Income Tax Appellate Tribunal - Jaipur
Income-Tax Officer vs Nemichand Garg on 10 April, 1987
Equivalent citations: [1987]23ITD309(JP)
ORDER
A. Kalyanasundharam, Accountant Member
1. This is an appeal preferred by the revenue against the order of the CIT(A) and the grievance that has been raised in the appeal is the deletion of incomes from Naresh Powerloom Factory and Dinesh Textile Industries, which were clubbed with the income of the assessee treating it to be benami concerns of the assessee and the second grievance is in regard to the deletion of trading addition of Rs, 15,700.
2. The learned Senior Departmental Representative Mr. L.K. Koolwal submitted that he proposes to establish in the instant case that the two businesses, namely, Naresh Powerloom Factory and Dinesh Textile Industries said to be owned by Smt. Krishna Devi wife of the assessee and Smt. Mohini Devi mother-in-law of the assessee are, in fact, the business that is owned by the assessee. He submitted that the various facts that have been gathered by the ITO as well as the IAC in the instant case go to establish that these are businesses of the assessee only as there are sufficient evidences from which inference could be drawn that it is the fact and the evidences are in the nature of business being identical in nature common cash book" seized on survey employees being common, finances are interlinked and there have been purchases and sales between them and that the initial assessment in the hands of the two ladies was done in a summary fashion and it is also admitted by the assessee himself that the entire business of all the firms are under his control.
2.1 The learned Senior Departmental Eepresentative has filed paper book running 221 pages, which included photo copy of the common cash book. Drawing our attention to this common cash book, he pleaded that the manner in which the first page is written up which is started after the usual Pooja, which is done and in the opening page it has been mentioned as rough cash book of Nemichand Garg that is the assessee as clearly establishes that the businesses belonged to the assessee. He pleaded that this should be made note of. He further submitted that the cash book had opening balance of Rs. 695.58 and it has been mentioned as cash in hand of more than one of the so called different concerns. At this point of time, he brought to our attention that a survey was conducted of the factory shed belonging to the assessee on 11th of June, 1979 and the survey revealed that the shed accommodated several powerlooms which have been claimed to be belonging to several persons, who are either related such as wife, brother-in law, mother-in-law, brother etc. It was at the time of survey that the department had seized the common cash book. The survey also revealed that separate books of accounts were being maintained in respect of each of the concerns. At the time of survey at the shed the assessee only was available. The assessee was asked about the common cash book and he had submitted that it is only for his memory and that since he was controlling the affairs of all the concerns and one common Munim being there it was so recorded for memory and convenience. He also admitted that all the concerns were functioning under his control. Referring to the statement of the assessee taken on 11th of June, 1979, the learned Senior Departmental Representative pointed out that the inter-lacing and inter purchase transactions are very clearly evident from the question that was put to him as well as the answer that was given by the assessee. At page 26 of the paper book filed by the assessee, the second question was that, who all purchased during 1977-78 from Dinesh Kumar & Co. The reply was Sanjay Powerloom made purchases of Rs. 14,526.75 in cash and the Dinesh Textile of Rs. 19,577.77. At page 28 the second question that was put to the assessee was that who looks after the businesses of the various firms, which are located in the shed, the answer was that the purchases, sale, manufacturing is all done under his supervision. Another statement of the assessee was also taken on 12-9-79 in which he again confirmed the same. It was, therefore, pleaded that the assessee himself clearly admitted the fact that he was the real owner of the business and, in fact, had all the control of profits as well as cash. It was further pleaded that there was very little withdrawal by any of the so called owners. Referring to his third statement at page 32, he submitted that to the questions about the addresses of the Munims, the assessee was not able to give the addresses except of Shri Ramdeo. According to the learned Senior Departmental Representative, it was rather strange for an employer not to know the residential address of his Munim. Referring to the same page, the learned Senior Departmental Representative wanted us to make a note of the fact that Shri Ramesh Kumar Bansal was a relative of the assessee, who also did the work of a Munim and even his address could not be provided, which is also rather strange. At this point of time, the learned Senior