# V. D. M, R. M. M. R. M. MUTHIAH CHETIIAR v. COMMISSIONER OF INCOME-TAX, MADRAS

- **Citation:** [1969] 3 S.C.R. 715
- **Court:** Supreme Court of India
- **Decided:** 1969-02-14
- **Case number:** Civil Appeals Nos. 1457 to 1459 of 1958
- **Bench:** J. C. Shah, V. Ramaswami, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/v-d-m-r-m-m-r-m-muthiah-chetiiar-v-commissioner-of-income-tax-madras-4632
- **Pages:** 7

## Headnote

c
D
E
F
G
H
Indian Income-tax Act (11 of 1922), ss. 34 and 16(3)-Assessee's
return of income as individual not showing that other members of his' firm
were his minor sons-Income of minors separately assessed-S. 34(1) and
s. 34(l)(b), applicability of income of a minor son whether can be added
under s. 16(3 )-Income of assessee after having been separately assessed.
The assessee and his minor sons separately held shares in a resident
firm. For assessment years 1952-53 to 1954-55, the assessee filed returns
as an individual and therein stated under the head business income that
the profit should be ascertained from the Income-tax Officer assessing the
firm.
The names of the partners were stated, but it was not stated in the
return that some of the parties were his minor sons.
The minors, through
their mother as guardian,
also filed returns for these assessment years,
and they were atisessed to tax. The assessee was also assessed as an individual, in respect of his share in the income of the firm and other sources,
but the assessment order did not include the share of the minors from the
firm.
The Income-tax Officer
issued notices
Of reassessment
to
the
assessee under s. 34(1)(a) of the Indian Income-tax Act, 1922 for the
years 1952-53 and 1953-54 and under s. 34(1)(b) for the year 1954-55.
The Income-tax Officer took the view that the .assessee had not disclosed
the fact that his sons were minors and the income of the sons which
mould have been included under s. 16(3)(a)(ii) had escaped assessment
n the assessee's hands and accordingly he brought that income to tax. The
Appellate Assistant Commissioner confirmed this order. The Appellate
Tribunal, in appeal held that for the first two years s. 34(l)(a) applied,
that in respect of the third year there was no change of opinion but the
assessment was made on information
received
within
the meaning Of
s. 34(1 )(b) and that the income of the minors could be assessed in the
hands of the assessee notwithstanding the separate assessments already
made on the minors. On reference, the High Court answered the ques·
tions against the assessee.
In appeal, this Court,
HELD·: Section 16(3) of the Act imposed an obligation upon the
Income-tax Offit,er to compute the total income of any individual for the
purpose of assessment by including the items of income set out in els.
(a)(i) to (iv) and (b), but thereby no obligation was imposed upon the
tax-payer to disclose the income liable to be included in his assessment
under s: 16( 3). For failing or omitting to disclose that income proceedings for reassessment could not be commenced under " 34(1)(a).
Section 22( 5) required the assessee to furnish particulars of the names of
the shares of the partners but imposed no obligation to mention or set out
the income of the nature mentioned in s. 16( 3). In . the relevant years
there was no head in the form of return prescribed under the rules under
which income liable to be assessed to tax under s. 16(3)(a) & (b) could
be disclosed. These assessments under s. 34(1)(a) for the years 1952-53
.and 1953-54 could not, therefore be upheld. [721 A]
(ii) 'The income of a minor can be included in the hands of an
assessee under s. 16(3) of the Act, notwithstanding that an assessment has
been made on the minor represented by his guardian. [718 G-H]
?16
SUP.LUlME COURT REPORTS
[1969] 3 S.C.R.
C. R. Nagappa v. Commissioner of Income-tax, Mysore, [1969] 1
S.C.R. 979, followed.
(iii) In respect of the assessment years 1954-55, there was n~ bas!s .for
the argument that the Income-tax Officer had only changed his oplD!on.
The order of re-assessment was made well within four years 'from the date
of the last day of that assessment year. The notice wasJ therefore, com·
petently issued by the Income-tax Officer. [721 F]

## Text

715
o.
V. D. M, R. M. M. R. M. MUTHIAH CHETIIAR
v.
