest: on the following factors :
(i) Source of investment ;
(ii) Enjoyment of income as also title to the fruits ; and
(iii) Ownership of the business and the assets as also control thereof.
8. He has also contended that the income, the subject matter of these appeals resulted to UPEM i.e. the proprietor, Smt. Manbir Sondhi, not on account of the act of her husband, Shri Rahul Sondhi, but on account of the willingness of the principals, Kirloskars, since the creater of the source of income is not the husband, but the principals. He placed strong reliance on the observations and finding of the Special Bench of the Tribunal as also on the fact that income resulting to Smt. Manbir Sondhi and turned into net wealth has been assessed as such, i.e., as net wealth belonging to the said lady in her hands and if the income as net wealth accrued belongs to Smt. Manbir Sondhi, then the same must be held to be income of Smt. Manbir Sondhi and no one else. Shri Sharma also contended that Shri Rahul Sondhi was acting as manager of Smt. Manbir Sondhi, since he happens to be the husband of the lady and in a given situation and under the facts stated above any husband of a lady would help the wife to manage the affairs of the business as any father would do for a minor child and it is nothing new, much less, can be said to be a device, for diversion of income with an object to reduce tax incidence vis-a-vis the assessee-firm, since according to Shri Sharma, the assessee is a firm where the husband-Shri Rahul Sondhi, is one of the partners and the other partner, Smt. Kamala Sondhi, is not a privy to any act/agreement entered into by Shri Rahul Sondhi as manager acting for UPEM. Shri Sharma, as such, finally contended that the assessee-firm being a partnership firm, merely because Smt. Manbir Sondhi, the proprietor of UPEM was helped by her husband, Shri Rahul Sondhi, it cannot be said that the income of Smt. Manbir Sondhi is either includible in the hands of the assessee-firm or else that the said lady is a benamidar of the assessee-partnership firm. Shri Sharma relied heavily on the ratio of the decision of the Hon’ble Delhi High Court in Addl. CIT v. Gokalchand Jagan Nath [1986] 157 ITR 187 on a point of clarification, both the parties brought to our notice that both the orders of the Tribunal, i.e., in quantum assessment as also in penalty proceedings have become final.
9. Having heard the parties at length, we can reproduce usefully paragraphs 2 to 5 of order dated 27-4-1982 made by the Tribunal, Delhi Bench ‘A’ (Special Bench) in Income-tax Appeal Nos. 71 and 72 of 1975-76 relating to the assessment year 1971-72 :
The assessee-firm before us has little history. This business of tractors, now carried on by the present firm was originally started by a joint family consisting of Shri Rahul Sondhi as karta sometime in 1958, as dealers of Ferguson Tractors. Sometime in 1963, the said firm was able to obtain the dealership of Kirloskar Oil Engines, sometime in 1965 Kirloskar Oil Engines Ltd. finding that the assessee had been carrying on simultaneously the business of Ferguson Tractors, protested that their business should be exclusively carried on in the product manufactured by them and should not be coupled with any other product. At about 1-4-1965, the protest took a turn of almost termination of agency and the assessee preferred to give up the agency of Kirloskar Oil Engines Ltd., and to continue the agency of Ferguson Tractors. The agency of Kirloskar Oil Engines Ltd., thus, given up by the assessee, was taken up by Smt. Manbir Sondhi the wife of the assessee, was an individual and was carried on in that capacity. The business of Ferguson Tractors was being carried on in partnership by the assessee consisting of himself and his mother Smt. Kamla Sondhi. The view of the department was that this was an arrangement brought about by the assessee deliberately so that the income derived from the carrying on of the Kirloskar agency could be diverted, and that, therefore, that business was the benaini of the assessee-firm.
After going through the relevant materials on record after considering the arguments addressed to us, that was patently clear is, that certain fresh materials come to be considered by the Bench, which heard the penalty appeals, tested on which the conclusion reached in the quantum appeals was doubted. This additional material was not considered by the AAC while disposing of the appeals for subsequent years. The learned counsel for the assessee, Shri C.P. Chhabra, appearing before us, fairly submitted that there was no categorical finding recorded by the Tribunal in the penalty appeals that the finding given in the quantum appeals was incorrect. It is quite obvious that it is not possible to say that there is an actual conflict between the two views arrived at by the Tribunal. When there is no apparent conflict and when some fresh material was considered and considering on which a different conclusion could be arrived at, that exercise should have been gone through in all fairness at the stage of the AAC, if it would have been a case of considering the same material over again by a different Bench for subsequent year, the position would have been totally different but this is a case where admittedly and undisputedly there was enough material, which was not produced and considered before the Bench which decided the quantum appeals for the assessment years 1967-68 to 1969-70. It appeared to us to be unfair that without considering the full material and its scope no final conclusion on fact should have been arrived at more so in a case of this nature that the said Smt. Manbir Sondhi was the benami of the assessee before us (sic).
