V S ARULANANDAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AS a non-resident married individual the assessee was charged to income-tax for the assessment year 1954-55, the previous year ending on April 12, 1954, on a total income arising to him within the taxable territory. On the ground that a sum of Rs. 4,805 credited to his wife as interest due to her on certain deposits made by her with a firm called P. P.M. Thangiah Nadar at Tuticorin was not disclosed by the assessee, the assessment was reopened under section 34 (1) (a) of the Income-tax Act, 1922, and the amount become final and is no longer in question. Proceedings under section 28 (1) (c) against the assessee followed with the result a penalty of Rs. 1,000 was levied. Various objections were raised by the assessee which were all overruled in the first instance as well as in the further appeals. Pursuant to the directions of this court, a statement of the case has been submitted to us under section 66 (2) on the following question :

(2.) THE question so framed in effect raises the point as to whether the income that falls within the ambit of section 16 (3) (a) (iii) is required to be included by the assessee as part of his total income in his return under section 22 (1). THEre is no dispute at any time that the wifes income does fall within the ambit of section 16 (3) (a) (iii). "Total income" is defined by to in sub-section (1) of section 4, computed in the manner laid down in the Act. Section 4 (1) (c) directs that the total income of the previous year of any person shall include all income, profits and gains from whatever source derived, which, if such person is not a resident in the taxable territories during such year, accrue, or arise or are deemed to accrue or arise to him in the taxable territories during such year. THE charge under section 3 is in respect of the total income of the previous year. It is manifest from these provisions that what is contemplated by them is the total income that accrues or arises or is deemed to accrue or arise to the assessee in the taxable territory in the previous year. In other words, it is the total income of the assessee as such that is brought to charge by section 3. THE scheme of these provisions is also carried into section 22 (1) which requires an individual having a chargeable total income in the previous year to return it in the prescribed form. THE sub-section requires every person "whose total income during the previous year exceeded the maximum amount which is not chargeable to income-tax" to furnish a return in the prescribed form. THE form of return prescribed also indicates that it is the total income of the individual as such in terms of its definition that is required to be returned. But as we noticed, total income referred to in sub-section (1) but computed in the manner laid down in the Act. THE total income as defined is not stated as of as a particular individual or as his own total income. But, it is, however, implied in this provision because of sub-section (1) of section 4 that the total income will consist of what is referred to in section 4 (1). That means the total income must be referable to income that accrues or arises or is deemed to accrue or arises or is deemed to accrue or arise to the individual. THE Act contains a series of sections which provide as to how to compute the total income of an individual under different heads. In addition to them, there is section 16, which provided for certain exemptions and exclusions in determining the total income, as it originally stood, but actually, as it stood at the relevant time, it contains certain inclusions. Sub-section (3) was introduced into the Act by section 2 of the Indian Income-tax Act (Amendment) Act, 1937. This sub-section so far as is relevant for the present purpose says that, in computing the total income of any individual for the purpose of assessment, there shall be included so much of the income of the wife as transferred from assets directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart. This provision itself makes it clear that but for it such an income of the wife of an individual will not be liable to be included in the total income of the latter. THE underlying assumption of the provision is that the income is of the wife, but, for purposes of assessment, it shall be included in the total income of the husband. That is not to say that thereby the income of the wife becomes the income of the husband. THE view we take is supported by D. R. Dhanwate v. Commissioner of Income-tax and Akula Venkatasubbaiah v. Commissioner of Income-tax.

(3.) WHAT then is the effect of the direction in section 16 (3) (a) that income which falls under any one of the categories mentioned in it shall be included in the total income of the individual ? The answer, to our minds, is that, in view of this provision, the assessee is expected to give particulars of the wifes income in his return; but this does not imply any legal obligation on him, for a breach of which he can be penalised under any of the provisions of the Act. R. Ganesan v. Commissioner of Income-tax Officer visualised that there was such a duty. But we do not think that a failure to mention the particulars of the wifes income can, having regard to the language of section 28 (1) (c), be brought under its mischief. We do not think that Calcutta Discount Co. Ltd. v. Income-tax Officer cited to us for the revenue is of much help in deciding the question before us. The question there considered was as to the scope of the words "omission or failure to disclose there considered was as to the scope of the words "omission or failure to disclose fully and truly all material facts" in section 34 (1) (a). The majority of the learned judges were of the view that on the view that on the facts in that case there was no omission or failure.