High Court Of Madhya Pradesh : Gwalior Bench
CIT vs. Digvijay Singh
Section WT 17(1)(a), WT 17(1)(b), WT 27A
Asst. Year 1979-80 to 1985-86
Subhash Samvatsar & A.P. Shrivastava, JJ.
Misc. Appeal Nos. 296 to 298 & 301 to 303 of 1999 and 300 of 2000
28th March, 2006
Counsel Appeared
R.D. Jain with Ku. Shraddha Dubey, for the Appellant : Vivek Jain, for the Respondent
JUDGMENT
Subhash Samvatsar, J. :
This order shall govern disposal of this Misc. Appeal No. 296 of 1999 as well as Misc. Appeal Nos. 297 of 1999, 298 of 1999, 300 of 2000, 301 of 1999, 302 of 1999 and 303 of 1999, which are filed under s. 27A of the WT Act, 1957, for short, “the WT Act”, challenging orders passed by the Tribunal, Agra Bench, Camp at Delhi, in WTA Nos. 430 to 434/Del/1994 by order dt. 30th Nov., 1998.
2. All these miscellaneous appeals were admitted by this Court on 18th Oct., 2000, on the following three substantial questions of law :
“(a) Whether the impugned order stands vitiated in law on account of it being based on the decision in the case of Smt. Asha Digvijaya Singh in WTA Nos. 1253 to 1259/Del/1988 of the Tribunal, Delhi Bench ‘A’, stood set aside vide the decision in the case. MCC No. 73 of 1991, CWT vs. Smt. Asha Digvijaya Singh decided on 6th Aug., 1996, by this Court ?
(b) Whether the Tribunal has erred in law in holding that there was no underassessment in terms of s. 17 of the WT Act requiring reopening of the assessment ? (c) Whether the finding of the Tribunal to the effect that net wealth as declared in the relevant assessment years varied and was not on the same figure is vitiated on account of error apparent on the face of the record ?”
3. The brief facts of the case are that the late Rajmata Aparna Kumari was assessed during the years 1979-80 to 1985-86 under s. 16(1) of the WT Act. The returns filed by the assessee were accepted. Subsequently, a notice dt. 8th Oct., 1987, was served under s. 17 of the WT Act for reopening of the assessment. As per the returns the assessee has disclosed her wealth in the return as under :
Assessment years Value of the wealth shown in the return and assessed (Rs.)
1980-81 1,40,800
1981-82 1,35,100
1982-83 1,49,600
1983-84 1,85,600
1984-85 1,99,400
1985-86 1,92,400
1986-87 2,09,400
After service of the notice for reassessment, order Annex. A-1 was passed assessing the value of the assets at Rs. 3,67,000. This order was passed on 30th March, 1990. This order was challenged by the assessee by filing an appeal. The appeal was allowed by the appellate authority against which the Department preferred appeals before the Tribunal and all these appeals were dismissed by a common order dt. 30th Nov., 1998. Hence, the present appeals have been filed.
4. Counsel for the respondent raised a preliminary objection about the maintainability of the appeals. According to him the total tax effect in every appeal is around Rs. 2,000. He invited the attention of this Court to notification issued under s. 10 of the WT Act, which provides that appeal could not be preferred to the High Court in cases where a debt of wealth-tax does not exceed Rs. 25,000. He invited the attention of this Court to the judgment of the Bombay High Court in the case of CIT vs. Zoeb Y. Topiwala (2005) 199 CTR (Bom) 656 : (2006) 284 ITR 379 (Bom) wherein the Bombay High Court has held that the directions issued by the Board dt. 27th March, 2000, directing the Department not to raise questions of law where the tax effect is less than Rs. 2 lakhs is binding on the Revenue. The appeal which was filed having tax effect of less than Rs. 7,000 was dismissed as not maintainable by the Bombay High Court by holding that the directions issued by the Board are binding on the Department.
