1985 (1) TMI 13 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessments for the assessment years 1964-65 and 1965-66 are barred by limitation and therefore invalid.
2. Whether the Income-tax Officer was correct in including the share income of the assessee's minor children in the total income of the assessee u/s 64(ii) of the Income-tax Act, 1961.

Summary:

Issue 1: Limitation of Assessments
The primary issue was whether the assessments made in 1973 for the assessment years 1964-65 and 1965-66 were barred by the limitation period of four years prescribed by section 153(1) of the Income-tax Act, 1961. The court noted that sub-sections (1) and (2) of section 153 impose a limitation period, but sub-section (3) lifts this bar in certain circumstances, such as when assessments are made to give effect to any finding or direction contained in an order u/s 264. The court held that the language of section 153(3) clearly provides that an assessment made beyond the period of limitation to give effect to a direction u/s 264 is not barred by limitation. The court rejected the argument that the limitation period should apply to the Commissioner's directions under section 264, noting that such an interpretation would make the Act unworkable. The court concluded that the reassessments made in 1973 were valid and not barred by limitation.

Issue 2: Inclusion of Minor's Income
The second issue was whether the Income-tax Officer was correct in including the share income of the assessee's minor children in the total income of the assessee u/s 64(ii) of the Income-tax Act, 1961. The court noted that the assessee's total income should include the income of the minors u/s 64(iii) of the Act. The court observed that the Income-tax Officer had followed the correct procedure as required by section 64, but had committed a procedural error by not giving notice to the assessee. The Commissioner had set aside the assessments and directed the Income-tax Officer to make fresh assessments in accordance with the law. The court held that the direction issued by the Commissioner was a positive direction and fell within the language of section 153(3), thus saving the limitation period. The court also rejected the argument that the Commissioner's direction was prejudicial to the assessee, noting that the direction was necessary to correct the procedural error and ensure compliance with the law.

Conclusion:
The court answered both questions in favor of the Revenue and against the assessee. The assessments made in 1973 were held to be valid and not barred by limitation, and the inclusion of the share income of the assessee's minor children in the total income of the assessee was upheld. The court also rejected the assessee's request for a certificate u/s 261 for appeal to the Supreme Court, stating that the decision was based on the plain language of the statute and authoritative pronouncements of the Supreme Court.