JUDGMENT
Ajit K. Sengupta, J.
1. In this reference under Section 256(2) of the Income-tax Act, 1961, the following questions of law have been referred to this court for the assessment year 1962-63 :
” 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee was under no
obligation to disclose in her return of income, the income of her minor daughter ?
2. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Section 64(4) of the Income-tax Act, 1961, the Tribunal misdirected itself in law in holding that the Income-tax Officer was not justified in reopening the assessment of the assessee under Section 147(a) of the Income-tax Act, 1961, in respect of her omission or failure to disclose the income of her minor daughter in her own assessment ?”
2. Shortly stated, the facts are that, originally, the assessment was completed under Section 143(3) on November 25, 1962, on a total income of Rs. 1,14,689. Subsequently, reassessment was made under Section 147(b) on February 29, 1968, on a total income of Rs. 1,65,169. The assessee has given a gift of Rs. 1,00,011 on October 7, 1959, to her minor daughter, Kumari Manjushree Birla, and this amount was invested in shares of Kesoram Industries and Cotton Mills Ltd. and Hindusthan Motors Ltd. The Income-tax Officer was of the view that the income arising from the assets transferred to the minor child was to be treated as the income of the individual under Section 64(4) and, therefore, such income had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Since such income was not disclosed in the original return filed on August 29, 1962, the Income-tax Officer initiated reassessment proceedings under Section 147(a) and included capital gains arising on transfer of shares at Rs. 29,274 and dividend income from the shares at Rs. 5,983 in the total income of Rs. 1,65,169 already determined.
3. Being aggrieved, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the Income-tax Officer had no jurisdiction to reopen the assessment under Section 147(a) of the Income-tax Act, 1961. The Appellate Assistant Commissioner followed the decision of this court in Radheshyam Ladia v. ITO [1971] 82 ITR 247. Accordingly, he set aside the order of assessment.
4. The Revenue preferred an appeal before the Tribunal. Following the decision of the Madhya Pradesh High Court in CIT v. Smt Rani Duleiya [1972] 84 ITR 770, the Tribunal upheld the decision of the Appellate Assistant Commissioner.
5. At the hearing before us, a contention was raised that, in view of the two Supreme Court judgments, proceedings could not be initiated under Section 147(a) as there was no obligation on the part of the assessee
to disclose the income of the minor as, at the relevant time, the form of income-tax return did not contain any such column. Our attention has also been drawn to the relevant form for filing the income-tax return under the Income-tax Act at the material time.
6. The two decisions which are relied on by counsel appearing for the parties required to be considered in detail.
7. The first decision is in CIT v. Smt. P. K. Kochammu Amma . In that case, the assessee filed her return for the assessment year 1964-65, disclosing therein income from property and income from other sources and against item (b), under the column “Profits and gains of business and profession” stated : “please ascertain from the firms’ files”. Though the prescribed form of return did not contain a separate column for that purpose, there was a note in the return stating that, if the income of any other person is includible in the total income of the assessee under the provisions of the Income-tax Act, 1961, inter alia, of Section 64, such income should also be shown under the appropriate head. The respondent, however, did not show in the return the amounts representing the shares of her husband and minor daughter in two firms, though they were includible in her total income under Section 64(1)(i) and (iii). The question was whether penalty could be imposed on the respondent under Section 271(1)(c), on the ground that the assessee had concealed the particulars of her income because she had not shown the shares of her husband and her minor daughter in the two firms as forming part of the total income in the return submitted by her. The Supreme Court held (at page 627) :
