N.V. Balasubramanian, J.
One A.S. Savadappan Gounder, deceased husband of the respondent, A.S. Rukmani Ammal (hereinafter referred to as the assessee) executed a Will by which his property was bequeathed in her favour and his two minor children, namely, Sowdeswari and Ganesan. A.S. Savadappan Gounder appointed his cousin brother, A. Savadappan as an executor to administer his properties in terms of the Will, and the executor accordingly continued the business of the Estate. He has also invested a sum of Rs. 7,500 each as capital of the two minors in the firms, M/s. K. Nallaya Gounder and A. Savadappan Gounder. Two minors were admitted to the benefits of partnership. The share income of two minors were included in the income of Estate of late A.S. Savadappan Gounder, but the executor Savadappan objected to the same claiming that the share income belonged to the minors individually and should not be included in the hands of the Estate. The Appellate Tribunal, in the appeal preferred by the Estate, upheld the objection raised by the executor and held that the share income could not be considered as income of the Estate. The order of the Appellate Tribunal was subject-matter of consideration before this court in CIT v. A. Savadappan : [2000]244ITR620(Mad) in which one of us was a party), and this court, by judgment dated 30-4-1998, agreed with the views expressed by the Appellate Tribunal and held that the Income Tax Officer was not justified in clubbing the minors share income from the firm with the income of the Estate. The court also held that the provisions of section 168 of the Income Tax Act were not applicable.
2. The Income Tax Officer found that the assessee, mother of the two children, did not file her return of income including the share income of the minors. It is stated that the assessee has not, in fact, filed returns for the assessment years 1976-77 to 1984-85. The Income Tax Officer was of the view that the share income of the minors from the firm in which the minors had been admitted to the benefits of partnership has to be clubbed in the hands of the assessee under section 64(1)(iii) of the Income Tax Act, 1961 and therefore issued a notice under section 147(a) of the Income Tax Act to the assessee to assess the share income in her hand. The assessee filed returns and in the returns filed, she did not include the share income of the minors from the firm. The Income Tax Officer completed the reassessment including the share income of the minors from the firm in the hands of the assessee for the assessment years 1976-77 to 1984-85.
3. The assessee filed appeals against the orders of the Income Tax Officer passed under section 143(3), read with section 147(a) of the Income Tax Act. The assessee raised two points : (i) the Income Tax Officer had no jurisdiction to issue notice under section 147(a) of the Income Tax Act to include the income of the minors in her assessments and (ii) on merits of the case on the inclusion of share income of the minors from the firm in the hands of the assessee under section 64(1)(iii) of the Income Tax Act which, according to her, was not sustainable. The Deputy Commissioner (Appeals) rejected both the contentions and held that the assessee did not file the returns showing the share income of the minors before the receipt of notice under section 147(a) of the Income Tax Act and there was an omission or failure on the part of the assessee to file returns of income and therefore, the Income Tax Officer was justified in issuing notice under section 147(a) of the Income Tax Act. The Deputy Commissioner (Appeals) also upheld the inclusion on merits of the case and dismissed the appeals.
4. The assessee preferred further appeals before the Income Tax Appellate Tribunal. The Appellate Tribunal held that the reopening of the assessment under section 147(a) of the Income Tax Act was without jurisdiction on the ground that the share income of the minors had been assessed in their hands individually by the assessing officer under section 143(1)(a) of the Income Tax Act and once the assessments were made in the hands of the minors, the failure to disclose the income could not be attributed to the assessee. The Appellate Tribunal therefore held that there was no failure on the part of the assessee as the income had already been assessed in the hands of the minors and the reopening of assessments under section 147(a) was without jurisdiction. The Appellate Tribunal did not go into the merits of the case, but allowed the appeals preferred by the assessee.
5. The Appellate Tribunal, on the basis of the directions of this court, has stated a case and referred the following common question of law for all assessment years in question :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in annulling the assessment on the ground that the assessing officer has no jurisdiction to make the assessment under section 147(a) ?'
6. We heard Mrs. Pushya Sitharaman, learned senior standing counsel for the revenue and Mr. R. Janakiraman, learned counsel for the assessee. It is well settled now by several decisions of the Supreme Court that for the Income Tax Officer to assume jurisdiction to issue notice under section 147(a) of the Income Tax Act, two conditions must be complied with; firstly he must have reason to believe that the income of the assessee had escaped assessment; and secondly, he must have reason to believe that such escapement is by reason of omission or failure on the part of the assessee to disclose fully and truly the material facts which are necessary for assessment. If either of the conditions is not fulfilled, it must be held that the notice issued by the Income Tax Officer is without jurisdiction.
