C.K. GOVINDANKUTTY NAIR v. WEALTH-TAX OFFICER
[Citation -2006-LL-0531]

Citation 2006-LL-0531
Appellant Name C.K. GOVINDANKUTTY NAIR
Respondent Name WEALTH-TAX OFFICER
Court ITAT
Relevant Act Wealth-tax
Date of Order 31/05/2006
Assessment Year 1989-90, 1990-91, 1991-92
Judgment View Judgment
Keyword Tags reassessment proceedings • change of opinion • reason to believe • dissolution deed • original return • wealth-tax act • valuation date • net wealth • net value
Bot Summary: The Assessing Officer completed the assessments accepting the valuation declared by the assessee for all the three assessment years under consideration. The Assessing Officer observed that the building with land of 10.580 cents appurtenant thereto purchased by the firm in which the assessee was a partner and which devolved to the assessee along with some other properties purchased under five other registered documents as per dissolution deed, is distinctly identifiable and hence the assessee was eligible for the benefit of valuation under Schedule-III only in respect of the said building with 10.580 cents and the remaining 30.265 cents of land was to be valued at market rate. AR of t h e assessee submitted that the assessee had disclosed fully and truly all material facts necessary for the assessment in the returns of net wealth and at the time of assessment proceedings under section 16(3) of the Act. From the discussion of the Assessing Officer in the original assessment orders, it is clear that the assessee has given, all the facts which are necessary for completion of his assessments. In the case of Foramer France, the Hon'ble Supreme Court has affirmed the judgment of the Hon'ble Allahabad High Court in the same case wherein the Hon'ble has held that if there is no failure on the part of the assessee to disclose fully and truly all material facts then as per the proviso to section 147 of the Act, no action can be taken by the Assessing Officer if the original assessment has been made under section 143(3) and a notice under section 148 will be illegal if issued more than four years after the end of the relevant assessment year. The legislative intent in putting the bar on the powers of the Assessing Officer vide the proviso where the Assessing Officer has already exercised his powers to determine the correct assessable wealth and during that process the assessee has also appeared before the Assessing Officer and disclosed all the facts, is very clear that again and again under the pretext of determining the assessable wealth, the assessee should not be put to hardships. In our considered opinion, the assessee is protected by the proviso as admittedly the reassessment proceedings are initiated after four years from the end of the respective assessment years and original assessments were also under section 16(3) of the Wealth-tax Act.


These appeals by assessee are directed against common order of t h e Commissioner of Wealth-tax (Appeals)-V, Kochi dated 6-1-2004 for assessment years 1989-90, 1990-91 and 1991-92. Since common issue is involved in all these appeals, they were heard together and are being disposed of by consolidated order for sake of convenience. 2. assessee has raised several grounds, but sole common issue involved in these appeals is against reopening of assessments under section 17 of Wealth-tax Act. 3. facts of case can be briefly stated as follows: assessee filed returns of net wealth for assessment years 1989-90, 1990-91 and 1991-92 o n 31-10-1989, 28-12-1990 and 19-12-1991 declaring net wealth of Rs. 28,04,100, Rs. 12,23,800 and Rs. 14,93,600 respectively. For assessment year 1989-90, revised return was filed on 30-11-1990 declaring net wealth of Rs. 17,22,600. Assessing Officer assessed net wealth of assessee at Rs. 18,20,500, Rs. 14,73,500 and Rs. 17,74,200 for assessment years 1989-90, 1990-91 and 1991-92 respectively. In return filed originally for assessment year 1989-90 value of 40.845 cents of land with building at Ernakulam was taken by assessee at Rs. 16,00,000 for purpose of computation of interest in M/s. Sreekumar Construction Co., declaring net value of interest in said firm at Rs. 6,81,851. assessee filed revised return to avail of benefit of valuation under Schedule-III as envisaged in section 7(2) of Act and value determined and declared for said 40.845 cents of land with building in revised return was Rs. 1,68,500 which is same value declared for assessment years 1990-91 and 1991-92 also. Assessing Officer completed assessments accepting valuation declared by assessee for all three assessment years under consideration. 