K.L. Roy, J.
1. The petitioner in this application is entitled to succeed on the basis of the reasons given by the Income-tax Officer for purporting to reopen the assessment of the petitioner for the assessment year 1960-61 under Section 147(a) of the Income-tax Act, 1961.
2. The facts shortly are that the petitioner was assessed by the Income-tax Officer, 'J' Ward, District 1(1), Calcutta, in respect of the assessment year 1960-61 on a total income of Rs. 8,682. It also appears that the assessee's wife, Smt. Chandra Kant Periwal, purported to invest Rs. 35,000 in a partnership firm styled 'Rajasthan Knitting Mills' as her capital contribution for becoming a partner in that firm with a four annas share and in her individual assessment for the assessment year 1959-60 made by the Income-tax Officer, 'B' Ward, 24-Parganas, the loss from the aforesaid firm was accepted subject to rectification on receipt of the share allocation report of the assessment of the firm. It also appears that for the assessment year 1960-61, another Income-tax Officer allowed registration to the firm of Rajasthan Knitting Mills. For the accounting year 1960-61, the Income-tax Officer making the assessment of the petitioner's wife questioned the contribution of Rs. 35,000 made by her towards the capital of the firm and after discussing the evidence adduced by her, came to the conclusion that the said amount was invested benami by her husband, Madanlal Maheswari. Accordingly, for that year he only made a protective assessment on the wife in respect of the income from that firm. This order was made on the 27th March, 1965. On the 17th February, 1969, the respondent-Income-tax Officer informed the petitioner that it had come to his notice from the assessment file of his wife that the alleged contribution by her to the capital of M/s. Rajasthan Knitting Mills could not be satisfactorily established and in the circumstances he was of opinion that the wife was nothing but a benamidar in respect of the partnership income of which the petitioner was the ostensible owner. The petitioner was directed to show cause in writing why the income earned by his wife as a partner of the said firm should not be taxed in his hands under Section 64 of the Act of 1961. The assessment of the petitioner for the year 1964-65 was completed on the 18th March, 1969, and therein the share of the profit of the petitioner's wife from M/s. Rajasthan Knitting Mills was included under Section 64 of the Act. By a notice under Section 148 dated the 28th March, 1969, the respondent-Income-tax Officer proposed to reassess the petitioner's income for 1960-61 and required the petitioner to file his return for that year within 30 days from the date of the receipt of the notice. It was further stated in the notice that it was being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, West Bengal III, Calcutta.
3. Dr. D. Pal, the learned counsel for the petitioner, challenges the notice under Section 148 on the ground that as there was no obligation on the petitioner to disclose any income accruing or arising to his wife under Section 64, it could not be said that there was any failure on his part to disclose such income for his assessment for 1960-61. He relied on the decision of the Supreme Court in the case of Muthiah Chettiar v. Commissioner of Income-tax, : 74ITR183(SC) where it had been held that Section 16(3) of the Income-tax Act, 1922, imposed an obligation upon the Income-tax Officer to compute the total income of an individual for the purposes of assessment by including the items of income set out in Clauses (a)(i) to (iv) and (b); but thereby no obligation was 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 could not, therefore, be commenced under Section 34(1)(a). There is no dispute that Section 16(3) and Section 34(1)(a) of the Act of 1922 correspond respectively to Section 64 and Section 147(a) of the Act of 1961. If, therefore, the respondent-Income-tax Officer proposes to reopen the assessment for 1960-61 on the ground of the petitioner's failure to disclose the fact that the income accruing or arising to his wife from assets transferred directly or indirectly by the petitioner to his wife had not been disclosed, the impugned notice must be struck down as not permissible under Section 147(a) in accordance with the aforesaid decision of the Supreme Court.
4. The learned counsel for the department argued that the reference to Section 64 in the respondent-Income-tax Officer's letter, dated the 17th February, 1969, was in connection with the petitioner's assessment for 1964-65, and in that assessment the wife's income was included under that section. In attempting to reopen the assessment for 1960-61, the department's case is that the said amount of Rs. 35,000 belonged to the petitioner and the petitioner invested it in the name of his wife, that is, as his benamidar, and any income arising therefrom is the income of the petitioner. There is no question of the application of Section 64 in this case. During the opening of the application by Dr. Pal, I was puzzled as to why any reference was made to Section 64 at all. If the department's case is that the petitioner's wife was merely a benainidar then the money actually belonged to the petitioner and the income arising therefrom was also the petitioner's income. No question of any application of Section 64 would arise in such a case and the ratio of the aforesaid decision of the Supreme Court would not be attracted. Therefore, I wanted to be satisfied as to the reason which induced the respondent-Income-tax Officer to issue the notice under Section 148. The records of the proceedings were produced before me and I find from the proposal by the respondent-Income-tax Officer forobtaining the sanction of the Commissioner that the following reasons are given:
'As per findings of the Income-tax Officer, 24-Parganas, the income of Smt. Chandra Kant Debi Periwal, wife of my assessee as a partner of M/s. Rajasthan Knitting Mills is to be clubbed in the hands of the respondent under Section 64(3) of the Act. Since the said income has escaped assessment, approval may kindly be accorded to reopen the assessment for the assessment year 1960-61 under Section 147(a) of the Income-tax Act.'
5. In the absence of the reasons recorded for reopening the assessment I would have certainly accepted the contention of the department that as the amount of Rs. 35,000 has been held to belong to the petitioner and his wife has been found to be merely his benamidar, any income arising therefrom is the petitioner's income and in not disclosing such income the petitioner has failed to disclose material particulars for his assessment. But, in view of the reasons recorded, the ratio of the aforesaid decision of the Supreme Court must be held to apply and that the impugned notice under Section 148 must be struck down as not authorised by law.
6. Accordingly, the rule is made absolute. The notice under Section 148 is quashed and the respondents are prohibited from taking any further steps in respect of the aforesaid notice.
7. There will be no order as to costs.
8. The operation of this order would be stayed till two weeks after the vacation. The interim order would continue in the meantime.