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Commissioner of Income-tax Vs. Smt. Rani Duleiya - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 215 of 1969
Judge
Reported in1972MPLJ232
ActsIncome Tax Act, 1961 - Sections 64, 139 and 271(1)
AppellantCommissioner of Income-tax
RespondentSmt. Rani Duleiya
Appellant AdvocateL.S. Shukla and ;P.S. Khirwadkar, Advs.
Respondent AdvocateR.K. Tankha and ;B.L. Nema, Advs.
Cases ReferredRadheshyam Ladia v. Income
Excerpt:
.....return of total income which she was required to furnish under sub-section (1) of section 139 or had concealed the particulars of her income or had deliberately furnished inaccurate particulars of such income. the penalty has not been inflicted for failure to give any other particulars such as relationship, etc......in part iii(c) of the return that the particulars were 'as per firm's return'. part iii(c) of the form of return requires that the assessee should show the relationship with other partners which she had tailed to mention. after the assessment was over, the income-tax officer reopened the assessment and called upon the assessee to file a fresh return. again the return was filed in the same manner, that is to say, in her own income she bad not included the income of her minor sons from the partnership nor did she mention her relationship with the partners. the income-tax officer, however, on this occasion included the share income of her sons also in her income as is required under section 64 of the income-tax act, 1961, and reassessed her accordingly. the income-tax officer also started.....
Judgment:

Bhave, J.

1. The Income-tax Appellate Tribunal, Bombay, has referred the following question for our decision :

'Whether, on the facts and in the circumstances of the case, penalty could be levied under Section 271(1)(c) for the assessment year 1962-63 ?'

2. The facts of the case, in brief, are that Smt. Rani Duleiya is a partner of the firm, Messrs. Agarwal & Co., which was registered under the Income-tax Act. Her three minor sons are also admitted to the benefits of the partnership. For the assessment year 1962-63, the assessee and her sons were separately assessed in respect of their shares from the firm. In the return filed by her, she had not included in her total income the shares of profit of her minor sons from the firm. She had, however, pointed out in Part III(c) of the return that the particulars were 'as per firm's return'. Part III(c) of the form of return requires that the assessee should show the relationship with other partners which she had tailed to mention. After the assessment was over, the Income-tax Officer reopened the assessment and called upon the assessee to file a fresh return. Again the return was filed in the same manner, that is to say, in her own income she bad not included the income of her minor sons from the partnership nor did she mention her relationship with the partners. The Income-tax Officer, however, on this occasion included the share income of her sons also in her income as is required under Section 64 of the Income-tax Act, 1961, and reassessed her accordingly. The Income-tax Officer also started proceeding under Section 271(1)(c) of the Act which proceeding was disposed of by the Inspecting Assistant Commissioner of Income-tax. A penalty of Rs. 9,000 was imposed on the assessee. This order in penalty proceeding was challenged before the Income-tax Appellate Tribunal. The Tribunal held in favour of the assessee and hence the present reference has been made at the instance of the department.

3. Before the Tribunal, the assessee relied on the decisions reported in D.R. Dhanwate v. Commissioner of Income-tax, [1961] 42 I.T.R. 253 (Bom.) and V.S. Arulanandam v. Commissioner of Income-tax, [1968] 67 I.T.R. 305 (Mad.) in support of her submission that under the Act the assessee was not required to separately show the income of her minor sons and that she had complied with the requirements of law. The contention of the department, on the other hand, was that the two decisions were based on the provisions of the Income-tax Act of 1922 and are not applicable as the provisions of the present Act were materially different. This argument was not accepted by the Tribunal. The same argument was pressed before us on behalf of the department.

4. Section 64 of the Income-tax Act, 1961, is to the following effect:

' In computing the total income of any individual, there shall be included all such income as arises directly or indirectly--. .... (ii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm in which such individual is a partner ...'

