KANHAIYA LAL PRAHLADRAI Vs. INCOME-TAX OFFICER

JUDGEMENT

(1.) The original assessment in this case was made under section 143(1) of the Income-tax Act, 1961 (the Act) on 24-10-1976 on an income of Rs. 81,860. It was subsequently revised to Rs. 83,940 under section 155 of the Act on 16-2-1977. The assessee was a partner in the firm of Prahlad Rai Steel Forging Works in the capacity of the karta of his HUF. His wife, Smt. Sumitra Devi, was also a partner in this firm. A sum of Rs. 16,520 came to her share from the above firm. This amount was neither shown by the assessee in his return in the status of an individual, nor was it included in the original assessment.

(2.) In the meantime, the Allahabad High Court in the case of Madho Prasad v. CIT, 1978 112 ITR 492(All) held that under section 64(1)(ii) of the Act, the share of a minor admitted to the benefits of partnership could be assessed in the hands of his father if the latter was also a partner in that firm irrespective of the fact whether he was partner as an individual or as a karta of his joint family. The ITO was of the view that this principle applied to the case of the assessee also, which fell under section 64(1)(i) as substituted by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976. He, therefore, initiated proceedings under section 147(a) of the Act by issuing a notice under section 148 of the Act on 31-10-1979. After giving the assessee an opportunity of being heard and following the decision in the case of Madho Prasad (supra), he made the assessment on 28-3-1980 by including the sum of Rs. 16,520 in the assessment of the assessee in the status of an individual, which, as stated above, was the share falling to his wife, Smt. Sumitra Devi, from the firm of Prahlad Rai Steel Forging Works. In the assessment order, the ITO also observed that the case was also covered by the time limitation provided for the application of section 147(b) .

(3.) The assessee appealed to the Commissioner (Appeals). There were two submissions before him. The first submission was that there was no obligation on the part of the assessee to declare the share income of his wife in his personal return, as he was partner in the firm of Prahlad Rai Steel Forging Works not in his individual capacity, but in the capacity of the karta of his HUF. The second submission was that the decision of the Allahabad High Court in Madho Prasads case (supra) had not laid down the correct legal position and that there were decisions of other High Courts taking a contrary view. The Commissioner (Appeals) rejected both the contentions. About the first contention, he held that the return of income provided a column for showing the income arising to the assessees wife referred to in Chapter V of the Act and, therefore, it was obligatory on the part of the assessee to declare it in the return. About the second contention, he held that the decision of the Allahabad High Court was binding on him and, therefore, he could not take a different view. He finally dismissed the appeal.