SAU JAMNADEVI BALKISAN JAJU v. FIRST WEALTH TAX OFFICER
[Citation -1986-LL-0912]

Citation 1986-LL-0912
Appellant Name SAU JAMNADEVI BALKISAN JAJU
Respondent Name FIRST WEALTH TAX OFFICER
Court ITAT
Relevant Act Wealth-tax
Date of Order 12/09/1986
Assessment Year 1979-80, 1980-81
Judgment View Judgment
Keyword Tags proceedings for reassessment • reassessment proceedings • escapement of assessment • income chargeable to tax • industrial development • period of limitation • income from business • reason to believe • issue of notice • wealth-tax act • valuation cell • enhanced value • value of land • enhanced rent • annual value • market value • monthly rent • sale of land • sale price • net wealth
Bot Summary: In short, on the basis of what the ITO had discovered in respect of the assessment year 1963-64 with regard to advertisement expenses, action for reopening the assessment was taken for the assessment year 1960-61. In the case decided by the Bombay High Court on which the assessee has relied, income-tax assessment was involved and, on the basis of information pertaining to the assessment year 1963-64, the ITO had sought to reopen the assessment for the assessment year 1960-61 and it was argued by the assessee that there being nothing to show that the circumstances existing in 1963-64 had also existed in 1960-61, the action for reassessment was bad in law. The original assessments for the assessment years 1947-48 and 1950-51 were made on 20-2-1950 and 29-2-1952, respectively, and in those assessments the ITO had allowed the claim of the assessee to deduct interest payable to one V.M. Co. In respect of the assessment for the assessment year 1951-52 the Tribunal held that the interest payable by the assessee to V.M. Co. was not a permissible deduction in computing the assessee's income from business under section 10. In view of the valuation made by the valuer, the WTO reopened the assessments under section 17(1)(a) on the ground that the assessee had failed to disclose fully and truly all material facts necessary for the assessment of his net wealth for the assessment years 1961-62 to 1967-68, and reassessed the net wealth taking into account the enhanced value of the property. The Tribunal further held that for the assessment years 1966-67 and 1967-68, the WTO having initiated the proceedings under section 17(1)(a), could not reopen the assessment under section 17(1)(b). The High Court held as under: ...that since the assessee in his returns for the assessment years 1961-62 to 1967-68, disclosed the property as his asset and offered its estimated value for wealth-tax and the WTO accepted the valuation declared by the assessee, it could not be said that the assessee had omitted or failed to disclose fully and truly all material facts necessary for the assessment of his net wealth and the reopening of the assessment was not valid under section 17(1)(a). The High Court further held as under: That information about the enhanced rent was information within the meaning of section 147(b) and the Tribunal had jurisdiction to convert o r alter the assessments as assessments under section 147(b) and maintain them as such.


abovementioned two appeals filed by assessee pertain to assessment years 1979-80 and 1980-81. valuation dates relevant to these t w o assessment years are 31-3-1979 and 31-3-1980. As these appeals had raised similar issues, they were consolidated and heard together. After hearing rival submissions, these appeals are being disposed of by common order as under. 2. main issue to be decided in these appeals is whether reassessment proceedings are valid. 3. facts giving rise to these appeals may be stated. original assessments for these two years were completed on net wealth as disclosed by assessee in her returns. For assessment year 1979-80, assessee had filed her wealth-tax return on 6-11-1979 showing net wealth of Rs. 2,53,128. WTO completed assessment on 28-10-1980 on same wealth. For assessment year 1980-81, assessee had filed her return showing net wealth of Rs. 2,10,947 and WTO completed assessment on 28-10-1980 on same wealth as shown by assessee. assessee had owned certain agricultural land. In respect of both years, assessee had shown value of this agricultural land at Rs. 62,300. While completing assessments, WTO adopted same value. Subsequently, WTO found that assessee had sold portion of that agricultural land on 25-2-1982 and 3-7-1982 for total consideration of Rs. 8,50,000. In view of this, WTO felt that value of agricultural land, as disclosed by assessee for Rs. 62,300 on valuation dates 31-3-1979 and 31-3-1980, was low. WTO, hence, came to believe that by reason of failure on part of assessee to disclose truly value of agricultural land, net wealth chargeable to tax had escaped assessment. WTO initiated proceedings under section 17(1)(a) of Wealth-tax Act, 1957 ('the Act') to assess wealth that had escaped assessment. reassessment for both years were completed by WTO on 19-5-1984. In these reassessments, WTO adopted value of agricultural land at Rs. 6 lakhs in respect of both years. reassessment for assessment year 1979-80 was completed on net wealth of Rs. 6,96,700 and for assessment year 1980-81 on net wealth of Rs 6,55,100. assessee had returned same wealth during course of reassessment proceedings, as had been shown by her in returns filed originally. 