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Petitioner: DURGA PROSAD MORE VS Respondent: COMMISSIONER OF INCOME-TAX, WEST BENGAL II
Court Name: Calcutta High Court Judge(s): K. C. Sen, P. B. Mukharji Title: DURGA PROSAD MORE vs COMMISSIONER OF INCOME-TAX, WEST BENGAL II Case No.: Income-tax References Nos. 78 and 79 of 1964 Date of Judgment:- Reported As: 1971 PTD 228 Result: Question answered in negative
JUDGMENT
JUDGMENT A. C. SEN, J.-This is a reference under section 66(2) of the Income-tax Act, 1922, at the instance of the assessee. The question that has been referred to us for our opinion is as follows: "Whether, in the facts and circumstances of the case, and on a proper interpretation of the deed of conveyance and the deed of settlement the Tribunal is right in holding that the house property being premises Nos. 46-A and 46-B, Wellesley Street, Calcutta, is not trust property?" The facts may briefly be stated thus: In the course of the assessment proceedings for the assessm ent years 1958-59 and 1959-60, the assessee claimed before the Income-tax Officer that the income of the house property consisting of premises Nos. 46-A and 46-B, Wellesley Street, Calcutta, should be treated as income derived from trust property and hence should be taxed not in his hands as his individual income but as income derived by him as trustee from trust property. It appears that the assessee filed two returns-one in his own name, viz., Shri Durga Prosad More, declaring loss at Rs. 9,736 and the other in the name of Shri Durga Prosad More in the capacity of trustee to the estate of Sm. Benarasi Debi declaring total income at Rs. 34,380. It was stated by the representative of the assessee before the Income-tax Officer that the said house property should not be taxed in the hands of the assessee as it was a trust property but should be taxed separately. In the deed of sale dated 30th September, by which the aforesaid premises were purchased, the assessee has been described as a trustee, being a party thereto as of the fourth part. In the recitals we get the following assertions: "Whereas Sm. Benarasi, wife of the said trustee, has set apart and made over certain sums to the trustee to have and to hold the same upon trust for investing the same in immovable properties for
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the maintenance of herself during her lifetime with the rents, issues and profits thereof after payment of all outgoings and her death to hold the same in trust for her sons for their maintenance during their minority and on their attaining majority upon trust to make over the same to the said sons absolutely in equal shares and whereas as such trustee as aforesaid and with a portion of the money made over to him for the purposes of the aforesaid trust the said trustee became desirous of purchasing the said premises Nos. 46-A, 46-B, Welleselly Street, and whereas the vendor has agreed with the trustee for an absolute sale to him of the said land . . . . For the sum of rupees one lakh and eight-five thousand free from all encumbrances . . . . . Now this indenture witnesseth that, etc." Therefore, in the deed of conveyance it is clearly stated that the assessee got from Sm. Benarasi a certain sum of money with the direction that the money was to be utilized for purchasing the premises in question and that the said premises were to be held in trust for the benefit of Benarasi and her two sons. Nearly after one year another deed known as the deed of settlement was executed by and between Sm. Benarasi and the assessee. The relevant portion of the recitals in the deed of settlement runs thus: "This indenture between Sm. Benarasi, wife of Durga Prosad More . . . . . And Durga Prosad More, son of Jagannath More . . . Hereafter called the trustee: Whereas the settlor was possessed of and absolutely entitled to a con--siderable amount of money as her absolute stridhan property . . . . And whereas the settlor requested the trustee to act as trustee of such trust and the trustee agreed to act as such trustee and whereas the settlor gave the said sum of rupees two lakhs to the trustee absolutely to hold the same upon the trust hereafter mentioned and to invest the same in suitable immovable or other properties . . . . . And whereas out of such money the trustee has invested a sum of Rs. 1,85,000 (rupees one lakh eighty-five thousand) in the purchase of premises Nos. 46-A and 46-B, Wellesley Street . . . . . And whereas it is desirable that the terms upon which the trustee is holding the trust properties, the trusts and his duties and powers should be recorded in a document . . . . . It is hereby declared as follows . . . . ." The recitals clearly indicate that this document is merely in the nature of a declaration of trust. The conveyance dated 30th September 1940, indicates that the money was received by the assessee on the basis of an oral agreement to hold the said money for the benefit of his wife and the two sons and with the further obligation to utilize a part of the money towards purchase of some house property to be held in the same manner. Therefore, the documents clearly state that the assessee received the money from his wife subject to the trust aforesaid and that the money was the stridhan property of the wife. There is nothing in these two documents to indicate that the money really belonged to the assessee himself. The Income-tax