1. The short point that arises for consideration in this application Is whether there is any obligation on an assessee to disclose at the time of his assessment any transfers made by his wife of assets, gifted to her by the assessee, which might have resulted in capital gains during the accounting year. The facts shortly are that the petitioner was assessed to income-tax for the assessment year 1960-61 under Section 23(3) of the Act of 1922 on 4th March, 1961. The assessment was made by the Income-tax Officer, 'C' ward, Special Survey Circle-IV, Calcutta. His assessments for the years 1961-62 and 1962-63 were made under Section 143(3) of the 1961 Act on 10th and 11th June, 1963, respectively, and it appears from the assessment orders for these two years that certain interest received by the assessee's wife were included in the assessee's total income under Section 16(3) of the old Act and/or Section 64 of the new Act. There is also an observation in the assessment order for 1961-62 that during the accounting year the assessee had made a gift of Rs. 1,00,000 to his wife out of his income. There notices purported to be under Section 148 of the 1961 Act, all dated the 6th January, 1968, were served on the assessee by the respondent-Income-tax Officer, 'B' Ward, District 1(2), Calcutta, to whom the assessee's file had in the meantime been transferred. As the assessee's protest to the Income-tax Officer as to the propriety of the aforesaid notices went unheeded this rule was obtained from this court on the 21st May, 1968, requiring the respondent-Income-tax Officer, the respondent-Commissioner of Income-tax, West Bengal-Ill, and the respondent-Union of India, to show cause why proper writs should not be issued to quash the aforesaid notices purported to have been issued under Section 148, and why a direction prohibiting the respondents from taking any further action thereon should not be given. In showing cause the respondent-Income-tax Officer, in paragraph 3 of the affidavit-in-opposition, has disclosed the following reasons for his belief that the assessee's income for the aforesaid three years had escaped assessment, viz., that during the course of her assessment for the year 1963-64, Smt. Sushila Debi, the wife of the petitioner, contended that she had received valuable assets from the petitioner between the llth December, 1955, and the 28th October, 1960, without adequate consideration in money or money's worth. It was further contended on her behalf that she had received over 1,203 tolas of gold and jewellery on or about the 11th December, 1955, and Rs. 1,00,000 in cash on or about the 28th October, 1960. It was further represented on her behalf that the said jewellery was sold between the years 1959 and 1962. As the income from the said assets transferred to the wife and/or the capital gains arising from the sale of the said gold or jewelley had not been disclosed by the assesseee in his return and had not been included in his total income for the three assessment years 1960-61 to 1962-63, the impugned notices were issued as the petitioner had failed and neglected to disclose fully and truly all material facts necessary for the purpose of his assessment for these years.
2. The income accruing or arising to the wife or a minor child of an assessee is to be included in his total income under certain circumstances. Under section 16(3) of the 1922 Act, which has been re-enacted in Section 64 of the 1961 Act, it is provided that in computing the total income of an individual, there shall be included all such income as arises directly or indirectly-
(i) to the spouse of such individual from the partnership of the spouse in a firm carrying on a business in which such individual is a partner;
(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;
(iii) to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart;
(iv) to a minor child, not being a married daughter of such individual, from assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration ;
(v) to any person or association of persons from assets transferred otherwise than for adequate consideration to the person or association of persons by such individual, to the extent to which the income from such assets is for the immediate or deferred benefit of his or her spouse or minor child or both.
3. After the introduction of the tax on capital gains the heads of income chargeable to tax were enlarged from 5 to 6 by the inclusion of capital gains. It is now settled by the decision of the Supreme Court in Sevantilal Maneklal Sheth v. Commissioner Income-tax, : 68ITR503(SC) that on the inclusion of 'capital gains' in the definition of income, the term 'income' as used in Section 16(3) must be construed to include capital gains and that there was nothing in the context or in the language of Section 16(3) to suggest that capital gains was excluded from its scope. It is, therefore, clear that if any capital gains had arisen to the petitioner's wife from the transfer of any assets gifted by the petitioner to his wife, such capital gains would be included in the total income of the petitioner either under Section 16(3) of the 1922 Act or Section 64 of the 1961 Act, and if no such capital gains have been so included it is clearly a case of the assessee's income escaping assessment.
