Law: Income Tax Act, 1961

Section: 256

Income-tax---Income from undisclosed sources---Money-lending business ---Pronotes in the names of relatives of assessee discovered during search in assessee's premises--Finding by Tribunal that pronotes did not belong to assessee--- Interest on amount representing pronotes could not be added to income of assessee---Indian Income Tax Act, 1961. The assessee returned a sum of Rs.5,034 as income from interest received from certain parties. The assessee's premises and also the premises of certain other relatives of the assessee, like his father-in-law, brother-in-law, etc., were searched by the Department. The search revealed that the assessee was in possession of pronotes executed in favour of the assessee's relations. The Income-tax Officer found that the seized books contained transactions of the above parties for various years. The Income-tax Officer questioned the assessee with regard to the seized materials. The assessee claimed that the pronotes belonging to these persons, in whose names they were standing, were kept in the custody of the assessee for the sake of convenience. Each one of the above persons had his or her own funds for advancing money to others and they were enjoying the interest income derived there from. The Income-tax Officer did not, however, accept this contention and held that the business alleged to have been carried on in the names of these parties actually belonged to the assessee and the entire income was assessable in his hands. The Tribunal came to the conclusion that though the parties in question were closely related to the assessee, there was no evidence to hold that the assessee was holding these amounts in benami names. The Tribunal held that these persons could not be held as the benemidars of the assessee, who had invested moneys in their names. Ultimately, the Tribunal sustained interest at 22 percent. instead of 24 percent. adopted by the authorities below. The Tribunal further held that the interest payable to the outsiders could be put at about 10 percent. on an average. The Income-tax Officer had found that the amounts standing in the names of the alleged bienamidars came to Rs.5,08,340. The. Tribunal treated a sum of…

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