5. Section 64 in terms places the responsibility of including the income of a minor in that of the individual assessee on the Income-tax Officer. There is nothing to indicate in this section that the assessee is under any obligation to show that income in the return filed by him. Section 139 of the Act provides:

' 139. (1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed .....'

6. Now Section 139 clearly envisages the same individual having two capacities of being assessed, namely, for his own individual income as also for the income of some other person because the assessee happens to be either a trustee or an agent of some other person. In our opinion, Section 139 does not refer to the income of some other person that is to be included in the assessee's income. In that case, there will be no question of filing two returns. The expression ' setting forth such other particulars as may be prescribed ' also does not help the department. In Form No. 2 prescribed under Rule 12(2), which was in force at the relevant time, item 4 only refers to income from business or share of profits in a registered firm, but does not make any provision for indicating income that is liable to be included as the assessee's income under Sections 61 to 64 of the Act. It is no doubt true that, in Note 2 underneath that form, it is stated that income of other persons which is to be included in the assessee's total income under Sections 60 to 64 of the Act should also be taken into account in filling the return but, as we have already pointed out, no place is shown in the form where such an income could be indicated. It is also true that in Part III of the said form, the assessee is required to give the names of the partners in which he or she is a partner and to give their relationship and it is also required to be stated if any of the partners are minor children of the assessee. In this particular case, the assessee had referred to the partnership assessment and had thus substantially complied with the requirements of Part III also. We, therefore, find it difficult to hold that the assessee had without reasonable cause failed to furnish the return of total income which she was required to furnish under Sub-section (1) of Section 139 or had concealed the particulars of her income or had deliberately furnished inaccurate particulars of such income. In our opinion, the Tribunal was justified, on the facts and circumstances of the case, in the view it had taken. We are fortified in our view by the decision of the Supreme Court in Muthiah Chettiar v. Commissioner of Income-tax, [1969] 74 I.T.R. 183, 188, 189 ; [1969] 3 S.C.R. 715(S.C.), where their Lordships, while considering the effect of Sections 16(3) and 25(5) of the Income-tax Act of 1922, observed as under:

'Section 16(3) imposes an obligation upon the Income-tax Officer to compute the total income of any individual for the purpose of assessment by including the items of income set out in Clauses (a)(i) to (iv,) and (b), but thereby no obligation is imposed upon the taxpayer to disclose the income liable to be included in his assessment under Section 16(3). For failing or omitting to disclose that income proceedings for reassessment cannot therefore be commenced under Section 34(1)(a). Section 22(5) required the assessee to furnish particulars of the names and shares of his partners, but imposed no obligation to mention or set out the income of the nature mentioned in Section 16(3). In the relevant years there was no head in the Form under which income liable to be assessed to tax under Section 16(3)(a) and (b) could be disclosed.'

7. Under the present Act also, as discussed above, the situation is not in any way different. If, as held by their Lordships of the Supreme Court, the assessment could not be reopened, much less can any penalty be imposed under Section 271 of the Act. The provisions of the present Act referred to above also came for consideration before the Calcutta High Court in Radheshyam Ladia v. Income-tax Officer, [197IJ 82 I.T.R. 247 (Cal.), wherein the same conclusion was reached on the interpretation of Sections 64 and 139 and the Form prescribed.

8 It is also worthy of note that in this particular case penalty was imposed under Clause (c) of Section 271(1) of the Act. That clause speaks of concealment by the assessee of ' his income '. The income of the minors, which is included under Section 64 of the Act in the income of the assessee, is not certainly the income of the assessee. The penalty has not been inflicted for failure to give any other particulars such as relationship, etc., of the minors with the assessee. The provisions of Section 271(1)(c) are thus not at all attracted in this case.

9. For the aforesaid reasons, our answer to the question is that, on the facts and circumstances of the case, penalty could not be levied under Section 271(1)(c) of the Act for the assessment year 1962-63.

10. The department shall pay the costs of the assessee. Hearing fee, Rs. 100.


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