COMMISSIONER OF INCOME-TAX, MADRAS
February 14, 1969
B
(J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]
c
D
E
F
G
H
Indian Income-tax Act (11 of 1922), ss. 34 and 16(3)-Assessee's
return of income as individual not showing that other members of his' firm
were his minor sons-Income of minors separately assessed-S. 34(1) and
s. 34(l)(b), applicability of income of a minor son whether can be added
under s. 16(3 )-Income of assessee after having been separately assessed.
The assessee and his minor sons separately held shares in a resident
firm. For assessment years 1952-53 to 1954-55, the assessee filed returns
as an individual and therein stated under the head business income that
the profit should be ascertained from the Income-tax Officer assessing the
firm.
The names of the partners were stated, but it was not stated in the
return that some of the parties were his minor sons.
The minors, through
their mother as guardian,
also filed returns for these assessment years,
and they were atisessed to tax. The assessee was also assessed as an individual, in respect of his share in the income of the firm and other sources,
but the assessment order did not include the share of the minors from the
firm.
The Income-tax Officer
issued notices
Of reassessment
to
the
assessee under s. 34(1)(a) of the Indian Income-tax Act, 1922 for the
years 1952-53 and 1953-54 and under s. 34(1)(b) for the year 1954-55.
The Income-tax Officer took the view that the .assessee had not disclosed
the fact that his sons were minors and the income of the sons which
mould have been included under s. 16(3)(a)(ii) had escaped assessment
n the assessee's hands and accordingly he brought that income to tax. The
Appellate Assistant Commissioner confirmed this order. The Appellate
Tribunal, in appeal held that for the first two years s. 34(l)(a) applied,
that in respect of the third year there was no change of opinion but the
assessment was made on information
received
within
the meaning Of
s. 34(1 )(b) and that the income of the minors could be assessed in the
hands of the assessee notwithstanding the separate assessments already
made on the minors. On reference, the High Court answered the ques·
tions against the assessee.
In appeal, this Court,
HELD·: Section 16(3) of the Act imposed an obligation upon the
Income-tax Offit,er to compute the total income of any individual for the
purpose of assessment by including the items of income set out in els.
(a)(i) to (iv) and (b), but thereby no obligation was imposed upon the
tax-payer to disclose the income liable to be included in his assessment
under s: 16( 3). For failing or omitting to disclose that income proceedings for reassessment could not be commenced under " 34(1)(a).
Section 22( 5) required the assessee to furnish particulars of the names of
the shares of the partners but imposed no obligation to mention or set out
the income of the nature mentioned in s. 16( 3). In . the relevant years
there was no head in the form of return prescribed under the rules under
which income liable to be assessed to tax under s. 16(3)(a) & (b) could
be disclosed. These assessments under s. 34(1)(a) for the years 1952-53
.and 1953-54 could not, therefore be upheld. [721 A]
(ii) 'The income of a minor can be included in the hands of an
assessee under s. 16(3) of the Act, notwithstanding that an assessment has
been made on the minor represented by his guardian. [718 G-H]
?16
SUP.LUlME COURT REPORTS
[1969] 3 S.C.R.
C. R. Nagappa v. Commissioner of Income-tax, Mysore, [1969] 1
S.C.R. 979, followed.
(iii) In respect of the assessment years 1954-55, there was n~ bas!s .for
the argument that the Income-tax Officer had only changed his oplD!on.
The order of re-assessment was made well within four years 'from the date
of the last day of that assessment year. The notice wasJ therefore, com·
petently issued by the Income-tax Officer. [721 F]
CIVIL APPELLATE JURISDICTION :Civil Appeals Nos. 1457 to
1459 of 1958.
Appeals from the judgment and order dated August 21, 1964
of. the Madras High Court in T.C. No. 75 of 1962 (Reference
No. 50 of 1962).
M. C. Chagla and T. A. Ramachandran, for the appellant (in
all the appeals).
S. K. Aiyar aail B. D. Sharma, for the respondent (in all the
appeals).
The Judgment of the Court was delivered by
Shah, J.
Ramanathan Chettiar his son Muthiah Chettiar
~ailed hereinafter for the sake ·of brevity, Muthiah-and Ramanathan, Annamalai and Alagappan, sons of Muthiah, constituted
a Hindu undivided family. The family owned a 3 /5th share ijll
M.R.M.S. Firm, Seramban in Malaya.