“There is a decision of this court which is directly in point and it concludes the determination of the question arising in this appeal against the Revenue but before we refer to that decision, we might first examine the question on principle as a matter of pure interpretative exercise. Section 271, Sub-section (1), Clause (c), provides for imposition of penalty on an assessee if it is found, inter alia, that the assessee has concealed the particulars of ‘his income’. The question is what is the scope and content of the words ‘his income’ occurring in this penal provision. Do they refer only to the income of the assessee himself or do they also take in the income of others which is liable to be included in the computation of the total income of the assessee by reason of the relevant provisions of the Act, such as Section 64, Sub-section (1), Clauses (i) and (iii) ? The answer to this question obviously depends upon as to what is ‘his income’ which the assessee is liable to disclose for the purpose of assessment, for,
concealment can only be of that which one is bound to disclose and yet fails to do so. Section 139 provides for filing of a return of income by an assessee and Sub-section (1) of this section lays down that every person whose total income during the previous year exceeds the maximum amount which is not chargeable to income-tax, shall furnish a return of his income in the prescribed form and verified in the prescribed manner, and setting forth such other particulars as may be prescribed. The return of income is required to be filed in order to enable the Revenue authorities to make a proper assessment of tax on the assessee. It must, therefore, follow a fortiori that the assessee must disclose in the return every item of income which is liable to be taxed in his hands as part of his total income. The charge of income-tax is levied by Section 4 on the total income of the assessee, and ‘total income’ is defined in Section 2, Sub-section (45), to mean ‘the total amount of income referred to in Section 5 computed in the manner laid down’ in the Act. It is no doubt true that the definition of ‘total income’ in Section 2, Sub-section (45), refers to Section 5 and this latter provision lays down that all income, profits and gains accrued or arising to the assessee or received by or on behalf of the assessee shall be liable to be included in his total income but this provision is subject to the other provisions of the Act, and, therefore, if the income of any other person is declared by any provision of the Act to be includible in computing the total income of the assessee, such income would form part of the total income exigible to tax under Section 4 of the Act. Now, Section 64, Sub-section (1), is one such provision which provides for inclusion of the income of certain other persons in computing the total income of an assessee. Clauses (i) and (iii) of this sub-section provide that in computing the total income of an assessee there shall be included all such income as arises directly or indirectly to the spouse of such assessee from the membership of the spouse in a firm carrying on a business in which such individual is a partner as also to a minor child of such assessee from the admission of the minor to the benefits of the partnership firm. It is clear from this provision that though the share of the spouse or minor child in the profits of a partnership firm in which the assessee is a partner is not the income of the assessee but is the income of such spouse or minor child, it is liable to be included in computing the total income of the assessee, and it would be assessable to tax in the hands of the assessee. The total income of the assessee chargeable to tax would include the amounts representing the shares of the spouse and minor child in the profits of the partnership firm. If this be the correct legal position, there can be no doubt that the assessee must disclose in the return submitted
by him, all amounts representing the shares of the spouse and minor child in the profits of the partnership firm in which he is a partner, since they form part of his total income chargeable to tax. The words ‘his income’ in Section 139, Sub-section (1), must include every item of income which goes to make up his total income assessable under the Act. The amounts representing the shares of the spouse and minor child in the profits of the partnership firm would be part of ‘his income’ for the purpose of assessment to tax and would have to be shown in the return of income filed by him.
