1990 (9) TMI 29 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 155 of the Income-tax Act, 1961.
2. Inclusion of minor children's income in the assessee's income under Section 64 of the Act.
3. Rectification of assessment under Section 155.
4. Interpretation of "mistake apparent from the record."

Issue-wise Detailed Analysis:

1. Applicability of Section 155 of the Income-tax Act, 1961:
The primary issue was whether the provisions of Section 155 could be applied to club the share income of the minors with the assessee's income. The court held that Section 155(1) allows the Income-tax Officer to amend the assessment of a partner to include the correct share of income from the firm. The court noted that the language of Section 155 does not reference a "mistake apparent from the record," unlike the older Section 35(5) of the Indian Income-tax Act, 1922. Therefore, the contention that Section 155 deals with mistakes apparent from the record was deemed unacceptable.

2. Inclusion of Minor Children's Income in the Assessee's Income under Section 64 of the Act:
The assessee argued that the share income of the minors should not be clubbed with her income under Section 64, as it was a disputed question of law. However, the court observed that Section 64(1) mandates the inclusion of the minor children's income in the assessee's income if it arises directly or indirectly from the partnership. The court cited the Supreme Court decision in CIT v. P. K. Kochammu Amma, which held that the share income of the spouse and minor children must be included in the assessee's total income.

3. Rectification of Assessment under Section 155:
The court examined whether the rectification under Section 155 was valid. The assessee contended that the rectification involved a disputed question of law and could not be considered a mistake apparent from the record. The court held that Section 155 allows for the amendment of a partner's assessment to include the correct share of income from the firm, without requiring it to be a mistake apparent from the record. The court also referenced CIT v. Balkishan Bhatia and CIT v. M. M. Thimmaiah to support this interpretation.

4. Interpretation of "Mistake Apparent from the Record":
The court clarified that Section 155 does not deal with mistakes apparent from the record, unlike Section 154. The court noted that the language of Section 155 and the facts of the case, particularly the concession made by the assessee's representative, did not support the argument that there was a mistake apparent from the record. The court referenced the Supreme Court decision in ITO v. S. K. Habibullah, which dealt with Section 35(5) of the Indian Income-tax Act, 1922, to illustrate that the inclusion or correction of a partner's share income was deemed to be a rectification of a mistake apparent from the record under the older law, but not under the current Section 155.

Conclusion:
The court answered the question in the affirmative, holding that the Tribunal was right in law in holding that the provisions of Section 155 would apply and that the order under Section 155 clubbing the share income of the minors was valid and within jurisdiction. The court also held that the minor's share income could be clubbed with the assessee's income under Section 64 while passing orders under Section 155. The Revenue was entitled to its costs in this reference.