7. The Deputy Commissioner (Appeals) found and it is also not disputed by the learned counsel for the assessee that the assessee herein has not filed returns of income during the relevant assessment years in question. It was also found by the Deputy Commissioner (Appeals) that the assessee did not file returns including the share income of the minors. Learned counsel for the assessee has not disputed and in fact fairly admitted that the assessee has not filed returns of income for the relevant assessment years in question. His main submission was that the minors were admitted to the benefits of partnership and the capital came from the Estate of their father and when the Income Tax Officer made assessment of the Estate, he also made assessment in the hands of the minors and he was fully aware of the fact that it was the income of the minors from the firm and all necessary and primary facts for inclusion of the share income of the minors in the hands of the assessee were available before the Income Tax Officer at the time of completion of assessment of the minors and it is for the Income Tax Officer to draw proper inference to include the minors income with their mother and for his failure to draw necessary inference, it is not open to the Income Tax Officer to resort to reassessment proceedings under section 147(a) of the Income Tax Act. He also submitted that there is no escapement of income. He submitted that section 64 of the Income Tax Act is not a deeming provision as the income of the mother is different from the share income of the minors and they are separate and only by operation of section 64 of the Income Tax Act, the share income of the minors is included in the hands of the mother and when necessary facts relating to the share income of the minors were present before the Income Tax Officer at the time of completion of assessment of the Estate of the deceased, it is not open to the Income Tax Officer to reopen the assessment of the assessee to include the share income of the minors by applying the provisions of section 64(1)(iii) of the Income Tax Act.
8. We are unable to accept the submission of the learned counsel for the assessee. There is no finding by the Appellate Tribunal that all primary facts necessary for the completion of assessment were present before the Income Tax Officer as the assessee did not file returns at all in her individual capacity. Therefore, the fact that the share income was considered in the assessment of the Estate or was assessed in the hands of the minors under section 143(1)(a) of the Income Tax Act is not of much relevance in considering the question whether the primary facts were before the Income Tax Officer at the time of completion of assessment of the assessee. As a matter of fact, there was no assessment at all of the assessee prior to the issue of notice under section 148 of the Income Tax Act and first assessment itself was made after the issue of notice under section 148, read with section 143(1)(a) of the Income Tax Act. Therefore the submission of the learned counsel for the assessee that the Income Tax Officer had all necessary facts at the time of completion of assessment of the assessee is erroneous and no assessment was completed in the hands of the assessee prior to the issue of reassessment notice.
9. The second submission of the learned counsel for the assessee was that though the assessee might not have filed a return, the Income Tax Officer considered the share income for inclusion of the same in the assessment of the Estate and he also made assessment in the hands of the minors including the share income and when primary facts were before the Income Tax Officer, he should have made assessment of the assessee at that time itself. This submission is also without force as the assessee had not filed any return of income at all for the assessment years in question and without return from the assessee, even accepting the case of the learned counsel for assessee, it was not possible for the Income Tax Officer to process the return and assess the share income of the minors in the hands of the assessee. Since no return was filed by the assessee, the Income Tax Officer was perfectly justified in issuing notice under section 148 of the Income Tax Act calling upon the assessee to file returns for the escaped income in her hands. Further, when there was no return filed by the assessee, it is permissible for the Income Tax Officer to initiate reassessment proceedings against the assessee for inclusion of share income of minors under section 64 of the Income Tax Act and hence, he was correct in calling upon the assessee to file the returns, since there was a failure on the part of the assessee to file returns.