Officer, however, treated the sum of Rs. 1,85,000 utilized for the purchase of the said house property as belonging to the assessee. He, therefore, treated the house property in question as the property belonging to the assessee. In other words, in the opinion of the Income-tax Officer, the wife is nothing but a benamidar of the assessee. Still, we do not find that any attempt was made by the Income-tax Officer together facts or materials in support of this conclusion. The only reason offered by the Income-tax Officer would appear from the following extract from the assessm ent order: "I find from records that this property was purchased for a sum of Rs. 1,85,030 on September 30, 1940, to the name of Sm. Benarasi Devi and the income from his property for the assessment year 1942-43 assessed in the hands of the assessee and the assessee did not object to the same. The assessee, however, went on appeal against the orders of the Income tax Officer assessing the income from this property in the hands of the assessee for the assessment years 1943-44 to 1948-
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49, but the appeals were dismissed and it was held that the Income--tax Officer was right in assessing the income from this property in the hands of the assessee." The Appellate Assistant Commissioner affirmed the assess--ment made by the Income-tax Officer. He also seems to have adopted the reasoning given by the Income-tax Officer. He said as follows: "I may mention that the appellant himself is responsible to a considerable extent for the inclusion of the income from this property in his total income." On further appeal the Income-tax Appellate Tribunal also affirmed the decision of the authorities below. The Tribunal too thinks that the assessee having allowed himself to be assessed in respect of the income derived from the house property in question year after year and having failed to adduce any fresh evidence, there is no reason why this income should not be assessed in his hands as his individual income in the assessment year in question. This is what the Tribunal said in its order: "The matter came up to the Tribunal and the assessee did not succeed in satisfying the Tribunal that the house properties were purchased not by the assessee himself in his individual capacity but as a trustee to that estate. Having failed in all those previous years, it was expected that if the assessee's claim was genuine, he should have come armed with evidence of unimpeachable character. Unfortunately, however, apart from the two documents . . . . . No further materials have been brought to our notice to justify the claim made by the assessee. Under these circumstances we are confirmed in our view that the action taken by the departmental authorities . . . . . Is correct." So far as the assessm ent for the two years with which we are concerned, we find that the tax authorities had no materials before them which supported the finding that the house property in question was purchased by the assessee with his own money and not with the stridhan of his wife. All of them proceeded on the footing that the assessee allowed himself to be assessed in respect of the income of this house property year after year since the assessment year 1942-43. According to them he should not be permitted to say, in the absence of any positive evidence adduced by him, that the money with which the house property was purchased really belonged to his wife. It is well settled that in the case of benami, the onus is upon the Depart--ment to prove that the person whose name appears in the document is merely a name-lender. The Appellate Assistant Commissioner made a feeble attempt to prove that the Depart--ment had discharged the onus. He quoted a portion from the report of the Income-tax Officer made in connection with the assessm ent for the assessm ent year 1942-43. The portion quoted runs thus: "There is a separate set of accounts for this property and the accounts were closed on 30th September 1941 . . . . . The reason submitted by the assessee is that the assessee never considered this amount as his own but as belonging to his wife, Benarasi Debi. According to this submission as contended by the party it was her stridhan. Questioned as to how this stridhan was built up the party is unable to give any satisfactory explanation not to speak of any tangible evidence but only reiterates that the money had been lying with his father-in-law for the last few years . . . . . As the assessee has failed to produce any evidence relating to the stridhan character of the amount, the transaction is treated as benami, i.e., the real owner of the property is the assessee though it stands in the name of the assessee's wife." Mr. P.I appearing on behalf of the revenue, also relies strongly on this passage. But a close examination of the above passage makes it clear that the Income-tax Officer in the assessment year 1942-43, instead of discharging the onus of proving that the money did not belong to the wife, called upon the assessee to prove that the money in fact belonged to his wife. The assessee stated that for the last few years the money was lying with his father-in-law. But there is nothing in the order of the Income-tax Officer to say that the father-in-law was not in a position to supply this money, or that there are other circum. Stances which make the explanation highly improbable.
