Delhi H.C : Whether on the facts and in the circumstances of the case, the Tribunal was right in law in concluding that the WTO had no jurisdiction to consider in the present reassessment proceedings initiated under s. 17(1)(a) of the WT Act for the two asst. yrs. 1966-67 and 1967-68 the question of valuation of the two immovable properties the one at 15, Barakhamba Road, and the other at Paharganj at New Delhi and enhanced the valuation of the said two properties while completing the said reassessments under s. 17(1)(a) of the Act ?

Counsel Appeared

Sanjiv Khanna with Ajay Jha, for the Petitioner : Anoop Sharma with R.K. Raghavan & M. Husain, for the Respondent

JUDGMENT

ARIJIT PASAYAT, C.J. :

These two reference applications involve identical questions and this common judgment shall dispose of each of the cases. At the instance of Revenue, the Income-tax Appellate Tribunal, Delhi Bench-B (for short the Tribunal) has referred the following questions under s. 27(1) of the WT Act, 1957 (for short the Act), for opinion of this Court : “Whether on the facts and in the circumstances of the case, the Tribunal was right in law in concluding that the WTO had no jurisdiction to consider in the present reassessment proceedings initiated under s. 17(1)(a) of the WT Act for the two asst. yrs. 1966-67 and 1967-68 the question of valuation of the two immovable properties the one at 15, Barakhamba Road, and the other at Paharganj at New Delhi and enhanced the valuation of the said two properties while completing the said reassessments under s. 17(1)(a) of the Act ?”

2. Factual position as indicated in statement of the case is essentially as follows. For the asst. yrs. 1966-67 and 1967-68 assessee’s father late Hans Raj Vadera filed returns of wealth on 5th Aug., 1966, and 31st Oct., 1967, disclosing net wealth of Rs. 3,71,188 and Rs. 3,47,924, respectively. Original assessments were completed under s. 16(3) of the Act on 15th May, 1968, accepting net wealth declared. Subsequently, the assessments were reopened under s. 17 of the Act. As in the meantime Shri H.R. Vadera had expired, notices were served on his son, Shri D.R. Vadera (hereinafter referred to as legal heir). In response to the notices he submitted returns and marked them as ‘returns under protest’. The WTO rejected the objections raised about the maintainability of the proceedings and completed reassessments. Net wealth in respect of the two years was determined at Rs. 14,96,612 and Rs. 16,29,924, respectively. In the reassessment proceedings value of the immovable property at 15,Barakhamba Road, New Delhi, was taken to be Rs. 12,54,100 for the first year and Rs. 13,53,100 for the subsequent year. Value of the other property at Paharganj was taken at Rs. 1,00,000 and Rs. 1,20,000,respectively, for the two years. The reassessment orders were assailed before the AAC on several grounds. The main grounds of challenge were that : (a) for reassessment proceedings were initiated in relation to the shares in various companies and it was not permissible to make enhancement of valuation in relation to properties referred to above, and (b) proceedings for reopening assessments were not valid. Though challenge was to the legality of the reopening, it was observed by the AAC that action under s. 17(1)(a) of the Act was validly initiated to reassess wealth in so far as shares in various companies were concerned and to that extent the reassessments made were valid. With regard to enhancement of valuation in respect of the two properties indicated above, it was held to be beyond the scope of reassessment under s. 17(1)(a) of the Act. These conclusions were affirmed by the Tribunal. It has to be noted that the assessee did not assail the conclusions of the AAC about the valid initiation of proceedings under s. 17(1)(a) of the Act relating to shares. On being moved by the Revenue, the Tribunal has referred the question indicated above. Mr. Sanjiv Khanna, learned counsel for the Revenue, submitted that once assessment proceedings are reopened, the entire gamut can be taken note of by the AO and reassessment proceedings are not restricted to only those items for which initially notice was given. Learned counsel appearing for the assessee, on the other hand, submitted that the scope of reassessment is restricted to items in respect of which notice was initially issued. Once the AO decides to reopen the assessment the previous assessment is wiped out and whole assessment proceedings start afresh. Once valid proceedings are started for reassessment, the AO not only has the jurisdiction but also has a duty to levy tax on the entire income or wealth as the case may be, that had escaped assessment during that year. This position was highlighted by the apex Court in V. Jaganmohan Rao & Ors. vs. CIT/CEPT (1970) 75 ITR 373 (SC) : TC 51R.313. Once the assessment is reopened no distinction can be made between those items in respect of which reassessment proceedings are initiated, and those which form part of the wealth or income as the case may be, will have to be taxed. The reopening is done to bring into the net of taxation an item which has escaped assessment. The position was succinctly stated by the apex Court in CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) : TC 51R.314. It, is manifest that once an assessment is reopened, the previous underassessment is set aside and the whole assessment proceedings start afresh. What is set aside is only the previous underassessment and not the original assessment proceedings. An order made in respect to the escaped item does not affect the operative force of the original assessment, particularly if it has acquired finality, and the original order retains both its character and identity. It is only in case of “underassessment”, that the assessment of net income/wealth and tax due has to be recomputed on the entire taxable wealth/income, as the case may be. That being the position, our answer to the identical question referred in the two reference applications is in the negative, i.e., in favour of the Revenue and against the assessee.

[Citation : 246 ITR 348]