Law: Income Tax Act, 1961

Section: 22

(a) Income-tax----Benami transactions---Property---Ownership of property ---Benami purchase of property---Burden of proof on Revenue to. establish benami nature of purchase---No proof that property had been purchased benami---Income from property was not assessable in hands of alleged benami purchaser---Indian Income Tax Act, 1961, S. 22. (b) Income-tax--- ----General principles ---Benami transactions---Burden of proving that a transaction was benami "is on Revenue" ---Criteria for determining whether transaction was benami. The ordinary presumption of law is that the apparent state of facts is real unless the contrary is proved and, therefore, the burden of proving that -a transaction is sham or that the person in whose name the property stands is not the real owner but is only a benamidar for another, is on the taxing authorities. For determining the question no absolute formulae uniformly applicable to all situations can be laid down. Yet, in weighing the probabilities Courts are usually guided by the following circumstances: (1) the source from which the purchase money came; (2) the nature and possession of the property after purchase; (3) the motive, if any, for giving the transaction a benami colour; (4) the position of the parties and the relationship, if any, between the alleged real owner and benamidar; (5) custody of the title deeds after the sale; and (6) the conduct of the parties concerned in dealing with the property after the sale. The above indicia are not exhaustive and their efficacy varies according to the facts of each case. The Assessing Officer held that the assessee had purchased a property in benami names and subsequently constructed a compound wall at an estimated cost of Rs. 40,000. Accordingly, a sum of Rs. 40,000 was added as income from undisclosed sources and the rental income from the property for the subsequent years was brought to tax in his hands. The Tribunal held that the Revenue had failed to establish the benami nature of the transaction. On a reference: Held, that the burden of proving the nature of a sham or a benami transaction was on the taxing authorities. It was not enough to show circumstances which might create…

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