The firm was assessed
under the Indian Income-tax Act, 1922, in the status of a firm
resident within the taxable territories. On September 16, 1950,
Muthiah separated from the family taking his I/5th share in the
M.R.M.S. Firm.
On April 13, 195_1 the status of the family
became completely disrupted and the three sons of Muthiah took
in equal shares the remaining 2/5th share--the grandfather Rarnanathan taking no share in the M.RM.S: Firm.
For the ·assessment year 1952-53 Muthiah submitted a return
of his income as an individual and stated under the head business
income "Ki~dly ascertain his ( assessee's) share· of profit and
remittances from the Income-tax officer, Second Additional Circle
-I, Karaikudi, in F. 6098-m/1952-53". In Part III of the return
M uthiah supplied the following informatio~ about his partners :
Name and address of the firm
Name of each partner including
assessee
Messrs. R.RM.S. Firm
. .
1. Assessee (Muthiah Chettiar)
Seramban, F.M.S.
2. VD. M.RM. M.RM. M.
Ramanathan Chettiar (minor).
3. VD.·M. RM. M. RM. M.
Alagappan Chettiar (minor).
4. VD.M.RM.M.RM.M.
Annamalai Chettiar (minor)
5. C.P.R.
6. M.S.S,
7. Charity
Shjlre
60/303
40/303
40/303
40/303
60/303
60/303
3/303
A
B
c
D
E
F
G
H.
A
ll
c
D
E
MUTHIAH v. C.I.T. (Shah,/.)
717
For the assessment year 1953-54 in column 3 in section B of the
retunn Muthiah stated: "Kindly ascertain the remittances from
the Income-tax Officer, Fifth Additional, Karaikudi in F. 6098-m",
and at p. 3 of the retum in column 3 ol. Section F it was stated :
"Assessee has 60/303 share in Messrs. :MRMS Joint
Se ram ban, (Malaya). Kindly ascertain share of profit
or loss from the Income-tax Officer, Fifth Additional.
Karaikudi in F. 6098."
In Part ill of the retum he set out the names of the partners as
were mentioned in the return for 1952-53. Against the names
of Ramanathan Chettiar, A!agappan Chettiar and Annamalai
Chettiar it was not disclOsed that they were minors.
For the assessment year 1954-55 at the foot of page 1 of the
return Muthiah stated :
''The assessee has a remittance of Rs. 6,188-12-0
from R.R.M.S. Firm,· Seramban.
His share of income
may be taken from the firm's file.",
and in Part IIl the names of seven partners as mentioned in 1952
53 return were set-out-Ramanathan, A!agapp'an, Annamalai wer
not shewn as minors.
Ramanathan, A!agappan and Aannamalai-the three minor
sons of Muthiah represented by their mother allid guardian alw
filed returns of their respective income for the years 1952-53,
1953-54 and 1954-55 and disclosed therein their shares in the
profit from the 2/5th share in the M.RM.S. Firm.
For the assessment years 1952-53, 1953-54 and 1954-55 the·
Income-tax officer completed the assessments separately on the firm.
F
on Muthiah as an individual ~
on the three minors represented
by their mother and guardian. Muthiah was assessed in respect
of his share in the income of the firm and from other sources.
In his returns Muthiah had not disclosed the share received by
his minor sons and the Income-tax Officer did not ~ making the
assessments include shares of the minors from the firm under
G
s. 16(3)(a)(ii) of the Indian Income-tax Act,
1922.
The
Income-tax Officer issued notices of reassessment to Muthiah under
s. 34(1) (a) of the Income-tax Act, 1922 for the years 1952-53
and 1953-54 and under s. 34(1) (b) for the year 1954-55. Muthiah
filed returns under protest declaring the same income as originally
assessed. In the view of the Income-tax Officer Muthiah had not
furnished in Part IIl clause ( c) ol. the return full facts regarding
B
the other narties and in column 2 he had merely disclosed that
Ramanathan, Alagappain and Annamalai were minors : that
"information was not full in the sense that he had not stated that
LIOSup./69-11
718
SUPREME COURT REPORTS
[!969] 3 S.C.R,
they were minors sons" of Muthiah. Accordingly the Income-tax · A
Officer held that the income of the sons of Muth1ah which should
have been included .under s. 16(3)(a)(ii) of the linlcome-tax Act
had escaped assessment in Muthiah's hands and he brought that
income to tax.
