RADHESHYAM LADIA Vs. INCOME TAX OFFICER B WARD

JUDGEMENT

(1.) The short point that arises for consideration in this application Is whether there is any obligation on an assessee to disclose at the time of his assessment any transfers made by his wife of assets, gifted to her by the assessee, which might have resulted in capital gains during the accounting year. The facts shortly are that the petitioner was assessed to income-tax for the assessment year 1960-61 under Section 23(3) of the Act of 1922 on 4th March, 1961. The assessment was made by the Income-tax Officer, "C" ward, Special Survey Circle-IV, Calcutta. His assessments for the years 1961-62 and 1962-63 were made under Section 143(3) of the 1961 Act on 10th and 11th June, 1963, respectively, and it appears from the assessment orders for these two years that certain interest received by the assessee's wife were included in the assessee's total income under Section 16(3) of the old Act and/or Section 64 of the new Act. There is also an observation in the assessment order for 1961-62 that during the accounting year the assessee had made a gift of Rs. 1,00,000 to his wife out of his income. There notices purported to be under Section 148 of the 1961 Act, all dated the 6th January, 1968, were served on the assessee by the respondent-Income-tax Officer, "B" Ward, District 1(2), Calcutta, to whom the assessee's file had in the meantime been transferred. As the assessee's protest to the Income-tax Officer as to the propriety of the aforesaid notices went unheeded this rule was obtained from this court on the 21st May, 1968, requiring the respondent-Income-tax Officer, the respondent-Commissioner of Income-tax, West Bengal-Ill, and the respondent-Union of India, to show cause why proper writs should not be issued to quash the aforesaid notices purported to have been issued under Section 148, and why a direction prohibiting the respondents from taking any further action thereon should not be given. In showing cause the respondent-Income-tax Officer, in paragraph 3 of the affidavit-in-opposition, has disclosed the following reasons for his belief that the assessee's income for the aforesaid three years had escaped assessment, viz., that during the course of her assessment for the year 1963-64, Smt. Sushila Debi, the wife of the petitioner, contended that she had received valuable assets from the petitioner between the llth December, 1955, and the 28th October, 1960, without adequate consideration in money or money's worth. It was further contended on her behalf that she had received over 1,203 tolas of gold and jewellery on or about the 11th December, 1955, and Rs. 1,00,000 in cash on or about the 28th October, 1960. It was further represented on her behalf that the said jewellery was sold between the years 1959 and 1962. As the income from the said assets transferred to the wife and/or the capital gains arising from the sale of the said gold or jewelley had not been disclosed by the assesseee in his return and had not been included in his total income for the three assessment years 1960-61 to 1962-63, the impugned notices were issued as the petitioner had failed and neglected to disclose fully and truly all material facts necessary for the purpose of his assessment for these years.

(2.) The income accruing or arising to the wife or a minor child of an assessee is to be included in his total income under certain circumstances. Under section 16(3) of the 1922 Act, which has been re-enacted in Section 64 of the 1961 Act, it is provided that in computing the total income of an individual, there shall be included all such income as arises directly or indirectly-

(3.) After the introduction of the tax on capital gains the heads of income chargeable to tax were enlarged from 5 to 6 by the inclusion of capital gains. It is now settled by the decision of the Supreme Court in Sevantilal Maneklal Sheth v. Commissioner Income-tax, that on the inclusion of "capital gains" in the definition of income, the term "income" as used in Section 16(3) must be construed to include capital gains and that there was nothing in the context or in the language of Section 16(3) to suggest that capital gains was excluded from its scope. It is, therefore, clear that if any capital gains had arisen to the petitioner's wife from the transfer of any assets gifted by the petitioner to his wife, such capital gains would be included in the total income of the petitioner either under Section 16(3) of the 1922 Act or Section 64 of the 1961 Act, and if no such capital gains have been so included it is clearly a case of the assessee's income escaping assessment.