4. Dr. Pal for the petitioner contended that it is now settled by the decision of the Supreme Court in Calcutta Discount Company's case, : 41ITR191(SC) that under Section 31 of the old Act or Section 147 of the 1961 Act a duty was cast on every assessee to disclose fully and truly all material facts necessary for his assessment. From the primary facts in his possession, whether on disclosure by the assessee or discovered by him on the basis of the facts disclosed or otherwise, the assessing authority is to draw inference as regards certain other facts and ultimately from the primary facts and the further facts inferred from them the authority has to draw the proper legal inference and ascertain on a correct interpretation of the taxing enactments the proper tax leviable. Once all the primary facts are before the assessing authority he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. Dr. Pal submitted that in this case the assessee had disclosed to the Income-tax Officer at the time of his original assessment that he had transferred certain assets to his wife including a sum of Rs. 1,00,000 without adequate monetary consideration and the Income-tax Officer had included the interest accruing or arising to the petitioner's wife from the assets transferred in the total income of the petitioner in these years. Whether any capital gains could have arisen to the assessee's wife due to the sale of any of the assets transferred was to have been investigated and determined by the Income-tax Officer from the primary facts disclosed and there was no obligation on the petitioner to have disclosed the fact that any such capital gains had accrued to the wife either in his return or subsequently in the course of the assessment. For this proposition, Dr. Pal relied on a recent decision of the Supreme Court in Muthiah Chettiar v. Commissioner of Income-tax,  74 I.T.R. 183, 187 (S.C.). The facts in that case were that the wife of the assessee was a partner in a firm of which the assessee was a partner while his minor child had also been admitted to the benefits of that partnership. In accordance with the provisions of Section 22(5) of the 1922 Act the names of the partners of the firm including the assessee's wife and minor child were shown in Part III of the return, but the share income of the wife and the minor child was not included in the assessee's total income in the return. On the Income-tax Officer issuing a notice for reassessment under Section 34(1)(a), the Supreme Court held that Section 16(3) of the Act 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 (i) to (iv), 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 be commenced under Section 34(1)(a). Certain passages in the judgment of the court are quoted below in order to meet certain arguments advanced by the learned counsel for the respondents :
'Section 23 dealt with the assessment. It conferred power upon the Income-tax Officer to assess the total income of the assessee and to determine the sum payable by him on the basis of such return submitted by him. Rule 19 framed under Section 59 of the Income-tax Act, 1922, required the assessee to make a return in the form prescribed thereunder, and in Form A applicable to an individual or a Hindu undivided family or an association of persons there was no clause which required the disclosure of income of any person other than the income of the assessee, which was liable to be included in his total income. The Act and the Rules accordingly imposed no obligation upon the assessee to disclose to the Income-tax Officer in his return information relating to income of any other person by law taxable in his hands.'
5. In answer to the arguments advanced by the revenue that 'in the notes of guidance' for drawing up the return there were instructions that the assessee should disclose the income received by his wife and minor children from a firm of which the assessee is a partner, the court observed that 'assuming that there were instructions printed in the forms of return, in the absence in the return of any head under which the income of the wife or a 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 could not be deemed to have failed or omitted to disclose fully and truly all material facts necessary for his assessment.' Dr. Pal relied on this judgment and stressed the fact that there was no material distinction between the provisions of Section 16(3) of the old Act and Section 64 of the present Act and the same principles would also apply in the instant case and it must be held that the Income-tax Officer was not justified in issuing the impugned notices.
6. Mr. Mitter, the learned counsel for the department, presented an interesting argument and submitted that the aforesaid decision of the Supreme Court in Muthiah Chettiar v. Commissioner of Income-tax was distinguishable as it was based mainly on the interpretation of the provisions of Section 22 of the old Act from which there has been a material change in the provisions of the corresponding Section 139 of the 1961 Act. While under Section 22 of the old Act the Income-tax Officer had to issue a general notice under Sub-section (1) and a personal notice to the assessee under Sub-section (2) requiring him to furnish a return in the prescribed form and verified in the prescribed manner setting forth along with such particulars as may be specified in the notice his total income during the previous year, Section 139 requires every person whose total income exceeds the maximum exempted from tax to file a return of his income within the time specified in the section in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. There is also a provision in this section similar to Section 22(2) enabling the Income-tax Officer to serve a notice on any person who in the opinion of the Income-tax Officer has a total income taxable under the Act to file a return also in the prescribed manner arid setting forth such other particulars as may be prescribed. Mr. Mitter pointed out that under the old Act it was only those particulars that were asked for in the notice that were required to be furnished in the return while under the new Act the particulars as prescribed must be furnished in the return. Mr. Mitter also pointed out that it was the duty of every person, if his total income or the total income of any other person in respect of which he is assessable (under the 1961 Act) to tax exceeded the maximum amount exempted from tax to file the return in respect of such income. This is a new provision introduced in the 1961 Act and was not present in the earlier Act. So far as the latter part of the argument of Mr. Mitter is concerned, I am of the opinion that the income of any person in respect of which an assessee is assessable must refer to the income which the assessee is assessable as a representative assessee. Section 139 does not contemplate that an assessee should file one return including therein not only his own total income but also the total income of any other person in respect of which he is assessable. If he is assessable in respect of the income of any other person and if his own total income is also assessable he will be required to furnish two separate returns, one in respect of his own total income and one in respect of the income for which he is assessable. The other contention of Mr. Mitter is that the return should contain all the parliculars prescribed and in the form prescribed under the Indian Income tax Rules, 1962. Form No. 3, which is the form of a return for an individual, contains, inter alia, a note to the following effect, viz.:
'If the income of any other person is includible in your total income under Section 60, 61, 62, 63 or 64 of the Income-tax Act, 1961, such income should also be shown separately in this return under the appropriate heads.'
7. Accordingly, Mr. Mitter contended that it was the duty of the petitioner to have disclosed in his return any income including capital gains accruing or arising to his wife from assets transferred to her without adequate monetary consideration. At first sight this argument sounds logical but, as I have already pointed out, before the Supreme Court in Muthiah Chettiar's case a similar contention was raised by the counsel for the department which is noticed at page 188 of the report and I have also quoted the observation of the Supreme Court in that case that assuming that there are instructions printed in the forms of return the taxpayer cannot be deemed to have failed or omitted to disclose all material facts necessary for his assessment as there were no appropriate heads under which the income of the wife on minor child could be shown. Considering the very definite view taken by the Supreme Court in the aforesaid case that by not showing the income of the assessee's wife or minor child which is includible in his total income under Section 16(3), the assessee cannot 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); it must be held in this case also that there has been no such failure on the part of the assessee and the assumption of jurisdiction under Section 147(a) by the respondent-Income-tax Officer was not justified. In this view the rule must be made absolute. The impugned notices must be quashed. There will be no order as to costs.