4. Having felt aggrieved with orders of reassessment, assessee went up in appeal in respect of both years before AAC. assessee challenged reopening of assessments by WTO under section 17(1)(a). It was contended that there was no basis for WTO to have reason to believe that any wealth chargeable to tax had escaped assessment. It was stated that value of land shown by assessee at Rs. 62,300 for relevant valuation dates could not be regarded as undervaluation. It was stated that subsequent to these valuation dates, lot of development had taken place in area and it was on account of this development that price of land had arisen sharply. It was stated that lot of industrialisation had taken place and Government of Maharashtra had acquired lands at village Lohara for putting up Maharashtra Industrial Development Corpn. It was further stated that lands in area were also acquired by housing societies for construction of housing colonies. It was pointed out that it was on account of effect of sudden development in area that prices of land had shot up. It was pointed out that from sale of land for Rs. 8,50,000 in 1982, it could not be inferred that value of land for Rs. 62,300 as shown by assessee on 31-3-1979 and 31-3-1980 was undervaluation. It was further contended that there was no failure on part of assessee to disclose all material facts necessary for her assessment and hence WTO was not justified to reopen assessments under section 17(1)(a). 5. AAC did not agree with assessee that reopening of assessments was not valid. He, however, held that since assessee had disclosed all material facts relevant for assessment, reopening of assessments could not be under section 17(1)(a), but provisions of section 17(1)(b) were applicable to facts of case. AAC, however, felt that valuation of land had not been properly made. He hence set aside assessments with direction to WTO to make assessments afresh after referring matter of valuation of land to departmental valuer. Being aggrieved with decision of AAC, assessee has now come up in appeal before us. contention of assessee is that AAC had erred in appeal before us. contention of assessee is that AAC had erred in holding that provisions of section 17(1)(b) were applicable to facts of case. It is further contended that, in any event, since WTO had proceeded under section 17(1)(a), AAC was not justified to convert those proceedings into proceedings under section 17(1)(b). It was stated that AAC, after having held that proceedings under section 17(1)(a) were not justified, should have proceeded to cancel reassessment proceedings. submission of assessee before us is that reassessment proceedings, should be struck down as being illegal and void ab initio. 6. First of all, we will examine whether provisions of section 17(1)(b) can be considered to be applicable to facts of present case or not. AAC has held that provisions of section 17(1)(b) were applicable in facts of case and hence reassessment proceedings were justified. objection of assessee that proceedings for reassessment, having been taken by WTO under section 17(1)(a), could not be sustained by invoking provisions of section 17(1)(b), will be examined later. 7. reason advanced by assessee for her contention that section 17(1)(b) was not applicable in facts of case was that there was no information pertaining to assessment years under consideration on basis of which WTO could form belief that wealth had escaped assessment. It is pointed out by assessee that on basis of information of sale of agricultural land in 1982, action could not be taken for assessment years 1979-80 and 1980-81. assessee had relied on decision of Bombay High Court in case of Ramkrishna Ramnath v. ITO [1970] 77 ITR 995. In that case, in income-tax assessment of assessee for assessment year 1960-61, as originally made, deduction of Rs. 49,440 in respect of advertisement expenses in form of printing and distribution of calendars, as had been claimed by assessee, was given. Subsequently, for this assessment year, ITO took reassessment proceedings. reason recorded by ITO for issue of notice under section 148 of Income-tax Act, 1961 ('the 1961 Act') was that he had occasion to critically examine such deduction