Case: H.H. Prince Azam Jha Bahadur  through L.Rs  Vs.  Expenditure Tax Officer

2. The facts in C. As. 1794-1796/67 may be stated. Prince Azam Jha Bahadur the eldest son of the Nizam of Hyderabad filed returns for the purpose of assessment of Expenditure Tax for the assessment years 1959-60, 1960-61 and 1961-62The assessment were completed as follows:On May 5, 1962 the Expenditure Tax Officer issued notices under S.16 of the Act calling upon the assessee to file supplementary returns for the three years in question on the ground that he had reason to believe that assessees expenditure had escaped assessment or had been under-assessed. The supplementary returns were filed on March 16, 1962 declaring the same expenditure as shown in the original returns. It appears that the assessee or the assessees representative was informed by the Expenditure Tax Officer that the assessments had been reopened for including the expenditure incurred by the wife of the assessee. A letter also appears to have been written by the said officer to the assessee on July 20, 1962 but that letter has not been included in the printed record. The assessee filed three writ petitions in the High Court of Andhra Pradesh challenging the reopening of the assessment on various grounds. The writ petitions were dismissed by a learned single judge of the High Court on November 1, 1963. Appeals were filed by the assessee under the Letters Patent which were ultimately decided by a Full Bench of the High Court. The judgment of the learned single judge was upheld by the Full Bench although Krishna Rao J. while agreeing with the other two learned judges in dismissing the appeals wrote a separate judgment and expressed a somewhat different view on some of the points.

Reasoning: 6. We are unable to concur in the view of the Madras and Madhya Pradesh High Courts that the word dependent in S.2 (g) (i) should be given a meaning which, owing to the clear and plain language employed therein cannot possibly be given. Section 2 (g) (i) has to be read in two parts. The first part which ends with minor child followed by comma contains the word means. The second part is intended to include the kind of person mentioned therein, namely, one who is wholly or mainly dependent on the assessee for support and maintenance. Before the inclusive part of the definition starts the meaning of the word dependent has been clearly and completely specified. If Section 2 (g) (i) as it stood before the amendment is contrasted with the Section as it was substituted by the amendment the intention of the legislature became obvious. Before the amendment dependent meant where the assessee was an individual his or her spouse or child wholly or mainly dependant on the assessee for support and maintenance. After the amendment Section 2 (g) (i) underwent a complete change. The legislature stopped short of making the spouse or the minor child dependent on the assessee for support and maintenance and employed those words only for the new category of persons who came to be included, namely any one who was neither the spouse nor the minor child of the assessee but was otherwise wholly or mainly dependent on him for support and maintenance. Thus in the concluding part even major children of the assessee came to be included so long as they satisfied the conditions that they were wholly or mainly dependent on him. The argument that the amended definition is only intended to enlarge the categories of dependent by adding another category cannot be sustainedIt is true that the words Hindu undivided family have not been used instead of the word assessee towards the concluding part of Section 4 (ii). But that will not alter the true import of the aforesaid provision read with Section 2 (g). The scheme as noticed before is that the assessee have been divided into two classes which are well known. One is that of an individual and the other of the Hindu undivided family. In the case of an individual assessee the only qualification for the expenditure to be included in his assessment is that it should have been incurred by his dependent as defined in Section 2 (g) (1). In the case of a H.U.F. it could be included only if it is from out of the income or property transferred directly or indirectly to the dependent by the family. Even otherwise looking at the context in which the word assessee is found in the concluding part of Section 4 (ii) that word has clearly been used only with reference to the second part of clause (ii) which relates to the case of an assessee which is a H.U.F8. It does look somewhat anomalous and illogical that where the expenditure has been incurred by the wife and minor children who are altogether independent of the assessee and which has no connection with their being dependent on him or with any property transferred to them should be included in the expenditure of the assessee. The position would be similar where the wife is the assessee and the expenditure incurred by the husband comes to be included in computation of her liability