1972 (3) TMI 8 - HC - Income Tax

Expenditure Tax Act, 1957 - petitioner is aggrieved by the notice issued by the respondent under section 15(4) read with section 16 of the Expenditure-tax Act, 1957, an seeks a writ of prohibition-preventing the respondent from making a revised assessment on the petitioner - In case the provisions of section 4(i) were mistakenly applied by the revenue on the earlier occasion and such an error was discovered later, department is at liberty to take such necessary actions therefore, officer had the jurisdiction to reopen the assessment

Issues Involved:

1. Validity of the notice issued under section 15(4) read with section 16 of the Expenditure-tax Act, 1957.
2. Applicability of section 4(i) versus section 4(ii) of the Expenditure-tax Act.
3. Principle of res judicata and the rule of finality in tax proceedings.
4. Jurisdiction to reopen assessment under section 16(b) of the Expenditure-tax Act.
5. Definition and scope of "information" under section 16 of the Expenditure-tax Act.
6. Conditions for issuing a writ of prohibition.

Detailed Analysis:

1. Validity of the notice issued under section 15(4) read with section 16 of the Expenditure-tax Act, 1957:
The petitioner challenged the notice issued by the respondent under section 15(4) read with section 16 of the Expenditure-tax Act, 1957, seeking a writ of prohibition to prevent the respondent from making a revised assessment. The petitioner argued that the expenditure incurred by his sons should not be included in his taxable expenditure. However, the Expenditure-tax Officer believed that the expenses incurred by the sons were includible in the taxable expenditure of the assessee.

2. Applicability of section 4(i) versus section 4(ii) of the Expenditure-tax Act:
The initial assessment was based on section 4(i) of the Act, which was later contested. The Tribunal ruled in favor of the petitioner, stating that the expenditure incurred by the sons was under their own obligation and not towards the assessee's obligation. The department later sought to reopen the assessment under section 4(ii), arguing that the expenditure incurred by the petitioner's sons, who were his dependants, should be included in the taxable expenditure.

3. Principle of res judicata and the rule of finality in tax proceedings:
The petitioner argued that the earlier proceedings concluded with a final order based on section 4(i) and, therefore, the same subject matter could not be re-adjudicated under section 4(ii) based on the principle of res judicata. The court referred to the decision in Commissioner of Income-tax v. Rao Thakur Narayan Singh, which states that taxing officers cannot reopen final decisions made against the revenue in earlier proceedings. However, the court noted that if the reopening is based on new information leading to a reasonable belief of tax escapement, the principle of res judicata may not apply.

4. Jurisdiction to reopen assessment under section 16(b) of the Expenditure-tax Act:
The court examined whether the respondent had the jurisdiction to reopen the assessment under section 16(b) of the Act. It was noted that section 16 allows reopening if the Expenditure-tax Officer has information leading to a reasonable belief that the expenditure chargeable to tax has escaped assessment. The court found that the respondent had such information and a reasonable belief, justifying the reopening under section 16(b).

5. Definition and scope of "information" under section 16 of the Expenditure-tax Act:
The court discussed the definition of "information" and its scope, citing various precedents. It was established that information could include judicial decisions and other external sources. The court referred to the Andhra Pradesh High Court decision in His Highness Prince Azam Jah v. Expenditure-tax Officer, Hyderabad, which was brought to the respondent's notice and constituted valid information under section 16(b).

6. Conditions for issuing a writ of prohibition:
The court noted that a writ of prohibition is not issued as a matter of course and is typically warranted when there is a want of jurisdiction or an attempt to usurp jurisdiction. The court found that the respondent had jurisdiction to reopen the assessment based on new information and a reasonable belief of tax escapement. Therefore, the conditions for issuing a writ of prohibition were not met.

Conclusion:
The court concluded that the respondent had the jurisdiction to reopen the assessment under section 16(b) of the Expenditure-tax Act based on new information and a reasonable belief of tax escapement. The principle of res judicata did not apply as the reopening was not due to a change of opinion but based on new information. Consequently, the writ petition was dismissed, allowing the respondent to proceed with the enquiry. All legal pleas, including the petitioner's membership in the joint family, could be presented before the assessing officer for adjudication.

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