The burden of proof regarding benami is upon the one who alleges benami.

1. "Shanti Villa", a house, was purchased in 1961 for a sum of Rs. 40,000 by Navin Chandra, Prabhat Chandra and Subhash Chandra, the three minor grandsons of the assessee, who was a leading civil lawyer of Hardoi having professional and property income, under the guardianship of their mother. In 1970, the ITO reopened proceedings for the assessment years 1962-63 to 1969-70, being of opinion that the assessee had failed to disclose the income from this property and to explain the investments made therein, in his returns. The explanation of the assessee supported by his own affidavit that the money was given to his grandsons by their grandmother who had owned property and had income therefrom was not accepted. The ITO held that the house was purchased by the assessee out of his past savings, the sale of agricultural land and National. Savings Certificates.

2. In consequence of this finding, notices under Section 271(1)(c) were also issued. But as the assessee had died, proceedings were initiated and continued against his son. The explanation that the default, if any, was not wilful or deliberate was rejected. IN appeal, both the orders, of reassessment and penalty, were maintained. The Tribunal also did not find any merit in any of the appeals. It, however, allowed the application under Section 256(1), filed against the appellate orders in the penalty matters and referred the following questions of law in ITR No. 981 of 1976. For the assessment year 1967-68 :

"Whether, on the facts and in the circumstances of the case the Tribunal was right in holding that the law as on the date of the filing of the return would be applicable for levy of penalty for concealment and not the law as it stood on April 1, 1967, the first day of the assessment year ?"

3. For the assessment years 1967-68 and 1968-69 :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in rejecting the assessee's contention that he had not been allowed an opportunity of being heard before the levy of these penalties ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was liable to penalty under Section 271(1)(c) of the Income-tax Act for these years?"

4. In ITR No. 602 of 1977 the following question of law was referred :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was liable to penalty under Section 271(1)(c) of the INcome-tax Act for the year?"

In respect of the appeal relating to the assessment, the Tribunal having rejected the application of the assessee approached this court and the application under Section 256(2) was allowed. The Tribunal was directed to refer the following questions of law which are the subject-matter of ITR No. 108 of 1978 :

"1. Whether, on the facts and in the circumstances of the case, the notice under Section 148 of the Act issued to the assessee was valid ?

2. Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the house 'Shanti Villa' belonged to the assessee is vitiated on account of the omission of the Tribunal to consider material evidence and also the ground that it has taken into account irrelevant facts?"

5. As the fate of these references shall primarily depend on the answer given by us to question No. 2 in ITR No. 108 of 1978, we propose to take it first. The entire dispute was whether the house purchased by the minor grandsons of the assessee was his benami purchase. The Tribunal found that out of Rs. 40,000 only a sum of Rs. 12,400 was paid in cash at the time of execution of the sale deed while the balance which was to be paid to the successful party in the litigation pending for the ownership of the house was not paid or explained even till the hearing of the appeal. Further, the assessee failed to explain the source of Rs. 7,600 paid by the assessee's son to the owner of the house on July 30, 1962, by bank draft. It (