INCOME TAX OFFICER Vs. SUMITRA DEVI
INCOME TAX APPELLATE TRIBUNAL
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S.K. Chander, Accountant Member -
(1.) THIS appeal by the revenue is directed against the order of the AAC dated 6-2-1981 relating to the assessment year 1976-77. The grievance of the revenue is that he 'erred in holding that the provisions of Section 147(a) is not attracted in this case' and that, 'provisions of Section 64(1)(iii) are not applicable in this case and income of minor son is not includible in the income of the assessee'.
(2.) The factual background to be taken into consideration for determination of the issues is as under : For the assessment year 1976-77 which is under appeal before us, the original assessment in the case of Shri Mela Ram, since deceased, was completed on 26-6-1978 on a total income of Rs. 39,900 under Section 143(1) of the Income-tax Act, 1961 ('the Act'). In the case of Smt. Sumitra Devi, w/o Shri Mela Ram, the assessment for the assessment year 1976-77 was completed on 10-1-1978 on a total income of Rs. 47,560. These two assessments were made by the same ITO (Shri H.K. Srivastava) acting as the ITO. There was a firm working under the name and style of Mangat Ram Rarnesh Kumar, Yamunanagar, having business of timber. This firm was constituted of six sons of Mela Ram, namely, Mangat Ram, Ramesh Kumar and Surinder Kumar who were major and fullfledged partners and Vijay Kumar, Ashok Kumar and Virinder Kumar, minors admitted to the benefits of partnership and bis wife Smt. Sumitra Devi. For the assessment year 1976-77, the assessment of the firm was completed on 27-9-1978 treating the firm as registered. The shares of the minors as per allocation under Section 158 of the Act were respectively, Rs. 11,174, Rs. 8,381 and Rs. 8,381. Before completion of the firm's assessment the ITO had assessed under Section 143(1), the three minors on the share of income coming to them from this firm. These assessments were made in all the three cases on 10-1-1978.
Subsequently, the ITO issued notice under Section 148 of the Act to reopen the assessment in the case of Mela Ram under Section 147(a) of the Act. This notice dated 17-3-1980 was served upon Smt. Sumitra Devi on 19-3-1980 because Mela Ram had since deceased. The notice issued by the ITO was addressed to Mela Ram (deceased through Smt. Sumitra Devi). On the basis of this notice, the ITO raised reassessment under Section 143(3)/147(a) dated September 1980. According to the ITO, he had reason to believe that income of the minors aforesaid chargeable to tax for the period under review had escaped assessment within the meaning of Section 147(a). The assessee during the course of reassessment proceedings, after filing the return, asked for the reasons for reopening the assessment and the ITO intimated the substance thereof to the assessee. In this, the ITO did not give a clear-cut idea as to what information he received subsequent to the original assessment that gave him the judicial satisfaction that by failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, the income liable to tax had escaped assessment. During the course of hearing before us, we informed ourselves from the record of the ITO that he had examined the record and came to a conclusion that reassessment was justified. There is no information as such that came into his possession to which he has adverted to.
(3.) IN the reassessment proceedings, the ITO focused his attention on the admission of the three sons of Mela Ram to the benefits of partnership in the aforesaid firm and the provisions of Section 64(1)(iii) of the Act substituted by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976. According to him, though the minors had ceased to be admitted to the benefits of partnership in the aforesaid firm with effect from 1-10-1975, yet the income accruing and arising to them out of the benefits of partnership for the period from 1-4-1975 to 30-9-1975 was includible in the hands of their father in view of the new provisions referred to above. Hence, he added the sum total of the shares of the minors amounting to Rs. 27,936 to the total income of their father's originally assessed. This was challenged in appeal.;
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