claimed in respect of advertisement expenses for assessment year 1963-64 and it was noticed that sum of Rs 63,000 which had been claimed in respect of those expenses for that assessment year was totally bogus, and, hence, he had every reason to believe that fictitious expenses in form of calendar distributions were made to profit and loss accounts to reduce profit. In short, on basis of what ITO had discovered in respect of assessment year 1963-64 with regard to advertisement expenses, action for reopening assessment was taken for assessment year 1960-61. contention of assessee before High Court was that information on which ITO issued notice under section 148 being information relating to different year, and not to year in respect of which notice was issued, it could not be said that ITO had any reason to believe that income chargeable to tax had escaped assessment in year in respect of which notice had been issued. It was contended by assessee that circumstances existing in later year may not exist in previous year and hence there was no justification to issue notice for assessment year 1960-61 on basis of some information which pertained to assessment year 1963-64. This contention of assessee was accepted. 8. But, according to us, this case will not be of any help to assessee. On valuation dates 31-3-1979 and 31-3-1980 relevant to assessment years 1970-80 and 1980-81, assessee had shown value of certain land at Rs. 62,300. Subsequently, it was found that portion of that land was sold on 25-2-1982 and 3-7-1982 for Rs. 8,50,000. Will this fact of sale of land for sum of Rs. 8,50,000 within two to three years of valuation dates under consideration not lead to reasonable inference that value of land as shown by assessee at Rs. 62,300 for these valuation dates was low? This fact of sale of land at much higher price is definitely information telling that value of land on valuation dates under consideration was much more than mere Rs. 62,300 which had been shown by assessee. Information means 'instruction or knowledge derived from external source concerning facts or particulars, or as to law relating to matter bearing on assessment'. In case decided by Bombay High Court on which assessee has relied, income-tax assessment was involved and, on basis of information pertaining to assessment year 1963-64, ITO had sought to reopen assessment for assessment year 1960-61 and it was argued by assessee that there being nothing to show that circumstances existing in 1963-64 had also existed in 1960-61, action for reassessment was bad in law. This argument of assessee was accepted. But in present case, information was that land had been sold at price much higher than value which had been disclosed by assessee. sale price which land fetched in 1982 definitely instructed WTO about its likely value on valuation dates, 31-3- 1979 and 31-3-1980. We are hence of view that there was information in consequence of which WTO came to believe that wealth chargeable to tax had escaped assessment. We hold that provisions of section 17(1)(b) are applicable to facts of case in respect of both assessment years. 9. Another contention raised by assessee before us was that WTO was not justified to infer from fact of sale of land for Rs. 8.50,000 in 1982 that value of land on relevant valuation dates, namely, 31-3-1979 and 31-3-1980 was much higher than value of Rs. 62,300 which had been disclosed by assessee. It was thus stated that it could not be said that there was any information about value of property being in fact higher than value that had been disclosed by assessee. It was hence stated that action for reassessment was uncalled for, as there was no reason to believe that any wealth had escaped assessment. It is held by us that it was not necessary for WTO to come to definite conclusion about value of land on valuation dates, prior to taking up reassessment proceedings. only thing that is necessary is that there must be reasonable ground for his coming to believe that there has been escapement of assessment of wealth. sale of land at Rs. 8,50,000 within two years of valuation dates under consideration afforded reasonable ground for such belief. Whether reason was adequate or sufficient for such belief is not required to be gone into. We, hence, uphold action for reassessment. 