1971 (12) TMI 1 - HC - Income Tax

Minor admitted to the benefits of the partnership - Leviability of penalty u/s 271(1) (c) - not a case of concealment of income section 271(1) (c) not at all attracted penalty not leviable

Summary

Issues:
1. Penalty under section 271(1)(c) for the assessment year 1962-63.
2. Interpretation of sections 64 and 139 of the Income-tax Act, 1961.
3. Compliance with the requirements of filing income tax returns.

Detailed Analysis:
The High Court of Madhya Pradesh was tasked with determining whether a penalty could be levied under section 271(1)(c) of the Income-tax Act for the assessment year 1962-63. The case involved an assessee, a partner in a firm with her minor sons also admitted to the benefits of the partnership. The Income-tax Officer included the minor sons' share income in the assessee's income under section 64 of the Act and initiated penalty proceedings under section 271(1)(c), resulting in a penalty of Rs. 9,000 being imposed. The Tribunal ruled in favor of the assessee, prompting the department to challenge the decision before the High Court.

The crux of the issue revolved around the interpretation of sections 64 and 139 of the Income-tax Act, 1961. Section 64 places the responsibility of including a minor's income in the individual assessee's income on the Income-tax Officer, without explicitly mandating the assessee to disclose such income in their return. Section 139 requires the filing of returns for the individual's income and the income of other persons assessable under the Act. However, the absence of a provision in the prescribed form for indicating such income to be included in the assessee's total income led to a debate on compliance with the statutory requirements.

The Court analyzed the relevant legal provisions and previous judicial decisions to determine the assessee's obligations regarding disclosure of the minor sons' income. Referring to the Supreme Court's decision in Muthiah Chettiar v. Commissioner of Income-tax, the Court emphasized that the Act did not impose an obligation on the taxpayer to disclose income liable for inclusion in their assessment. The Court also cited the Calcutta High Court's decision in Radheshyam Ladia v. Income-tax Officer, which supported the interpretation of sections 64 and 139 regarding disclosure requirements.

Furthermore, the Court highlighted that the penalty under section 271(1)(c) pertained to the concealment of "his income" by the assessee. Since the income of the minor sons, included under section 64, did not constitute the assessee's income, the provisions of section 271(1)(c) were deemed inapplicable in this scenario. Ultimately, the Court concluded that, based on the facts and circumstances of the case, the penalty could not be levied under section 271(1)(c) for the assessment year 1962-63. The department was directed to bear the costs of the assessee, including a hearing fee of Rs. 100.