to tax because the word used in spouse in Sec. 2 (g) (i). But it must be remembered that logic or reason cannot be of much avail in interpreting a taxing statute9. We are unable to see that any double taxation would be involved if the meaning of the word dependent as given in the first part of Section 2 (g) (i) is to be applied without qualifying the same with what follows in the second part of that clause that is that person should be wholly or mainly dependent on the assessee for support and maintenance. Although there is no bar to double taxation but the legislature must distinctly enact it. It is only when there are general words of taxation and they have to be interpreted that they cannot be so interpreted as to tax the subject twice over to the same tax. There is nothing in the Act which does away with the principle that in the absence of an express provision, the same item will not be taxed over again. Moreover the charging Section 3 only subjects to tax the expenditure incurred by an individual or a Hindu undivided family. Once the expenditure incurred by both the assessee as an individual and the spouse has been included in his or her assessment of expenditure tax, it cannot be again subjected to tax, in the assessment of the other spouse. The learned Solicitor General agrees to this being the true position10. A good deal of reliance has been placed on the decisions which are in favour of the assessee that there is no reasonable basis for making a distinction between an assessee who is an individual and an assessee, that is a Hindu undivided family which would justify a different treatment. It was and has been suggested that the relevant provisions of the Act should not be so interpreted as to give rise to discrimination between the two cases there being no reasonable basis for such discrimination. We find no force or substance in this argument. Firstly, it is not disputed that the case of an individual and that of a Hindu undivided family fall into two different classes. The challenge is based only on there being a nonexus between the differentia and the object sought to be achieved by the legislation, the suggestion being that favourable treatment has been accorded to the Hindu undivided family. The learned Single Judge who disposed of the writ petitions in the present case considered the matter very fully and we find no infirmity in his reasoning in coming to the conclusion that. In a tax legislation where the incidence of the tax falls differently upon different classes of assessees as in the present case it can be said that there is legislation without any classification or that there is no rational relation to the object. According to the learned Judge, the object of the enactment is to augment the revenue, to encourage thrift and to avoid wasteful expenditure and because some classes are taxed higher than the others or some are given concessions while others are not, it cannot be held that there has been discrimination within the meaning of Art. 1411. It was contended before the High Court and that contention has been reiterated in a half-hearted manner before us that the Act was void ab initio for want of legislative competence. It has been pointed out that there is no Entry in List I of the Seventh Schedule or in List III relating to tax on expenditure. Reference has been made to Entry 62 in List II which reads Taxes on luxuries including taxes on entertainments, amusement betting and gambling. We are wholly unable to comprehend how expenditure tax can fall within the aforesaid Entry. We are in entire agreement with the majority decision of the Andhra Pradesh High Court that Entry 97 in List I which is the residuary Entry covers the tax of the kind imposed by the ActIn the absence of any ambiguity in the language employed in the first part of Section 2 (g) (i), we have to go by the plain meaning and that is confined to the spouse or minor child of the assessee when he is an individual irrespective of such spouse or minor child being dependent on or independent of the assessee for support and maintenance. As a matter of fact, the whole construction of that clause leaves no room for doubt that in the first part no question of dependence in fact arises and the spouse or the minor child simpliciter has to be treated as a dependent. The conjunctive word and appearing between the two parts makes the intention of the legislature still clearer. The second part or any words in that part do not qualify the first part. We may conclude the discussion on this point by referring to a decision of the Bombay High Courtin M. N. Patwardhan v. Commr. of Expenditure Tax, Poona (1970) 78 ITR 338 (Bom) in which the decision of the Andhra Pradesh High Court under appeal has been followed after a full consideration of the various points which arose for determination. Rajkumar Singhjis case which is the subject matter of appeal in C. As. 2389-2391/68 was dissented from by the Bombay High Court.In our judgment the majority of the full bench of the Andhra Pradesh High Court