DHANWATAY D R Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under s. 66(1) of the Indian IT Act, 1922.

(2.) THE facts on which the reference is founded are as follows : The assessee is an individual. His assessment for the year 1946 -47, the year of account being the financial year ending 31st March, 1946, was made by the ITO Shri Bandevar on 6th Dec., 1946. The assessee had a two anna share in Shiv Raj Fine Art Litho Works, Nagpur. This is a registered firm. The partners of the firm were the assessee, his wife and four major sons. The two minor sons of the assessee were admitted to the benefits of the partnership. Thus there were in all eight persons, each having a two anna share, amongst whom the profits of the firm were to be divided. In the return submitted by the assessee for the year 1946 -47 he showed only his share of income but omitted to include the profits which fell to the share of his wife and minor sons. Such income has to be included for computing the total income of any individual for the purpose of assessment by virtue of the provisions of s. 16(3)(a)(i) and (ii) of the Indian IT Act. Shri Bandevar, however, overlooked the provisions of s. 16(3)(a)(i) and (ii) of the Act when he assessed the assessee's income for the year 1946 -47. He assessed the assessee, his wife and his minor sons separately. He did the same thing in the year 1947 -48. In the year 1948 -49 Shri Bandevar was succeeded by Shri Gahlot, who also assessed these persons in the same way. The Tribunal both while dismissing the assessee's appeal and while making a reference has accepted the position that Shri Bandevar as well as Shri Gahlot had overlooked the provisions of s. 16(3)(a)(i) and (ii) of the Act.

(3.) WHILE Shri Gahlot was making the assessment for the year 1949 -50, he realised that an error had been committed in respect of the past assessment of the assessee inasmuch as in the income of the assessee the profits which fell to the share of his wife and minor sons were not included as required by s. 16(3)(a)(i) and (ii) of the Act. Thereupon he made a report to the CIT for sanction as required by s. 34, as amended by the Amending Act of 1948. The CIT gave the sanction, whereupon the ITO, issued a notice to the assessee under s. 34 of the Act and after hearing the assessee included in his income the income of his wife and minor sons. The appeal taken by the assessee against that order was dismissed by the AAC. A further appeal taken by him before the Tribunal was also dismissed. The assessee then made an application to the Tribunal for stating the case to this Court. The Tribunal allowed the application and has framed the following questions of law for decision by this Court :