1. The next case relied upon by him is in the case of CIT vs. Camco Colour Co. (2002) 173 CTR (Bom) 255 : (2002) 254 ITR 565 (Bom) in which the Bombay High Court has reproduced the circular issued by the Ministry of Finance dt. 27th March, 2000, in which it is directed that appeals under s. 260A of the IT Act with tax effect of less than Rs. 2 lakhs should not be preferred. In para 5 of the said circular it is mentioned that the said circular is applicable to wealth-tax, gift-tax, estate duty, etc. In that case also the appeal was dismissed by the Bombay High Court by holding the same as not maintainable. A number of other judgments were relied upon by counsel for the appellant for supporting his arguments on the said question, including CIT vs. Kelvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 : (2002) 256 ITR 1 (Del)(FB), which is a Full Bench judgment of the Delhi High Court, UCO Bank vs. CIT (1999) 154 CTR (SC) 88 : (1999) 4 SCC 599 and CIT vs. Pithwa Engineering Works (2005) 197 CTR (Bom) 655 : (2005) 276 ITR 519 (Bom). In all these cases appeals were dismissed on the ground that the tax effect involved in the appeals is very low. In the present case also the tax effect is less than Rs. 5,000 per year hence the appeals are not maintainable. However, to complete the judgment we proceed to decide other grounds.
2. Counsel for the respondent has also urged that the Department has not preferred appeal against an order passed for the asst. yr. 1986-87 and orders passed in the cases two other assessees, i.e., Asha Devi and Laxmansingh, are also not challenged. Hence, this appeal be dismissed. The contention of learned counsel for the appellant is that these points were not raised by the appellant before the Tribunal and they cannot be decided in these appeals. We find force in the arguments of counsel for the appellant. The order for the year 1986-87 is not on record. Hence, appeals cannot be dismissed on that account.
3. After perusing the questions framed by this Court in these appeals, we find that question No. (a) is not correctly framed. Question No. (a) which is framed is that the decision in the case of Smt. Asha Digvijaya Singh in WTA Nos. 1253 to 1259/Del/1988 stood set aside by this Court in M.C.C. No. 73 of 1991. After perusing the said judgment which is reported in CWT vs. Smt. Asha Digvijaya Singh (1997) 143 CTR (MP) 72 : (1998) 234 ITR 77 (MP), we find that the judgment in Smt. Asha Digvijaya Singh case is not set aside by this High Court and this Court has merely formulated questions of law for reference to the High Court. It is true that once this High Court formulated the questions with a direction to the Tribunal to send a statement of fact for decision on the said questions the said judgment cannot be said to have attained finality but still it cannot be said that the judgment of the Tribunal is set aside by the High Court.
4. As regards question Nos. (b) and (c) framed by this Court the gist of the questions is whether the proceedings under s. 17 of the WT Act are justified. For this purpose it is necessary for this Court to first refer to s. 17 of the WT Act. The relevant portions of the said section read as under : “17. Wealth escaping assessment.—(1) If the AO— (a) has reason to believe that by reason of the omission or failure on the part of any person to make a return under s. 14 of his net wealth or the net wealth of any other person in respect of which he is assessable under this Act for any assessment year or to disclose fully and truly all material facts necessary for assessment of his net wealth or the net wealth of such other person for that year, the net wealth chargeable to tax has escaped assessment for that year, whether by reason of underassessment or assessment at too low a rate or otherwise; or(b) has, in consequence of any information in his possession, reason to believe, notwithstanding that there has been no such omission or failure as is referred to in cl. (a), that the net wealth chargeable to tax has escaped assessment for any year, whether by reason of underassessment or assessment at too low a rate or otherwise;”
1. Sec. 17 is divided in two parts, i.e., 17(1)(a) and 17(1)(b). In the present case notice does not mention the section but that itself is not sufficient to vitiate the notices. Notice even does not refer to any reason reopening the assessment, but the reasons are assigned to the respondent assessee on his demand as has been stated in the assessment order dt. 30th March, 1990. The reasons which are assigned to the respondent-assessee are two-fold. Firstly, relating to the value of ornaments, the petitioner has claimed impurity in the ornaments to the extent of 25 per cent, while in case of silver utensils at the rate of 30 per cent. According to the assessment order the ornaments being old the impurity can be allowed only to the extent of 15 per cent, for the gold ornaments and 20 per cent for the silver utensils. Thus, the value of the ornaments disclosed by the respondent-assessee is much higher than shown in the return.
