MADANLAL MAHESWARI Vs. INCOME TAX OFFICER J WARD

JUDGEMENT

(1.) The petitioner in this application is entitled to succeed on the basis of the reasons given by the Income-tax Officer for purporting to reopen the assessment of the petitioner for the assessment year 1960-61 under Section 147(a) of the Income-tax Act, 1961.

(2.) The facts shortly are that the petitioner was assessed by the Income-tax Officer, "J" Ward, District 1(1), Calcutta, in respect of the assessment year 1960-61 on a total income of Rs. 8,682. It also appears that the assessee's wife, Smt. Chandra Kant Periwal, purported to invest Rs. 35,000 in a partnership firm styled "Rajasthan Knitting Mills" as her capital contribution for becoming a partner in that firm with a four annas share and in her individual assessment for the assessment year 1959-60 made by the Income-tax Officer, "B" Ward, 24-Parganas, the loss from the aforesaid firm was accepted subject to rectification on receipt of the share allocation report of the assessment of the firm. It also appears that for the assessment year 1960-61, another Income-tax Officer allowed registration to the firm of Rajasthan Knitting Mills. For the accounting year 1960-61, the Income-tax Officer making the assessment of the petitioner's wife questioned the contribution of Rs. 35,000 made by her towards the capital of the firm and after discussing the evidence adduced by her, came to the conclusion that the said amount was invested benami by her husband, Madanlal Maheswari. Accordingly, for that year he only made a protective assessment on the wife in respect of the income from that firm. This order was made on the 27th March, 1965. On the 17th February, 1969, the respondent-Income-tax Officer informed the petitioner that it had come to his notice from the assessment file of his wife that the alleged contribution by her to the capital of M/s. Rajasthan Knitting Mills could not be satisfactorily established and in the circumstances he was of opinion that the wife was nothing but a benamidar in respect of the partnership income of which the petitioner was the ostensible owner. The petitioner was directed to show cause in writing why the income earned by his wife as a partner of the said firm should not be taxed in his hands under Section 64 of the Act of 1961. The assessment of the petitioner for the year 1964-65 was completed on the 18th March, 1969, and therein the share of the profit of the petitioner's wife from M/s. Rajasthan Knitting Mills was included under Section 64 of the Act. By a notice under Section 148 dated the 28th March, 1969, the respondent-Income-tax Officer proposed to reassess the petitioner's income for 1960-61 and required the petitioner to file his return for that year within 30 days from the date of the receipt of the notice. It was further stated in the notice that it was being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, West Bengal III, Calcutta.

(3.) Dr. D. Pal, the learned counsel for the petitioner, challenges the notice under Section 148 on the ground that as there was no obligation on the petitioner to disclose any income accruing or arising to his wife under Section 64, it could not be said that there was any failure on his part to disclose such income for his assessment for 1960-61. He relied on the decision of the Supreme Court in the case of Muthiah Chettiar v. Commissioner of Income-tax, where it had been held that Section 16(3) of the Income-tax Act, 1922, imposed an obligation upon the Income-tax Officer to compute the total income of an individual for the purposes of assessment by including the items of income set out in Clauses (a)(i) to (iv) and (b); but thereby no obligation was imposed upon the taxpayer to disclose the income liable to be included in his assessment under Section 16(3). For failing or omitting to disclose that income proceedings for reassessment could not, therefore, be commenced under Section 34(1)(a). There is no dispute that Section 16(3) and Section 34(1)(a) of the Act of 1922 correspond respectively to Section 64 and Section 147(a) of the Act of 1961. If, therefore, the respondent-Income-tax Officer proposes to reopen the assessment for 1960-61 on the ground of the petitioner's failure to disclose the fact that the income accruing or arising to his wife from assets transferred directly or indirectly by the petitioner to his wife had not been disclosed, the impugned notice must be struck down as not permissible under Section 147(a) in accordance with the aforesaid decision of the Supreme Court.