R.K.GULATI, J. - (1.) IN pursuance of the directions of this court under section 256(2) of the INcome-tax Act, 1961, the INcome-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following three questions of law for the opinion of this court : 1. Whether, on the facts and in the circumstances of the case, the INcome-tax Appellate Tribunal was legally correct in holding that the assessee was a benamidar of his wife, Smt. Durgawati Singh, who had been carrying on the business under the name and style of Friends Automobiles ? 2. Whether, on the facts and in the circumstances of the case, the INcome-tax Appellate Tribunal was legally correct in holding that the assessee failed to produce any evidence, whatsoever, to show that Smt. Durgawati Singh was the absolute proprietor of Friends Automobiles ? 3. Whether, on the facts and in the circumstances of the case, the INcome-tax Appellate Tribunal was legally correct to confirm the addition of a sum of Rs. 33,495 as the income of the assessee ?
(2.) BRIEFLY, the facts are that for the assessment year 1973-74 for which the previous year ended on March 31, 1973, the assessee, Vijai Bahadur Singh, filed his return of income in the status of an individual from two sources, viz., (i) salary income as an employee of Friends Automobiles, a partnership concern, in which his wife, Smt. Durgawati Singh, was a partner, and (ii) income from a proprietary business known as Sanjay Trading Corporation which held an agency from Super Speed (P.) Ltd. for purchase and sale of its products. Smt. Durgawati Singh, the wife of the assessee, had set up her proprietary business Friends Automobiles on April 8, 1970, as dealer of Suvega Motor Cycles, manufactured by Moped India Ltd., Coimbatore. The capital invested by her was Rs. 4,000 only which she had received as a gift from her father. The books of account for the first time were closed on March 31, 1971, but no return of income was filed, nor any assessment was made. However, for the assessment year 1972-73 an assessment was completed in her hands on an income of Rs. 28,767 as the proprietor of Friends Automobiles. In the previous year relevant to the assessment year 1973-74 which is in dispute the said business continued as a proprietary business up to May, 1972, and from May 29, 1972, it was converted into a partnership business in which the wife of the assessee had 40 per cent. share.
(3.) IN due course while framing the assessment order for the assessment year 1973-74 in the case of the assessees wife, the INcome-tax Officer took the view that she was only a benamidar of her husband who was the real owner of the business Friends Automobiles so long it was a proprietary business and thereafter it was actually he who was a partner in the firm through his wife. The INcome-tax Officer further held that the income earned by her will be clubbed in the hands of her husband, namely, the assessee, in this reference. However, the disputed income was also assessed protectively in the hands of Smt. Durgawati Singh with the remarks : As the return has been filed voluntarily the assessment is made on protective basis. For the reasons given in his assessment order which the Income-tax Officer framed against the assessee for the assessment year in dispute, he recorded identical findings, viz., the benami character of business, and held that though the wife of the assessee was the ostensible owner of the business Friends Automobiles in reality, the assessee was the owner of that business. As a result of the view expressed in those two sets of assessment orders referred to above, an amount of Rs. 33,495 was brought to tax in the hands of the assessee as income from business of Friends Automobiles, earned in the name of Smt. Durgawati Singh - a benami of the assessee. The aforesaid amount included income for both the periods when Friends Automobiles was a proprietary business, and thereafter the share of profits allocated to the wife of the assessee when that business was taken over on May 29, 1992, by a partnership concern.;