Departmental Representative chose to refer the statement of Shri Ramdeo Joshi, who was a Munim of the assessee, which statement is at page 128 of the paper book filed by the department. At pages 130 and 131, Shri Ramdeo was specifically asked about certain entries that were recorded in the common cash book against which it was written "not to be entered" and the reason therefor. The reply given by him was that since it was so written he did not enter into the books of account of any of the concerns and the purpose was with a view to show a lesser income. The learned Senior Departmental Representative drew our attention to statement of Shri Ramesh Kumar Bansal, which is at pages 34 to 39 in which Ramesh Kumar had admitted that he had been writing the rough cash book of Sanjay Powerloom and that he used to write the books between the period 2-11-1978 to 28-5-1979 and apart from him Ramdeo and sometime even the assessee himself used to write the rough cash book. He admitted that the opening balance of Rs. 695.58 represented cash balance, which he received from Radheyshyam Munim. At the point of time, it was pointed out that the answer to this question was in contradiction to the answer that was given by the assessee at the time when the survey was conducted.
2.2 Referring to the common cash book, he submitted that the manner in which the cash book is written up clearly indicates the fact that it is one business only and the names of various concerns have been written up so as to. make it convenient to the assessee to avoid taxing of income at one particular place and is, in fact, an ingenious way of giving a colour to the actual fact of income belonging to one shown as if it belongs to several persons. According to the learned Senior Departmental Representative, but for the vigilant survey officials seizing the cash book it would have been very diffioult to establish the evasive tactics of the assessee. According to the learned Sr. Departmental Representative, the so called books of accounts maintained for each of the units is not at all relevant for the issue. Since those books have been written up on the basis of the common cash book. According to the learned Sr. Departmental Representative the fact that all the looms were situated at one particular place, controlled by the assessee, which is borne out from the manner in which the common cash book is written up, the only possible inference that could be drawn is that the entire business belongs to the assessee only. The individual books of accounts of the so called separate businesses, therefore, have no relevance at all when they are weighed with the overwhelming evidence of the common cash book.
3. Apart from these overwhelming evidences the two businesses which are said to be owned by the assessee are none other than the wife of the assessee and the mother-in-law of the assessee. The mother-in-law is stated to have started her business of powerloom in 1975 and the wife her powerloom in 1977. According to the learned Sr. Departmental Representative, the assessee had clearly admitted that he was in control of the business and, therefore, the two ladies having filed the returns showing the business to be owned by them, which assessments having been done on a summary fashion should not be taken into account as relevant when the issue of benami is to be decided. The two ladies were examined and they, no doubt, admitted that the business did belong to them. At this point of time. it was brought to our notice that the capital that was brought in by the ladies is in the shape of income from tailoring business or in the shape of income from sale of Papad etc. for which there is no evidence available. Even the balance sheet of the ladies did not indicate owning of any sewing machine. It was further submitted that the wife of the assessee at the time of start of her business had borrowed amounts from the assessee, which fact should be seen in the light of the various evidences that have been placed on record as only a manner to cover up the actual fact. The statement of the ladies as were given by them before the ITO are no more than the self-serving statement and need only to be rejected. The employees who were engaged such as Munim, jober, folder etc., were shown to be common employees. The examination of the records also revealed that cotton yarn purchases could be utilised by any of the so called separate concerns and there is absolutely no evidence available that it is not so utilised. The productions are all pooled and the entries regarding purchases and sales are made according to the convenience so as to balance the income in such a manner that all of them show a minimum income or marginal income. There are no separate production register available, nor any stock register available. Considering all these facts, the ITO had drawn the inference that the entire business belonged to the assessee only and clubbed the incomes in the hands of the assessee. 