Commissioner of Income Tax vs N. Ramakrishnan

Ramanujam, J.—In these applications filed u/s 256(2) of the Income Tax Act, 1961, the Revenue seeks a direction to the Income Tax

Appellate Tribunal to refer the following two questions for the opinion of this court :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding that the reassessment which was

actually made u/s 147(a) for the assessment years 1970-71, 1971-72 and 1972-73 was not valid ?

Whether, on the facts and in the circumstances of the case, the share income of the minors from the partnership firm in which the Hindu

undivided family comprised of the assessee and his wife has a share as a beneficial owner cannot be included in the income of the assessee u/s 64

of the Income Tax Act, 1961 ?

However, after going through the facts and circumstances of the case, we do not think that there is any referable question arising from the order

of the Tribunal.

The assessee in this case is a partner in a registered firm of Messrs. Muthuswamy Chettiar and Sons, Madurai. His minor sons, R. Gunasekar,

R. Ravisekar and R. Rajasekar, have been admitted to the benefits of partnership in the said firm. Originally, the Income Tax Officer assessed the

share income of the assessee in the status of a Hindu undivided family. He also assessed the share income of the minor partners in their individual

hands. Later, at the instance of the audit, the Income Tax Officer reopened the assessments u/s 147(a) of the Income Tax Act on the ground that

there has been an escapement of income by the non-disclosure of the relevant material by the assessee. The proposal for reopening of the

assessment was opposed by the assessee on the ground that section 147(a) cannot be applied on the facts and circumstances of the case, and that

in the case of the reopening of the assessment, the Income Tax Officer is changing his opinion as regards the application of section 64 of the

Income Tax Act. The assessee also contended that even on merits, there cannot be any reopening of the assessments for there is no question of

clubbing of the minors'' income with his income as he has been assessed on his share income in the status of a Hindu undivided family and,

therefore, section 64 cannot be applied in such a case. The Income Tax Officer overruled the above objections of the assessee and proceeded to

reopen the assessee''s assessments and brought the minors'' share income to tax with the share income of the assessee in all the three assessment

years.

The assessee took the matter in appeal to the Appellate Assistant Commissioner who held that the Income Tax Officer had no jurisdiction to

reopen the assessments by invoking section 147(a) as it only amounted to a change of opinion as all the facts were fully disclosed before him at the

time of the original assessment and that even on merits, section 64 will not apply to a case where the father had been assessed in the status of a

Hindu undivided family. For this purpose, the Appellate Assistant Commissioner relied on the decision of the Andhra Pradesh High Court in

Commissioner of Income Tax Vs. Sanka Sankaraiah, . Thus, the assessee succeeded before the Appellate Assistant Commissioner in challenging

the reassessment made by the Income Tax Officer for all the three years. The Revenue took the matter in appeal to the Income Tax Appellate

Tribunal and the Tribunal held that since all the material particulars were already before the assessing authority at the time when the original

assessments were made by him, section 147(a) cannot be invoked and that the reassessments were based only on mere change of opinion on the

part of the Income Tax Officer. The Tribunal also went into the merits and held that in a case where the father has been assessed in the stauts of a

Hindu undivided family, section 64 cannot be applied and the minors'' share income cannot be clubbed with that of the father''s income. The

Revenue, as already stated, seeks to raise the two questions set out above as arising out of the order of the Tribunal.

So far as the second question is concerned, the learned counsel for the Revenue points out that similar questions have been referred to this court

in view of the decision of this court in Commissioner of Income Tax, Tamil Nadu-I Vs. S. Balasubramaniam, and in so far as the decision of the

Tribunal is against the view expressed by this court in the said decision, the second question has necessarily to be referred.

So far as the first question is concerned, the learned counsel for the Revenue contends that in so far as the assessee had not disclosed in his

return the share income of the minors which he is expected to do, it cannot be said that all the material particulars had been furnished by the

assessee at the time of the original assessment. It is no doubt true that if the share income of the minors had not been disclosed by the assessee in

the return, as per the decision of the Delhi High Court in Sushila Devi Jain Vs. Commissioner of Income Tax, Delhi-I, , it can be taken as a non-

disclosure of relevant material by the assessee which will attract section 147(a). But, in this case, the Appellate Assistant Commissioner against

whose orders the Revenue went in appeal before the Tribunal specifically proceeds on the basis that all the facts were fully disclosed before the

assessing authority at the time of the assessment and that what the assessing authority proposed to do was merely changing his opinion regarding

the applicability of section 64. When the Revenue filed an appeal before the Tribunal, it should have specifically challenged the finding given by the

Appellate Assistant Commissioner and contended before the Tribunal that the assessee had not disclosed the share income of the minors in his

return as he is bound to do. A perusal of the order of the Tribunal does not indicate that any such objection was taken. As a matter of fact, the

Tribunal also proceeds on the basis that all the particulars were already before the assessing authority at the time of the original assessments.

Whether all the necessary material particulars were before the assessing authority at the time of the original assessments is a question of fact and

when the Tribunal has given a finding agreeing with the view expressed by the Appellate Assistant Commissioner that all the facts were fully

disclosed by the assessee at the time of the original assessment, it is not possible for this court to proceed on the basis of the contention raised by

the Revenue that the share income of the minors had not been disclosed by the assessee in his return. Thus, the admitted position appears to be

that the assessing authority at the time of the original assessments, after making an assessment of the share income of the assessee in his status of a

Hindu undivided family, proceeded to make the assessments on the minors in their status as individuals of their income from the partnership. That

shows that the Income Tax Officer was aware of the position even at the time of the original assessments that the assessee had minor children, that

they were partners of the same firm in which the assessee was a partner and that during the relevant assessment years, the minors had their share

income. It cannot be assumed that while the assessing authority assessed the share income of the assessee in his status of a Hindu undivided family,

he did not see the deed of partnership which would be indicative of the fact that the minor children of the assessee had been admitted to the

benefits of partnership and that they would, therefore, have had their share income during the relevant years. Therefore, if the assessing authority

had perused the partnership deed at the time of the assessment of the assessee, he would have come to know that the assessee''s minor sons were

admitted to the benefits of partnership in the same firm and of the possibility of applying section 64 in their cases. Thus, on the facts and

circumstances of this case, the attempt of the Income Tax Officer to reopen the assessments can be said to be based only on a mere change of

opinion as has been held by the Tribunal. Though we may agree with the learned counsel for the petitioner that the second question is a question of

law arising out of the order of the Tribunal, that question will be merely academic if we hold that the proceedings u/s 147(a) initiated by the Income

Tax Officer cannot be sustained in law. As we have already expressed that in this case section 147(a) could not have been invoked, we are not in

a position to refer the first question. In view of the fact that the first question does not arise, we are not directing a reference of the second question

which is merely academic.

The petitions are, therefore, dismissed. There will, however, be no order as to costs.