- (1.) AT the instance of the Revenue Department, the Tribunal referred the following question under s. 256(1) of the IT Act, 1961 ('the Act') for our opinion: "Whether, on the facts and in the circumstances of the case, the finding of the Tribunal in holding that the property in question was purchased by the minor sons of the assessee and as such, the income of this property could not be assessed in his hands is perverse?"
(2.) THIS reference relates to the assessment years of 1973-74 and 1974-75. The assessee is a Doctor. He submitted his return of income for the asst. yr. 1973-74 declaring income of Rs. 17,303 inclusive of salary, private practice, property income and income from interest from his minor sons. The ITO found that the assessee had purchased immovable property of Rs. 60,000 in the names of his minor sons Arun Kumar and Anil Kumar during the accounting years relevant to the assessment years of 1973-74 and 1974-75. The assessee explained to the ITO by his lettered dt. 3rd March, 1976 that the house was purchased by assessee's sons. He also declared the source of their income as under : The ITO did not accept the explanation offered by the assessee and passed order under s. 144 of the Act on 23rd March, 1976 and added Rs. 43,627 as unexplained investment made for purchase of the said house and also made an addition of Rs. 5,000 as an estimated rental income Loan borrowed by S/Shri Arun Kumar and Anil Kumar Arun Kumar Anil Kumar Loan from assessee Dr. Sohanlal Sankhla 12,000 12,000 Loan from wife of assessee 8,500 3,500 Loan from Bharat Motors 7,500 7,500 Loan from Shri Mam Raj 5,000 Loan from Jaimal Singh 10,000 Total Rs. 33,000 33,000 from the house purchased by him in the name of his minor sons. That order passed under s. 144 was cancelled by the ITO under s. 146 of the Act and assessment proceedings were reopened. Once again, the assessee explained that he was not the real owner of the house in question by letter dt. 9th Aug., 1976. The same was not accepted by the ITO as according to him, the assessee was the real owner of the house and not his sons. They were Benamidars of the assessee. Aggrieved by that the assessee carried the matter further before the AAC, who by his order dt. 5th March, 1977 upheld that order passed by the ITO. Second appeal was filed by the assessee against the said order before the Tribunal which accepted the claim of the assessee and held that: "16. In my opinion, the contention of the assessee must be accepted. The sale deed is in the name of both the minors. The copy of the sale deed is on the paper book. For purchasing the property in question, loans were raised by third parties, it is not the case of the Department that the loans were bogus. These loans were given by third parties to Shri Anil Kumar and Shri Arun Kumar, Rs. 13,000 were advanced by the mother of the minors. Similarly, Rs. 24,000 were given on loan by the assessee to the minor sons. The ITO did not add Rs. 60,000 or any amount in the hands of the assessee as unexplained investment. As a matter of fact, the learned ITO did not dispute the advancement of loans in question, he also did not say that the said persons did not have the capacity to advance the loans. It means the theory of loans was accepted by the Department. If the Department was not satisfied with the explanation of the assessee, the assessee, his wife and the minor should have been examined. They were never examined. So apparently it is clear that the property in question was purchased by the minor sons of the assessee after taking loans from different persons as discussed above. Apparently there is no material on record to show that in reality the assessee is the owner of the property and entire investment was made by him. I may point out that it is not the case of Department that the whole transaction is sham one. The Department proceeded on the premises that both the minor sons were benamidars for their father. As a matter of fact, at the time of purchase of the property, one of the sons was on the verge of attaining majority and the other son was younger boy two to three years. In the absence of any other material on record it could not be said that the minors were not in a position to make arrangement for purchasing the property in question. If their parents helped them in purchasing the property in question, there is nothing wrong in it. In view of the aforesaid discussions, it is clear that the property in question was purchased by the minor sons of the assessee. The property income of this property could not be assessed in the hands of the assessee. So the property income added in the hands of the assessee in both the years under consideration shall be excluded from the computation of his income". The Revenue filed two reference applications under s. 256(1) before the Tribunal requesting it to refer the above-mentioned common question to this Court. The said reference applications were rejected by the Tribunal. Thereafter, CIT approached this Court under s. 256(2). This Court directed the Tribunal to refer the above-mentioned question along with the statement of case for its opinion. Accordingly, the Tribunal referred the above-mentioned question to the Court for its opinion. The learned counsel Shri Bhandawat for the Department submitted that it was a Benami transaction and the ITO as well as the AAC both have rightly found that the real owner of the house was the assessee and not his minor sons because source of income of minors was not disclosed and the minors were unable to earn. He submitted that the Tribunal has, therefore, committed error in allowing the appeal of the assessee in part. This submission of Mr. Bhandawat cannot be accepted for the simple reason that the assessee had pointed out the source of income of his minor sons. Arun Kumar and Anil Kumar both minor sons of assessee got loan from the assessee and his wife. Not only that, they got the loan from three other independent persons also. This was on record and this fact could not be disputed. That apart, sale deed of the property was in the name of the minors and not in the name of the assessee. Therefore, in our opinion, the learned Tribunal was right in holding that the evidence on record shows that the property was purchased by the minors and it belongs to them and the property income of the minors could not be added in the assessee.
(3.) MR. Bhandawat next contended that the learned Tribunal committed a grave error in holding that if the Department was not satisfied with the explanation of the assessee then it should have examined the assessee, his wife and his minor sons but they were never examined. He submitted that all of them were examined. Their evidence was already on record. There is some substance in what Mr. Bhandawat has submitted. But in our opinion, nothing would turn out from it whether they were examined or not, particularly when there was a clear documentary evidence on record which goes to show that the minor received the loan from which they constructed the house. That apart, registered the loan was also very much there on record which was not in the name of the assessee but in the name of the his minor sons. At this stage, we must point out that it was never the case of the Department that the whole transaction was a sham and bogus one. The case of the Department was on the premise that both the minor sons of the assessee were Benamidars for their father. In fact, one of the minor sons was on the verge of attaining majority and other younger son was about to attain majority within 2-3 years. We fully agree with the view taken by the Tribunal that if parents helped in purchasing the property to their minor sons, there was nothing wrong in it. ;