4. As against these facts, the order of the CIT(A) indicates that he has accepted the submissions of the assessee as were put before him. The reading of the CIT(A) order is indicative of the fact that he had come to the conclusion that overwhelming evidence which directly pointed out that the business belonged to the assessee was not so overwhelming according to him. He was further of this view that the assessee's acceptance of the fact that he was looking after the business was held as inconclusive of the business being owned by the assessee has been misconceived. On the issue of a similar common cash book maintained for the earlier period it was brushed aside by the CIT(A) as mere imagination. The CIT(A) had also overlooked the fact that in regard to the entries against which mention had been made has not to be accounted for have been accepted as business of the assessee and included in his income, notwithstanding this fact the CIT(A) had accepted the submission of the assessee that the common cash book is for a memory purposes only for making entries in respective accounts of respective concerns. The learned CIT(A) had also accepted the submission of the assessee that there is hardly any material which could go to indicate about the inter-locking, inter-lacing and inter-connection of the businesses. The CIT(A) seems to have gone by the submission of the assessee alone as regards capital brought in by the ladies and according to him the financial help provided by the assessee is in the nature of loan. He had also placed reliance on the statement of the two ladies wherein they claimed that the business belonged to them and had come to the conclusion that the business was really owned by them. For coming to this conclusion, he had placed reliance on the statement of the Munim and the jober, chowkidar and folder, who had all claimed that they were working for the two ladies. He was further impressed by the fact that each of these concerns had separate power connection, separate trade marks, separate licences etc. It was, therefore, pleaded that the CIT(A) was in error in coming to the conclusion that the business did not belong to the. assessee and, accordingly, the prayer was that the order of the ITO must be restored which has been passed after obtaining the approval of the IAC Under Section 144B.
5. On the issue of the trading addition, the plea was in view of lack of manufacturing record, absence of stock register as well as the common cash book containing mention not to be accounted for clearly goes to indicate that the books of accounts are not reliable and only estimate has to be made. In the circumstances, the estimate as was made by the ITO cannot be said to be reasonable, which has been deleted by the CIT(A) without any basis.
5.1 The learned Senior Departmental Representative had placed reliance on McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC), K.P. Varghese v. ITO [1981] 131 ITR 597 (SC), CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) and Chimanlal Umaji v. CIT [1980] 121 ITR 507 (MP) on the proposition of seeing through the veil, ingenuity of human mind as also regarding the benami nature of the business.
5.2 The learned counsel for the assessee Mr. S.K. Jain submitted that it is an admitted fact that Smt. Mohini Devi, mother-in-law of the assessee was carrying on the business of the power-loom in the name and style of Renuka Textile from the shed owned by Shri Inderchand before moving to the shed owned by the assessee. It is also not denied that the power-loom which Smt. Mohinidevi had, had the shed of Inderchand was sold from that shed itself. Smt. Mohinidevi became a widow sometime in 1971 and had six daughters and a son and the only means of income was a rent from the Sambher property and also from the sale of Papad and Mangoodi as well as business of tailoring. Since income was meagre she had started the business of power-loom sometime in 1975 with a meagre capital of Rs. 6,500 and had taken loans from the market as well as from the bank. This business she continued in the shed of Inderchand till 1982, which she sold of. She put a set of four power-looms in April, 1978, which was in the shed of the assessee. It is not correct for the department to say that the assessment was done in a summary fashion. In support of this claim, the assessee drew our attention to page 13 of the paper book, which contained the explanation in connection with the first assessment of the lady of 1976-77 wherein the initial investments stood explained. He also drew our attention to the assessment that was made of the lady, which is at page 61 and (submitted that the assessment is under Section 143(3), which is indicative of the fact that the assessment was made after examination of the various facts. It was, therefore, pleaded that it is wrong to say that the assessment was made in a summary fashion without examination. He submitted that same is the case of the facts regarding Smt. Krishna, who also had income from tailoring business and had started the business in 1976 and the first assessment was made under Section 143(3) wherein the initial investment was explained and after examination it was found to be acceptable and accordingly accepted.
