Ranganath Misra, J. - (1.) This appeal by the Revenue is by certificate and is directed against the judgment of a Division Bench of the Calcutta, High Court which upheld the decision of a single Judge in a writ petition quashing the notices issued to the petitioner under S. 147(a) of the Income-tax Act of 1961 in respect of assessment years 1960-61, 1961-62 and 1962-63.
(2.) Respondent was assessed to income-tax for the assessment year 1960-61 under S. 23(3) of the Act of 1922 on 4-3-1961 and for the following two assessment years under S. 143(3) of the Act of 1961 on 10th and 11th June, 1963, respectively. Notices under S. 147(a) read with S. 148 of the Act of 1961 were issued to the respondent in respect of these three assessment years whereupon he challenged the validity of those notices by filing an application under Art. 226 of the Constitution. Though the notices did not disclose any material to justify their issue, the Income-tax Officer in his return to the rule nisi before the High Court stated: "............The assessment for the year 1963- 64 of Smt. Sushila Bala Devi Ladia, wife of the petitioner, was taken up by me. During the course of the said assessment, she contended having received valuable assets from the petitioner between 11 th December, 1955 and 28th October, 1960, without adequate consideration in money or money's worth. It was contended on her behalf that she received over 1203 tolas of gold in jewellery on or about 11. 12./1955 and Rs. 1,00,000/- in cash on or about 28-10-1960. It was further contended on her behalf that the said jewellery was sold between the years 1959 and 1962. The income from the said assets which should have been included in the return of the petitioner was not so included by him. The capital gains arising therefrom was also not included or disclosed by the petitioner in his returns." On behalf of the assessee reliance was placed on the decision of this Court in Muthiah Chettiar v. Commr. of Income-tax, Madras, 74 ITR 183 where with reference to failure of the assessee to include the share income of his wife and minor child in a firm, this Court held : "In considering the first question it is necessary to refer to certain provisions of the Income-tax Act, 1922. By S. 3 the total income of the previous year of every individual, Hindu undivided family, company and local authority, and. of every firm and other association of persons or the partners of the firm or the members of the association individually was charged to tax for that year in accordance with, and subject to the provisions of the Act at any rate or rates prescribed by the Finance Act. Total income was, defined in S. 2(15) as meaning 'total amount of income, profits and gains referred to in sub-s. (1) of S. 4 computed in the manner laid down in this Act'. Section 4(l) set out the method of computation of total income; it enacted: '(1) Subject to the provisions of this Act, a total income of any previous year of any person includes all income, profits and gains from whatever source derived which - (a) are received or are deemed to be received in the taxable territories in such year by or on behalf of such person, or (b) if such person is resident in the taxable territories during such year, - (i) accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year, or ..........." Section 22 by sub-sec. (1) required the income-tax officer to give notice by publication in the press in the prescribed manner, requiring every person whose total income during the previous year exceeds the maximum exempt from tax, to furnish a return in the prescribed form setting forth his total income. Sub-sec. (2) authorised the Income-tax Officer to serve a notice upon a person whose income in the opinion of the income-tax officer exceeded the minimum free from tax. Section 23 dealt with the assessment. It conferred power upon the Income-tax Officer to assess the total income of the assessee and to determine the sum payable by him on the basis of such return submitted by him. Rule 19 framed under S. 59 of the Income-tax Act, 1922 required the assessee to make a return in 'the form prescribed thereunder, and in Form A applicable to an individual or a Hindu undivided family or an association of persons; there was no clause which required disclosure of income of any person other than the income of the assessee, which was liable to be included in the total income. The Act and rules accordingly imposed no obligation upon the assessee to disclose to the Income-tax Officer in his return information relating to income of any other person by law taxable in his hands." "But S. 16, sub-s. (3) provided in computing the total income of any individual for the purpose of assessment there shall be included the classes of income mentioned in Cls. (a) and (b). Sub-sec. (3)(a)(ii) insofar as it is material, provided: 'In computing the total income of any individual for the purpose of assessment there shall be included - (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly - ........ (ii) From the admission of minor to the benefits of partnership in a firm of which such individual is a partner.' The assessee was bound to disclose under S. 22(5) the names and addresses of his partners, if any, engaged in business, profession or vocation together with the location and style of the principal place and branches thereof and the extent of the shares of all such partners in the profits of the business, profession or vocation and branches thereof, but the assessee was not required in making a return to disclose that any income was received by his wife or minor child admitted to the benefits of partnership of a firm of which he was a partner." Upon this conclusion this Court therein held: "For failing or omitting to disclose that income proceedings for reassessment cannot, therefore, be commenced under S. 34(l) (a)."
(3.) Relying upon this decision the learned single Judge quashed the notices. The Revenue appealed to the Division Bench but failed to obtain any relief in view of the said decision of this Court. The Division Bench also took note of the decision in the case of Malegaon Electricity Co. (P.) Ltd. v. Commr. of Income-tax, Bombay, 78 ITR 466. Therein after referring to Muthiah Chettiar case (supra), Hegde, J. speaking for the Court, stated : "Hence, by not showing the income of his wife and minor children, the assessee cannot be deemed to have failed to disclose fully and truly all material facts necessary for his assessment within the meaning of S. 34(l)(a) of the Act.";