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TMI Blog1972 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... urning his income and his wealth as an individual and was assessed as such. He performed his daughter's marriage on September 2, 1960, and spent a sum of Rs. 25,631 in connection with it. In addition to such an expenditure incurred by him, his four sons spent from the assets allotted to them a total sum of Rs. 61,292 for the said marriage. During the assessment proceedings under the Expenditure-tax Act, the petitioner's case is that every available material was placed before the assessing officer and, it was contended that only a sum of Rs. 25,631 incurred by the petitioner in connection with the marriage of his daughter should be taken into account for purpose of assessment under the Expenditure-tax Act. The Expenditure-tax Officer, however, was of the view that the expenses incurred by the sons from the assets allotted to them in the partition during the accounting year ending March 3, 1961, were also includible in the taxable expenditure of the assessee. In these circumstances the total taxable expenditure was determined at Rs. 70,851 and the expenditure-tax payable thereon at Rs. 41,851. On appeal, the petitioner was successful. The department preferred a further appeal to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of finality urged by the petitioner is not applicable to the instant case. As a reasonable belief has been entertained that there has been an escapement of tax in not appreciating the correct content of section 4(ii) and as such a reasonable belief and information can be the basis for reopening proceedings under section 16, the claim is that there is no basis for the request for the issue of a rule of prohibition. In reply, the petitioner's case is that the department having contended once that the proper section applicable to the subject-matter, is section 4(i) of the Expenditure-tax Act, it cannot turn round and contend that section 4(ii) is applicable and plead its own default in not applying the correct section as a ground to start reassessment proceedings. In this view the interdict against further processing of the notice is justified. As a writ of prohibition is asked for, I am not inclined to go into the merits, since the assessee, if he fails in these proceedings, will still have an adequate opportunity to place such material before the department and get an adjudication thereon. The only question which has to be decided is whether a writ of prohibition should issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure incurred by any other person for or on behalf of the assessee by way of customary hospitality or which is of a trivial or inconsequential nature. " Section 16 deals with expenditure escaping assessment. The text of this section is similar to the text of section 34 of the Indian Income-tax Act. The primordial basis for such reopening is that the Expenditure-tax Officer should have, in consequence of any information in his possession, reason to believe that the expenditure chargeable to tax has escaped assessment in any assessment year. Section 16(a) provides for a particular circumstance whereunder such a reopening can be undertaken. Section 16(b) provides for such invocation of jurisdiction notwithstanding section 16(a). Therefore, if there is information and in consequence thereof the assessing officer entertains a reasonable belief that there has been an escapement of assessment, he has the jurisdiction under section 16(b) to issue the notice and proceed with the enquiry. The case of the petitioner is that, as the earlier proceedings which concluded in a final order of assessment proceeded on the footing that it was section 4(i) that was applicable and as the depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax brought to the notice of the assessing officer a decision of the Andhra Pradesh High Court in His Highness Prince Azam Jah v. Expenditure-tax Officer, Hyderabad , whereunder such expenditure incurred by the assessee's sons was to be legitimately considered as expenditure incurred by the assessee, the same having been incurred by the dependants of the assessee. Undoubtedly, this information would fall within the meaning of section 16(b) and the action that followed is in consequence of it. It cannot be said that as a result of such information in his possession, he cannot reasonably believe that the expenditure chargeable to tax has escaped assessment. This is not a case where he changed his mood or opinion, but this is a case in which he is bona fide channelising his action within the compass of statutory provisions and if he does act in the way he purports to do in this case, it would not be proper to injunct him at this stage by the issue of a rule of prohibition. But, the argument is that on the earlier occasion the revenue took up a definite stand that the expenditure was includible and chargeable under section 4(i) and it was in the conspectus of such events tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be said that the revenue in the circumstances of the case can reopen such a closed assessment under section 16(b) of the Act, because such an assumption of jurisdiction when the circumstances do not warrant is by itself not legal and, therefore, has to be stopped. There are not many decisions under section 16 of the Expenditure-tax Act. Therefore, the Bar had to cite citations under the Income-tax Act of 1922 with particular reference to section 34 of the Act of 1922 and section 147 of the Act of 1961. On this subject eminent judges have entered the labyrinth by the same path but came out through different avenues. The abundance of judicial authority on this subject which sometimes appear to be varying in scope has certainly set guidelines which can be usually applied. Precedents on this subject are so many that I am inclined only to consider a few so as to appreciate the contentions of parties. At one time it was thought that the power to reassess was available to the revenue only in a case where the record projects a lacuna attributable to a cause or circumstance other than that referable to the conduct of the revenue. The above observation, of Jagannadhadas J. in Chattura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has escaped unnoticed can prompt the Income-tax Officer to act under section 34(1)(b) of the Act. In Salem Provident Fund Society Ltd. v. Commissioner of Income-tax, the court said that the information which the Income-tax Officer might secure may be on his own volition or it might have been transmitted to him by some one else. So long as information is made available or found and, if on that basis, a belief is entertained that there was an escapement, the action under section 34(1)(b) is competent. In Anandji Haridas and Co. (P.) Ltd. v. S. P. Kushare, Sales Tax, Officer, Nagpur , the Supreme Court confirming its earlier view in Commissioner of Income-tax v. Narsee Nagsee and Co. said : " All these cases show that the words 'escaping assessment' apply equally to cases where a notice was received by the assessee but resulted in no assessment at all and to cases where due to any reason no notice was issued to the assessee, and, therefore, there was no-assessment of his income. " In the very same decision the Supreme Court reiterated the principle that " information " includes information as to the true and correct state of the law and so would cover information as to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 'Information', in the context in which it occurs in section 147(b) of the Income-tax Act, 1961, must mean ' instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter, bearing on the assessment '. Mere change of opinion on the part of the Income-tax Officer cannot constitute information so as to entitle him to initiate proceedings under section 147(b). If the information is as to any fact, it may be received from any person who knows the fact, and it cannot be limited to any particular person, body or authority since such fact may be within the knowledge or possession of any one and it may be received by the Income-tax Officer from any source. But, in the case of information as to the correct state of the law, the external source from which it may be received must necessarily be of a limited character. Though it may not be possible to define precisely the cases where intimation received by the Officer as to the correct state of the law may be regarded as information, opinion as to the state of the law by any and every, person cannot constitute ' information ' for the purpose of the section. It must be a statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion. The correct conclusion was brought to his notice by the decision of the Tribunal and the High Court and that was information as a consequence of which he came to believe that the provisions of section. 34(1)(b) were attracted. The Income-tax Officer had, therefore, jurisdiction to issue the notice under section 34(1)(b). " In Assistant Controller of Estate Duty, Hyderabad v. Nawab Sir Mir Osman Ali Khan Bahadur, H.E.H. The Nizam of Hyderabad , which arose under the Estate Duty Act, 1953, the Supreme Court had once again the opportunity to consider the content of the word " information ". They said : " The opinion of the Central Board of Revenue regarding the correct valuation of the securities for purposes of estate duty expressed in an appeal prepared by the accountable person, is 'information' within the meaning of section 59 of the Estate Duty Act, 1953, as amended by the Estate Duty (Amendment) Act of 1958, on the basis of which the Controller can entertain a reasonable belief that property assessed to estate duty has been under-valued. " The force of the march of law as compiled above does not prompt me to make the rule nisi absolute. But Mr. Swaminathan forcibly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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