6. He submitted that the CIT(A) had proved enough opportunity to the ITO in the shape of providing him the copy of detailed submissions that were made by the assessee before him to which the ITO had replied vide his letter dated 26th of October, 1986, the copy of which is at pages 1 to 3 of the paper book. Referring to this reply of the ITO, Mr. Jain submitted that at the time of survey the department found six different powerlooms under the shed owned by the assessee. Of these, the department is holding that the income of Krishna Textile and Dinesh Textile as belonging to the assessee for the reason that they are owned by his wife and his mother-in-law. According to Mr. Jain, the ITO has proceeded merely on the promise and supposition of existence of a similar cash book such as the one found at the time of survey for the earlier period as well. The statement of the assessee during the time of survey was emphatic about the fact that earlier there were only three firms and, therefore, there was no necessity of maintaining any such memoranda book and since in the year under reference the number of firms had gone up to six, the memoranda book was maintained so that the entries are not omitted. Referring to the ITO's reply, he submitted that the ITO is only surmising of possibility of utilisation of the raw material by all the firms together though there is hardly any evidence to support the claim and also of the fact that there was hardly any purchases and sales between the concerns, except one or two transactions in the whole of the year. The reply of the ITO is also clearly indicative of the fact that the assessee's capital built up over the years from 1974 onwards was not substantial enough so as to make him own several power-looms.
7. The learned CIT(A) had conducted the case after hearing the assessee as well as the ITO, both who had done the assessment as well as the ITO, who was presently holding charge at the time of hearing of the appeal. Mr. Jain further argued that the learned CIT(A) after examining the seized records found as a matter of fact that the so called common cash book was not of the nature of cash book taut a memoranda register as it never contained any opening balance and closing balance. He further emphasised the fact that the department accepts the fact that separate detailed records in respect of each of the units were found at the time of survey. It is also not denied by the department that all transactions are recorded in the memoranda book that is to say entries in respect of withdrawals by the proprietor concerned did not figure in the memoranda book. He further emphasised that the capacity of the powerlooms were so small that it did not require separate staff for each of the power-looms or each of the concerns. It was, therefore, pleaded that for convenience of working so as to keep the expenditure to the minimum persons were employed whose job was to look ofter the power-looms of all the concerns at a time and it was also convenient for them since all of them were situated under one group. The jobers, folders etc. were not only working for the concerns which were located in the shed owned by the assessee but were also looking after similar other concerns elsewhere owned by others. It is also an admitted fact that separate bank accounts were there in respect of each of the concerns and they were being operated by the respective proprietors only and not by the assessee. The CIT(A) also realised the fact that it is a common feature that the husband normally looks after the affairs of his wife and in the instant case the assessee happened to be the son-in-law as well, was merely helping his mother-in-law, who was old enough and this by itself does not make the assessee the owner of the businesses. It was further pleaded that the CIT(A) had further realised the fact that the initial capital was brought in by the ladies, the profits were under their control and that it never flowed to the coffers of the assessee, which are essential ingredients for establishing a benami ownership. The CIT(A), therefore, considering the overall situation of the fact was convinced that the various propositions laid by the ITO did not have material to support and, rather, the assessment was framed merely on the basis of doubt in the minds of the ITO. The CIT(A) was further observant about the fact that the ITO has made a observation that but for the help of the assessee the ladies could not have shown such as huge profit i.e. to the tune of 63 per cent of the initial capital contributed by the respective ladies, which also laid him to come to the conclusion that the assessee was only providing a helping hand. The learned counsel also on a test check basis provided the various vouchers of different dates in the respective books of accounts of the concerns so as to establish that the