Officer, Calcutta & Ors Vs. Radheshyam Ladia  INSC 119 (21 April
Rangnath Misra Rangnath Pathak, R.S. (CJ) Citation: 1987 Air 1768 1987 SCR
(2)1102 1987 SCC (2) 616 JT 1987 (2) 218 1987 Scale (1)961
Tax Act, 1961--Section 34(1)(a)--Assessee--Failure to disclose share income of
wife and minor child--Whether there is failure to disclose fully and truly all
respondent was assessed to income tax for assessment year 1960-61 under s.
23(3) of the, Income Tax Act, 1922 and for the assessment years 1961-62 and
1962-63 under s. 143(3) of the income Tax Act, 1961. The validity of the
notices issued under s. 147(a) read with s. 148 of the Act of 1961 in respect
of these three assessment years was challenged by the respondent under Act 226.
Though the notices did not disclose any material to justify their issue, the
Income Tax Officer in his return before the High Court stated that during the
course of assessment for the year 1963-64 of the wife of the respondent, she
contended having received valuable assets from the respondent between 11th
December 1955 and 28th October, 1960 without adequate consideration in money or
money's worth. The income from the said assets which should have been included
in the return of the respondent was not so included by him and that the capital
gains arisen there from was also not included or disclosed by the respondent In
Learned Single Judge relying upon the decision of the Supreme Court in V.D.M.
RM. M. RM. Mathiah Chettiar v.Commissioner of Income-tax, Madras 74 ITR 183
quashed the notices. The appeal of the Revenue failed before the Division
Bench. ' Dismissing the appeal,
By failure of the assessee to include the share income of his wife and minor
child in his return, it cannot be deemed that he has failed to disclose fully
and truly all material facts necessary for the assessment within the meaning of
s. 34(1)(a) of the Indian Income Tax Act. 1961.
V.D.M. RM. M. RM. Muthiah Chettiar v. Commissioner of Income-tax, Madras, 74
ITR 183; Malegaon Electricity Co. (P) Ltd. v. 1103 Commissioner of Income-tax,
Bombay, 78 ITR 466 and Commissioner of Income-tax, Kerala v. Smt. P.K. Kochammu
Amma, Peroke, 125 ITR 624, followed.
Appellate Jurisdiction: Civil Appeal No. 1187 of 1974.
the Judgment and Order dated 19.12.1973 of the Calcutta High Court in Appeal
No. 131 of 1971.
Manchanda and Ms. A. Subhashini for the Appellants.
Maheshwari, S.P. Mittal and R.S. Rana for the Respondent, The Judgment of the
Court was delivered by RANGANATH MISRA, J. This appeal by the Revenue is by
certificate and is directed against the judgment of a Division Bench of the
Calcutta High Court which upheld the decision of a single judge in a writ
petition quashing the notices issued to the petitioner under section 147(a) of
the Income Tax Act of 1961 in respect of assessment years 1960- 61, 1961-62 and
was assessed to income-tax for the assessment year 1960-61 under section 23(3)
of the Act of 1922 on 4.3.1961 and for the following two assessment years under
section 143(3) of the Act of 1961 on 10th and 11th June, 1963, respectively.
Notices under section 147(a) read with section 148 of the Act of 1961 were
issued to the respondent in respect of these three assessment years whereupon
he challenged the validity of those notices by filing an application under
Article 226 of the Constitution. Though the notices did not disclose any
material to justify their issue, the Income-tax Officer in his return to the
rule nisi before the High Court stated:
..... The assessment for the year 1963-64 of Smt. Sushila Bala Devi Ladia, wife
of the petitioner, was taken up by me. During the course of the said
assessment, she contended having received valuable assets from the petitioner
between 11th December, 1955 and 28th October, 1960, without adequate consideration
in money or money's worth. It was con- tended on her behalf that she received
over 1203 tolas of gold in jeweler on or about 11.12./1955 and 1104 Rs.1,00,000
in cash on or about 28.10.1960. It was further contended on her behalf that the
said jeweler was sold between the years 1959 and 1962. The income from the said
assets which should have been included in the return of the petitioner was not
so included by him.