Thus, it turned to be a case where for the purposes of quantum appeals certain aspects and evidence only were considered and for the purpose of penalty appeals, certain more materials and fresh evidence were brought on record and were considered. As a consequence of the consideration of, if we may call so, partial and full evidence, different conclusions were reached by different Benches of the Tribunal. That is how, one Bench took the view that it could not be so. It is now a matter for consideration whether entire evidence, for the purposes of arriving at a correct finding for subsequent years should or should not be considered which was not done by the AAC in the present appeals.
The finding recorded in a penalty appeal that there was no concealment of income does not conclusively prove against the benami nature. It is a finding arrived at on the basis of preponderance of probabilities and strong doubts based on the material available. Such a finding, it is difficult to say, is determinative of benami character. But the combined effect of a finding arrived at after evaluation of the entire material available on record could be of binding nature. We, therefore, felt that the interest of justice and equity require that the fresh material which was considered by the Tribunal while disposing of the penalty appeals, should have been considered by the AAC and then a conclusion arrived at.
10. The Special Bench of the Tribunal, Delhi Bench ‘A’ has, as such, held that there was fresh material before the Tribunal while disposing of penalty appeals of the assessee and accordingly it directed the learned first appellate authority to redecide the matter for the assessment year 1971-72 after considering that ‘fresh material’. The presently impugned orders of the learned first appellate authority for all the years under appeal (the speaking order is only for the assessment year 1971-72) have, thus, been made accordingly and justifiably on facts the learned AAC has held the issue in favour of the assessee. The Hon’ble Allahabad High Court (Jurisdictional High Court in this case) has, in the case of Prakash Narain v. CIT [1982] 134 ITR 364 had considered the issue of benami in the above case and their Lordships in a classic decision of theirs in the case of Prakash Narain (supra) considered the ratio of the decision of the following cases :
Bhuban Mohini Dasi v. Kumud Bala Dasi AIR 1924 Cal. 467, CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), CIT v. Daya Chand Jain Vaidya [1975] 98 ITR 280 (All.), CIT v. Durga Prasad More [1971] 82 ITR 540 (SC), CIT v. M. Ganapathi Mudaliar [1964] 53 ITR 623 (SC), Dalip Singh v. Chaudharain Rawal Kumar 36 Indian Appeals 104, D. Damodaran v. D. Leela Vathi Ammal AIR 1975 Mad. 278, Dhurumdas v. Sham Sundari 3 MIA 289 1843, Gangadara Ayyar v. Subramania Sastrigal AIR 1949 FC 88, S.N. Ganguly v. CIT [1953] 24 ITR 16 (Pat.), A. Govindarajulu Mudaliar v. CIT [1959] 34 ITR 807 (SC), Hazarilal v. CIT [1963] 47 ITR 516 (AP), Imambandi Begam v. Kamaleshwari LR 13 IA 160 SC, ILR 14 Cal. 109-1986), Irshad Alt v. Kariman 22 Calcutta Weekly Notes 530 . First ITO v. M.R. Dhanalakshmi Ammal [1978] 112 ITR 413 (Mad.), Jaydayal Poddar v. Mst. Bibi Hazra AIR 1974 SC 171, Kale Khan Mohd. Hanif v. CIT[1963] 50 ITR 1 (SC), Karnani Properties Ltd. v. CIT [1971] 82 ITR 547 (SC), Ramkinkar Banerji v. CIT [1936] 4 ITR 108 (Pat.), 5. Kumaraswami Reddiar v. CIT [1960] 40 ITR 590 (Ker.), Sree Meenakshi Mills Ltd. v. CIT [1967] 63 ITR 207 (SC), R.K. Murthi v. CIT [1961] 42 ITR 379 (Mad), Pramode Kumar Roy v. Madan Mohan Saha Pramanik AIR 1923 Cal. 228, Rai Bahadur Mohan Singh Oberoi v. CIT [1973] 88 ITR 53 (SC), K. Ramaswami Naidu v. CIT[1974] 93 ITR 341 (Mad.), Seth Ramnath Daga v. CIT[1971] 82 ITR 287 (Bom.), K.B. Sheikh Mohd. Naqi v. CIT [1945] 13 ITR 452 (Lahore), L. Sheo Narain Lal., [1954] 26 ITR 249 (All.), Sovaram Jokhiram v. CIT [1944] 12 ITR 110 (Pat.), K.M.N.N.S.N. Subramanian v. CIT[1965] 56 ITR 610 (Mad.), Union of India v. Moksh Builders & Financiers Ltd. AIR 1977 SC 409, Woomesh Chander Biswas v. Qashochini Dasi 21 Calcutta Weekly Notes 280.