4. above property in question was possessed by firm M/s. Sreekumar Construction Co. in which assessee was partner. said firm was dissolved as per dissolution deed dated 7-4-1986 as result of which said properties were devolved to assessee. Assessing Officer noticed that properties so devolved included 10.580 cents of land with building purchased by firm through single document. Section 7(2) of Act provides for valuation under Schedule-I in respect of house belonging to assessee and exclusively used by him for residential purposes throughout year. As per Assessing Officer, since 10.580 cents of land with building purchased as per one document is distinctly identifiable, valuation of entire plot of 40 and odd cents and building as one unit under Schedule-III resulted in escapement of net wealth. Assessing Officer, accordingly, issued notices under section 17 of Act for assessment years under appeal on 11-3-1997 in response to which assessee filed revised returns declaring net wealth as aforesaid. assessee vide his letters dated 17-4-1997, 6-1-1998 and 10-1-1998 objected to reopening of assessments. assessee further objected to reopening of completed assessments on basis of "information" of audit party. Assessing Officer rejected assessee's objections. Assessing Officer observed that building with land of 10.580 cents appurtenant thereto purchased by firm in which assessee was partner and which devolved to assessee along with some other properties purchased under five other registered documents as per dissolution deed, is distinctly identifiable and hence assessee was eligible for benefit of valuation under Schedule-III only in respect of said building with 10.580 cents and remaining 30.265 cents of land was to be valued at market rate. Assessing Officer, accordingly, determined net wealth of assessee at Rs. 32,48,000, Rs. 29,03,200 and Rs. 32,01,000 for assessment years 1989-90, 1990-91 and 1991-92 respectively. 5. assessee carried matter in appeal before CWT (Appeals). According to CWT (Appeals), for reopening assessment under Wealth-tax Act possession of new information was not necessary. What was required was reason to believe by Assessing Officer that assessable wealth has escaped assessment. He, accordingly, upheld reopening of assessments. As far as taxability of 40.845 cents of land was concerned, CIT (Appeals) also upheld Wealth-tax Officer's action. Now, assessee has challenged impugned order of CWT (Appeals) before us. 6. We have heard Shri M.P. Ittyrah, ld. CA for assessee and Shri K.K. John, ld. Departmental Representative for revenue. ld. AR of t h e assessee submitted that assessee had disclosed fully and truly all material facts necessary for assessment in returns of net wealth and at time of assessment proceedings under section 16(3) of Act. It was further submitted that valuation of 40 cents of land with building appurtenant thereto was adopted by assessee as per Schedule-III which was accepted by Assessing Officer. It was further submitted that previous owner had purchased properties in 1977 which were adjacent lands and converted into single block and he has been using said property as single unit for 9 years. said property was transferred to assessee in year 1986 by single document. It was contended that this is not fresh information in possession of Assessing Officer and assessee had furnished those details at time of hearing under section 16(3). It was further contended that reopening notices issued under section 17 after four years from end of t h e relevant assessment years is invalid and against law. It was further contended that reopening of completed assessments was based on mere change of opinion which is not permissible in law. ld. AR relied on following precedents:- (i) CIT v. Foramer France [2003] 264 ITR 566 (SC).(ii)CIT v. Bhauji Lavji [1971] 79 ITR 582 (SC). (iii)ITO v. Nawab Mir Barkat Ali Khan Bahadur [1974] 97 ITR 239 (SC). (iv)Sirpur Paper Mills Ltd. v. ITO [1978] 114 ITR 404 (AP). (v)Century Enka Ltd. v. ITO [1983] 143 ITR 629 (Cal.). 7. On other hand, ld. Departmental Representative vehemently submitted that though as per proviso, if original assessment is made under section 16(3) of Act, then there are limitations on powers of Assessing Officer, but at same time, there may be occasion even with due diligence, Assessing Officer may miss some important issues and for that purpose, Explanation is added to proviso. He supported orders of Assessing Officer as well as CWT (Appeals). 