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There--fore, in the report of the Income-tax Commissioner relating to the assessment year 1942-43 there is nothing to show that the onus lying upon the Department had been discharged. It is settled law that an apparent state of affairs must be taken to be real unless the contrary is proved. The two documents, namely, the deed of sale and the deed of settlement, show that the money belonged to the wife. It is for the Depart--ment to establish by cogent evidence that the real owner was the assessee and not the wife. The onus undoubtedly lies upon the Department. I have already shown that the Department failed to discharge this onus even for the assessment year 1942-43. So far as the assessm ent years 1958-59 and 1959-60, the subject-matter of the present reference are concerned, no attempt has been made by the Department to discharge the onus. Therefore, the finding that the money really belonged to the assessee is wholly unwarranted. If any authority is needed for the proposition that the apparent state of affairs must be taken to be real, reference may be made to the case of Ramkinkar Banerji v. Commissioner of Income-tax ((1936) 4 I T R 108). In that case it has been further stated that there is no presumption that a property standing in the name of a married lady does, in fact, belong to her husband. It, therefore, follows that in the instant case simply because the money stood in the name of the assessee's wife, the assessee could not be presumed to be the real owner. The Appellate Assistant Commissioner has stated that there is material to show that the real ownership of the property has been considered by the Income-tax Officer to make the assess-- ment for the assessm ent year 1942-43. It is true that he tried to ascertain the real ownership. But he did not proceed in the manner warranted by law. The Appellate Assistant Commis--sioner has given detailed account of the past history with regard to the assessment of this house property. He has indicated that for the assessm ent years 1942-43 to 1945-46, the appellant unsuccessfully endeavoured to agitate the point relating to the inclusion of the income from this property in his total income before the Appellate Tribunal. He further pointed out that the appellant himself in some of the appeals did not raise this question in his grounds of appeal. He has drawn our attention to the order passed by the Tribunal on August 23, 1951, dismissing the appeals relating to the assessm ent years 1943-44 to 1948-49. It seems that in that order dated August 23, 1951, the Tribunal made it clear that it would be open to the assessee to raise the point in a subsequent assessm ent if he was so advised. He dismissed the appeals primarily on the ground that in spite of the above direction contained in the order of the Tribunal, he did not come forward with any new materials to substantiate his claim that the money really belonged to his wife. It goes without saying that in doing so be really placed the onus on the assessee which he was not justified in doing. If we turn to the order of the Tribunal, we find that the Tribunal also was labouring under a misconception. The deed of settlement came into existence nearly a year after the deed of conveyance. The Tribunal therefore thinks that the case of the assessee being the purchaser in the capacity of a trustee looks incompatible. We fail to understand why this case should appear to be incompatible. In the deed of conveyance it is clearly stated that he received the money for the benefit of his wife and the two sons with the specific direction to utilise part of the money in the purchase of house property to be held for the benefit of the wife and her sons. The deed of settlement executed nearly one year thereafter is merely declaratory in nature. Therefore, we do not agree with the Tribunal when the Tribunal holds that "the case of the assessee being the purchaser in the capacity of the trustee looks incompatible". The Tribunal seems to think that the trust deed is completely silent about the oral trust on which the assessee received the money before the purchase of the house property. Here also we cannot see eye to eye with the Tribunal. In the deed of conveyance itself it is clearly stated that the money was received by him impressed with the trust and that trust necessarily was oral in nature. Therefore, the Tribunal is not correct in saying that "the case of the trust having been originally made orally therefore cannot stand".
