Madhya Pradesh High Court
Rampal Thakurdin Gupta vs Commissioner Of Income-Tax on 5 August, 1997
Equivalent citations: [1998]234ITR304(MP)
Author: A.K. Mathur
Bench: A.K. Mathur, Dipak Misra
JUDGMENT A.K. Mathur, C.J.
1. This is an income-tax reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the assessee and the following questions of law have been referred by the Tribunal for answer of this court :
"(i) Whether the Tribunal erred in law in holding that the assessee though inveigled by his employers to sign certain papers and a return, was estopped from claiming that he was not the beneficial owner of liquor contract business taken in his name by his employers nor he made any investment in them ?
(ii) Whether, on the facts and circumstances of the case, the Tribunal is right in law in holding by applying the decision of the Delhi High Court in the case of Sohan Singh v. CIT [1986] 158 ITR 174, 179, that even though the assessee, Rampal Gupta, was not the real owner of the business but only an ostensible owner of the liquor business, the income is to be assessed in his hands, even though the Department might assess the real owner ?
(iii) Whether the order of the Tribunal assessing the liquor business income in the hands of the assessee is unjustified and vitiated in law being arbitrary and capricious being in disregard to materials on record?
(iv) Whether the Tribunal erred in confirming the additions on account of investment in security deposits, payment of licence fee and the circulating capital for country liquor business for the assessment year 1974-75 which the Department had not challenged ?"
2. It is alleged that the contract for sale of country liquor at certain shops in the districts of Jabalpur and Seoni for the financial years 1973-74 to 1976-77 corresponding to the assessment year 1974-75 was knocked down in favour of the assessee on payment of certain licence fees in the public auction. The assessment for the assessment year 1975-76 was completed on March 17, 1989. The Assessing Officer had also issued notices under Section 148 of the Income-tax Act requiring the assessee to furnish returns of income for the assessment years 1974-75, 1976-77 and 1977-78. During the survey operations, it transpired that the assessee was not the real contractor but was benamidar of Shri Subhash Jaiswal and Smt. Nanhibai Jaiswal. In the assessment proceedings, the assessee took the stand that he was not the real contractor but was only a servant of Smt. Nanhibai. He also took the stand that he was inveigled to put his signature on certain papers by Smt. Nanhibai. Thus, it is alleged that the real persons who had earned the income were Smt. Nanhibai and Shri Sub-hash Jaiswal. Though all the contracts were successfully carried through the name of the assessee, the tax authorities below believed that the real contractor was Smt. Nanhibai. The assessment of the assessment year 1975-76 was at one point of time completed on protective basis in the case of the assessee and on substantive basis in the case of Smt. Nanhibai. However, the Commissioner of Income-tax acting upon the documentary evidence that the contractor was the assessee, deleted the additions for the assessment year 1975-76 made in the case of Smt. Nanhibai under Section 264 of the Act and directed the same to be considered on substantive basis in the hands of the assessee. The assessments for all the four assessment years were eventually framed on substantive basis in the hands of the assessee, but all those were not found justified by the Commissioner of Income-tax (Appeals), and, therefore, those assessments suffered remand twice by the orders dated February 26, 1983 and November 4, 1985 of the Commissioner of Income-tax (Appeals). The insistence of both the orders of the Commissioner of Income-tax (Appeals) was that the real person having income from those contracts should be caught, They wanted the Assessing Officer to inquire into the matter as to who was the real earner. The assessee had filed an affidavit stating that he was an illiterate person and he used to sign certain papers at the direction of Smt. Nanhibai. However, the Assessing Officer again assessed the income for all the four years under consideration in the hands of the assessee but the Commissioner of Income-tax (Appeals) deleted the income from liquor contracts assessed in the hands of the assessee, vide his consolidated order dated September 13, 1989.
3. Against the aforesaid order of the Commissioner, the Revenue took up the matter before the Tribunal and the Tribunal held that that the asses-see, by his declaration and act, intentionally, had caused or permitted the Excise Department of the State of M. P. and also the Income-tax Department to believe that he was the real contractor and both the parties acted upon such representations. Therefore, it was held that he cannot be allowed in the assessment proceedings to deny the truth of the fact that he represented himself to be the real earner. Therefore, he cannot turn round and plead that he was only the benamidar of the real contractor behind Smt. Nanhibai. The Tribunal after considering both the matters, came to the conclusion that the assessee who seeks to answer for it as he was the real owner of the contract of excise from the State of M. P. and accordingly reversed the findings of the Commissioner and held him guilty.
4. Against the order of the Tribunal, a reference petition was filed by the assessee for referring the question before this court and, accordingly, the aforesaid questions have been referred by the Tribunal for answer of this court.
5. We have heard learned counsel for the parties and perused the records.
6. The assessee himself has acted as a contractor and signed all the papers before the Excise Department and took a contract of four years then he has to answer for the tax liability also. It is too belated a stage to represent that behind him somebody else was the real owner and he is only the representative of that. Such argument cannot be countenanced for the simple reason that he signed the contract with the Excise Department of the State of M. P. which is a statutory contract and it is he who is liable to have lifted the requisite amount of the liquor, therefore, he was the real contractor and he might be acting at the instance of somebody else ; but he cannot escape the liability for any breach committed by him arising out of the liquor contract in the State of M. P. Therefore, he was the person recognised to be the real contractor with the State of M. P. and for any profit and loss arising out of the contract, he has to pay the tax. In this view of the matter, we are of the opinion that the view taken by the Tribunal appears to be justified and all the aforesaid questions are answered in favour of the Revenue and against the assessee and there is no reason for us to take a different view from the view taken by the Tribunal. We answer all the aforesaid questions in favour of the Revenue and against the assessee.