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Kanhaiya Lal Prahladrai Vs. Income-tax Officer. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberI. T. APPEAL NO. 1253 (ALL.) OF 1982 [ASSESSMENT YEAR 1976-77]
Reported in[1986]17ITD1075(NULL)
AppellantKanhaiya Lal Prahladrai
Respondentincome-tax Officer.
Excerpt:
head note: income tax reassessment under s. 147--full and true disclosure--wife's share income in return. ratio: non-declaration of the share of assessee's wife ìamounted to omission to disclose fully and truly all material ìfacts, reopening therefore justified. held: as the assessee was bound to disclose the income of ìhis wife in the return, which admittedly related to the period ìafter 1-4-1972 and in which also undisputably there is a column ìfor declaring the income of the spouse/minor chid, etc., as ìreferred to in chapter v, the non-declaration of the share of ìthe assessee's wife amounted to omission to disclose fully and ìtruly all material facts necessary for the assessee's assessment. ìthe provisions of section..........status of an individual, nor was it included in the original assessment.2. in the meantime, the allahabad high court in the case of madho prasad v. cit : [1978]112itr492(all) held that under section 64(1)(ii) of the act, the share of a minor admitted to the benefits of partnership could be assessed in the hands of his father if the latter was also a partner in that firm irrespective of the fact whether he was partner as an individual or as a karta of his joint family. the ito was of the view that this principle applied to the case of the assessee also, which fell under section 64(1)(i) as substituted by the taxation laws (amendment) act, 1975, with effect from 1-4-1976. he, therefore, initiated proceedings under section 147(a) of the act by issuing a notice under section 148 of the.....
Judgment:
ORDER

Per Shri Prakash Narain, Accountant Member - The original assessment in this case was made under section 143(1) of the Income-tax Act, 1961 (the Act) on 24-10-1976 on an income of Rs. 81,860. It was subsequently revised to Rs. 83,940 under section 155 of the Act on 16-2-1977. The assessee was a partner in the firm of Prahlad Rai Steel Forging Works in the capacity of the karta of his HUF. His wife, Smt. Sumitra Devi, was also a partner in this firm. A sum of Rs. 16,520 came to her share from the above firm. This amount was neither shown by the assessee in his return in the status of an individual, nor was it included in the original assessment.

2. In the meantime, the Allahabad High Court in the case of Madho Prasad v. CIT : [1978]112ITR492(All) held that under section 64(1)(ii) of the Act, the share of a minor admitted to the benefits of partnership could be assessed in the hands of his father if the latter was also a partner in that firm irrespective of the fact whether he was partner as an individual or as a karta of his joint family. The ITO was of the view that this principle applied to the case of the assessee also, which fell under section 64(1)(i) as substituted by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976. He, therefore, initiated proceedings under section 147(a) of the Act by issuing a notice under section 148 of the Act on 31-10-1979. After giving the assessee an opportunity of being heard and following the decision in the case of Madho Prasad (supra), he made the assessment on 28-3-1980 by including the sum of Rs. 16,520 in the assessment of the assessee in the status of an individual, which, as stated above, was the share falling to his wife, Smt. Sumitra Devi, from the firm of Prahlad Rai Steel Forging Works. In the assessment order, the ITO also observed that the case was also covered by the time limitation provided for the application of section 147(b).

3. The assessee appealed to the Commissioner (Appeals). There were two submissions before him. The first submission was that there was no obligation on the part of the assessee to declare the share income of his wife in his personal return, as he was partner in the firm of Prahlad Rai Steel Forging Works not in his individual capacity, but in the capacity of the karta of his HUF. The second submission was that the decision of the Allahabad High Court in Madho Prasads case (supra) had not laid down the correct legal position and that there were decisions of other High Courts taking a contrary view. The Commissioner (Appeals) rejected both the contentions. About the first contention, he held that the return of income provided a column for showing the income arising to the assessees wife referred to in Chapter V of the Act and, therefore, it was obligatory on the part of the assessee to declare it in the return. About the second contention, he held that the decision of the Allahabad High Court was binding on him and, therefore, he could not take a different view. He finally dismissed the appeal.