2. Another ground is that the assessee has not declared the correct value of a flat at Delhi. The assessee is a co-owner of the flat which is partly used for residential purpose and partly let out to a tenant. The assessee has 1/3rd share in the flat and has shown the value of his share at Rs. 17,737 for the asst. yr. 1979-80 and Rs. 23,803 for the asst. yr. 1986-87 and claimed exemption under s. 5(1)(iv) of the WT Act. As per the WTO the value should be worked out on the net maintainable rent/house tax divided into 16 for repairs, multiplying by 100/8 as per r. 1BB and thus the property was underassessed or the assessment is too low and therefore the assessment should be reopened. It is also alleged that the assessee has 1/7th share in the Fort and the assessee has not properly valued his share in the Fort. But, this point was decided by the WTO in favour of the assessee.
3. Now, the question is whether the assessee has not truly or correctly disclosed the material facts to exercise the powers under s. 17(1)(a) of the WT Act that the WTO has any information in his possession to show that the property was valued too low to escape the assessment to exercise powers under s. 17(1)(b).
4. Shri R.D. Jain, learned senior advocate, appearing for the appellant, relied upon a judgment of the apex Court in the case of Phool Chand Bajrang Lal vs. ITO (1993) 113
CTR (SC) 436 : (1993) 4 SCC 77, wherein, the apex Court has construed the words “reasons to believe”. The apex Court has held that the words “reasons to believe” are based on specific, reliable and relevant information subsequently received by the AO, which tends to expose untruthfulness or inadequacy of the material disclosed by the assessee on the basis of which the original assessment was based. There is no dispute about this proposition. The question is whether the WTO has any information in his possession which tends to expose untruthfulness or inadequacy of the material disclosed. These sections are also considered by the apex Court in the case of CIT vs. Corporation Bank Ltd. (2002) 174 CTR (SC) 577 : (2002) 254 ITR 791 (SC). In that case the assessee bank has not represented the case of loan recovery and, therefore, notice under s. 147(a) of the IT Act was issued. The apex Court has held that the assessee has furnished particulars pertaining to amount as not recoverable and has filed the statement along with the original return disclosing full details of interest and there is no failure on the part of the assessee to disclose wholly and truly material facts.
5. In the present case the impugned order shows that the information gathered by the WTO is on the basis of some audit objections. The apex Court in the case of Indian & Eastern Newspaper Society vs. CIT (1979) 12 CTR (SC) 190 : (1979) 119 ITR 996 (SC), has considered this aspect and held that the opinion of an audit party of the IT Department cannot be regarded as “information” within the meaning of s. 147(b) of the IT Act for the purpose of reopening of an assessment. Similar view is taken by this Court in the case of Lokendra Singh Rathore vs. WTO (1985) 153 ITR 466 (MP), and held that s. 17(1)(a) of the WT Act does not empower the Revenue to reopen a final assessment where by oversight, carelessness or inefficiency on the part of the WTO proper investigation was not carried out though all the primary facts which the assessee was required to place were before him.
6. In the present case the assessee has disclosed gold ornaments and silver utensils. The only ground for reassessment is that he has claimed impurity at the rate of 25 per cent for gold ornaments and 30 per cent for silver utensils when as per the WTO it should be not more than 15 per cent in gold ornaments and 20 per cent in silver utensils. Thus, it cannot be said in the present case that the assessee has not truly and fully disclosed the material fact relevant for the assessment.
7. Similarly, as regards the valuation of flat is concerned, the WTO while reopening has merely adopted some other system for valuation. The material fact which the assessee was required to place in his return was the details of the flat. Merely because the valuation can be arrived at by some other method does not mean that the assessee has not truly and correctly disclosed all material facts required to be disclosed by him and in such a situation the Tribunal has found by the impugned judgment that there was no further information made available to the WTO for reopening of the case and there is no material on record to show that the assessee did not fully disclose the material facts which led to escapement or undervaluation of wealth or the wealth was assessed at a lower figure.
8. This apart, the audit report could not form the basis for invoking the provisions of s. 17(1)(b) of the WT Act. In such situation in answer to question Nos. (b) and (c) we hold that the Tribunal was right in dismissing the appeal filed by the Department and maintaining the order of the appellate authority.
9. We do not find any merit in these appeals. Hence, all the appeals, stated above stand dismissed on the merits as well as on the ground of maintainability with no order as to costs.
[Citation : 292 ITR 314]