8. We have heard rival submissions of parties. We have also carefully considered facts of these appeals as per record available before us. We have also carefully considered principles in precedents relied on by ld. AR. Now, as far as basic facts are concerned, original assessments were completed for assessment years 1989-90,1990-91 and 1991-92 under section 16(3) of Wealth-tax Act vide orders dated 28-2-1991, 30-3-1993 and 30-3-1994 respectively. As far as issue of reopening of is concerned, grievance of revenue as noted by Assessing Officer, is relating to value of 40.84 cents of land with building at Ernakulam for purpose of computation of interest in M/s. Sreekumar Construction Co. said property was belonging to M/s. Sreekumar Construction Co., firm in which assessee was partner. said firm was dissolved vide dissolution deed dated 7-4-1986 and properties in question were devolved on assessee which included 10.58 cents of land with building purchased by firm through single document. In opinion of Assessing Officer, section 7(2) of Act envisages valuation under Schedule-I in respect of house belonging to assessee and exclusively used by him for residential purposes throughout year. According to Assessing Officer, since 10.58 cents of land and building purchased as per one document was distinctly identifiable and valuation of entire plot of 40 and odd cents and building as one unit under Schedule-III resulted in escapement of net wealth. 9. On background of above facts, we will have to examine provisions of section 17 of Act which vests power or jurisdiction on Assessing Officer if wealth liable to tax has been escaped. At same time, proviso is added to section 17 which restricts power or jurisdiction of Assessing Officer to take action under section 17 of Act. Section 17 as it was brought on statute book with effect from 1-4-1989 reads as under:- "17. (1) If Assessing Officer has reason to believe that net wealth chargeable to tax in respect of which any person is assessable under this Act has escaped assessment for any assessment year (whether by reason of under-assessment or assessment at too low rate or otherwise), he may, subject to other provisions of this section and section 17A, serve on such person notice requiring him to furnish within such period, as may be specified in notice, return in prescribed form and verified in prescribed manner setting forth net wealth in respect of which such person is assessable as on valuation date mentioned in notice, along with such other particulars as may be required by notice, and may proceed to assess or reassess such net wealth and also any other net wealth chargeable to tax in respect of which such person is assessable, which has escaped assessment and which comes to his notice subsequently in course of proceedings under this section for assessment year concerned (hereafter in this section referred to as relevant assessment year), and provisions of this Act shall, so far as may be, apply as if return were return required to be furnished under section 14: Provided that where assessment under sub-section (3) of section 16 or this section has been made for relevant assessment year, no action shall be taken under this section after expiry of four years from end of relevant assessment year, unless any net wealth chargeable to tax has escaped assessment for such assessment year by reason of failure on part of assessee to make return under section 14 or section 15 or in response to notice issued under sub-section (4) of section 16 or this section or to disclose fully and truly all material facts necessary for his assessment for that assessment year: Provided further that Assessing Officer shall, before issuing any notice under this sub-section, record his reasons for doing so. Explanation.-Production before Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by Assessing Officer will not necessarily amount to disclosure within meaning of foregoing proviso. (1A) to (2)** **** " This provision is analogous to section 147 of Income-tax Act, 1961. It is clear from language used by Legislature in provisos that protection is given to assessee in case his assessments are completed by Assessing Officer under section 16(3) of Act and no action can be taken after expiry of four years from end of assessment year and only in following situations, Assessing Officer can initiate proceedings under section 17:- (i) If there is failure, on part of assessee to make return under section 14 or section 15 or in response to notice under sub-section (4) of section 16 or section 17(1). (ii)If assessee fails to disclose fully and truly all material facts necessary for his assessment. 10. Explanation added to sub-section (1) creates certain legal presumptions that production before Assessing Officer of account books or other evidence will not necessarily amount to disclosure and certainly this Explanation relates to situation No. (ii) i.e. failure on part of assessee to disclose fully or truly all material facts necessary for his assessment. 