1964 (8) TMI 87 - HC - Income Tax

Summary

Issues Involved
1. Validity of reassessment under section 34 of the Act for the years 1952-53 to 1954-55.
2. Validity of including the share income of the minor in the hands of the assessee under section 16(3) of the Act.

Detailed Analysis

Issue 1: Validity of Reassessment under Section 34 of the Act for the Years 1952-53 to 1954-55

The primary question was whether the reassessment made on the assessee under section 34 of the Income-tax Act for the years 1952-53 to 1954-55 was valid. The reassessment was initiated because the Income-tax Officer (ITO) noticed that the assessee had not disclosed the share income of his minor sons, which should have been included in his income under section 16(3) of the Act.

The assessee contended that he had disclosed all necessary information in his returns and that it was the duty of the ITO to ascertain the correct share of income from the firm's assessment records. However, the ITO argued that the assessee had failed to disclose fully and truly all material facts necessary for his assessment, specifically the relationship of the minors to the assessee.

The Tribunal upheld the ITO's view, stating that the assessee had not disclosed the relationship of the minors to himself, which was a crucial piece of information for applying section 16(3). The Tribunal dismissed the appeals, and the High Court agreed, emphasizing that the duty of the assessee includes disclosing all primary facts necessary for the assessment.

The High Court referred to the Supreme Court's decision in Calcutta Discount Company v. Income-tax Officer, which clarified that the duty of the assessee is to disclose fully and truly all material facts necessary for his assessment. The High Court concluded that the relationship of the minors to the assessee was a primary fact that should have been disclosed. Therefore, the reassessment under section 34 was valid.

Issue 2: Validity of Including the Share Income of the Minor in the Hands of the Assessee under Section 16(3) of the Act

The second question addressed whether the inclusion of the share income of the minor sons in the hands of the assessee, by invoking the provisions of section 16(3) of the Act, was valid, notwithstanding that the assessment was made on the minor represented by his guardian.

The High Court noted that the assessee had three minor sons who were admitted to the benefits of a partnership in which the assessee was a partner. The original assessments did not apply section 16(3), which was later corrected by the ITO through reassessment.

The assessee argued that he had complied with section 22 of the Act by providing all the required information in the returns. However, the High Court observed that section 16(3) mandates the inclusion of the share income of the minor children in the total income of the assessee. The Court also referred to the Supreme Court's interpretation that the duty of the assessee includes disclosing all primary facts necessary for the assessment.

The High Court concluded that the relationship of the minors to the assessee was a primary fact that was not disclosed. Therefore, the inclusion of the share income of the minor sons in the hands of the assessee under section 16(3) was valid.

Conclusion

The High Court answered both questions against the assessee. The reassessment under section 34 was deemed valid, and the inclusion of the share income of the minor sons in the assessee's income under section 16(3) was upheld. The assessee was ordered to pay the costs of the department, with counsel's fee set at Rs. 250.