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TMI Blog1961 (3) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... han those mentioned in the form. In part (c) of disclosed that his minor son, Yeshwantrao Dhanawate, was admitted to the benefits of the partnership. In that column he also disclosed that in addition to the two annas share, he was being paid ₹ 6,800 as honorarium. The assessment of the firm as well as the assessments of the assessee and other partners of the firm were taken together on February 25, 1948 by Mr. Bandwar, the then Income-tax Officer (1st Additional), Nagpur. He acting under sub-section (6) of section 23 of the Act, determined the total income of the firm at ₹ 2,00,176. Out of the income he apportioned ₹ 29,597 as the share of the assessee; ₹ 22,797 as the share of his wife Parvatibai and ₹ 22,797 as a share of his minor son, Yeshwantrao. On the same day he completed the assessment of the assessee as well as Parvatibai and Yeshwantrao. In the assessment order made by him, the Income-tax Officer did not include the share of income of Parvatibai and Yeshwantrao in the income of the assessee. On the other hand, the Income-tax Officer assessed that income and taxed it in the hands of Parvatibai and Yeshwantrao. It appears that some time in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of February 27, 1956, the Department did not prefer an appeal to the Tribunal, but on the other hand, on March 21, 1956, a notice was issued by the Income- tax Officer under clause (a) of sub-section (1) of section 34 calling upon the assessee to file a fresh return within 35 days of the receipt of the notice. It was further stated in the notice that it was being issued after obtaining the necessary sanction of the Commissioner of Income- tax, M.P. Bhopal, Nagpur. The Income-tax Officer again passed an order on July 31, 1956, bringing to assessment in the hands of the assessee the share income of the assessee's wife and minor child under section 16(3) of the Act. The reason given by him is contained in paragraph 14 of his order, which is in the following terms: As stated above the assessee has year after year since 1940-41 onwards failed to show in his return the share income of his wife and minor sons from the firm, Shivraj Fine Art Litho Works, although the instructions contained in the return required that the assessee should show such share incomes in his own return. The mere fact that the constitution of the firm was before the Income-tax Officer when he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to include in his total income the share incomes of his wife and minor son. He placed reliance on an unreported decision of this court in Parvatibai Kishanlal Tiwari v. Commissioner of Income-tax, Income Tax Reference No. 35 of 1955 decided by a Division Bench of this court of February 24, 1956. Mr. Joshi, learned counsel for the Department, on the other hand, contends that the case falls under the second part of section 34(1)(a) of the Act. We may at this stage state that even though the Tribunal had found that the case fell under both the parts of section 34(1)(a), Mr. Joshi concedes that the case does not fall under the first part of sections 34 (1)(a). As already stated, according to Mr. Joshi, the case falls under the latter part of the section, namely, failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessee's assessment for the year 1947-48. He contends that on a true construction of this clause read together with the provisions of sections 3, 22, 23, 16(3) and Note (3) of the Notes contained in the prescribed form, it becomes clear that it is obligatory on the assessee to include in his total income the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner..... Section 59 deals with the powers of the Central Board of Revenue to make rules. Clause (e) of sub-section (2) empowers the Central Board of Revenue to provide for any matter which by this Act is to be prescribed. Sub-section (5) of section 59 provides that rules made under this section shall be published in the Official Gazette and shall thereupon have effect as it enacted in this Act. In exercise of the powers conferred on it by clause (c) of sub-section (2) of section 59, the Central Board of Revenue has prescribed the rules and rule 19 provides that the return of the total income and total world income for individuals, Hindu undivided family, etc., required under sub-sections (1) and (2) of section 22 shall be in the prescribed form and shall be verified in the manner indicated therein. Part 1 of the form relates to the details that are to be filled in by the assessee regarding his sources of income. In the form it is mentioned that in filling this Part Note No. 3 should be taken into consideration. These Notes are given for guidance in filling up the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such in the strict sense though it may be chargeable to tax in his hand. Section 16 provides that in computing the total income of an individual for purpose of assessment, the income of the wife or a minor child of such individual as arises directly or indirectly from the membership of the wife and from admission of the minor to the benefits of the partnership is to be therein included. The provision thus first recognises that the income truly is the income of the wife or the minor child of the individual. It then directs its inclusion in the total income of the individual at the stage of computation of his total income. That being the position on the language of sub-section (3) of section 16, it cannot be clearly and definitely said that clause (b) of item 4 of Part 1 would be the appropriate head for the disclosure required to be made in the return under Note 3 of rule 19. Mr. Kolah on the other hand referred to Note 9 of rule 19, which is in the following terms: Business, profession or vocation: If you are a partner in registered firm or if your firm has applied for registration you must complete item 4(b) of Part 1 and if you are a partner in an unregistered firm you m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will have to read in the section, failure to disclose fully and truly in his return all material facts necessary for his assessment for that year . That would involve adding something to the section, for which we find neither any warrant nor any justification. In our opinion, therefore, even assuming that it was the duty of the assessee to include the income of his wife and minor child in his income and show it so in his return, failure on his part did not amount to failure to disclose fully and truly all material facts necessary for his assessment for the relevant year . This brings us to the next contention of Mr. Joshi. As already stated, it is his contention that the assessee had not in his assessment proceedings told the Income-tax Officer or disclosed to the Income-tax Officer that the income of his wife and minor son are to added to his income in computing his total income, and, therefore, it is a failure on his part to disclose fully and truly all material facts. To put such a strict construction on the clause in the case of an assessment of a partner in a registered partnership is, in our opinion, not warranted. The assessment of a partner in a registered firm can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Income-tax Officer on July 31, 1956, cannot be upheld. Mr. Joshi next contends that of any rate it should be held that the Income-tax Officer was justified in adding to the income of the assessee the income of Parvatibai and Yeshwantrao apportioned to them on reopening the assessment on disclosure of additional income of ₹ 1,35,000 under what the Tribunal calls the Voluntary Disclosure Scheme of the Government. It is the argument of Mr. Joshi that as the income of ₹ 1,35,000 was not disclosed by the assessee, there had been a failure on his part to make a full and complete disclosure of these material facts necessary for the purpose of his assessment. The Income-tax Officer, therefore, had power under section 34(1)(a) to re-open the assessment and serve a notice on the assessee and thereafter to make a fresh assessment and add the respective sums of ₹ 16,875 as income of Parvatibai and another sum of ₹ 16,875 as income of Yeshwantrao to the income of the assessee as these sums represent the shares of Parvatibai and Yeshwantrao in the undisclosed income of ₹ 1,35,000. There are, however, difficulties in the way of Mr. Joshi. The question in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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