was right in holding that the expenditure incurred by the wife of the assessee was ineludible in his assessment for computing the expenditure tax under the Act13. The other point which was canvassed before the High Court of Andhra Pradesh and has been urged before us relates to the validity of the notice which was issued by the Expenditure Tax Officer for reopening the assessments in question. In the notices. It was stated that whereas the Expenditure tax Officer had reason to believe that expenditure chargeable to expenditure tax had (a) escaped assessment (b) been under assessed, (c) been assessed at too low a rate it was proposed to reassess the expenditure for the assessment year in question. The assessee was required to file a return in form A of expenditure for the assessment years in question. From the judgment of the learned Single Judge it appears that in a subsequent letter, the Expenditure Tax officer referred to return of expenditure filed in response to the notices issued under Section 16 (a) of the Expenditure Tax Act, 1957. In the writ petition which was filed on behalf of Prince Azam Jha Bahadur in the High Court, it was stated in para 7 that the action of the Expenditure Tax Officer in reopening the assessments under Section 16 (a) was wholly arbitrary and illegal. It was, however, further stated there has been no omission or failure on the part of the petitioner to make a return of his expenditure or to disclose fully and truly all material facts. Nor has the respondent come into possession of any information warranting a reasonable belief that any expenditure has escaped taxation. All the material facts were disclosed. All the necessary information was available. In the counter affidavit of the Expenditure Tax Officer in para 5, it was asserted that he had reason to believe that on account of omission or failure on the part of the assessee to disclose truly and fully all material facts necessary for his assessment expenditure of his dependents chargeable to tax had escaped assessment. In para 8 also, reliance was placed mainly on the provisions of Section 16 (a) of the Act but in para 9, the Expenditure Tax Officer went on to say that the actual expenditure incurred by the assessees wife was disclosed by her returns filed before him and in consequence of the aforesaid information available to him on 5th May 1962, he had reason to believe that the expenditure of the assessee chargeable to tax had escaped assessment. It was pointed out that the notices which had been issued were within 4 years limit applicable to Section 16 (b) of the Act. It was reiterated that as the notices had been issued within four years reassessment proceedings could be sustained either under Sec. 16 (a) or Sec. 16 (b) of the Act15. On behalf of the assessee, a contention had been raised before the learned Single Judge of the High Court that the notices had been issued by the Expenditure Act Officer under S. 16 (a) of the Act. The notices were illegal inasmuch as the fact that Princess Durree Shehvar was the wife of the assessee and that she had to be considered as his dependant within the meaning of Section 2 (g) (i) of the Act were within the knowledge of the Expenditure Tax Officer and had been duly mentioned to him and as such there was no omission or failure on the part of the assessee to make a return of his expenditure or to disclose fully and truly all material facts. Since all the material facts had been disclosed and all the necessary information was available, the Expenditure Tax Officer had no jurisdiction to reopen the assessment merely because he had changed his opinion16. It is no doubt true that the impression created by the notices which were issued and the correspondence which followed between the assessee and the Expenditure Tax Officer was that the notices had been issued under Section 16 (a) of the Act but in the writ petitions and the returns which were filed both sides were quite clear that the matter was not confined only to clause (a) of Section 16 (1) and clause (b) figured prominently. We are unable to see that the notices which had been issued were confined only to the terms of Section 16 (a). It is not disputed on behalf of the assessee that if the matter was covered by Section 16 (b), they would be perfectly valid. The pleadings in the writ petitions covered both clauses of Section 16 and in any case, the Expenditure Tax Officer had made a positive averment that the information with regard to the expenditure incurred by the assessees wife became available to him only on 5th May 1962. Thus the notices which were issued on that date relating to the assessment years 1959-60, 1960-61 and 1061-62 were within the period of four years which was the limit prescribed with regard to action under clause (b) the limit being more in respect of clause (a). In our judgment, this concludes the matter because it was nowhere controverted in the High Court that the requisite information came into possession of the Expenditure Tax Officer only on 5th May, 1962.