10. The third submission of the learned counsel for the assessee is that at the time of assessments in the hands of other assesses, viz., the Estate and the minors, facts were very much available before the Income Tax Officer and, therefore, he should have taken steps to assess the income in the hands of the assessee. In this connection, he relied upon the decision of the Supreme Court in CIT v. Hemchandra Kar : [1970]77ITR1(SC) . We have carefully gone through the decision of the Supreme Court. The decision of the Supreme Court has no application as in the case before the Supreme Court, the assessment was made in the hands of a Hindu undivided family. It is also seen that five members of the family had encashed notes of the value of Rs. 1,10,000 and the Income Tax Officer reopened the assessment of the Hindu undivided family and of the five members and included the amount encashed by the family in the hands of the family and included the amount encashed by the members of the family in their individual assessments. Thereafter another notice was issued by the Income Tax Officer within few days to reopen the assessment of the family to include the amount of high denomination notes encashed separately by the members. It was also found as a matter of fact by the Appellate Assistant Commissioner that five members merely acted as name lenders of the Hindu undivided family and in spite of knowledge about the existence of fact that five members acted on behalf of the Hindu undivided family, the Income Tax Officer earlier completed the assessment. The Supreme Court held that when the Income Tax Officer was in possession of all the facts and he proceeded to make the reassessment of the individual members by including the amounts in question in their individual accounts he could not a few days later merely change his opinion and issue the notices under section 34 to the Hindu undivided family. It is relevant to mention here that in the case before the Supreme Court the Hindu undivided family filed the return and the individual members filed separate returns and the Income Tax Officer had knowledge of the fact that the amount really belonged to the Hindu undivided family at the time when he made first reassessment and in spite of the same, he included the same in the hands of the individual members and it is, in these circumstances, the Supreme Court held that the reassessment notice was invalid. On the other hand, the distinguishing factor in the case is that the assessee has not filed any return of income for all the assessment years and there is no finding by the Appellate Tribunal that all primary facts necessary for completion of assessment were before the Income Tax Officer.
11. Learned counsel for the assessee also relied upon the decision of the Supreme Court in Ganga Saran & Sons (P) Ltd. v. ITO : [1981]130ITR1(SC) . In the case before the Supreme Court, regular assessment was made in the hands of the assessee and after due enquiry, the salary and commission payments were allowed and thereafter the Income Tax Officer issued notice under section 147(a) of the Income Tax Act. The Supreme Court held that the assessee could not be said to have omitted or failed to disclose fully and truly the material facts relating to the assessment and since the requirement of section 147(a) were not present, reassessment proceedings were annulled. We hold that the decision of the Supreme Court in Ganga Saran & Sons (P) Ltd.s case (supra) has no application to the facts of the case.
12. Learned counsel for the assessee strongly placed reliance on the decision of this court in CIT v. N. Ramakrishnan : [1986]160ITR625(Mad) . The decision of this court is also distinguishable as in that case, there was a clear finding that all necessary material facts were before the assessing officer at the time of original assessment and the Appellate Tribunal also gave a finding that all the facts were disclosed by the assessee at the time of original assessment and hence, this court held that the reassessment initiated to include the share income of the minors in the hands of the assessee was not proper. However, there is no such finding at all by the Appellate Tribunal in the present case. In N. Ramakrishnan's case (supra) all primary facts were before the Income Tax Officer at the time of completion of assessment, but in the present case, the assessee has not filed the returns and there was no original assessment made in the hands of the assessee.
13. Learned counsel for the assessee also relied upon the decision of this court in Gordon Woodroffe & Co. Ltd. v. ITO : [1964]51ITR12(Mad) . The decision hardly helps the assessee as in Gordon Woodroffe's & Co. Ltd.s case (supra), there was a return of income of a foreign company represented by its Indian agent and after considering all the materials placed before him, the Income Tax Officer completed the assessment and after the order of assessment, the Income Tax Officer initiated reassessment proceedings for inclusion of amounts on the ground that the London company was really a resident company and there was a delay in submitting the return. This court held that there was a valid return filed in the status of non-resident and since there was no default in submitting the return, the department could not assume that the real status of the assessee was that of a resident and deduce therefrom the position that the return submitted was not proper. The decision is distinguishable as in the present case, the assessee has not filed any return of income for the relevant assessment years in question.
14. We hold that it would be humanly impossible for the Income Tax Officer dealing with hundreds of cases to remember that the income offered and assessed in one assessees assessment would have some bearing and relevance in the assessment of another assessee, particularly in cases where summary assessments are completed without inquiry and the returns are accepted as filed.
