PETITIONER:
INCOME-TAX OFFICER, CALCUTTA & ORS.
Vs.
RESPONDENT:
RADHESHYAM LADIA
DATE OF JUDGMENT21/04/1987
BENCH:
MISRA RANGNATH
PATHAK, R.S. (CJ)
CITATION:
1987 AIR 1768 1987 SCR (2)1102
1987 SCC (2) 616 JT 1987 (2) 218
1987 SCALE (1)961
ACT
Income Tax Act, 1961--Section 34(1)(a)--Assessee--Failure to disclose share income of wife and minor child--Whether there is failure to disclose fully and truly all material.
HEADNOTE
The respondent was assessed to income tax for assessment year 1960-61 under s. 23(3) of the, Income Tax Act, 1922 and for the assessment years 1961-62 and 1962-63 under s. 143(3) of the income Tax Act, 1961. The validity of the notices issued under s. 147(a) read with s. 148 of the Act of 1961 in respect of these three assessment years was challenged by the respondent under Act 226. Though the notices did not disclose any material to justify their issue, the Income Tax Officer in his return before the High Court stated that during the course of assessment for the year 1963-64 of the wife of the respondent, she contended having received valuable assets from the respondent between 11th December 1955 and 28th October, 1960 without adequate consideration in money or money’s worth. The income from the said assets which should have been included in the return of the respondent was not so included by him and that the capital gains arisen therefrom was also not included or disclosed by the respondent In his returns.
A Learned Single Judge relying upon the decision of the Supreme Court in V.D.M. RM. M. RM. Mathiah Chettiar v. Commissioner of Income-tax, Madras 74 ITR 183 quashed the notices. The appeal of the Revenue failed before the Division Bench. ’ Dismissing the appeal,
HELD: By failure of the assessee to include the share income of his wife and minor child in his return, it cannot be deemed that he has failed to disclose fully and truly all material facts necessary for the assessment within the meaning of s. 34(1)(a) of the Indian Income Tax Act. 1961. [1107B]
V.D.M. RM. M. RM. Muthiah Chettiar v. Commissioner of Income-tax, Madras, 74 ITR 183; Malegaon Electricity Co. (P) Ltd. v. 1103 Commissioner of Income-tax, Bombay, 78 ITR 466 and Commissioner of Income-tax, Kerala v. Smt. P.K. Kochammu Amma, Peroke, 125 ITR 624, followed.
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1187 of 1974.
From the Judgment and Order dated 19.12.1973 of the Calcutta High Court in Appeal No. 131 of 1971. S.C. Manchanda and Ms. A. Subhashini for the Appellants.
B.P. Maheshwari, S.P. Mittal and R.S. Rana for the Respondent, The Judgment of the Court was delivered by
RANGANATH MISRA, J. This appeal by the Revenue is by certificate and is directed against the judgment of a Division Bench of the Calcutta High Court which upheld the decision of a single judge in a writ petition quashing the notices issued to the petitioner under section 147(a) of the Income Tax Act of 1961 in respect of assessment years 1960- 61, 1961-62 and 1962-63.
Respondent was assessed to income-tax for the assessment year 1960-61 under section 23(3) of the Act of 1922 on 4.3.1961 and for the following two assessment years under section 143(3) of the Act of 1961 on 10th and 11th June, 1963, respectively. Notices under section 147(a) read with section 148 of the Act of 1961 were issued to the respondent in respect of these three assessment years whereupon he challenged the validity of those notices by filing an application under Article 226 of the Constitution. Though the notices did not disclose any material to justify their issue, the Income-tax Officer in his return to the rule nisi before the High Court stated:
" ..... The assessment for the year 1963-64
of Smt. Sushila Bala Devi Ladia, wife of the
petitioner, was taken up by me. During the
course of the said assessment, she contended
having received valuable assets from the
petitioner between 11th December, 1955 and
28th October, 1960, without adequate consider-
ation in money or money’s worth. It was con-
tended on her behalf that she received over
1203 tolas of gold in jewellery on or about
11.12./1955 and
1104
Rs.1,00,000 in cash on or about 28.10.1960. It
was further contended on her behalf that the
said jewellery was sold between the years 1959
and 1962. The income from the said assets
which should have been included in the return
of the petitioner was not so included by him.
The capital gains arising therefrom was also
not included or disclosed by the petitioner in
his returns." On behalf of the assessee reliance was placed on the decision of this Court in V.D.M. RM. M. RM. Muthiah Chettiar v. Commissioner of Income-tax, Madras, 74 ITR 183 where with reference to failure of the assessee to include the share income of his wife and minor child in a firm, this Court held:-
"In considering the first question it is
necessary to refer to certain provisions of
the Income-tax Act, 1922. By section 3 the
total income of the previous year of every
individual, Hindu Undivided family, company
and local authority, and of every firm and
other association of persons or the partners
of the firm or the members of the association
individually was charged to tax for that year
in accordance with, and subject to the provi-
sions of the Act at any rate or rates pre-
scribed by the Finance Act. Total income was
defined in section 2(15) as meaning ’total
amount of income, profits gains referred to in
sub-section (1) of section 4 computed in the
manner laid down this Act’. Section 4(1) set
out the method of computation of total income;
it enacted:
’(I) subject to the provisions of
this Act, a total income of any previous year
of any person includes all income, profits and
gains from whatever source derived which:-
(a) are received or are deemed to be
received in the taxable territories in such
year by or on behalf of such person, or
(b) if such person is resent in the
taxable territories during such year--
(i) accrue or arise or are deemed to accrue or
arise to him in the taxable territories during
such year, or ........ ’
1105
Section 22 by sub-section (1) required the
income-tax officer to give notice by publica-
tion in the press in the prescribed manner,
requiring every person whose total income
during the previous year exceed the maximum
exempt from tax, to furnish a return in the
prescribed form setting forth his total in-
come. Sub-section (2) authorised the Income-
tax Officer to serve a notice upon a person
whose income in the opinion of the income tax
officer exceeded the minimum free from tax.
