Commissioner Of Income Tax v. Jai Ram Prasad — 1985 DIGILAW 116 (PAT)

Judgment 1. This is a reference under Sec.256(1) of the Income-tax Act (in short, the "Act"). The two questions referred for the opinion of this court are as mentioned below : "(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that nondisclosure of the incomes of wife and minor sons, which was includible under Sec. 64 of the Income-tax Act, 1961, in the total income of the assessee did not attract the provisions of Sec.271(1)(c) of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the additions made on estimate under the head Income from other sources on account of inadequate withdrawals did not attract the provisions of Sec.271(1)(c) of the Income-tax Act, 1961 ?" 2. The assessee was a partner in a firm during the assessment year 1969-70. His minor sons and wife were paid interest by the firm. These sums were to the tune of Rs. 6,098. They were not disclosed in the return of income filed by the assessee. The Income-tax Officer added this amount to the total income of the assessee. Another item added to the total income of the assessee was a sum of Rs. 2,000 for low withdrawals. The assessees total income was assessed at Rs. 12,580 as against loss of Rs. 1,955. The discrepancy between the assessed sum and the sum returned being more than 20% of the assessed income, proceeding for levy of penalty was initiated. Notice under Sec.274(2) of the Act was issued. The assessee denied the charge of concealment of income. In regard to low withdrawals, the assessee claimed that the sum of Rs. 1,215 shown by him was correct. The Inspecting Assistant Commissioner rejected the stand of the assessee on both counts. 3. The Income-tax Appellate Tribunal, on appeal, accepted the appeal and cancelled the penalty proceeding. The Revenue being aggrieved by the order of the Tribunal moved it for making a reference to this court. The Tribunal has thereupon referred the above two questions for our opinion. 4. The first question must be answered on the ratio of the Supreme Court in V. D.M. RM. M. RM. Muthiah Chettiar V/s. CIT [1969] 74 ITR 183. The Revenue being aggrieved by the order of the Tribunal moved it for making a reference to this court. The Tribunal has thereupon referred the above two questions for our opinion. 4. The first question must be answered on the ratio of the Supreme Court in V. D.M. RM. M. RM. Muthiah Chettiar V/s. CIT [1969] 74 ITR 183. In that case also, the assessee had omitted to include the income of his wife and minor children in his total income. The stand of the assessee in that case was that since no column had been prescribed in the prescribed form for filing the return, there was no obligation on the assessee to show his wifes and minor sons income in the return of the assessee. The Department relied upon some notes in the Notes for Guidance in the form prescribed. The note reads as follows (page 188 of 74 ITR) : "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 is a partner." 5. The above were the notes in the form prescribed in the years prior to 1969. In 1969, the form for return of income was slightly altered. The note for showing the income of spouse and minor children was required even in terms of the form prescribed in the year 1969. The wordings of the notes were slightly different but the substance was substantially the same as in the form prior to 1969. It is noteworthy that even in the form prescribed in 1969, no column was indicated for stating the income of spouse or minor children. The matter was fully clarified in 1972 when a separate column was indicated which was numbered as column No. 12. This column reads as follows : Income included in items 1 to 6 below : (a) Income arising outside India. (b) Income arising to spouse/minor child or any other person as referred to in Chapter 5 of the Act. 6. There is no controversy that after 1972, an obligation was cast on the assesses to return the income of his wife and/or minor child. (b) Income arising to spouse/minor child or any other person as referred to in Chapter 5 of the Act. 6. There is no controversy that after 1972, an obligation was cast on the assesses to return the income of his wife and/or minor child. The instant case, however, is of a period prior to 1972, i.e., 1969-70. The Supreme Court rejected the submission on behalf of the Department that the Notes for Guidance clearly indicated that the spouses or minors income had to be shown. It held that there was no obligation upon the assessee to return it. The facts of the instant case are materially the same as in the case of V. D. M. RM. M. RM. Muthiah Chettiar V/s. CIT [1969] 74 ITR 183 (SC). 7. Learned counsel for the Department endeavoured to distinguish Muthiah Chettiars case [1969] 74 ITR 183 (SC), but he failed in this behalf. The Notes for Guidance prescribed for the assessment year 1969-70 were in existence even prior thereto. Merely upon the notes without a specific column, the Supreme Court held, no obligation was cast. The present case must, therefore, be decided upon the ratio of the Supreme Court case mentioned above. 8. Learned counsel for the Department brought to our notice another decision of the Supreme Court in the case of CIT V/s. P.K. Kochammu Amma, Peroke [1980] 125 ITR 624. It cannot be denied that the two Hon ble Judges who decided this case did hold that despite the want of a separate column for returning the income of spouse and minor children, the Act did cast an obligation upon the assessee. It, however, refrained from referring the matter to a larger Bench and preferred not to disagree with the decision in Muthiah Chettiars case [1969] 74 ITR 183 (SC). The law of the land thus remained as laid down in Muthiah Chettiars case [1969] 74 ITR 183 (SC). In that view of the matter, the present case must be decided in the same manner. No penalty could, therefore, be levied for not returning the income of the spouse and minor children. The Tribunal was thus fully justified in cancelling the order of penalty on the first ground. 9. We shall now take up the second question. This arises due to low withdrawals by the assessee. No penalty could, therefore, be levied for not returning the income of the spouse and minor children. The Tribunal was thus fully justified in cancelling the order of penalty on the first ground. 9. We shall now take up the second question. This arises due to low withdrawals by the assessee. Sec.256(1) of the Act enjoins upon the Tribunal to make a reference to this court on any question of law arising out of such order. It is, therefore, elementary that only such question can be referred for our opinion as fell for consideration and as was decided by the Tribunal. The order of the Tribunal which is annexure-B to this reference is silent in regard to the low withdrawals. In that view of the matter, the reference of the second question for our opinion is misconceived. We, therefore, need not answer the second question. 10. For the reasons stated above, we refuse to answer question No. 2 as it does not arise out of the order of the Tribunal. Question No. 1 is answered in the affirmative in favour of the assessee and against the Department. There shall be no order as to costs.