1998 (12) TMI 33 - HC - Income Tax

Summary

Issues:
1. Inclusion of minor children's income in the parent's assessment.
2. Justification of reopening assessments under section 147 of the Income-tax Act.

Analysis:

Issue 1: Inclusion of minor children's income in the parent's assessment

The case involved the question of whether the income of minor children from a firm should be included in the parent's assessment. The assessee, as a karta of his Hindu undivided family, was a partner in a firm where his minor sons were also admitted to the benefits of the partnership. The Tribunal upheld the Income-tax Officer's view that the income of the minor children should be treated as assessable in the hands of the father under section 64 of the Income-tax Act. However, the assessee argued that prior to the amendment on April 1, 1976, section 64 did not require the inclusion of minor children's income unless the parent was a partner in the firm. As the assessee was not a partner in his individual capacity, he contended that he had no obligation to file a return including his minor children's income. The court agreed with the assessee's contention for the assessment years 1972-73, 1973-74, 1974-75, and 1975-76, stating that the reopening of assessments for those years was unjustified. However, for the assessment year 1976-77, post-amendment, the parent was required to include the minor children's income in the return, justifying the reopening of assessment under section 147.

Issue 2: Justification of reopening assessments under section 147

Regarding the reopening of assessments under section 147, the court held that it was justified for the assessment year 1976-77 due to the parent's failure to include the minor children's income in the return. The court referred to a previous decision stating that even if the parent had no independent source of income, they were required to file a return showing the income of the minor children from a firm. Therefore, the reopening for the assessment year 1976-77 was deemed justified. However, for the earlier assessment years, the court concluded that the Income-tax Officer was not justified in reopening the assessments under section 147 as the parent had no obligation to include the minor children's income unless they were a partner in the firm.

In summary, the court ruled in favor of the assessee for the earlier assessment years, stating that the income of the minors was not includible in the parent's assessment. However, for the assessment year 1976-77, the court upheld the inclusion of minor children's income and the justification for reopening the assessment under section 147.