Their Lordships mainly relied upon the ratio of the decision of Hon’ble Supreme Court in the case of Jaydayal Poddar v. Bibi Hazra AIR 1974 SC 171 and laid down the following tests :
(i) The source of investment ;
(ii) Nature and possession of property after the transaction ;
(iii) Motive ;
(iv) The position of the parties and the relationship, if any, inter se ;
(v) The custody or the title deeds to the property ; and
(vi) The conduct of the parties concerned in dealing with the property and as an after event.
On the facts and in the circumstances of the cases, with which we are presently seized of, and as noted by the Special Bench of the Tribunal, Delhi Bench ‘A’ in paragraph 2 of the said order dated 27-4-1982, the business vis-a-vis dealership of Kirloskar Oil Engines was not an exclusive business with U.P. Tractors but it has been originally a business of the joint family. The said dealership of Kirloskar products was initially with the joint family, then with the assessee and at the relevant time, i.e. vis-a-vis the accounting periods in relation to the assessment years under appeal with Smt. Manbir Sondhi-UPEM. The Special Bench in paragraph 2 of the above order has also given the background as to the said dealership having had to be with different entities at different times and there is also no controversy on this issue vis-a-vis the parties that the source of investment in UPEM was made by the lady, viz., Smt. Manbir Sondhi, that nature and possession of the dealership as also Kirloskar products, the sale proceeds, the resultant income has always remained with the lady, Smt. Manbir Sondhi, and further that the said income accumulation resulting in net wealth in terms of assets as house property, etc., have been assessed in the hands of the lady Smt. Manbir Sondhi as her net wealth by the revenue department ; that vis-a-vis the assessee-firm and the said lady Smt. Manbir Sondhi, there is no relationship although Shri Rahul Sondhi is a partner in the assessee-firm and he is husband of the said lady Smt. Manbir Sondhi, but at the same time the fact remains that the assessee is a partnership firm of which Shri Rahul Sondhi is one partner. The parties are also not at issue with regards to the fruits of the business inasmuch as, as already stated, the net wealth which the business generated as income has been assessed in the hands of the lady Smt. Manbir Sondhi as her net wealth and, accordingly, it can safely be held that the custody of the net wealth is with the lady Smt. Manbir Sondhi and not with the assessee. The motive for the dealership having gone to the lady has been discussed by the Special Bench in paragraph 2 of its order where it has noted that, “At about 1-4-1965, the protest took a turn of almost termination of agency and the assessee preferred to give up the agency of Kirloskar Oil Engines Ltd. and to continue the agency of Ferguson Tractors. The agency of Kirloskar Oil Engines Ltd., thus, given up by the assessee, was taken up by Smt. Manbir Sondhi . . .” Next remains the conduct of the parties and since Shri Rahul Sondhi was the husband of Smt. Manbir Sondhi, in the relationship to which these two were put by nature, it is but natural that any husband would help and assist his wife anywhere, more so, in business and the conduct of the parties, on the facts and in the circumstances of the case either on facts or in law is not questionable. For this proposition, we can do no better, but to rely on the decision of the Hon’ble Calcutta High Court in the case of CIT v. K.K. Birla [1981] 7 Taxman 193. In that case the assessee, Shri K.K. Birla, as father and natural guardian entered into speculative transaction on behalf of his minor daughter and their Lordships held that performance of certain functions by the guardian, which in a fiduciary capacity, he would have been normally obliged to, would not lead us to believe that speculation business income could be included in the assessee’s income when there was no evidence that either the assessee utilised the said funds or else had claimed any right in the impugned investments.
On the facts and in the circumstances of the case, the fact remains that the investment in UPEM was made by Smt. Manbir Sondhi, the enjoyment of income is by her and she retains the full control over the income and the assets as also the custody thereof and accordingly the apparent is the real state of affairs cannot be disputed. The onus of proof to dislodge the belief about the apparent being the real state of affairs having not been discharged by the revenue, we do uphold the impugned order of the learned first appellate authority for the assessment year 1971-72 as also for subsequent assessment years under appeals, of course, fully concurring with his reasoning and conclusion. All the appeals fail and stand dismissed.
11. Before parting, we would like to say that since we have applied the tests laid down by their Lordships of the High Court, we are not considering the other case law for obvious reasons.
