Prakash Narain, Accountant Member -
(1.) THE only contention in this appeal is that the AAC was not justified in confirming the order of the ITO with reference to the inclusion of Rs. 24,130 being the share of the assessee's wife, Smt. Suhasini Singh from the firm of Heer Palace. 2, THEre are two firms Heer Palace and Rupam THEatre. THEir respective constitutions are as under:
From the above, it would be seen that Shri B.P. Singh is a partner in Heer Palace in a representative capacity representing his HUF. In this very firm, his wife Smt. Suhasini Singh is also a partner. Shri B.P. Singh, the assessee, is also a partner in Rupam THEatre. In this firm he is a partner in his individual capacity. His wife is, however, not a partner in this firm.
3. THE assessee had returned only the share from Rupam THEatre amounting to Rs. 20,730. THE share from Heer Palace was not returned as it rightly belonged to his HUF and was assessable in its hands. THE assessment was also made under Section 143(1) of the Income-tax Act, 1961 ('the Act') on the declared income.
4. THE ITO, however, subsequently thought that an error had been committed in the assessment inasmuch as the share of his wife Smt. Suhasini Singh from Heer Palace had not been included in the assessment. He came to this conclusion in the light of the decision of the Allahabad High Court in Madho Prasad v. CIT  112 ITR 492. In that case, the matter related to the share of the assessee's minor admitted to the benefits of partnership in which he was also a partner in a representative capacity. It was held in this case that the share of the minor had to be assessed in the case of the assessee in his individual capacity. THE ITO was of the view that the same principle also applied to the share of the wife. We may observe here that the Allahabad High Court in the case of Madho Prasad (supra) was dealing with the provisions of Section 64(1) of the Act as it stood before its amendment by the Taxation Laws (Amendment) Act, 1975 with effect from 1-4-1976. THE language which the Court was required to interpret was that "In computing the total income of any individual, there shall be included all such income as arises directly or indirectly to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm in which such individual is a partner;..." Although there has been an amendment to the section, but it appears that there is no amendment to Clause (i) of Section 64(1), which reads that "In computing the total income of any individual, there shall be included all such income as arises directly or indirectly to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which individual is a partner." THE words 'in which such individual is a partner' appears both in Clauses (i) and (ii) before the amendment of the section. THE case of the ITO, therefore, was that the interpretation given by the Court in the case of Madho Prasad (supra) before the said amendment also applied to the case of a wife. In fact, there was no dispute before us on this issue. We have stated this fact only to avoid any controversy that might arise in future.
5. THE ITO in the light of the aforesaid decision of the Allahabad High Court thought that there was a mistake in the assessment of the assessee, which could be rectified under Section 154 of the Act. He accordingly initiated proceedings under the above section and after allowing the assessee an opportunity of being heard passed an order on 5-4-1980. As already stated above the income originally assessed amounted to Rs. 20,730 as the assessee's share from Rupam THEatre. THE ITO also included in the assessment Rs. 24,130 being the share of Smt. Suhasini Singh from the firm of Heer Palace. THE assessment was also confirmed by the AAC.
6. THE assessee is now in appeal before us. THE learned counsel for the assessee made three submissions before us. His first submission was that the issue under consideration was a debatable one and there could conceivably be two opinions. He submitted that while the Allahabad High Court in the case of Madho Prasad (supra) had taken one view, different views had been taken by the other High Court. As an illustration, he cited the case of the Andhra Pradesh High Court in CIT v. Sanka Sankaraiah  113 ITR 313. It was held in this case that where partner represented a HUF in a firm, Section 64 had no application. Similar view, according to the learned counsel for the assessee, had been taken by the Gujarat High Court in the case of Dinubhai Ishvarlal Patel v. K.D. Dixit  118 ITR 122. In this case, the principle in Madho Prasad's case (supra) was dissented from. He also referred to another decision of the Punjab and Haryana High Court CIT v. Anand Sarup in  6 TLR 32, which also according to him, took a view different from that of the Allahabad High Court. THE learned counsel for the assessee submitted before us that in the light of these different views it had to be admitted that there were two opinions on the same issue and, therefore, it could not be treated as a mistake apparent from the record. To support his submissions, he relied on the decision of the Supreme Court in the case of T.S. Balaram, ITO v. Volcart Bros.  82 ITR 50 and a few other decisions of other High Courts following the same view.
7. THE second contention of the learned counsel for the assessee was that originally the ITO had assessed only the share from the firm of Rupam THEatre. In that firm, his wife was not a partner and, therefore, her share from the firm of Heer Palace could not be clubbed with the assessee's share from Rupam THEatre. His third submission was that the ITO himself had not carried out any such rectification either in the assessment year 1977-78 or in the assessment year 1978-79 and, therefore, he had no authority to rectify the assessment for the assessment year 1976-77.
8. THE learned departmental representative, on the other hand, relying on a recent decision of the Allahabad High Court, in Omega Sports & Radio Works v. CIT  134 ITR 28 submitted that if there was a decision on a particular point by the High Court on a State, it was binding on the income-tax authorities in that State and merely because there was some judicial divergence of opinion on that point between some High Courts, it could not be said that there was still scope for a debate on the points and that, therefore, Section 154 was not attracted to the case. His next submission was that the assessment of Rs. 20,730 as the assessee's share from Rupam THEatre originally assessed in his hands had no relevance with the share of his wife from Heer Palace and that ground could not be made the subject for challenging the order under Section 154. His final submission was that merely because no such action was taken for other years, that could not estop the ITO from rectifying the assessment for the assessment year under appeal.
9. We have carefully considered the submissions placed before us. We are inclined to agree with the submissions of the learned departmental representative. It is no doubt correct that some other High Courts have not agreed with the view taken by the Allahabad High Court in the case of Madho Prasad (supra). However, there will still be a mistake falling within the scope of Section 154 in the light of the principle laid down by the Allahabad High Court in the case of Omega Sports (supra) referred to above. THE view of the Allahabad High Court was that the share of the wife from the firm in which her husband was also a partner was includible in his individual assessment. That view is binding in the State of U.P. and upon all the income-tax authorities in this State. Since the ITO failed to follow that decision in the case of the assessee, there was mistake apparent from record liable to be rectified under Section 154. This contention of the assessee is, therefore, rejected.
10. We also do not find any substance in the second contention of the learned counsel for the assessee. As already stated the assessee was also a partner in the firm of Rupam THEatre in his individual capacity. He was, therefore, liable to tax on his share from that firm. Since he was also a partner in Heer Palace (though in a representative capacity) the share of his wife, who was also a partner in Heer Palace, was also liable to be assessed in his individual assessment notwithstanding the fact that he was representing his HUF in this firm, in the light of the decision of the Allahabad High Court in Madho Prasad's case (supra). THEre is, therefore, no question of clubbing the income of Smt. Suhasini Singh with the income of her husband from a firm in which she was herself not a partner. That issue, in our opinion, is entirely irrelevant. Similarly, we also do not find any merit in the last contention of the learned counsel for the assessee that the ITO having not rectified the assessments for the subsequent two years, was not entitled to rectify the assessment for the assessment year 1976-77. THE principle of res judicata does not apply to the income-tax proceedings and, in any case, he did not only initiate such an action for those years and not that he gave a categorical finding that Section 154 did not apply to those assessment years. In our opinion, therefore, the provisions of Section 154 have been rightly applied to the present case and we confirm the order of the ITO.
11. In the result, the appeal is dismissed.;