transactions are recorded on a day to day basis in respect of the various concerns. The learned CIT(A), he submitted, was further impressed by the fact that there is no harm done if the husband also provided financial help and he has clearly after examining the evidence that the financial help was repaid by the ladies to the assessee in the subsequent year(s) and, therefore came to the conclusion that providing of paltry loans to the relatives does not lead to conclude that the business belonged to the lender. The fact that each of the business had separate power connections, separate licences, separate sales-tax Registration Nos. were also noted by him. In view of these facts, the conclusion arrived at by the CIT(A) is not only proper but is the only conclusion possible as the fact are only that. Regarding the trading addition, his submission was that the CIT(A) also had realised the fact of absence of stock register and production register and, therefore, had applied a gross profit rate of 4.5 per cent which was rather high in the facts of the case, against which the assessee did not prefer any appeal only on the ground that the assessee is not able to substantiate that the addition is not called for. The assessee further submitted that in his detailed paper book he has filed capital accounts of the two ladies for several years as well as their accumulations to establish the fact that it was under their control only. He also placed reliance on Madura Knitting Co. v. CIT [1956] 30 ITR 764 (Mad.) 28 ITR 757 (sic), CIT v. Gokaldas Hukumchand [1943] 11 ITR 426 (Bom.), CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), Bankim Ch. Datta v. CIT [1966] 62 ITR 239 (Cal), Steelsworth Ltd. v. CIT [1968] 69 ITR 366 (Assam and Nagaland) and Padma Ram Bharali v. CIT 1977 Tax LR 811 (Gauhati) 7 Tax World 278 decision of the Tribunal on identical facts and circumstances of similar business and also 3 Tax World page 263 regarding the husband managing the business does not lead to the conclusion that the business belonged to him.
8. We have given very careful considerations to the arguments that have been advanced by the parties and also have gone through the materials that have been placed on record. We have also perused the departmental records of the assessee as well as that of the two ladies.
9. The learned CIT(A) had provided the copy of the submission of the assessee made before him to the ITO for his comments and the learned ITO had provided the comments vide his reply dated 26-10-1984. The relevant submissions of the ITO in the abovesaid letter are as under :
(i) Clubbing of income of M/s Dinesh Textile Industries, M/s Naresh Powerloom Factory in the hands of Shri Nemichand Garg, Prop. M/s Sanjay Powerloom Factory.
In this connection it is submitted that survey operation under Section 133A of the IT Act was conducted and certain books of accounts of various concerns namely :-
1. Sanjay P/L Factory, Prop. Shri Nemichand Garg
2. Naresh P/L Factory, Prop. Krishna Devi
3. Sanjay kumar Naresh Kumar, consisting of three partners vis. Shri Nemichand Garg, 20 per cent, Shri Girdharilal brother 40 per cent and Shri Kanhiyalal brother-in-law 40 per cent.
4. Dinesh Textiles & Renuka Textiles, Prop. Mohini Devi.
5. Krishna Textiles, Prop.Krishna Devi.
6. Kanhiya Weaving Mills Prop. Kanhiyalal.
were impounded. The owners of the various concerns are close relatives of the appellant Sh. Nemichand Garg. From the examination of the account books it was noticed that there exists interlacing and interconnection of finance and Shri Nemichand Garg exercises complete control over all the above named concerns.
(ii) One common cash book of Nakal in the name of Shri Nemichand was found which contained preliminary record of all the transactions of all the above new concerns. This evidence clearly establishes that whole business of the above noted concerns has a single control and has complete interlacing, inter-locking and inter-connection among all these concerns. In fact all these business are being run by the appellant Shri Nemichand Garg single handedly, who is close relative of so called owners of all the above noted concerns.
(iii) The common cash book relates to the period Dewali, 1978 to Dewali 1979 i.e. for the assessment year 1980-81. The opening cash balance shown on the opening day of the Rokar is Rs. 695.58, since the said Rokar has shown an opening cash balance it was specifically asked to produce the Rokar for the earlier years showing closing cash balance at the end of the Dewali, 1978 (Asstt. year 1979-80), but Shri Nemichand Garg categorically denied for having any such common Rokar prior to the period of Dewali, 1978, which is unbeliveable since there appears an opening cash balance with said Rokar. Similar common Rokar must have also been maintained by the assessee for the assessment year 1978-79.
