COMMISSIONER OF INCOME TAX Vs. RATHINASABAPATHY MUDALIAR

JUDGEMENT

(1.) THIS reference has been brought before us at the instance of the Commissioner of Income-tax on his application under section 66 (1) of the Income-tax Act. The assessee was the karta of a Hindu undivided family. The family was partitioned on April 4, 1947. Following this partition, which was accepted by an order under section 25A, the assessee and his four major sons constituted themselves into a partnership, and to the benefits of this partnership a minor son was admitted. THIS partnership was also registered under section 26A of the Act. The partnership, it may be stated, was in respect of the managing agency of Pankaja Mills Limited, Coimbatore.

(2.) FOR the assessment years 1948-49 to 1951-52, individual assessment were made in respect of the share income of the minor on returns filed by his mother, Mrs. Komalavallithayar Ammal, as his guardian. The assessee, Rathinasabhapathy Mudaliar, the erstwhile karta of the family, was also assessed individually in respect of his income. In or about 1952, the Income-tax Officer realised that under section 16 (3) (a) of the Act, the income of the minor son from the partnership should have been included in the total income of the father and that had not been done in the assessment of the assessee, the father. In that view, therefore, that the income of the father had escaped assessment, proceedings were started under section 34 of the Act after obtaining the prior sanction of the Commissioner. To a notice issued in this regard, the assessee while submitting a revised return of his income, including the share income of the minor son, objected to the validity of the proceedings, contending that it was not a case where any income had escaped assessment and that at best it could only be stated that his own income had been under-assessed. The Income-tax Officer however made fresh assessments under section 23 (1) read with section 34. Against these orders of reassessment, appeals were taken to the Appellate Assistant Commissioner. It was contended before the appellate authority that the attempted inclusion of the share income of the minor in the assessment of the assessee amounted only to a change of opinion of the officer, that the officer who originally made the assessments both on the minor son and the assessee in their individual capacities had the entire matter before him and that, therefore, it was not correct to say that any income had escaped assessment. The Appellate Assistant Commissioner however took the view that since the minor son had been admitted to the benefits of the partnership in which the father was a partner, section 16 (3) (a) (ii) applied, and that, in computing the total income of the minor from the partnership had to be included. He thought that, since under the provisions of the Act the assessee is under a duty to disclose his total income, which total income by reason of section 16 (3) (a) (ii) would take in the income of the minor son admitted to the benefits of the partnership, the assessee had failed to disclose that part of the income for the purpose of assessment. He held that the case came within the scope of section 34 (1) (a) of the Act and that since all the conditions requisite to its application had been fulfilled, the proceedings were validly launched and completed.

(3.) IN yet another case, Maharajadhiraj Sir Kameshwar Singh v. State of Bihar, the Supreme Court, when dealing with the provisions of the Bihar Agricultural INcome-tax Act, dealt with a case of reassessment. Therein, the assessing authority excluded an item from assessment in the belief that it was exempted. Reassessment proceedings were started to include that item and the question arose whether such reassessment was permissible. That item had been included in the return submitted by the assessee in connection with the original proceedings. Their Lordships of the Supreme Court had to interpret section 26 of the Bihar Agricultural INcome-tax Act, which is substantially the same as section 34 of the INdian INcome-tax Act prior to its amendment. That section read :