The assessee then contended that the return of income which was required to be filed by her under Section 139, Sub-section (1), was a return in the prescribed form and the form of the return prescribed by Rule 12 of the Income-tax Rules, 1962, did not contain any column for showing the income of the spouse and minor child which was liable to be included in the total income of the assessee under Section 64, Sub-section (1), Clauses (i) and (iii), and there was, therefore, no obligation on the assessee to disclose this income in the returns filed by her. This contention is also, in our opinion, fallacious and deserves to be rejected. It is true that the form of return prescribed by Rule 12, which was in force during the relevant assessment year did not contain any separate column for showing the income of the spouse and minor child liable to be included in the total income of the assessee, but did contain a note stating that if the income of any other person is includible in the total income of the assessee under the provisions, inter alia, of Section 64, such income should also be shown in the return under the appropriate head. This note clearly required the assessee to show in the return under the appropriate head of income, namely, ‘profits and gains of business or profession’, the amounts representing the shares of the husband and minor daughter of the assessee in the profits of the two partnership firms. But even so, the assessee failed to disclose these amounts in the return submitted by her and there was, therefore, plainly and manifestly a breach of the obligation imposed by Section 139, Sub-section (1), requiring the assessee to furnish a return of her income in the prescribed form. It is difficult to see how the note in the prescribed form of the return could be ignored by the assessee and she could contend that, despite the note, she was not liable to show in her return the amounts representing the shares of her husband and minor, daughter in the two partnership firms. The contention of the assessee, if accepted, would render the note meaningless and futile and turn it into dead letter and that would be contrary to all recognised canons of construction. There can be no doubt that the assessee was bound to show
in her return the amounts representing the shares of her husband and minor daughter in the two partnership firms and in failing to do so, she was guilty of concealment of this item of income which plainly attracted the applicability of Section 271, Sub-section (1), Clause (c).”
8. Although, on this view, the order imposing penalty on the assessee would have been sustained but, in view of the decision of the Supreme Court in V.D.M.RM.M.RM. Muthiah Chettiar v. CIT [1969] 74 ITR 183, which is a larger Bench decision where a different view had been taken by a Bench of three judges of the Supreme Court, the contention of the assessee that imposition of penalty in this case is illegal had to be upheld. There, the Supreme Court proceeded to hold (at page 629 of 125 ITR):
“It was held in this case (Muthiah Chettiar) 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 minor child from a firm in 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 Section 34(1)(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 July 1, 1972, the form of the return prescribed by Rule 12 has been amended and since then, there is a separate column providing 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 carried out with effect from July 1, 1972. We would, therefore, follow this decision in Muthiah Chettiar’s case , which being a decision of a Bench of three judges of this court, is binding upon us, and following that decision, we hold that the assessee could not be said to have concealed her income by not disclosing in the return filed by her the amounts representing the shares of her husband and minor daughter in the two partnership firms.”
9. The next decision cited is in ITO v. Radheshyam Ladia . There the Supreme Court affirmed the decision of the Calcutta High Court in Radheshyam Ladia v. ITO [1987] 166 ITR 135 which was relied on by the Appellate Assistant Commissioner, In Radheshyam Ladia [1987] 166 ITR 135 (SC), the assessment years involved were 1960-61, 1961-62 and 1962-63. The Supreme Court followed the decisions in Smt. P.K. Kochammu Amma and Muthiah Chettiar’s case in and Malegaon Electricity Co. P. Ltd’s case . The Supreme Court extracted the aforesaid passage from Smt P. K. Kochammu Amma and observed (at page 141 of 166 ITR) :
“We agree with what has been stated in Kochammu Amma’s case , and for the reasons indicated therein, we do not propose to refer the case to a larger Bench. Following the law as laid down in the two cases in Muthiah Chettiar’s case and Malegaon Electricity Co. P. Lid’s case , we dismiss this appeal.”
10. Mr. Bajoria, learned counsel for the assessee, contended that the principles laid down in the aforesaid decisions of the Supreme Court will govern this case as the assessment year involved in one of the decisions was 1962-63 and in the other 1964-65. This is, however, not relevant. The question is whether, at the material time, when the return was filed by the assessee, the form of return contained a separate column to include the income under Section 64. The Supreme Court in Kochammu Amma [1980] 125 ITR 624 mentioned that the amendment in the form of return was carried out with effect from April 1, 1972, long after the original return was filed in this case.