(iv) The business of the assessee is similar with that of other concerns namely, Dinesh Textile Industries, Naresh Power-loom Factory, Krishna Textiles Industries and Renuka Textiles. The set beams purchased by one concern can also be utilised by other concerns, since there is no bifurcation of raw materials used in process of manufacturing of cloth by individual concerns.
(v) The same thing applies to cotton yarn purchased by the assessee. Yarn is purchased by different concerns but can be utilised on looms of any other concerns.
(vi) The details of production relating to particular concern are also not kept separately. All production is pooled together, hence sales can be shown from any of the concern.
(vii) The employees viz. Munim, Master, Chowkidar, Folder are the same for all the concerns in question.
(viii) The assessee Shri Nemichand Garg has clearly admitted on the spot during the course of survey on oath on 11-6-1979 that he had been solely looking after the business in the name of M/s Sanjay P/L Factory, (b) M/s Naresh Powerloom Factory, (c) Sanjay Kumar Naresh Kumar, (d) Dinesh Textiles Industries, (e) Kanhiya Weaving Mills & Krishna Textiles and Renuka Textiles.
The above facts reveal that Shri Nemichand Garg in fact is the real owner of all the aforesaid concern and hence income pertaining to Smt. Krishna Devi Prop. Naresh P/L Factory and income pertaining to Smt. Mohini Devi Prop M/s Dinesh Textiles Industries have been clubbed in the hands of Shri Nemichand Garg, Prop. M/s Sanjay Powerloom Factory, Kishangarh in the assessment year 1978-79. It is also mentioned here that Smt. Krishna Devi is a wife of Shri Nemichand Garg. and Smt. Mohini Devi is a mother-in-law of Shri Nemichand Garg.
** ** ** ** Financial aspects:
It is submitted that Smt. Mohini Devi started powerloom business with a nominal capital of Rs. 6,500 only in the assessment year 1976-77 which was too modest for running, of an independent business. She has earned net profit of 63 per cent in relation to her capital employed which was ordinarily impossible for a person engaged in household activities without any business experience or trade experience or formal education in this regard. Out of her total assets of Rs. 23,116 a sum of Rs. 12,430 has been raised as a loan from Shri Nemichand Garg, which again shows that the major resources received from Shri Nemichand Garg.
Financial aspects :
It was worthwhile to mention here that the sources of income shown in the assessment year 1975-76 and 1976-77 is from tailoring income. The powerloom business is said to have started in the assessment year 1977-78 with a capital of Rs. 6,500 only. The assessment for this year has been completed under Section 143(1) on 17-11-1977 without making detailed enquiry in regard to source of investment in the business. The assessee Smt. Krishna Devi Prop. Naresh Powerloom Factory had declared total business assets for the assessment year 1977-78 at Rs. 41,788 which included loan of Rs. 19,149/88 from her husband Shri Nemichand Garg. Prop. M/s. Sanjay P/L Factory. Similarly Smt. Krishna Devi had also shown total business assets for the Asstt. Year 1978-79 at Rs. 46,663/79 which includes loan from Shri Nemichand Garg Prop. Sanjay powerloom Factory at Rs. 15,144/46.
10. The 144B instructions issued by the IAC was also examined. The IAC in page 6 of his order had made observation in regard to both the ladies and confirmed the view of the ITO that but for the active co-operation by the assessee it would have been impossible for the ladies to have raised so much of income and, therefore, it was concluded that the assessee himself was not anly participating but also having control on the business. In page 8 of his order while discussing the addition on account of controlling business in the hands of the assessee, he observed that the income of Rs. 6,000 shown by the lady was being treated by the ITO as income from undisclosed sources on the basis that there was no sewing machine shown in the balance sheet and it was, therefore, held by the IAC in his directions that if at all the income has to be assessed only in the hands of the lady and not in the hands of the assessee and, accordingly, direction was issued to the ITO to exclude the income so added in the hands of the assessee.