Section 23 dealt with the assessment. It
conferred power upon the Income-tax Officer to
assess the total income of the assessee and to
determine the sum payable by him on the basis
of such return submitted by him. Rule 19
framed under section 59 of the Income-tax Act,
1922 required the assessee to make a return in
the form prescribed thereunder, and in Form A
applicable to an individual or a Hindu Undi-
vided family or an association of persons
there was no clause which required disclosure
of income of any person other than the income
of the assessee, which was liable to be in-
cluded in the total income. The Act and rules
accordingly imposed no obligation upon the
assessee to disclose to the Incometax Officer
in his return information relating to income
of any other person by law taxable in his
hands."
"But section 16 sub-section (3) provided
in computing the total income of any individu-
al for the purpose of assessment there shall
be included the classes of income mentioned in
clauses (a) and (b). Sub-section 3(a)(ii)
insolar as it is material, provided:
’In computing the total income of any
individual for the purpose of assessment there
shall be included--
(a) so much of the income of a wife or
minor child of such individual as arises
directly or indirectly ........
(ii) From the admission of minor to the
benefits of partnership in a firm of which
such individual is a partner.’
The assessee was bound to disclose under
section 22(5) the names and addresses of his
partners, if any, engaged in business, profes-
sion or vocation together with the location
and styled of the principal place and branches
1106
thereof and the extent of the shares of all
such partners in the profits of the business,
profession or vocation and branches thereof,
but the assessee was not required in making a
return to disclose that any income was re-
ceived by his wife or minor child admitted to
the benefits of partnership of a firm of which
he was a partner."
Upon this conclusion this Court therein held:
"For failing or omitting to disclose that
income proceedings for reassessment cannot,
therefore, be commenced under section 34(
l)(a)."
Relying upon this decision the learned Single Judge quashed the notices. The Revenue appealed to the Division Bench but failed to obtain any relief in view of the said decision of this Court. The Division Bench also took note of the decision in the case of Malegaon Electricity Co. (P) Ltd. v. Commissioner or Income-tax, Bombay, 78 ITR 466. Therein after referring to Muthiah Chettiar case (supra). Hedge, J. speaking for the Court, stated:
"Hence, by not showing the income of his wife
and minor children, the assessee cannot be
deemed to have failed to disclose fully and
truly all material facts necessary for his
assessment within the meaning of section
34(1)(a) of the
Act."
It is appropriate to take note of a later decision of this Court in Commissioner of Income-tax, Kerala v. Smt. P.K. Kochammu Amma, Peroke, 125 ITR 624. That was of a two- Judge Bench. Reliance was sought to be placed on Muthiah Chettiar’s case (supra). Dealing with the question of imposition of penalty under section 27 1(l)(c) of the 1961 Act, the Division Bench observed:
"It is obvious that on this view the order
imposing penalty on the assessee would have to
be sustained but there is a decision of this
Court in V.D.M. RM, M. RM. Muthiah Cheuiar v.
Commissioner of Income-tax, [1969] 74 ITR 183
(SC) which is binding upon us and where we
find that a different view has been taken by a
Bench of three Judges of this Court. It was
held in this case that even if there were any
printed instructions in the form of the return
requiring the assessee to disclose the income
received by his wife and
1107
minor child from a firm of which the assessee
was a partner. there was, in the absence in
the return of any head under which the income
of the wife or minor child could be shown, no
obligation on the assessee to disclose this
item of income, and the assessee could not be
deemed to have failed or omitted to disclose
fully and truly all material facts necessary
for his assessment within the meaning of
34(l)(a) of the Indian Income Tax Act, 1922.
With the greatest respect to the learned
Judges who decided this case. we do not think,
for reasons already discussed, that this
decision lays down the correct law on the
subject, and had it not been for the fact that
since 1st April, 1972, the form of the return
prescribed by rule 12 has been amended and
since then. there is a separate column provid-
ing that ’income arising to spouse/minor child
or any other person as referred to in Chapter
V of the Act’ should be shown separately under
that column and consequently there is no
longer any scope for arguing that the assessee
is not bound to disclose such income in the
return to be furnished by him, we would have
referred the present case to a larger Bench.
But we do not propose to do so since the
question has now become academic in view of
the amendment in the form of the return car-
ried out with effect from 1st April, 1972. we
would, therefore, follow this decision in
Muthian Chettiar’s case which being a decision
of three Judges of this Court is binding upon
us ....................................."
We agree with what has been stated in Kocharammu Amma’s case and for the reasons indicated therein, we do not propose to refer this case to a larger bench. Following the law as laid down in the two cases reported in 74 ITR 183 and 78 ITR 466 we dismiss the appeal. There would be no order for costs throughout. A.P.J. Appeal dismissed. 1108