1980 (9) TMI 1 - SC - Income Tax

Concealment of income - Failure to disclose share of spouse and minor children in firm - hold that the assessee could not be said to have concealed her income by not disclosing in the return filed by her the amounts representing the shares of her husband and minor daughter in the two partnership firms - revenue authorities are not justified in levying penalty on the assessee

Summary

Issues:
1. Whether failure to disclose income of spouse and minor child in the return constitutes concealment of income for penalty under section 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:
The case involved proceedings initiated by revenue authorities to levy a penalty on the assessee, a lady who was a partner in two firms along with her husband and minor daughter. The issue was whether the assessee's failure to disclose the income of her husband and minor daughter in the return constituted concealment of income under section 271(1)(c) of the Income Tax Act, 1961. The Income Tax Officer (ITO) included the amounts representing the shares of the husband and minor daughter in the assessment, leading to a penalty imposition of Rs. 7,000. The Tribunal held that the penalty was not justified as there was no obligation on the assessee to disclose these amounts in her return. The High Court also ruled in favor of the assessee, stating that the amounts were not the income of the assessee herself. The revenue appealed to the Supreme Court challenging the cancellation of the penalty.

The Supreme Court analyzed the scope of the term "his income" in section 271(1)(c) concerning the disclosure of income in the return. It was established that the term "his income" included all income liable to be taxed in the assessee's hands, even if derived from others, as per the provisions of the Income Tax Act. Section 64(1) mandates the inclusion of income of the spouse and minor child in the assessee's total income. Therefore, the assessee was required to disclose these amounts in her return as they formed part of her total income. The Court emphasized that the obligation to disclose such income was essential for a proper assessment of tax.

The assessee argued that the prescribed return form did not have a specific column for disclosing the income of the spouse and minor child. However, the Court rejected this argument, stating that the form contained a note directing the disclosure of such income under the appropriate head. The failure to disclose these amounts constituted a breach of the obligation under section 139(1) of the Income Tax Act. The Court highlighted that the assessee was bound to disclose these amounts, and the concealment of this income attracted the penalty under section 271(1)(c).

Despite an earlier conflicting decision, the Court followed a precedent that deemed the assessee not liable for concealment due to the absence of a specific column in the return form. The Court acknowledged the subsequent amendment to the return form, which now includes a separate column for such disclosures. Consequently, the Court dismissed the appeal, upholding the decision that the assessee did not conceal her income by failing to disclose the amounts representing the shares of her husband and minor daughter in the two partnership firms.

In conclusion, the Supreme Court dismissed the appeal, ruling that the assessee did not conceal her income by not disclosing the amounts representing the shares of her husband and minor daughter in the two partnership firms. The Court noted the amendment in the return form that now requires such disclosures and emphasized the importance of accurate income disclosure for tax assessment purposes.