10. Now further question whether reassessment proceedings, which had been initiated under section 17(1)(a), could be sustained by treating notice as being one under section 17(1)(b), will be examined. contention of assessee is that AAC having found that conditions for initiating reassessment proceedings under section 17(1)(a) were not satisfied, AAC was not justified to still sustain reassessment proceedings on ground that was not justified to still sustain reassessment proceedings on ground that conditions laid down under section 17(1)(b) were satisfied. assessee has on this behalf relied on decision of Bombay High Court in case of New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. v. CIT [1977] 107 ITR 760. High Court has observed: " propositions that emerge from consideration of above authorities are as follows: (1) If notice under section 34(1) expressly specifies that it is under clause (a) thereof, no reassessment in respect of any item can be made under clause (b) of that section under jurisdiction to reassess acquired by that notice. In such case, no question of period of limitation in respect of clause (b) being applicable would, therefore, arise. I do not approve of view taken by Madras High Court in Veerappa Chettiar's case [1973] 91 ITR 116 (Mad.) and by Calcutta High Court in P.R. Mukherjee's case [1956] 30 ITR 535 (Cal.), both of which have been cited above, that Income-tax Officer has jurisdiction in such case to reassess items under clause (b) also provided that reassessment proceedings were initiated within period of four years laid down in regard to section 34(1)(b). " In this case decided by Bombay High Court, reassessment proceedings under section 34(1)(a) of Indian Income-tax Act, 1922 ('the 1922 Act'), had been initiated. question that had arisen was whether in re- assessment such items which satisfied conditions of section 34(1)(b) and not of section 34(1)(a) could also be brought to tax. question of law which was referred to High Court was whether in t h e course of making reassessments after having validly initiated reassessment proceedings under section 34(1)(a) in respect of certain other items of escaped income, ITO could also add back, in computing business income under section 10 of 1922 Act, sum of Rs. 66,850 (for assessment year 1947-48) and Rs. 24,606 (for assessment year 1950- 51) which were allowed at time of original assessments, it being common ground that said amounts were not permissible deduction under section 10. question of adding back sums of Rs. 66,850 and Rs. 24,606 could arise under jurisdiction assumed under section 34(1)(b). On behalf of assessee, it was contended that in assessment reopened under section 34(1)(a), only such items as satisfied conditions of section 34(1)(a) could be brought to tax. original assessments for assessment years 1947-48 and 1950-51 were made on 20-2-1950 and 29-2-1952, respectively, and in those assessments ITO had allowed claim of assessee to deduct interest payable to one V.M. & Co. In respect of assessment for assessment year 1951-52, however, Tribunal held that interest payable by assessee to V.M. & Co. was not permissible deduction in computing assessee's income from business under section 10. In meantime, in respect of some other items, ITO had initiated reassessment proceedings for assessment years 1947-48 and 1950-51 under section 34(1)(a). In reassessments framed by him, he also disallowed interest payable to V.M. & Co. which had been allowed as deduction in original assessments. It was observed by High Court that in course of making reassessment after having initiated reassessment proceedings under section 34(1)(a) in respect of certain items of escaped income, ITO could not rope in such items which did not satisfy conditions of section 34(1)(a), but satisfied conditions of section 34(1)(b). It was observed that under jurisdiction to reassess under clause (a) of section 34(1), no reassessment of any item could be made under clause (b). 11. facts of case of New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. go to show that proceedings under section 34(1)(a) were, in that case, validly initiated and in reassessment, it was not only items which satisfied conditions of section 34(1)(a) which were brought to tax, but also such items which satisfied conditions of section 34(1)(b). question which had arisen in that case was whether under jurisdiction to reassess, assumed under one of clauses, could items pertaining to other clause also be brought to tax? High Court had stated that it could not be done. In that case, jurisdiction to reassess had been validly assumed under one of clauses. There were items satisfying conditions of clause (a) and also items satisfying conditions of clause (b), for reassessment. question that had arisen was whether, under jurisdiction assumed to reassess items that fell under one of clauses, could items falling under other clause be also brought to tax. But in case under consideration, there are no such two sets of items, some falling under clause (a) and some falling under clause (b). 