The Appellate Assistant Commissioner· confirmed the order
made by the Income-tax Officer. In appeal to the TribunaJ it was
contended by Muthiah that he had fully and truly disclosed all
the particulars he was required to disclose in the returns of his
income for the three years in question, and "s. 34(a)(a) had no
application to the assessment years 1952-53 and 1953-54 and for
1954-55 the re-opening was based o.nly on a change of opinion".
Muthiah also conteiOOed that s. 40 of the Income-tax Act was
mandatory and since the Income-tax Officer had made separate
assessments on the minors represented by their mother, no further
assessment under s. 16 ( 3) could be made, the twr sections being
mutually exclusive.
The Tribunal obsc;rved that for the first two years s. 34 ( l) (a)
applied, that in respect of the year 1954-55 there was no cha.ngc
of opinion but the assessment was made on information received
within the meaning of s. 34(1)(b) of the Income-tax Act and
that sc;parate assessment of the minors did :not stop the Incometax Officer from assessing the income received by the minor sons
in the hands of Muthiah.
The Appellate Tribunal accordingly
confirmed the order of the Appellate Assistant Commissioner.
At the instance of Muthiah the following questions were referred to the High Court of Madras :
'(i) Whether on the facts and in the circumstances
of the case, the re-assessment made on the assessee under s. 34 of the Act is valid in Jaw
for 1952-53 to 1954-55?
(ii) Whether on the facts and in the circumstances of
the case, the inclusion of the share income of the
minor in the hands of the assessee by invoking
the provisions of s. 16 ( 3) of the Act is valid in
law notwithstanding that an assessment is made
on the minor represented by his guardian ?"
The answer to the second question must, in view of the recent
judgment of this Court in C. R. Nagappa v. The Commissioner of
Income-tax, Mysore('), be in the affirmative.
B
c
D
E
F
G
In considering the first question it is necessarv to refer. to
H
certain provisions of the Income-fax Act, 1922.' By section 3
(t) [1969] I S.C.R. 979.
A
B
c
0
E
G
H
MUTHIAH v. C.I.T. (Shah,/.)
719
the total income of the previous yea( of every individual, Hindu
undivided family, company and l<>cal authority, and of every
firm and other association of ~rsons or the partners of the firm
or the members of the associat10n individually was charged to tax
for that year i.n accordance with, and subject to the provisions
of the act at any rate or rates prescribed by the Finance Act.
"Total income" was defined ins. 2(15) as meaning "total amount
of income, profits and gains referred to in sub-s. ( 1 ) ~f section
4 computed in the manner laid down in this Act." Secuon 4 ( I )
set out the method of computation of total income : it enacted :
• ( I ) Subject to the provisions of this Act, the total
income of any previous year of any person
includes all income, profits and gains from whatever source derived which-
( a) are received or are deemed to be received
in the taxable territories in such year by or
on behalf of such persoin, or
(b) if such person is resident in the taxable
·territories during such year,-
( j) accrue or arise or are deemed to
accrue or arise to him in the taxable
territories durinl! such year, or
Section 22 by sub-s. ( 1) required the Income-tax. Officer to give
notice by publication in the press in the prescribed niiμiner,
requiring every person whose total income during the previ<>us
year exceeds the maximum exempt from tax, to fumish a retbrn
in the prescribed form setting forth his total income. Sub-section
( 2) authorised the Income-tax Officer to serve a notice upon a
person whose income in the opinion of the Income-tax Officer
exceeded the minimum free from tax. SectiQ!l 23 dealt with the
assessment. It conferred power upon the Income-tax Officer. to
assess the total income of the assessee and to deternrine the sum
payable by him on the basis of 11uch return, submitted by him.
Rule 19 .framed under s. 59 of the Income-ta.Ji; Act, 1922, required the assessee to make a return in the form prescribed thereunder, and io Form A applicable to an individual or a Hindu
undivided family or an llSSOCiation of persons there was no clause
which requited disclosure of income o,f a,ny person other than the
income of the assessee, which was liable to be included in his total
income. The Act and the Rules accordingly imoosed no obligation
upon the ·assessee to disclose to the Income-tax Officer in his return
information relating to income of any other person by law taxable
in his hands.
720
SUPltliME COUllT ltEPOltTS
[1969] 3 S.C.lt.
