Broome, J. - (1.) THESE three special appeals are directed against the judgment of Hon'ble Brijlal Gupta J., dated November 23, 1961, Devendra Prakash v. income-tax Officer [1963] 47 I.T.R. 501 , by which he partly allowed three writ petitions (Nos. 841 of 1960 and 842 and 843 of 1961), challenging notices of demand issued by the income-tax authorities on the basis of a rectification order passed under Section 35 of the Income-tax Act, 1922.
(2.) THE facts of the case in brief are as follows : THEre was a partnership business started in the year 1949, in which the partners were Hirday Narain, his major son, Yogendra Prakash, and four minor sons, Surendra Prakash, Gajendra Prakash, Devendra Prakash and Bhupendra Prakash. This firm remained in existence up to July 11, 1952. But from July 12, 1952, it was reconstituted so as to exclude the father, Hirday Narain, and so as to introduce a later born minor son, Satendra Prakash, as a partner. Surendra Prakash had become major in the meantime, but Gajendra Prakash, Devendra Prakash and Bhupendra Prakash remained minors. An assessment order was passed against the firm on March 28, 1956, in respect of the assessment year 1953-54, apportioning the income among the partners as follows : "Net income remains at Rs. 3,95,788. THE above income is to be apportioned in the ratio of 1 : 5 which will come to Rs. 79,157 and Rs. 3,16,613. JUDGEMENT_151_ITR72_1969Html1.htm Out of the above income the entire profies up to July 11, 1952, will be assessed in the hands of Hirday Narain under Section 16(3)(a)(ii) except for a sum of Rs. 52,772 falling to the lot of Yogendra Prakash and also the sum of Rs. 13,192 falling to the lot of Satendra Prakash, under Section 16(3)(a)(iv)." Thus, the income received by the three petitioners, Gajendra Prakash, Devendra Prakash and Bhupendra Prakash, for the first part of the accounting period (October 10, 1951 to July 11, 1952) amounting to Rs. 52,772 for each of them, was lumped together with the income of their father, Hirday Narain, for the purpose of the assessment of tax, in accordance with the provisions of Section 16(3)(a)(ii), which provides that : "16. (3) 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 the minor to the benefits of partnership in a firm of which such individual as a partner." On the same day the above-quoted assessment order was passed against the firm, i.e., on March 28, 1956, individual assessment orders were passed against the separate partners and each of the three petitioners was assessed on an income of Rs. 13,193 (viz., the amount received from July 12, 1952, to September 27, 1952, only, and not the income received during the earlier period up to July 11, 1952). Subsequent modifications, which have not been challenged in these petitions, were made on November 24, 1956, and January 14, 1958, which had the effect of raising the assessed incomes of the petitioners to Rs. 13,990 each. Meanwhile, however, their father, Hirday Narain, went in appeal against the original assessment order, first to the Appellate Assistant Commissioner and then to the Appellate Tribunal; and on January 13, 1959, the Tribunal held that Hirday Narain should have been assessed in the status of a Hindu undivided family and not as an individual, with the result that Section 16(3)(a)(ii) was inapplicable to his case and the income of his minor sons, Gajendra Prakash, Devendra Prakash and Bhupendra Prakash, could not be lumped together with his income under the provisions of that section. The result was that the three sums of Rs. 52,772 earned by these three minors in the period up to July 11, 1922, remained untaxed either as their income or as part of their father's income. The Income-tax Officer sought to rectify this omission by issuing notices on August 8, 1959, under Section 35 of the Act. The petitioner filed objections, but these were overruled, and on March 3, 1960, orders of rectification were passed to include these amounts in the assessments of the three petitioners. It was these orders of March 3, 1960, together with the notices of demand issued thereon, that where challenged in the writ petitions out of which the present appeals arise, the main contention being that Section 35 could not be invoked in the circumstances of this case and, consequently, the assessments of the petitioners could not be enhanced beyond the figure of Rs. 13,990 shown against each of them in the orders of assessment passed on January 14, 1958.
(3.) A subsidiary contention raised in the writ petitions was that the amount of income derived by each petitioner from another firm (Choubey Madan Gopal) had been illegally enhanced by the order of March 3, 1960, from Rs. 53 to Rs. 225 without issuing any notice in respect of this item. But it appears that this matter was not pressed before the learned single judge, for it has not been dealt with by him in his judgment; and there is no specific averment about it in the grounds of appeal. We propose, therefore, to ignore this part of the case.;