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PETITIONER: INCOME-TAX OFFICER, CALCUTTA & ORS.

       Vs.

RESPONDENT: RADHESHYAM LADIA

DATE OF JUDGMENT21/04/1987

BENCH: MISRA RANGNATH 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--Fail- ure to disclose share income of wife and minor child--Wheth- er there is failure to disclose fully and truly all  materi- al.

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  valu- able  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  re- spondent  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  Divi- sion 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

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Commissioner  of Income-tax, Bombay, 78 ITR 466 and  Commis- sioner  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  Divi- sion  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 appli- cation  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  deci- sion 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

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             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

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             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  impo- sition 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

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             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  pro- pose 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    dis- missed. 1108