1985 (2) TMI 57 - AT - Income Tax

Summary

Issues:
1. Validity of reopening the assessment under section 147(a).
2. Inclusion of minor children's income in the assessment of the assessee under section 64(1)(iii).
3. Applicability of the amended section 64(1)(iii) for the assessment year in question.
4. Whether income of minors separately assessed can be included in the assessment of the assessee.

Analysis:

Issue 1: The validity of reopening the assessment under section 147(a)
The assessee failed to disclose income arising to minor children in the original return, leading to the ITO initiating action under section 147(a) based on the belief that income had escaped assessment due to the omission. The Tribunal held that the provisions of section 147(a) were applicable as the assessee did not disclose material facts necessary for assessment, citing the Supreme Court's decision in CIT v. Smt. P.K. Kochammu Amma [1980] 125 ITR 624.

Issue 2: Inclusion of minor children's income in the assessment of the assessee under section 64(1)(iii)
The ITO included the income of minor children from a partnership firm in the assessment of the assessee under section 64(1)(iii) of the Income-tax Act, 1961. The Tribunal upheld this inclusion, stating that the explicit provision of section 64(1)(iii) mandated the inclusion of such income in the assessee's assessment.

Issue 3: Applicability of the amended section 64(1)(iii) for the assessment year in question
The assessee argued that the amendment to section 64(1)(iii) was not relevant for the assessment year in question as it was introduced after the period to which the income of minors related. However, the Tribunal rejected this contention, emphasizing that the law as on 1-4-1976, when the amendment was made effective, must apply to the assessment year 1976-77.

Issue 4: Whether income of minors separately assessed can be included in the assessment of the assessee
The assessee contended that since the minors were separately assessed, their income should not be included in the assessee's assessment. The Tribunal disagreed, stating that the income had to be assessed in the hands of the person legally liable, regardless of separate assessments on minors. The principle of double taxation does not apply in this scenario, as established by previous Supreme Court decisions.

In conclusion, the Tribunal dismissed the appeal, affirming the validity of reopening the assessment, the inclusion of minor children's income in the assessee's assessment, the applicability of the amended section 64(1)(iii), and the inclusion of minors' income despite separate assessments.