12. In instant appeals, it is not case that items satisfying conditions of both clauses (a) and (b) of section 17(1) were sought to be taxed in course of reassessment proceedings initiated under one of clauses. In cases under consideration, reassessment proceedings had been initiated under clause (a) of sub-section (1) of section 17. It was subsequently held at appellate stage by AAC that action for reassessment under clause (a) was not valid, on ground that there was no failure on part of assessee to disclose material facts necessary for assessment. But AAC, however, held that reassessment proceedings were justified, as clause (b) of section 17(1) became applicable to facts of case. He, hence, sustained reassessment proceedings. It will thus be obvious that here question is not that items satisfying conditions of both clauses (a) and (b) are sought to be brought to tax, in reassessment proceedings initiated under o n e of clauses. Hence, in all humility, We feel that decision of Bombay High Court in case of New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. which was given in different context, will not be applicable to facts of present case. In that case reassessment proceedings under clause (a) of section 34(1) had been validly taken. Hence question that had arisen was whether in reassessment only such items were to be brought to tax which satisfied conditions of section 34(1)(a) or whether such other items which satisfied conditions of section 34(1)(b) could also be brought to tax. In case under consideration, appellate authority is of view that action under clause (a) of section 17(1) has not been validly taken. Hence question that arises for consideration is whether action for reassessment, in case it is maintainable under clause (b), should be sustained or not. It is question different from one which had been referred to Bombay High Court in case of New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. 13. We will draw attention of Gujarat High Court in case of CWT v. Chhatrshal Sinhji D. Zala [1982] 135 ITR 826. In that case, for assessment years 1961-62 to 1967-68, WTO completed assessments of assessee accepting value of property declared by assessee at Rs. 1 assessee accepting value of property declared by assessee at Rs. 1 lakh. For assessment year 1968-69, assessee declared market value of property at Rs. 3,77,200 on basis of valuer's report. In view of valuation made by valuer, WTO reopened assessments under section 17(1)(a) on ground that assessee had failed to disclose fully and truly all material facts necessary for assessment of his net wealth for assessment years 1961-62 to 1967-68, and reassessed net wealth taking into account enhanced value of property. Tribunal held that assessee had disclosed assets, viz., property in his returns and its estimated value was also mentioned in returns and it could not be said that assessee had omitted or failed to disclose fully and truly all necessary facts and that, therefore, assessee's case did not fall within mischief of section 17(1)(a). Tribunal further held that for assessment years 1966-67 and 1967-68, WTO having initiated proceedings under section 17(1)(a), could not reopen assessment under section 17(1)(b). High Court held as under: " ...that since assessee in his returns for assessment years 1961-62 to 1967-68, disclosed property as his asset and offered its estimated value for wealth-tax and WTO accepted valuation declared by assessee, it could not be said that assessee had omitted or failed to disclose fully and truly all material facts necessary for assessment of his net wealth and reopening of assessment was not valid under section 17(1)(a). (ii) Clauses (a) and (b) of sub-section (1) of section 17 contemplate different situations for exercise of jurisdiction but same set of facts may form basis for inference under section 17(1)(a) and may also constitute 'information' under section 17(1)(b). In such case, even if there was no omission or failure on part of assessee to disclose fully and truly all material facts, action could be taken under section 17(1)(b). It is, therefore, immaterial whether notice for reopening of assessments was issued under clause (a) or clause (b) of section 17(1). valuer's report submitted by assessee himself for assessment year 1968-69 constituted information on basis of which assessments could be reopened under section 17(1)(b). Therefore, for assessment years 1966-67 and 1967-68, reopening of assessments under section 17(1)(b) was valid. " 14. Attention is also drawn to what Punjab and Haryana High Court observed in case of CIT v. Ess Ess Kay Engg. Co. (P.) Ltd. [1982] 137 ITR 446: " Section 147 is not charging section. It merely provides machinery whereby income which had escaped assessment or had been under- assessed in relevant assessment years could be brought into network of taxation. separate provisions limiting conditions under which notices under clause (a) or clause (b) of section 147 can be issued and