11. The learned OIT(A) was impressed by the fact that the first assessment of the two ladies were completed much before the survey that was done by the department and that the assessment was made under Section 143(3). The records of the two ladies have also been examined and the initial investments have also been explained by the ladies. The files of the ladies also reveal that loans were taken by the ladies from the banks for which confirmations are available in the files of the ladies. The learned CIT(A) was also impressed by the fact that the ladies had separate bank accounts, separate electric connections, separate sales-tax Registration Nos., separate accounts were also maintained and the statement of the ladies also showed that they were aware of the business and that they had admitted to have looked after the business which was also corroborated by the employees. The learned CIT(A) had also examined the statement of the assessee and considered his reply that he was looking after the affairs of the various concerns located in his shed. According to him, the common cash book is in the nature of memoranda book while as per the ITO this is the main record which indicated that the business belonged to the assessee. As observed by the CIT(A), re-examination of the common cash book revealed that there were no opening cash balances nor closing balances of any of the day. On a test check the bills of respective concerns were also examined in the presence of the parties as having been duly entered in the respective accounts on a day to day basis maintained for the purpose. One of the arguments advanced by the learned Senior Departmental Representative, Mr. Koolwal was that the common cash book did not contain entries in respect of withdrawals by the owners, which according to him, is clearly indicative of the fact that businesses are not owned by the several persons but in fact was owned by the assessee only. The fact that only business transactions were entered in the common cash book is admitted by the assessee and it was also admitted that entries pertaining to the assessee's personal withdrawals were not reflected in the common cash book,
12. The statement of capital accumulations by the ladies which is at page 12 of Mr. Mohini Devi indicates that the Renuka Textile business was closed and sold in view of pressure from the creditors in 1982-83 and Dinesh Textiles was closed and sold so as to enable her to perform the marriage of the daughter and the son. The balance sheet of Smt. Krishnadevi for the various years as well as her capital accumulations are also filed at page 5 onwards of the paper book. She started with the capital of Rs. 6,500 plus a loan of Rs. 19,549 from her husband which was repaid by her in assessment year 1979-80 and rather in that year she was to receive a sum of Rs. 3,172 from her husband. The balance sheet also reveals that there were withdrawals by the ladies from out of their capital account.
13. When we consider these various facts together with the various observations made by the ITO it is rather difficult for us to come to the same conclusion as was arrived at by the ITO and so confirmed by the IAC. The reason being that the initial capital brought in by the ladies said to be from tailoring, sale of Pa,pad, Mangodi etc. though appear to be doubtful on the face of it have not been established by the department to be a story. At the time of assessment the ITO as well as the IAC have proceeded on the basis that the initial capital of the ladies are merely stories, though fully realising the fact that they were assessed under Section 143(3). In the absence of any evidence to the contrary that the ladies did not carry on any activity such as tailoring etc., rejecting of the earlier accepted position by the department would be approaching the circumstances with blinkers. The fact that Mrs. Mohinidevi had sold off her powerloom to pay off the creditors and also for purposes of performing the marriage of her daughter and son also is a possible indication of the ownership by the ladies. The statement of the ladies though taken almost after year of survey clearly indicates that they were aware of their ownership of their power-looms and had clearly answered various questions about the nature of business, their bank accounts etc. which were also supported by the statement of the employees. The ladies' statement also revealed that they were looking after the business though the help of the assessee was always available. When we weigh the various circumstances with the various submissions as well as other materials of events, it appears that the approach of the department is one of suspicion or doubt since it involved ladies one of whom being the wife of the assessee and the other, the mother-in-law of the assessee. On an identical situation in the case of Ramchand Shakerlal v. ITO decided on 5-9-1984 where also ladies were involved the question that was arrived at was that there is nothing wrong if ladies are also carrying on business and this by itself does not lead to the conclusion that they were incapable of running of the business or to own the business. In the instant case also, we are of the view that merely because the two ladies are involved it cannot be mean that the business was owned by the assessee and for coming to this conclusion we have taken cognisance of the fact that the initial capital of the ladies have been accepted in their own personal assessments much before the survey that is almost one year prior to the survey and also by the fact that they had been withdrawing monies from the business as also that one of them had sold off the business for purpose of conducting the marriage" of the daughter and son and to pay off the creditors.
