K. Karuppiah Nadar vs Commissioner of Income Tax

R. Jayasimha babu, J.—The questions have been brought before us, at the instance of the assessee. They arise out of the order of the

Tribunal for the assessment years 1972-73, 1973-74, 1974-75, 1975-76 and 1976-77.

The assessee as a karta of his Hindu undivided family, is a partner in the firm of Karuppiah Nadar. His minor sons had been admitted to the

benefits of the partnership. For these assessment years, the assessee did not file any return of his income in his individual capacity on the ground

that he had no income in that capacity. The children of the assessee were assessed separately in respect of their income from that firm. After the

assessment for these years had been completed, they were reopened on the ground that the assessee had failed to file a return in his individual

capacity, as the income received by his children who had been admitted to the benefits of the partnership, was u/s 64 of the Income Tax Act,

required to be treated as income assessable in the hands of the father.

The Tribunal has affirmed the view of the Income Tax Officer in this regard. The assessee is, therefore, aggrieved.

Counsel for the assessee contended that the statutory provision as it stood during the assessment years 1972-73, 1973-74, 1974-75 and 1975-

76 did not provide for including the income of the minor children in the income of the parent unless the parent was a partner in the firm. That

submission for the assessee must be accepted as Section 64 as it stood prior to its amendment on April 1, 1976, did not permit the inclusion of the

minor children''s income from the firm in the income of the parent unless, the parent was a partner. Admittedly, the assessee was not a partner in

individual capacity and, therefore, he had no obligation to file a return in his individual capacity including therein the income of his minor children

from the firm. The Tribunal''s order in so far as the assessment years 1972-73, 1973-74, 1974-75 and 1975-76 must be held to be unsustainable.

The reopening of the assessments for those years was wholly unjustified.

So far as the assessment year 1976-77 is concerned, after the amendment of Section 64 of the Act, a parent whose minor children received

income from a firm was required to include such income in his return. His failure to file a return was clearly an omission on his part justifying the

reopening of the assessment u/s 147 of the Act. The fact that the minor children had been separately assessed would not have the effect of

condoning the parent''s failure to file the return. The reopening for the assessment year 1976-77 was justified.

So far as the second question is concerned, it is now settled by the decision of this court in the case of CIT v. P. Alwarsamy [1995] 211 ITR

353, that even in cases where the parent has no independent source of income he is required to file a return showing the income of the minor

children from a firm. The second question referred to us, namely :

Whether the Tribunal was right in holding that the share income of the minor sons was includible in the hands of the assessee u/s 64 even though

he had no independent source of income for computation in his individual status ?

is answered in favour of the Revenue and against the assessee for the assessment year 1976-77 only. For the earlier assessment years, the income

of the minors was not so includible.

As regards the first question regarding the correctness of the Tribunal''s views that the Income Tax Officer was justified in reopening the

assessment u/s 147 of the Act, it must be held that it was justified for the assessment year 1976-77 only and not for other assessment years. We

answer the first question referred to us, namely :--

Whether the Income Tax Appellate Tribunal was right in law in holding that the Income Tax Officer was justified in reopening the assessment u/s

147 of the Act ?

in the manner as set out above.