High Court Of Madhya Pradesh : Indore Bench
Commissioner Of Wealth Tax vs. Malhar Rao Tatya Saheb Holkar
Sections WT 16A, WT 17
Asst. Year 1971-72, 1972-73, 1973-74
A.R. Tiwari & S.B. Sakrikar, JJ.
MCC No. 70 of 1989
24th January, 1996
D.D. Vyas, for the Revenue : Subhash Samvatsar, for the Assessee
A.R. TIWARI, J. :
At the instance of the CWT, Bhopal, the Tribunal has stated the case and referred the undernoted question under s. 27(1) of the WT Act, 1957 (for short the `Act’) for our opinion :
“Whether, on the facts and in the circumstances of the case, the Tribunal is correct in holding that reference by the WTO to the Valuation Officer as to the properties was bad in law and as such the report of the Valuation Officer could not be formed the basis for reason to believe that by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of his net wealth the net wealth chargeable to tax has escaped assessment ?”
Briefly stated, the facts of the case are that the assessments for the asst. yrs. 1971-72 to 197374 were made on 28th March, 1974. Thereafter, the WTO referred the matter to the Valuation Officer to ascertain the value of agricultural land and house as on the valuation date. Thereafter, the notice under s. 17 of the Act was served on the assessee on 25th March, 1980. The nonapplicant-assessee did not file any return in response to the notice. The WTO, accordingly, made best judgment assessment under s. 16(5) of the Act vide consolidated order dt. 12th March, 1984 (Annexure-A). The assessee filed the appeal before the CWT(A) who sustained the order (Annexure- B). The assessee then filed second appeal before the Tribunal. The Tribunal held that no reference could be made to the Valuation Officer after completion of the original assessment and as such, the reference was bad in law, and therefore, reopening of the assessment on the basis of the report of the Valuation Officer was without jurisdiction. It, therefore, allowed the appeal and set aside the order (Annexure- A). The applicant, then filed an application under s. 27(1) of the Act. The Tribunal referred the above noted question.
We have heard Shri D.D. Vyas, learned counsel for the applicant and Shri Subhash Samvatsar, learned counsel for the non-applicant.
The AO makes assessment of net wealth of the assessee and determines the amount of wealth-tax payable by the same in terms of s. 16 of the Act. Reference could be made to Valuation Officer under s. 16A of the Act for the purpose of making an assessment under the Act. Under s. 17, the AO may reassess the net wealth if he has reason to believe that net wealth chargeable to tax has escaped assessment for that year.
In the instant case, the assessment was completed under s. 16 of the Act. Reference was not made to the Valuation Officer under s. 16A of the Act for the purpose of making the assessment. After completion of the assessment, the AO referred the matter to the Valuation Officer. On the basis of the report, he formed the opinion and held that he has reason to believe that the net wealth chargeable to tax has escaped assessment. He, therefore, issued notice under s. 17 of the Act. The assessee questioned the validity of the proceeding. The CWT(A), however, rejected the contention and upheld the order of the WTO. The Tribunal, however, vacated the order and held that the proceedings were without jurisdiction.
6. The Tribunal held that no reference could be made after completion of original assessment.
7. Sec. 17 of the Act clearly stipulated that the power can be exercised if the AO has reason to believe that the net wealth chargeable to wealth-tax has escaped assessment. The material to form such a view must be available with the AO. In the instant case, no such material was available with the AO. In fact he referred the matter to the Valuation Officer to collect the material and then initiate proceedings. Such a procedure is not shown to be backed by any provision under the Act. The proceedings initiated by the WTO and upheld by the CWT(A) were manifastly vitiated on account of procedural impropriety.
8. In Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 11 : AIR 1977 SC 429, it is held as under : “At the same time, it must be borne in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issue should not be reactivated beyond stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity.”
9. Counsel for the applicant was unable to point out any error in the view taken by the Tribunal.
10. In view of the aforesaid legal position, we hold that the Tribunal is correct in holding that reference by the WTO to the Valuation Officer as to the properties after completion of assessment, was bad in law and as such, the report of the Officer could not become the basis of furnishing reason to believe that net wealth chargeable to tax has escaped assessment.
11. In the result, we answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue.
12. We, however, make no order as to costs. Counsel fee for each side shall, however, be Rs. 750, if certified.
[Citation: 220 ITR 466]