PRINCE AZAM JAH Vs. EXPENDITURE TAX OFFICER

JUDGEMENT

(1.) THESE three appeals (W. As. Nos. 67, 68 and 69 of 1964) have been referred to the Full Bench by a Division Bench of this court, consisting of Manohar Pershad C.J. and Mohd. Mirza., as they were of the opinion that an important question relating to "interpretation of section 2(g) and Section 4(ii) of the Expenditure-tax Act (XXIX of 1967) is involved." The appeals arise from the judgment of Jaganmohan Reddy J. (as he then was) dismissing Writ Petitions Nos. 712 to 714 of 1962 filed under Article 226 of the Constitution by Prince Alam Jah Bahadur, hereinafter referred to as the assessee, for the issue of a writ of prohibition or other appropriate writ or order directing the Expenditure-tax Officer (respondent) to forbear from taking or continuing any action in pursuance of the notice dated May 5, 1962, issued under Section 16(a) of the Expenditure-tax Act, 1957, hereinafter referred to as the Act, for the expenditure assessment year 1959-60.

(2.) THE relevant facts necessary for appreciating the question referred to the Full Bench are the following: THE assesee the eldest son of Nizam VII, filed expenditure-tax returns under the Act for the assessment years 1959-60, 1960-61 and 1961-62 and the respondent completed the expenditure-tax assessments on March 27, 1961, December 22, 1963, and January 25, 1962, respectively, determining the assessee's taxable expenditure for the three years at Rs. 2,34,864, Rs. 1,66,687 and Rs. 2,30,384, and the assessee also paid the tax demands in full. Subsequently, the respondent issued a notice dated May 5, 1962, under Section 16 of the Act calling upon the assessee to file supplemental returns of expenditure for the three years in question on the ground that the respondent had reason to believe that the assessee's expenditure had escaped assessment or that he has been under-assessed. As the assessee was not aware of the reasons which prompted the respondent to reopen the assessment, he filed supplemental returns of expenditure on July 16, 1962, declaring the same figures as shown earlier in the original returns. A date was fixed by the respondent for hearing the assessee or his representative and, at the time of hearing, the assessee was informed that the three assessments have been reopened for the purpose of including the expenditure incurred by his wife, Princess Durre Shahwar, hereinafter referred to as the Princess, under Section 4(ii) of the Act, as amended by Section 24 of the Finance Act, 1959. THE assessee was called upon to file his objections on or before July 25, 1962, failing which the respondent threatened to complete the assessments by including in the assessment of taxable expenditure, the expenditure incurred by his (assessee's) wife. It is contended by the assessee that this action under Section 16(a) of the Act is arbitrary and illegal and the fact that the Princess is the wife of the assessee and she has to be considered as his dependant within the meaning of Section 2(g) of the Act was known to the respondent and was also informed of it. THEre have been no omissions or failure on the part of the assessee to disclose fully and truly all material facts nor has the respondent come into possession of any information warranting that any expenditure has escaped taxation. Apart from want of jurisdiction, Section 4(ii) of the Act, it is contended by the assessee, is ultra vires of the Constitution, as it is discriminatory in character, offending Article 14 of the Constitution. It is also the case of the assessee that his wife, the Princess, lives in London and visits India for a very brief period every year and has her sources of income and property and any expenditure incurred is from out of the monies exclusively belonging to her. THE Princess too had filed her own returns for the expenditure incurred by her from out of her own income and the respondent's action in reopening the assessments, so as to include in the assessee's assessment his wife's expenditure, will cause hardship to him. If she is assessed separately on the returns filed by her, she will be entitled to deductions which will not be taken into account if the assessee is to be assessed by adding his wife's expenditure to the expenditure of the assessee, Another contention is that the amendment made by Section 24 of the Finance Act, 1959, brought about an unreasonable discrimination as between two units of the assessee, viz., the individual and Hindu undivided family, inasmuch as in the case of an individual, expenditure incurred by any dependent of such individual has to be included in the assessment of the individuals, without regard to any other consideration, while in the case of a Hindu undivided family, expenditure by any dependant from or out of any income or property transferred directly or indirectly to the dependant by the assessee alone has to be included. This according to the assessee constitutes discrimination. THE assessee's wife did not incur any expenditure from out of the income or property transferred directly or indirectly by the assessee and even so under the amended Section 4(ii), expenditure has to be included in the assessee's assessment and tax levied on him, whereas in the case of a Hindu undivided family, no such expenditure of the dependant has to be included in the assessment of the family. THE provisions of the Act are also challenged on the ground that they constitute an unreasonable restriction 'on a person's right to hold and enjoy property, and, consequently, violate Articles 19 and 31 of the Constitution.

(3.) MR. Narasaraju, appearing for the assessee, has assailed the findings of the learned judge in the main: (1) that the respondent has no jurisdiction to reopen the assessments and the notice dated May 5, 1962, issued by him is without jurisdiction, (2) that the amendment of the definition "dependant" in Section 2fg) and Section 4(ii) of the Act, as amended by Section 24 of the Finance Act, is ultra vires of the Constitution, (3) that the amendment is beyond the legislative competence, and (4) that the amendment has brought about an unreasonable discrimination as between the two units of the assessees, viz. individuals and Hindu undivided families and, as such, the provisions of Section 4, Clause (ii), are violative of Article 14 of the Constitution. Developing the argument further, MR. Narasaraju contended that on a proper interpretation of "dependant", occurring in Section 2(g), it means that the spouse or minor child should be a person wholly or mainly dependent on the assessee for support and maintenance as otherwise there will be no basis for classification between the spouse and the minor child on the one hand and other dependants, which term includes any person wholly or mainly dependent on the assessee for support and maintenance.