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A reference may be made to section 92 of the Trusts Act in this connection. The said section runs thus: "Where a person contracts to buy property to be held on trust for certain beneficiaries and buys the property accord--ingly, he must hold the property for their benefit to the extent necessary to give effect to the contract." From the deed of conveyance it is clear that the assessee contracted to buy the property to be held in trust of the bene--ficiaries mentioned in the recitals of the said deed of sale. Therefore, in our opinion, apart from the deed of settlement created later on, he must be regarded as a trustee for the benefit of his wife and the two sons under the provisions of the Indian Trusts Act. We accordingly hold that there are no materials on record to support the finding of the Tribunal that the money with which the house property in question was purchased really belonged to the assessee and not to his wife. We further hold that he is to be regarded as a trustee of the house property not only on the basis of the two deeds but also under section 92 of the Trusts Act and that he is to be assessed as such. Mr. P.I, appearing on behalf of the revenue, tried to justify the order passed by the Tribunal and the other authorities by drawing our attention to the conduct of the assessee. We have noticed above that the income of this house property was assessed in the hands of the assessee, ever since the assessm ent year 1942-43. So, the question for consideration is whether the assessee is estopped from saying that the house property in question is held by him as trustee and not in his personal capacity. It is also settled law that there cannot be any question of estoppel or res judicata in the matter of assessm ent. Mr. Ginwalla, counsel for the assessee, drew our attention to a number of decisions on this point. We may refer to some of them. He read out certain passages from the judgment of Lord Atkin delivered in Absalom v. Talbot (H. M. Inspector of Taxes) ((1944) 26 Tax Cas. 166). He drew our special attention to the following passage at page 192: "The taxpayer has for years prepared his accounts on the footing of entering the whole of the marginal payments at their face value, and the uncertainty of the payments is satisfactorily met by the allowances made in subsequent years for bad debts. There seems to have been some doubt on both sides as to whether these allowances in subsequent years are in accordance with law, doubts which are reflected in the judg--ments in the Court of Appeal . . . . But the practice of the tax-payer, acquiescing in the claim of the Inland Revenue, is of little value, when the practice is sought to be put upon a legal footing." This case clearly indicates that acquiescence on the part of the assessee cannot be the foundation of assessm ent. In the present case also we find that the income-tax authorities tried to justify the inclusion of this income in the total income of the assessee on the footing that he acquiesced in this income being assessed in his hands year after year. Lord Hanworth M. R. Quoted with approval in Commis--sioners of Inland Revenue v. Sneath ((1932) 17 Tax Cas. 149), the following observation or Lord Parker in Brooks v. Commissioners of Inland Revenue ((1914) 7 Tax Cas. 236 (H L) " . . . . . But it seems to me that; where there is a statutory provision requiring an estimate to be made for a statutory purpose and by a statutory authority, the principle of estoppel cannot be invoked to render the provision nugatory in cases where such principles might otherwise have applied." His Lordship in another place observed as follows: "It is the amount of the assessm ent to be made upon the facts of the case before them that is determined by them . . . . . The High Court may reverse, affirm or amend the determination in respect of which the case has been stated or remit the matter to the Commissioners with the
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opinion of the Court thereon. It is difficult to attribute to such a determination of an assessment in amount, the decision of a Its inter partes." Mr. Ginwalla drew our attention to the following passage in the judgment of Lord Atkin in Commissioner of Income-tax v. P. R. A. L. Muthukaruppan Chettiar ((1935) 3 I T R 208 (P C) "Counsel for the respondent pointed out that the contention of the Commissioner in this case was the contrary of that made by him in the previous case in Madras which was successful in the High Court, He protested strongly against the Commis--sioner in successive cases blowing hot and cold. But that is a privilege not confined to Commissioners of Income-tax and its exercise cannot influence judicial determination of the law." The Supreme Court also took a similar view in Dwarkadas Kesardeo Morarka v. Commissioner of Income-tax ((1962) 44 I T 529 (SC)). Judgment in this was delivered by Shah, J., who towards the