But s. 16 sub-s. ( 3) provided that in computing the total
income of any indiVidual for the purpose of assessment there shall
be included the classes of income mentioned in els. (a) and (b).
Sub-section ( 3 )(a)( ii) in-so-tar as it is material, provided :
"In computing the total income of any individual fOr
the purpose of assessment, there shall be ipicluded--
(a) so much of the income of a wife or minor
child of such individual as arises directly or
indirectly-
( i)
(ii) from the admission of the minor to the
benefits of partnership in a firm of which
such individual 'is a partner;"
The assessee was bound to disclose under s. 22(5) the names and
addresses of his par1;ners, i.f any, engaged in business, profession
or vocation together with the location and style of the principal
place and branches thereof ·and the extent of the shares of all such
partners. in the profits of the business, profession or vocatioo and
any branches thereof, but the assessee was not required in m~
a return to disclose that any income was received by his wife
or minor child admitted to the benefits of partnership of a firm
of which he was a partner.
Counsel for the Commissioner contended that in the forms
of returns prescribed in the "Notes of Guidance" for drawing up
the return were printed, and thereby the assessee was informed
that he had to disclose the income received b3 his wife and minor
children from a firm of which the assessee was a partner. Counsel
has however not placed before the Court the forms of return ill
vogue in the relevant year of assessment.
In the Income Tax
Manual published under the authority of the Central Government
in 1945 under cl. ( 3) printed at p. 185 the assessee is advised
to include the returtll under the appropriate head certain classes
of income which are liable to be included in the assessment of an
individual under s. 16, and income liable to be taxed under ss.
41 D, 44E and 44F. This instruction was repeated in the Manual
Parts II aiOO III at pp. 344 and 345 in the 10th Edition published
in
1950.
But
in
the
11th
Edition
of
the
Manual published i,n 1954 no such instructions were printed.
About the date on which the instructions were deleted Counsel
for the Commissioner was unable to give any information.
Assuming that there were instructions printed in the Forms of
return in the relevant years, in the absence of any head under
which the income of the wife or minor child of a partner whose
wife or a minor child was a partner in the same firm, could be
shown, by not showing that income the tax-payer cannot be deem·
ed to have failed or omitted to disclose fully and truly all material
c
D
E
F
G
H
A
B
c
D
E
MUTHIAH v. C.I.T. (Shah,/.)
721
fact& necessary for his assessment
Section 16 ( 3) imposes an
obligation upon the Income-tax Officer to compute the total income
of any individual for the purpose of assessment by including the
items of income set out in els. (a) (i) to (iv) and (b), but thereby no obligation is imposed upon the tax-payer to . disclose the
income liable to be included in his assessment under s. 16 ( 3).
For faili.ng · or omitting to disclose that income pr~
for
reassessment cannot therefore be commenced under s. 34(1)(a).
Section 22 ( 5 ) required the assessee to furnish particulars of the
names and shares of his partners, but imposes no obligation to
mention or set out the income of the nature mentioned in s. 16 ( 3) ,
In the relevant years there was no head in the form under which
income liable to be assessed to tax under s. 16(3)(a) and (b)
could be disclosed.
We are in the circumstances unable to agree with the High
Court that s. 34 imposed an obligatic,n upon the assessee to disclose all income includible in his assessment by reason of s.
16 ( 3 )(a)( ii) . Section 34 (1 )(a) sets out the conditions in which
the power may be exercised : it did not give rue to an obligation
to disclose information which enabled the ncome-tax Oflicer to
exercise the power under s. 16(3)(a)(ii), nor had the use of the
expression "necessary for his assessment" in s. 34(l)(a) that
effect.
The High Court. did not consider the question whether in the
year 1954-55 the notice under s. 34(l)(b) was properly issued
against Muthiah. The Trib11naI in their judgment observed :
"There is no basis for the ·argument that the Incometax Oflicer had only changed his opinion and re-opened
the assessment."
F
We agree with that view.
The order of re-assessment was made
well within four years from the date of the last day of the year
of ·assessment 1954-55.
The notice was therefore competeintly
issued by the Income-tax Oflicer.
The order passed by the High Court, in so far as it relates to
the years 1952-53 and 1953-54 is set aside and the answer in the
G
negative is recorded. For the year 1954-55 the answer recorded b}
the High Court is confirmed. There will be no order as to costs
throughout.
Y.P.
Appeal partly allowed.