4. The assessee is now in appeal before us. The learned counsel for the assessee submitted before us that the assessee was not bound to show the income of his wife in his return in view of the principle laid down by the Supreme Court in the case of V. D. M. RM. M. RM. Muthiah Chettiar v. CIT : [1969]74ITR183(SC) . On behalf of the department, there were two submissions. The first submissions. The first submission was that the above case of the Supreme Court was distinguishable in view of a later decision of the Supreme Court in the case of CIT v. Smt. P. K. Kochammu Amma : [1980]125ITR624(SC) . The learned departmental representative, in particular, referred to the observations of the Court at page 630. His second submission was that in any case the provisions of section 147(b) were applicable to the case. In reply, the learned counsel for the assessee submitted that the principle laid down by the Supreme Court in the case of V. D. M. RM. M. RM Muthiah Chettiar (supra) was still good in law as was held by the Allahabad High Court in a recent decision in the case of CIT v. Sohan Lal : [1983]143ITR901(All) . To the second submission of the learned departmental representative, his reply was that the assessment made under section 147(a) could not be changed to have been made under section 147(b) in view of the principle laid down by the Allahabad High Court itself in the case of Raghubar Dayal Ram Kishan v. CIT : [1967]63ITR572(All) .

5. We have carefully considered the submissions placed before us. There is no doubt that the return for the assessment year under appeal does provide a column for showing the income arising to the wife as referred to in Chapter V. There is also no dispute that the assessee did not declare the share falling to his wife from the firm of Prahlad Rai Steel Forging Works against this column. In our opinion, therefore, the assessees case is governed by the observations of the Honble Supreme Court in the case of Smt. P. K. Kochammu Amma (supra). The Court had observed that they were following the principle laid down by the Supreme Court in the case of V. D. M. RM. M. RM. Muthiah Chettiar (supra), inasmuch as the question of non-declaration of the share of the minor had become academic after the amendment of the form of return since 1-4-1972. which provided a separate column, for showing the income of spouse as referred to in Chapter V. It is, therefore, clear that their Lordships of the Supreme Court while finally deciding the case of Smt. P. K. Kochammu Amma (supra), did not differ from the earlier decision in V. D. M. RM. M. RM. Muthiah Chettiars case (supra), but that they laid down an additional principle that after 1-4-1972 it was obligatory upon an assessee to declare the income of spouse/minor child as referred to in Chapter V in the return. Section 64 does fall in this Chapter. In our opinion, the assessee was bound to disclose the income of his wife in the return, which admittedly related to the period after 1-4-1972 and in which also undisputably there is a column for declaring the income of the spouse/minor child, etc., as referred to in Chapter V. We do not agree with the learned counsel for the assessee that the Allahabad High Court in the case of Sohan Lal (supra) while following decision in V. D. M. RM. M. RM. Muthiah Chettiars case (supra) had laid down any principle different from that pronounced by their Lordships in Smt. P. K. Kochammu Ammas case (supra). The decision of the Allahabad High Court related to the assessment year 1965-66 when there was no column in the return for showing any such income.

6. We also do not agree with the learned counsel for the assessee that the latter was not bound to declare the income of his wife in the return prior to August 1976. when the decision of Madho Prasads case (supra) was pronounced by the Allahabad High Court. It is a settled law that a decision of a Court merely explains the provisions of an enactment and does not lay down any new law. The assessee was, therefore, under an obligation to declare the income of his wife under the provisions of the Act. although he might have become aware of that obligation only after the decision of the Allahabad High Court came to his knowledge. However, that does not make any difference so far as the non-declaration of the particulars in terms of section 147(a) is concerned. There is no doubt that the non-declaration of the share of the assessees wife amounted to omission to disclose fully and truly all material facts necessary for the assessees assessment. We, therefore, hold that the provisions of section 147(a) have been correctly applied to the assessees case.

7. We also agree with the findings of the Commissioner (Appeals) that in view of the decision of the Allahabad High Court in the case of Madho Prasad (supra), the income of the assessees wife has to be assessed in his assessment as the ITO has done. This contention also, therefore, fails.

8. In the result, the appeal is dismissed.


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