end observed as follows:- "In the matter of assessm ent of income-tax, each year's assessment is complete and the decision arrived at in a previous year on materials before the taxing authorities cannot be regarded as binding in the assessm ent for the subsequent years." Mr. Ginwalla drew our special attention to a Bench decision of our High Court in Asit Kumar Ghosh v. Commissioner of Income-tax ((1953) 24 I T R 576). In that case a receiver, pursuant to a direction given by the High Court, applied in certain assessment proceedings to be substituted in place of the previous receiver. The question arose whether he could take the plea that be was not liable to pay any income-tax. The judgment of the Court was delivered by Chakravatti, C. J. The learned Chief Justice pointed out that estoppel is only a rule of evidence and not a cause of action and that in any event estoppel cannot be the basis of liability to assessment under the Indian Income- tax Act, 1922. Relevant passage runs thus: "As to the two contentions urged by Mr. Meyer, the first is really a plea of estoppel. I do not, however, see how if the Act does not authorise the assessment of the assessee for the income which bad neither been received by him nor received by the executors on his behalf, there could be an estoppel against the statute. Estoppel is only a rule of evidence and not a cause of action. In any event, estoppel is not a basis of liability to assessment under the Indian Income-tax Act, and, therefore, the assessm ent of a person for an amount of income to which he is a stranger cannot be based on the ground that he himself wanted to be assessed on it." We respectfully agree with the above observations made by the learned Chief Justice. In the present case also the assessee cannot be made liable in respect of the income which does not really belong to him. Therefore, in our opinion, the argument advanced by Mr. P.I on behalf of the revenue that the orders of the income-tax authorities can be justified having regard to the past conduct of the assessee cannot be accepted. We accordingly accept this reference. The question, therefore, must be answered in the negative and in favour of the assessee. The assessee will get his costs from the revenue. P. B. MUKHARJI, J.-I agree. The question requiring an answer from this Court has two parts, one relates to the facts and circumstances and the other relates to the proper interpretation of the deed of conveyance and the deed of settlement. The question as framed is in these terms: "Whether, in the facts and circumstances of the case and on a proper interpretation of the deed of conveyance and the deed of settlement, the Tribunal is right in holding that the house property being premises Nos. 46-A and 46-B, Wellesley Street, Calcutta, is not trust property." So far as the interpretation of the deeds is concerned, there cannot, in my opinion, be any controversy whatever. The deeds are clear. The first is the deed of conveyance dated the 30th September 1940. In this deed the vendors were the Kotharia in three parts who were conveying the property to the assessee, Durga Prosad More,
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expressly describing him as the "trustee". No doubt the third party describing him as a trustee will not make him a trustee but the fact is that strangers and third parties took him as a trustee and treated him as a trustee and conveyed their own property as trustee on a sale. That means that by reputation and notoriety the assessee was a trustee already on the 30 September 1940. It is not alleged either in the facts or even suggested anywhere that this description was deliberately a false description or in any way otherwise incorrect. It also describes that such trustee is to carry out the trust in respect of this property by the use of the words "to hold the same upon trust for investing the same in immovable properties for the maintenance of herself during her lifetime with the rent issues and profits thereof after payment of all outgoings and on her death to hold the same in trust for her sons, Debi Prosad More and Badri Prosad More, for their maintenance during their minority and on their attaining majority upon trust to make over the same to the said sons absolutely in equal shares". This provision in the conveyance of the 30th September 1940, therefore, clearly records an existing trust and the chairman of the trust. It is further recited in the deed of conveyance: "And whereas as such trustee as aforesaid and with a portion of the money made over to him for the purposes of the aforesaid trust the said trustee became desirous of purchasing the said premises Nos. 46-A, 46-B. Wellesley Street . . . . ." This conveyance or sale deed, therefore, expressly recognises re an existing trust. The deed of settlement is clear enough. It is dated the 10th September 1941. It creates this trust. It recites…
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