1. The appeal is filed out of time by one day. Considering the reasons stated in the affidavit, the delay is condoned vide order sheet entry dated 6-6-1984.
2. This appeal is by the assessee and relates to the assessment year 1979-80.
3. In the case of the assessee, Shri Ramanujam, assessed in the status of an individual share income of his minor son from Srivastava Agencies, Vijayawada, was included. The share income so included was Rs. 6,407. This assessment dated 28-2-1982 was made by the ITO, A-Ward.
4. Earlier for the assessment year 1979-80 itself, in the assessment of the wife, which was done by the ITO, E-Ward, the share income of the minor son was included. This share income has been shown by her and was assessed under the provisions of Section 143(1) of the Income-tax Act, 1961 ('the Act').
5. The assessee appealed to the AAC and it was contended that since the share income of the minor had been taxed in the hands of the assessee's wife and such assessment was not disputed by her for the year under consideration, the income of the minor should have been taxed in the hands of the wife only. The AAC held that inasmuch as the assessee was having larger income compared to the income of the wife, according to the provisions of Section 64 of the Act, the income of the minor was to be taxed in the hands of the assessee and not in the hands of the assessee's wife. Therefore, he held that no interference was called for and the appeal was dismissed.
6. Against this decision, the assessee is in appeal before us. It is urged that on completion of the assessment in the case of the wife, an ad hoc finality had been reached, regarding the inclusion of the share income and such ad hoc finality in the assessment made by the ITO, E-Ward could not be disturbed by the ITO, A-Ward, when he came to make the assessment of the assessee's husband. Also it was submitted that neither of the ITOs gave an opportunity to either the assessee or his wife as to why the earlier action of including the share income of the minor in the hands of the wife should be changed. Therefore, it was submitted that in any view of the matter the share income included would have to be excluded. In support of the contention, the learned Counsel relied on the decision of the Gujarat High Court in the case of Mrs. J.D. Karaka v. CIT [IT Reference No. 102 of 1974, read with IT Reference No. 22 of 1975 dated 19-1-1976] reported in 1936 Taxation 45(3)-186.
7. The learned departmental representative, on the other hand, submitted that there was constructive notice to the assessee that the share income was to be included in his hands and that was sufficient.
The learned departmental representative relied on the decision of the Gujarat High Court in CIT v. Sumanthbhai C. Munshaw  128 ITR 142 for the proposition that where a point of defence had been abandoned by a party at a crucial stage, he could not be allowed to take up such objection later. Another contention put forth was that any objection which the assessee may have to offer against the inclusion of the share income in his hands could be considered by the appellate authority, though it was not considered by the ITO and in this regard reliance was placed on the decision of the Kerala High Court in V. Subramonia Iyer v. CIT  113 ITR 685. It was also submitted with reference to the decision of the Supreme Court in Grindlays Bank Ltd. v. ITO  122 ITR 55 that an assessee should not have an undue advantage by resorting to technical objections. For all these reasons, it was contended that the orders of the authorities below should be upheld.8. We have considered the rival submissions. The provisions of Section 64(1)(iii) and the Explanation 1 thereto are as under: (1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly --** ** ** (iii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm; Explanation 1: For the purposes of Clause (i) and Clause (ii), the individual, in computing whose total income the income referred to in that clause is to be included, shall be the husband or wife whose total income (excluding the income referred to in that clause) is greater; and, for the purposes of Clause (iii), the income of the minor child from the partnership shall be included in the income of that parent whose total income (excluding the income referred to in that clause) is greater; and where any such income is once included in the total income of either spouse or parent, any such income arising in any succeeding year shall not be included in the total income of the other spouse or parent, unless the Income-tax Officer is satisfied, after giving that spouse or parent an opportunity of being heard, that it is necessary so to do.
The aforesaid provisions have been the subject of elaborate examination by the Gujarat High Court in the case of Mrs. J.D. Karaka (supra), relied on by the learned Counsel for the assessee. The High Court has laid down that as far as the inclusion for the first time of the share income is concerned, whether in the case of the husband or the wife, there is an ad hoc finality reached of such inclusion by the ITO, who so includes the share income in point of time earlier, i.e. an ad hoc finality is reached on the occasion earlier in point of time when one ITO decides to include the share income either in the case of the husband or in the case of the wife. Such ad hoc finality could be disturbed only by way of appeal, revision, etc., for the same year.
Otherwise, according to the Court, if the ITO making the assessment next in point of time is allowed to make a change, he will be sitting in judgment over the order of the earlier ITO which he would not be competent to do. The second point decided by the Court is that once the share income is included in the hands of the husband or wife, as the case may be, if in subsequent year such share income is to be included in the hands of the other spouse, then an opportunity required by Explanation 1 has to be given by the ITO who had assessed the spouse in whose hands the share income had earlier been included to the other spouse in whose hands the share income is proposed to be included. The scheme of the Explanation, thus, is that an ITO, who has first decided that the share income of the minor is to be included in the hands of the husband or the wife, as the case may be, has to himself unsettle in the subsequent year, what has been settled in the earlier year and he is the only ITO who is contemplated by the first part of the Explanation and he alone has to give notice to the other spouse. In the present case, therefore, the action of the ITO, A-Ward, who made the assessment on 28-2-1982, suffers from two infirmities. The first infirmity is that for this very year, the ITO, E-Ward, already included the share income of the minor in the hands of the wife. Therefore, for this year an ad hoc finality had been reached and such finality could be disturbed only by way of appeal or revision, etc., and not by the ITO, A-Ward, acting on a subsequent date in making the assessment of the husband. Therefore, on this score, the inclusion would have to be excluded. This is the ratio of the judgment of the Gujarat High Court in Mrs. J.D. Karaka's case (supra). Even on the point of notice which of course does not apply since the change had been proposed for the same year, the notice should have been given by the ITO assessing the wife of the assessee. Such notice has not been given because he alone could unsettle his decision. This, of course, would have been the position if a change had been proposed in the subsequent year which is not the case here. In any view of the matter, the assessee, following the ratio of the judgment of the Gujarat High Court in the case of Mrs.
J.D. Karaka (supra), has to succeed and the income of the minor, which has been aggregated under Section 64, would have to be excluded.
9. The aforesaid discussion shows that specific notice has to be given by the ITO who first made the assessment either of the husband or the wife including therein the share income. The question of any constructive notice having been given to the assessee in the present case, as sought to be urged by the learned departmental representative, therefore, does not, in any view of the matter, arise. We are also unable to agree with the learned departmental representative that the defence now put forth was one which was abandoned at any earlier stage by the assessee. Therefore, nothing precludes the assessee from canvassing such an objection before us. The further contention that any objection the assessee may have to offer could be considered by the appellate authority, though it was not considered by the ITO, does not help the revenue in the present case because the ad hoc finality had been reached of the order of the ITO when the ITO assessing the wife had included earlier in point of time the share income of the minor for this very assessment year in the wife's assessment. It was only that assessment which could be modified in appeal, revision, etc., and not the assessment of the appellant-assessee. The objection taken by the assessee cannot also be held to be purely technical. The objection is one with reference to express statutory provisions and one in relation to the rights conferred by the statute on an assessee.