Punjab-Haryana High Court
Commissioner Of Income-Tax vs S.S. Gulati on 24 November, 1988
Equivalent citations: [1989]179ITR62(P&H)
JUDGMENT S.S. Sodhi, J.
1. The matter here relates to the three assessment years 1973-74, 1974-75 and 1975-76.
2. The assessee Shri S.S. Gulati, and his wife, Smt. Krishna Gulati, had 1/3rd share each in the firm, Belmont Rubber Industries, Faridabad, Both the assessee and his wife filed separate returns of income mentioning therein the amounts received by them from the said firm and they were assessed accordingly. Later, in the course of income-tax proceedings in the case of the firm for the year 1977-78, it came to the notice of the Income-tax Officer that the assessee had not included his wife's income from the firm in his income-tax return. He, consequently, initiated action under Section 147 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and issued notice to the assessee under Section 143 thereof. Fresh assessments for the three assessment years in question were thereafter completed and orders passed accordingly. During the course of these proceedings, the Income-tax Officer also initiated action under Section 271(1)(c) of the Act for imposing penalty on the ground that while filing his original returns, the assessee had not disclosed the income of his wife from Belmont Rubber Industries. The Income-tax Officer eventually held that the assessee had concealed his wife's income and he consequently levied penalties upon the assessee for the three assessment years in question in terms of Section 271(1)(c) of the Act. This order was later upheld in appeal by the Appellate Assistant Commissioner. The Tribunal, however, took a contrary view and held that as the assessee and his wife did not have any income other than their share income from the said firm, Belmont Rubber Industries, there was no concealment of income by the assessee by not including the income of his wife from the firm in his return. The penalty imposed upon the assessee was consequently cancelled.
3. It is in this context that the following question of law has now been referred to this court for its opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalties of Rs. 2,288, Rs. 8,546 and Rs. 11,665 for the years 1973-74, 1974-75 and 1975-76, respectively, on the ground that when neither spouse had any income other than the share income from the firm in which they were partners, it could not even be determined under Section 64(1)(i) and Explanation 1 to Section 64(1) as to the income of which spouse was to be included in the income of the other assessee ?"
4. In dealing with this matter, the important point to bear in mind is that the assessee and his wife had no income other than their share income from the firm, Belmont Rubber Industries. The relevant provisions of law governing the matter are contained in Section 64(1)(i) read with Explanation 1 thereof. These provisions read as :
"64(1) In computing the total income of any individual, there shall be included all such income as arises directly of indirectly-
(i) to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual is a partner ...
Explanation I -- For the purposes of Clause (i), (and Clause (ii)), the individual, in computing whose total income the income referred to in that clause is to be included, shall be the husband or wife whose total income (excluding the income referred to in that clause) is greater ..."
5. Where, in a case like the present, the assessee and his wife have no other income except from the firm in question, a plain reading of the provisions of Section 64(1)(i) and Explanation 1 thereto would show that it cannot be determined in whose income the income of the other spouse is to be included. In such a situation, no occasion was thus provided for imputing to the assessee any charge of concealment of income and there was, therefore, no warrant for the imposition of any penalty upon him.
6. The reference has thus to be answered in the affirmative, in favour of the assessee and against the Revenue. This matter is disposed of accordingly. The assessee shall be entitled to Rs. 500 as costs.