assessment has to be completed do not indicate that clause (a) or clause (b) deal with two separate jurisdictions. It is true that there are separate limitations prescribed for different contingencies but some of conditions are common and provided conditions which are common are all fulfilled and other limitations of other clause are also fulfilled, then action taken in respect of one might be justified with reference to powers under other clause. Even though ITO might have chosen to make assessment under more stringent and onerous provisions of section 147(a), his action might be sustained under section 147(b) provided conditions precedent are satisfied and are found on record. " 15. Attention is also drawn to decision of Delhi High Court in case of CIT v. Banwari Lal & Sons Ltd. [1982] 137 ITR 91. assessee- company had let its building to American embassy at rent of Rs. 3,212. During accounting year relevant to assessment year 1961-62, embassy vacated building and building was requisitioned by Government for its own use. rent was in dispute. For assessment year 1961-62, assessee filed its return with note appended thereto referring to requisitioning of building; question of monthly rent being in dispute; and fact of building let out to embassy at rent of Rs. 3,212 per month being exceptional transaction. ITO completed assessments for assessment years 1961-62 to 1965-66 calculating annual value on basis of rent of Rs. 3,212. Thereafter, ITO found that rent fixed by Government was Rs. 4,658 per month and he initiated reassessment proceedings under section 147(a) of 1961 Act, to bring to tax difference. Tribunal held that assessee could not be said to have failed or omitted to disclose all material facts necessary for assessment and also that proceedings initiated under section 147(a) could not be saved under section 147(b). On reference, it was held by Delhi High Court that escape of income from assessment was not due to failure or omission on part of assessee to disclose fully and truly all material facts and, hence, reassessment could not be initiated under section 147(a). High Court, however, further held as under: " That, however, information about enhanced rent was information within meaning of section 147(b) and Tribunal had jurisdiction to convert o r alter assessments as assessments under section 147(b) and maintain them as such. " 16. Taking into consideration what has been stated above, we are, hence, o f view that AAC was justified to maintain validity of reassessment proceedings under section 17(1)(b). WTO had jurisdiction to initiate reassessment proceedings under section 17(1)(b). WTO, however, chose to proceed under more stringent provisions of section 17(1)(a) on ground that assessee had failed to disclose fully and truly all material facts necessary for her assessment. If appellate authority comes to conclusion that on facts of case provisions of clause (a) did not become applicable, it does not mean that reassessments are to be struck down as being invalid. In case jurisdiction assumed by WTO for making reassessments is maintainable under section 17(1)(b), it is to be maintained. broad question to be decided is whether WTO had correctly assumed jurisdiction to reassess. It may be that under some impression he has chosen to proceed under clause, which, on examination, is not found to be applicable. But it cannot be denied that he had competence to assume jurisdiction under other clause. We fail to understand as to how we can, under circumstances, say that he has not assumed jurisdiction in accordance with law. mere mention of different clause, which in appeal is not considered to be applicable, will not detract from competence to assume jurisdiction to reassess which law has conferred on him. question which we have to consider is whether law actually confers jurisdiction, which he has consider is whether law actually confers jurisdiction, which he has assumed. Looked at thus, we find that WTO has assumed jurisdiction to reassess properly. We, hence, uphold order of AAC and reject assessee's ground of appeal that assessments are ab initio invalid. 17. Another contention raised by assessee was that AAC was not justified to give direction in his order that WTO should refer matter of valuation of land to departmental valuation cell before completing assessment afresh. 18. assessee has drawn our attention to decision of Tribunal, Chandigarh Bench in case of Rattan Chand & Sons v. WTO [1984] 18 TTJ (Chd.) 267 for assessment year 1975-76. Respectfully following this decision, we vacate direction of AAC on this behalf. However, it is left to discretion of WTO to refer matter to valuation cell, if he so desires. 19. Appeals are partly allowed. *** SAU JAMNADEVI BALKISAN JAJU v. FIRST WEALTH TAX OFFICER
Report Error