1985 (2) TMI 59 - AT - Income Tax

Summary

Issues:
1. Inclusion of minor children's income in the assessment of the assessee under s. 64(1)(iii) of the IT Act.
2. Validity of re-opening the assessment under s. 147(a) of the IT Act.

Analysis:

Issue 1: Inclusion of minor children's income
The case involved the assessment of an individual who had not declared the income of his minor sons from a partnership firm in his return. The Income Tax Officer (ITO) included the minors' income in the assessee's assessment under s. 64(1)(iii) of the IT Act, which states that income of a minor child admitted to the benefits of partnership shall be included in the parent's assessment. The assessee contended that the amendment to s. 64(1)(iii) was introduced after the period in question, but the Appellate Tribunal upheld the ITO's decision based on the explicit provision of the section. The Tribunal also rejected the argument that since the minors were separately assessed, their income should not be included in the assessee's assessment, emphasizing the assessee's failure to disclose the minors' income initially.

Issue 2: Validity of re-opening the assessment
The assessee challenged the validity of re-opening the assessment under s. 147(a) of the IT Act. The Tribunal held that the re-opening was valid as the assessee had not fully disclosed the material facts necessary for assessment, leading to income escapement. Citing the Supreme Court's decision in CIT vs. Smt. P. K. Kochammu Amma, the Tribunal emphasized that the assessee was obligated to disclose all relevant income, including that of spouse or minor children. The Tribunal also addressed the contention regarding the applicability of the amended s. 64(1)(iii) to the assessment year, stating that the law as of the beginning of the year governs the assessment. Additionally, the Tribunal clarified that the source of investment in the minors' names did not affect the inclusion of their income in the assessee's assessment under s. 64(1)(iii).

In conclusion, the Tribunal dismissed the appeal, upholding the inclusion of minor children's income in the assessee's assessment under s. 64(1)(iii) and affirming the validity of re-opening the assessment under s. 147(a) of the IT Act. The judgment reiterated the assessee's obligation to disclose all material facts for accurate assessment and clarified the application of relevant tax laws to the assessment year.