capital gains arising there from was also not included or disclosed by the
petitioner in his returns." On behalf of the assessee reliance was placed
on the decision of this Court in V.D.M. RM. M. RM. Muthiah Chettiar v. Commissioner
of Income-tax, Madras, 74 ITR 183 where with reference to failure of the
assessee to include the share income of his wife and minor child in a firm,
this Court held:- "In considering the first question it is necessary to
refer to certain provisions of the Income-tax Act, 1922. By section 3 the total
income of the previous year of every individual, Hindu Undivided family,
company and local authority, and of every firm and other association of persons
or the partners of the firm or the members of the association individually was
charged to tax for that year in accordance with, and subject to the provisions
of the Act at any rate or rates pre- scribed by the Finance Act. Total income
was defined in section 2(15) as meaning 'total amount of income, profits gains
referred to in sub-section (1) of section 4 computed in the manner laid down
this Act'. Section 4(1) set out the method of computation of total income; it
subject to the provisions of this Act, a total income of any previous year of
any person includes all income, profits and gains from whatever source derived
which:- (a) are received or are deemed to be received in the taxable
territories in such year by or on behalf of such person, or (b) if such person
is resent in the taxable territories during such year-- (i) accrue or arise or
are deemed to accrue or arise to him in the taxable territories during such
year, or ........ ' 1105 Section 22 by sub-section (1) required the income-tax
officer to give notice by publication in the press in the prescribed manner,
requiring every person whose total income during the previous year exceed the
maximum exempt from tax, to furnish a return in the prescribed form setting
forth his total in- come. Sub-section (2) authorised the Income- tax Officer to
serve a notice upon a person whose income in the opinion of the income tax
officer exceeded the minimum free from tax.
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 there under, and in Form A applicable to an individual or a Hindu
Undivided family or an association of persons there was no clause which
required disclosure of income of any person other than the income of the assessee,
which was liable to be included in the total income. The Act and 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." "But section 16 sub-section (3) provided in
computing the total income of any individual for the purpose of assessment
there shall be included the classes of income mentioned in clauses (a) and (b).
Sub-section 3(a)(ii) insolar as it is material, provided:
computing the total income of any individual for the purpose of assessment there
shall be included-- (a) so much of the income of a wife or minor child of such
individual as arises directly or indirectly ........
From the admission of minor to the benefits of partnership in a firm of which
such individual is a partner.' The assessee was bound to disclose under section
22(5) the names and addresses of his partners, if any, engaged in business,
profession or vocation together with the location and styled of the principal
place and branches 1106 thereof and the extent of the shares of all such
partners in the profits of the business, profession or vocation and branches
thereof, but the assessee was not required in making a return to disclose that
any income was received by his wife or minor child admitted to the benefits of
partnership of a firm of which he was a partner." Upon this conclusion
this Court therein held:
failing or omitting to disclose that income proceedings for reassessment
cannot, therefore, be commenced under section 34( l)(a)." Relying upon
this decision the learned Single Judge quashed the notices. The Revenue
appealed to the Division Bench but failed to obtain any relief in view of the
said decision of this Court. The Division Bench also took note of the decision
in the case of Malegaon Electricity Co. (P) Ltd. v. Commissioner or Income-tax,
Bombay, 78 ITR 466.
after referring to Muthiah Chettiar case (supra).
J. speaking for the Court, stated:
by not showing the income of his wife and minor children, the assessee cannot
be deemed to have failed to disclose fully and truly all material facts
necessary for his assessment within the meaning of section 34(1)(a) of the
Act." It is appropriate to take note of a later decision of this Court in
Commissioner of Income-tax, Kerala v. Smt.
Kochammu Amma, Peroke, 125 ITR 624. That was of a two- Judge Bench. Reliance
was sought to be placed on Muthiah Chettiar's case (supra). Dealing with the
question of imposition of penalty under section 27 1(l)(c) of the 1961 Act, the
Division Bench observed:
is obvious that on this view the order imposing penalty on the assessee would
have to be sustained but there is a decision of this Court in V.D.M. RM, M. RM.
Muthiah Cheuiar v. Commissioner of Income-tax,  74 ITR 183 (SC) which is
binding upon us and where we find that a different view has been taken by a
Bench of three Judges of this Court. It was held in this case that even if
there were any printed instructions in the form of the return requiring the
assessee to disclose the income received by his wife and 1107 minor child from
a firm of which the assessee was a partner. there was, in the absence in the
return of any head under which the income of the wife or minor child could be
shown, no obligation on the assessee to disclose this item of income, and the
assessee could not be deemed to have failed or omitted to disclose fully and
truly all material facts necessary for his assessment within the meaning of
34(l)(a) of the Indian Income Tax Act, 1922.
the greatest respect to the learned Judges who decided this case. we do not
think, for reasons already discussed, that this decision lays down the correct
law on the subject, and had it not been for the fact that since 1st April,
1972, the form of the return prescribed by rule 12 has been amended and since
then. there is a separate column providing that 'income arising to spouse/minor
child or any other person as referred to in Chapter V of the Act' should be
shown separately under that column and consequently there is no longer any
scope for arguing that the assessee is not bound to disclose such income in the
return to be furnished by him, we would have referred the present case to a
we do not propose to do so since the question has now become academic in view
of the amendment in the form of the return carried out with effect from 1st
April, 1972. we would, therefore, follow this decision in Muthian Chettiar's
case which being a decision of three Judges of this Court is binding upon us
....................................." We agree with what has been stated
in Kocharammu Amma's case and for the reasons indicated therein, we do not pro-
pose to refer this case to a larger bench. Following the law as laid down in
the two cases reported in 74 ITR 183 and 78 ITR 466 we dismiss the appeal.
There would be no order for costs throughout.