Law:

Section:

Explanation 3 to section 64 of the Income-tax Act, 1961 - Income of the individual to include income of the spouse - Transfer of assets by way of loan - Whether where assessee's wife had independent income and a part of consideration for land on which house property was constructed came from wife and wife as owner of house property realised rents and profit thereof and repaid money advanced by husband out of her income, the conclusion that husband advanced money as and by way of the loan to wife was a possible and reasonable conclusion - Held, yes Facts In the assessment year 1970-71, the ITO included the income from a house property standing in the name of the assessee's wife, in the total Income of the assessee. The plots of lands were acquired in 1956-57 at a cost of Rs. 42,000. In 1953 the assessee's wife had inherited certain agricultural land from the estate of her father. She filed a disclosure petition under section 271(4A) stating that she earned Rs. 1.5 lakhs in the course of several years. She also stated that the construction of the house property was made out of the income earned by her to the extent of Rs. 54,218. The disclosure was, however, rejected and it was directed that the assessee had to make a disclosure petition stating that the said income was earned by him. The assessee, accordingly, made a disclosure petition stating that lie advanced Rs. 1.4 lakhs to his wife for construction of the house property. The ITO, however, asserted that this was an afterthought. Before the ITO, the assessee also produced one bound cash book in which certain opening capital was shown. The ITO, however, held that it was written with some specific purpose to support that the assessee advanced loan to his wife. Thus, the ITO included the income from house property in the total income of the assessee. On appeal the AAC, however, excluded the said income from the house property from the total income of the assessee having regard to his earlier decision in the case of the assessee. The AAC in his earlier order considered the following evidences to show that the property belonged to his wife: (1) The deeds of conveyance relating to purchase of the plots showed that…

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