11. As far as issue before us is concerned, that is in respect of valuation of one property which was possessed by firm. On perusal of assessment order passed under section 16(3), it is clear that Assessing Officer has already examined issue of valuation in respect of sale of property. For purpose of putting facts in better light, same are reproduced as under:- ". . . . It was explained that while filing original return assessee did not take into account valuation prescribed under Schedule- III of Wealth-tax Act in respect of 40.845 cents of land with building at Ernakulam. It was explained that this property came into possession of assessee as his share of asset on dissolution of firm, M/s. Sree Kumar Construction Co. and this was included in interest of assessee in firm of M/s. Sree Kumar Construction Co. It is represented that dissolution deed dated 7-4-1986 has already been filed in connection with income-tax assessment of assessee. assessee also filed site plan in which area of building is certified by Cochin Corporation authorities. assessee also produced copy of building tax assessment order of Corporation of Cochin. Since assessee has proved that property of 40.845 cents at Ernakulam is property comprised of land and building, value prescribed under Schedule-III of Wealth-tax Act is to be followed. Therefore, revised return filed by assessee is treated as valid one." 12. Hence, from above noting of Assessing Officer, it is clear that Assessing Officer had already examined issue of valuation of said property. Hence, there is substance in argument of ld. AR that proviso to sub-section (1) of section 17 is applicable as there was no failure on part of assessee to disclose fully and truly all material facts. From discussion of Assessing Officer in original assessment orders, it is clear that assessee has given, all facts which are necessary for completion of his assessments. 13. In case of Foramer France (supra), Hon'ble Supreme Court has affirmed judgment of Hon'ble Allahabad High Court in same case wherein Hon'ble has held that if there is no failure on part of assessee to disclose fully and truly all material facts then as per proviso to section 147 of Act, no action can be taken by Assessing Officer if original assessment has been made under section 143(3) and notice under section 148 will be illegal if issued more than four years after end of relevant assessment year. 14. As regards argument of ld. Departmental Representative that though by virtue of proviso to section 17(1) of Act, powers of Assessing Officer are restricted wherein original assessments are made under section 16(3) of Act, but at same time, by virtue of Explanation to proviso, merely because books of account are produced and documents are produced that will not be sufficient on part of assessee and assessee has to make conscious disclosure of all material facts, is having no substance. legislative intent in putting bar on powers of Assessing Officer vide proviso where Assessing Officer has already exercised his powers to determine correct assessable wealth and during that process assessee has also appeared before Assessing Officer and disclosed all facts, is very clear that again and again under pretext of determining assessable wealth, assessee should not be put to hardships. 15. In this case, on perusal of facts as noted by Assessing Officer in assessment order, it is clear that there was no omission on part of assessee to disclose material facts in respect of issue which is again made subject-matter for reassessments. In our opinion, assessee has disclosed all material facts which were also examined by Assessing Officer as far as issue before us in respect of said property is concerned. In our considered opinion, assessee is protected by proviso as admittedly reassessment proceedings are initiated after four years from end of respective assessment years and original assessments were also under section 16(3) of Wealth-tax Act. Therefore, Assessing Officer was not justified in reopening assessments in respect of assessment years under appeal before us by invoking provisions of section 17 of Wealth-tax Act. We, therefore, cancel reassessment proceedings initiated by Assessing Officer under section 17 of Act for assessment years under appeal and set aside order of CWT (Appeals). 16. In result, all appeals of assessee are allowed. Order accordingly. *** C.K. GOVINDANKUTTY NAIR v. WEALTH-TAX OFFICER
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