1967 (4) TMI 40 - HC - Income Tax

Expenditure-tax Act - Ejusdem Generis - jurisdiction to issue notice u/s 16 of the Expenditure-tax Act proposing to reopen the previous assessments - ground for reopening the prior assessments is that the assessee omitted or failed to disclose the expenditure of his wife who was his dependant - wife had her own sources of income and had filed separate returns, the officer had jurisdiction to reopen the assessments

Summary

Issues Involved:
1. Jurisdiction to reopen assessments under Section 16 of the Expenditure-tax Act.
2. Constitutionality of the amendments to Section 2(g) and Section 4(ii) of the Expenditure-tax Act.
3. Interpretation of the term "dependant" in Section 2(g) and Section 4(ii) of the Expenditure-tax Act.

Detailed Analysis:

1. Jurisdiction to Reopen Assessments:
The court examined whether the Expenditure-tax Officer had jurisdiction to issue a notice under Section 16 of the Expenditure-tax Act to reopen the assessments. The assessee failed to disclose his wife's expenditure in his original returns, which prompted the reopening of assessments. The court held that the Expenditure-tax Officer was competent to issue the notice under Section 16 of the Act, as the assessee did not fully and truly disclose all material facts necessary for his assessment. The court referenced the Supreme Court's decision in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax, which emphasized that the officer must have information leading to the belief that income chargeable to tax had escaped assessment.

2. Constitutionality of the Amendments:
The court addressed the constitutionality of the amendments to Section 2(g) and Section 4(ii) of the Expenditure-tax Act, which were challenged under Articles 14, 19, and 31 of the Constitution. The amendments included the spouse and minor child as dependants without the condition of being wholly or mainly dependent on the assessee for support and maintenance. The court held that the classification was reasonable and had a rational relation to the object sought to be achieved by the legislation. The court emphasized that taxation laws cannot claim immunity from the equality clause of the Constitution and must not be arbitrary or oppressive. The court found that the amendments were intended to prevent tax evasion, augment revenue, and promote thrift and economy, which were legitimate objectives.

3. Interpretation of the Term "Dependant":
The court analyzed the term "dependant" as defined in Section 2(g) and Section 4(ii) of the Expenditure-tax Act. The amended Section 2(g)(i) included the spouse and minor child as dependants without the condition of being dependent on the assessee for support and maintenance. The court held that the clear language of the provision indicated that the spouse and minor child were dependants by reason of their relationship to the assessee. The court rejected the argument that the qualifying words "wholly or mainly dependent on the assessee for support and maintenance" should apply to the spouse and minor child, as the amendment created two distinct categories of dependants.

Separate Judgment by Krishna Rao J.:
Krishna Rao J. disagreed with the majority opinion on the interpretation of the term "dependant." He argued that the qualifying clause "wholly or mainly dependent on the assessee for support and maintenance" should apply to all preceding classes of persons mentioned in Section 2(g)(i), including the spouse and minor child. He emphasized that the essential test was whether the expenditure in relation to the maintenance of the dependant was incurred by the assessee. Krishna Rao J. held that the qualifying clause in Section 4(ii) should apply to both the dependant of an individual assessee and the dependant of a Hindu undivided family.

Conclusion:
The majority judgment dismissed the appeals, upholding the constitutionality of the amendments to Section 2(g) and Section 4(ii) of the Expenditure-tax Act and affirming the jurisdiction of the Expenditure-tax Officer to reopen the assessments. Krishna Rao J., in his separate judgment, agreed with the dismissal of the appeals but provided a different interpretation of the term "dependant."