COMMISSIONER OF INCOME TAX Vs. G M DHARIA

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal has referred the following question of law arising out of the order dated January 17, 1994, in respect of the assessment year 1981-82.

(2.) THE assessee is an individual. THEre was a firm by name Shree Trading Corporation which was doing the business separately. It was held that the said firm is a benami firm and accordingly proceedings under Section 147(a) were initiated. In the said firm the wife of the petitioner and the married daughter were partners. THEre were nine other partners who were friends and employees of Shri G.M. Dharia. In the assessment proceedings of Shree Trading Corporation, the Income-tax Officer found that the firm is not a genuine one and the entire income belonged to Sri G.M. Dharia. THE registration claim was refused and the income was subjected to tax as an unregistered firm. In the case of reassessment proceedings of Sri G.M. Dharia which was reopened it was contended that there were 11 partners in the firm out of which only two belong to the family of Sri G.M. Dharia and the firm had obtained sales tax registration certificate and complied with the statutory obligations of a business concern. THE firm was dealing in sugar. THE income of the firm cannot be considered as belonging to Sri G.M. Dharia. THE Income-tax Officer observed that in the order passed by the Third Income-tax Officer, Belgaum, regarding the genuineness of the firm he had discussed the matter at length and the said matter has become final. THE partners were inexperienced and they have obliged Sri G.M. Dharia by signing the partnership deed and, therefore, it was observed that the income of the firm belonged to Sri G.M. Dharia. THE Commissioner of Income-tax (Appeals), 'found that the firm was bogus and the partners were benamidars of the appellant and the inclusion of the income of the firm in the hands of the appellant was confirmed. THE appeal was dismissed. THE Tribunal found that the Income-tax Officer passed a protective assessment in the status of an unregistered firm and in the order under Section 185 it was found that the firm was bogus and sham. THE wife and daughter contributed Rs. 5,000 each as capital and the other partners have contributed Rs. 1,000 each and a total capital of the firm was Rs. 19,000. It was found that the circumstances undoubtedly show that Shree Trading Corporation was a bogus one. One partner, Sri G.K. Joshi, has signed the instrument not only for himself but also as representing another partner by name B.G. Shankesh-wari. B.G. Shankeshwari said that he has not signed the paper. It was observed that it was necessary for the Revenue to have shown that G.M. Dharia had invested his funds to trade in the name of a bogus firm. THE transactions of the firm were only with the concerns where G.M. Dharia had an interest. THE goods were purchased at a low price and sold at a very high price. It was considered that these circumstances do not lead to an inference of benami and at best it could be said that the profits of Shree Trading Corporation were part of the profits which those concerns should have made. It was found that a few circumstances may show that G.M. Dharia had a role in bringing about a spurious company by name Shree Trading Corporation but on that basis an inference of benami cannot be drawn merely on suspicion and surmises. THE appeal was allowed.

(3.) ON behalf of learned counsel for the assessee it is submitted that the assessee has not contributed any capital and simply because the wife and daughter have made contributions the income arising from the said firm cannot be considered as belonging to the assessee nor could the firm be considered as benami. The wife and daughters should not be treated simply as name-lenders. It is not a registered firm. To whom the income belongs has to be decided on the basis of some evidence. Since there was no material, it could not be considered that the said income belongs to the assessee nor could it be considered to be a benami concern of the assessee.