2002 (11) TMI 71 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in annulling the assessment on the ground that the Assessing Officer has no jurisdiction to make the assessment under section 147(a)? We hold that the finding of the Appellate Tribunal that merely because the assessments were made in the hands of the minors, there is no escapement of income is not sustainable and we are unable to sustain the said finding of the Appellate Tribunal. Accordingly, we hold that the reassessment proceedings were properly initiated. The result is that the matter has to go back to the Appellate Tribunal to consider the question on the merits of the matter. - Accordingly, we answer the common question of law referred to us in the negative, in favour of the Revenue and against the assessee.

Issues Involved:
1. Jurisdiction of the Income-tax Officer to issue notice under section 147(a) of the Income-tax Act.
2. Inclusion of minors' share income in the hands of the assessee under section 64(1)(iii) of the Income-tax Act.
3. The relevance of prior assessments of minors and the estate in the context of reopening assessments.

Detailed Analysis:

1. Jurisdiction of the Income-tax Officer to Issue Notice Under Section 147(a):
The court examined whether the Income-tax Officer had the jurisdiction to issue a notice under section 147(a) of the Income-tax Act. It is well settled by several decisions of the Supreme Court that for the Income-tax Officer to assume jurisdiction under section 147(a), two conditions must be met: (i) there must be reason to believe that the income of the assessee had escaped assessment, and (ii) such escapement must be due to omission or failure on the part of the assessee to disclose fully and truly the material facts necessary for assessment. The court found that the assessee had not filed returns of income for the relevant assessment years and had failed to include the share income of the minors in her returns. Therefore, the Income-tax Officer was justified in issuing the notice under section 147(a).

2. Inclusion of Minors' Share Income in the Hands of the Assessee Under Section 64(1)(iii):
The court addressed the merits of including the minors' share income in the hands of the assessee. The assessee argued that the share income of the minors from the firm should not be included in her income as it was already assessed in the hands of the minors. However, the court held that section 64(1)(iii) mandates the inclusion of minors' income in the hands of the parent. The court also noted that the assessee had not filed any returns, and thus, there was a failure to disclose fully and truly the material facts. Consequently, the Income-tax Officer was correct in including the minors' share income in the assessee's income.

3. Relevance of Prior Assessments of Minors and the Estate:
The court considered whether the prior assessments of the minors and the estate impacted the jurisdiction to reopen the assessee's assessments. The Appellate Tribunal had annulled the reassessment on the grounds that the minors' share income had already been assessed under section 143(1)(a) and that there was no failure on the part of the assessee. The court disagreed, stating that the mere assessment of minors' income under section 143(1)(a) did not preclude the Income-tax Officer from reopening the assessment of the assessee. The court emphasized that the reassessment was justified due to the assessee's failure to file returns and disclose the minors' share income.

Conclusion:
The court concluded that the reassessment proceedings were properly initiated and that the Appellate Tribunal's decision to annul the assessment was incorrect. The common question of law was answered in the negative, in favor of the Revenue and against the assessee. The matter was remanded to the Appellate Tribunal to consider the merits of the case.

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