14. The examination of the common cash book, no doubt, gives rise to a serious doubt about the ownership of the business but when we examine the common cash book in the light of the facts as emerge out in the cash of the two ladies as well as keeping in mind that there were no any closing balances, to reject the claim of the assessee all together that it is in the nature of memoranda book, may not be proper. Further, the manner in which it is kept and considering the statement of Shri R.K. Bansal as well as Ramdeo Joshi, Munims of the concerns that it is only a memoranda-book kept by them for their convenience, as there are number of family concerns in one shed, so that one person could make rough note of the day's transaction in one particular place and to help in making the entries later in the day in the respective books of accounts of the concerns, has its merits. Considering the further fact that there was no common general ledger found at the time of search and the overall situation we are of the view that the assessment has proceeded more on suspicion, as even before us department could not positively place any material which could go to demolish the claim of the assessee that the other two businesses did not belong to him.
15. In the case law relied upon by the learned Senior Departmental Representative, Chimanlal Umaji's case (supra) is regarding benami of a lady partner. In that case, the lady had paltry capital of Rs. 3,500 only and had a share of profit of 38 per cent and the transactions ran into crores. The husband of the lady was carrying on the same business and started another concern in which he made his wife as a partner and that the business continued in the same premises. In that case, considering the circumstances the conclusion was that the lady was only a show-piece and in fact her husband was the real owner of the business. In the instant case, before us, the transactions that are involved are not of such high magnitude and the profitability is also meagre. No doubt, if they are assumed to be one concern the rate of taxation could have been slightly on the higher slab it does not mean that in every case where the ladies are involved the ownership really vests with their husbands.
16. In 3 Tax World 267, the department had proceeded on the lines that since ladies were partners by means of gifts received from their husbands they were in fact benamidars of their husbands. The conclusion of the Tribunal was that this may be a reason to doubt the transaction but not conclusive enough. Further, one or two solitary transactions of purchase between one concern and another also does not lead to the conclusion that it is one business. As in the case of establishing of a benami transaction which requires the establishment of the fact that initial capital was by the real owner the profits earned flowed back to the real owner and that the capital was also under the control of the real owner, where the benamidars are third parties a similar finding of fact, to our mind, is also necessary even where female relatives are involved. We have already observed above that the initial capital has not been disputed and rather there is no finding that the capital in fact flowed from the aassessee but in fact the submission of the ITO in his letter of 26th of October, 1984 is also indicative that the assessee could not have provided the ladies with their initial capital as his own income was in the range of Rs. 8,000 to Rs. 12,000 annually. The fact that capital was not under the control of the ladies but under the control of the assessee is not based on sufficient material. Rather, the statement of capital of the ladies indicated otherwise especially in the case of Smt. Mohinidevi who had disposed of all her powerlooms in paying off the creditors as for performing the marriage of her son and daughter. In view of these several circumstances, we are not in a position to come to the same conclusion as was arrived at by the ITO and the IAC. We, therefore, uphold the action of the CIT(A) in deleting the incomes of the two ladies from the hands of the assessee.
17. In respect of the trading addition, the CIT(A) had applied the rate of 4.5 per cent on the basis of similar other assessees carrying on similar businesses. It is not the claim of the department that the conclusion arrived at by the CIT(A) is not based on similar comparable cases we are not inclined to interfere with his findings. We, therefore, dismiss the departmental appeal.