15. We have already held that the assessee has not filed returns of income and during the relevant assessment years in question, the returns were to be filed in Form No. 2 and in Form No. 2 there is a specific column, viz., column No. 9 in part I which refers to gross total income and the assessee is required to include the income arising to the minor children as referred to in Chapter V of the Income Tax Act which means the income arising under section 64 of the Income Tax Act. The Supreme Court in CIT v. Smt. P.K. Kochammu Amma Peroke : [1980]125ITR624(SC) has considered the note for including income of spouse and minor child and held that after 1972, the form of return prescribed by rule has been amended and there is a separate column providing that the income arising to spouse/minor child or any other person as referred in Chapter V of the Income Tax Act should be shown separately in that column and there is no longer any scope for arguing that the assessee is not bound to disclose such income in the return to be furnished by the assessee. The Supreme Court also held that the failure to disclose the share income of minors would amount to concealment of income within the meaning of section 271(1)(c) of the Income Tax Act. The Supreme Court held that the failure to disclose in the return of income the share income of minors includible under section 64 of the Income Tax Act would lead to penalty also under section 271 (1)(c) of the Income Tax Act. The principle laid down by the Supreme Court in Smt. P.K. Kochammu Amma case (Peroke's supra) is that the income of the assessee should include all kinds of income to be returned and the primary fact, namely, the minors were admitted to the benefits of partnership required the assessee to include the share income of the minors in the return to be filed by the assessee. The assessee did not file any return for the assessment years in question and there was a failure on the part of the assessee to disclose fully and truly the materials as to the share income of the minors assessable under the Income Tax Act. We therefore hold that there was a failure on the part of the assessee to disclose fully and truly the materials for the purpose of assessment of her income.
16. The Appellate Tribunal proceeded only on the basis that the minors share income was assessed under section 143(1)(a) of the Income Tax Act and therefore there was no failure on the part of the assessee in disclosing income. We are unable to subscribe the view of the Appellate Tribunal. The assessment of minors under section 143(1)(a) is different and the question that arises is whether the assessee has disclosed in her return of income the share income of minors which is includible in her assessment. The mere fact that the minors were assessed is not a ground to hold that the Income Tax Officer had no jurisdiction to invoke the provisions of section 147(a) of the Income Tax Act as against the assessee when he had reason to believe that the income had escaped assessment in the hands of the assessee. Further, it is also relevant to mention here that the assessment under section 143(1)(a) of the Income Tax Act is a summary assessment and in a summary assessment, the return submitted by the assessee is accepted without any enquiry and without any evidence in support of the return. In other words, the assessment is made accepting the income declared in the return and there is no enquiry under section 143(1)(a) of the Income Tax Act. Therefore the fact that assessments were made under section 143(1)(a) of the Income Tax Act in the hands of the minors is not relevant to consider the question whether the Income Tax Officer had jurisdiction to reopen the assessment in the hands of the assessee.
17. The Appellate Tribunal, however, in the statement of case has referred to one more fact to the effect that the income had already been assessed in the hands of the minors as partners and the reopening of the assessments under section 147(a) of the Income Tax Act was without jurisdiction. As far as the above finding given by the Appellate Tribunal in the statement of case is concerned, we find that the Appellate Tribunal, while hearing the appeal, has not rendered the finding that the income was assessed in the hands of the minors as partners and in the absence of such finding by the Appellate Tribunal in the appellate order, it is not open to the Appellate Tribunal to improve the case of the assessee in the statement of case. In the statement of case, the above observation seems to have been made by the Appellate Tribunal only to emphasise that the Income Tax Officer exercised the option to assess minor partners. We are of the opinion that the Appellate Tribunal is not correct as it is not a case where the assessment of minors and the assessment of the assessee were before the Income Tax Officer and he consciously applied his mind and opted to assess the minors in the capacity of partners and therefore the observation made by the Appellate Tribunal is not sustainable.
18. One other submission was also made by learned counsel for the assessee. He referred to the decision on this court in A. Savadappans case (supra) and submitted that before this court learned counsel for the revenue submitted that it was not a case falling within the scope of section 64 of the Income Tax Act, but it was a case falling under section 168(1) of the Income Tax Act, and therefore, the provisions of section 64 of the Income Tax Act are not applicable. We are unable to accept the submission of the learned counsel for the assessee. The said submission of the learned counsel for revenue was then made in the context of inclusion of income of the Estate and the learned counsel for the revenue there submitted that he was not going to resort to section 64 of the Income Tax Act to include the share income in the hands of minors. It does not mean that the revenue is precluded from invoking the provisions of section 64 of the Income Tax Act against the assessee who is the mother of the minors. We hold that the finding of the Appellate Tribunal that merely because the assessments were made in the hands of the minors, there is no escapement of income is not sustainable and we are unable to sustain the said finding of the Appellate Tribunal. Accordingly, we hold that the reassessment proceedings were properly initiated. The result is that the matter has to go back to the Appellate Tribunal to consider the question on merits of the matter.
19. Accordingly, we answer the common question of law referred to us in the negative, in favour of the revenue and against the assessee. However, in the circumstances, there will be no order as to costs.