11. It appears that the Income-tax (Second Amendment) Rules, 1967, came into force with effect from April 1, 1967. Rule 12 of the Income-tax Rules has been amended by the said amendment which provides as follows (see [1967] 64 ITR (St.) 13) :
“12. Return of income.–(1) The return of income required to be furnished under Sub-section (1) or Sub-section (2) or Sub-section (3) of Section 139 shall,–
(a) in the case of a company, be in Form No. 1 and be verified in the manner indicated therein ;
(b) in the case of a person not being a company, be in Form No. 2 and be verified in the manner indicated therein ;
Provided that in the case of a person, not being a company or a co-operative society or a local authority, whose total income (as computed by such person) does not exceed fifteen thousand rupees, the return of income may be furnished in Form No. 3 and shall be verified in the manner indicated therein.
(2) Notwithstanding anything contained in Sub-rule (1),–
(a) where a return of income relates to the assessment year commencing on April 1, 1961, or any earlier assessment year, it shall be furnished in the appropriate form prescribed in Rule 19 of the Indian Income-tax Rules, 1922, and shall be verified in the manner indicated therein ;
(b) where a return of income relates to the assessment year commencing on April 1, 1962, or April 1, 1963, or April 1, 1964, it shall be furnished in the appropriate form in force immediately before April 1, 1967, and shall be verified in the manner indicated therein.”
12. Thus, for the assessment year 1962-63, the old return form which was considered by the Supreme Court in those decisions remained in force.
13. The return form which has been prescribed by the said Amendment of 1967 Rules, also contains a note which is as follows :
“3. If the income of any other person is includible in your total income under the provisions of Section 60, 61, 62, 63 or 64 of the Income-tax Act, 1961, such income should also be shown in this return under the appropriate heads.”
14. But no separate column has been provided for inclusion of the income under Section 60, 61, 62, 63 or 64 of the Income-tax Act, 1961.
15. The rules were amended by the Income-tax (Amendment) Rules, 1971, which came into force on April 1, 1971. In the return form prescribed by the Rules, there is no separate column indicated but only a note was appended being Note No. 1 which is as follows :
“If the income of any other person is includible in your total income under the provisions of Section 60, 61, 62, 63 or 64 of the Income-tax Act, 1961, such incomes should also be shown separately in this return under the appropriate heads.”
16. Surprisingly, even after the judgment of the Supreme Court in V.D.M.RM.M.RM. Muthiah Chettiar v. CIT [1969] 74 ITR 183, the Central Board of Direct Taxes, while amending the Rules, did not provide any separate column for inclusion of the income under Section 64 of the Act. In V.D.M.RM.M.RM. Muthiah Chettiar v. CIT , a similar note was considered by the Supreme Court and it was held that, in the absence of any head under which the income of the wife or minor child of a partner whose wife or minor child was a partner in the same firm, could be shown, by not showing that income, the taxpayer cannot be deemed to have failed or omitted to disclose fully and truly all material facts necessary for his assessment ; it is only by the Income-tax (Second Amendment) Rules, 1972, which came into force on July 1, 1972, in the return form prescribed thereunder, a column has been added being column 12(b) where income arising to spouse/minor child or any other person as referred to in Chapter V of the Act is required to be shown. This amendment was noticed by the Supreme Court in Kochammu Amma [1980] 125 ITR 624.
17. In our view, therefore, at the material time when the original return was filed by the assessee some time in 1962, the form of return in force did not provide for any separate column to disclose the income arising under Section 64 of the Act. Even assuming that there was escapement in the subsequent return filed in 1968, in response to the notice under Section 148 read with Section 147(b), the position would not be different inasmuch as the 1967 Rules, which came into force with effect from April 1, 1967, did not also provide for any separate column for inclusion of such income under Section 64 of the Act. On the contrary, the form with a note continued to remain in force until a new form with a separate column came into force with effect from July 1, 1972.
18. For the reasons aforesaid and in view of the principles laid down by the Supreme Court as mentioned hereinbelow, it must be held that there was no omission or failure on the part of the assessee to disclose all her income.
19. The first question is, therefore, answered in the affirmative and the second question in the negative and both in favour of the assessee.
20. There will be no order as to costs.
Bhagabati Prasad Banerjee, J.
21. I agree.
