High Court Of Punjab & Haryana
Daya Nand vs. Commissioner Of Wealth Tax
Section WT 17
Asst. Year 1991-92
N.K. Sud & Hemant Gupta, JJ.
WT Appeal No. 37 of 2002
18th March, 2004
Counsel Appeared
Lokesh Sinhal, for the Appellant
JUDGMENT
N.K. Sud, J. :
The assessee has filed this appeal under s. 27A of the WT Act, 1957 (for short the “Act”), against the order of the Income-tax Appellate Tribunal, “F” Bench, New Delhi (for short the “Tribunal”), dt. 16th Jan., 2002.
2. Before adverting to the dispute, the relevant facts may first be noted. The original assessment of the assessee for the asst. yr. 1991-92 was finalised under s. 16(3) of the Act on the total wealth of Rs. 18,00,000 vide order dt. 11th Feb., 1992. Thereafter, it came to the notice of the AO that taxable wealth of the assessee had escaped assessment on account of undervaluation of immovable property. It was found that while calculating the value of immovable property under Sch. III to the Act, the assessee had adopted the gross maintainable rent at Rs. 1,51,550 as per his IT return. However, this amount included rent of one property for two months only, whereas the rent receivable for the entire year ought to have been included as provided in r. 3 of Part B of Sch. III to the Act. The correct value of the immovable property on that basis worked out to Rs. 26,92,125 against Rs. 15,23,375 declared by the assessee. Accordingly, the AO was satisfied that the value to the extent of Rs. 11,68,750 (26,92,125-15,23,775) had escaped assessment. Consequently, the assessment was reopened by initiating proceedings under s. 17 of the Act vide notice dt. 22nd July, 1993. Before issuing notice under s. 17, the AO was required to record reasons in writing and also obtain approval of the higher authority. In the present case, although the AO had recorded reasons, he had not obtained the prior approval of the higher authority. Realising this mistake, the AO referred the matter for approval of the Dy. CWT, Rohtak Range, Rohtak, and after obtaining his approval, fresh notice under s. 17 of the Act was issued on 4th March, 1994. In pursuance of the said notice, the AO completed the reassessment on 15th March, 1996, at the total wealth of Rs. 29,33,800 by adding the amount of Rs. 11,68,750 representing the difference in value of the property in question. The assessee preferred an appeal before the CWT(A) against the reassessment order which was dismissed. Aggrieved by the same, the assessee filed further appeal before the Tribunal which has also been dismissed vide impugned order dt. 16th Jan., 2002.
Mr. Lokesh Sinhal, learned counsel for the appellant, did not dispute the fact that while computing the valuation of the property under Sch. III to the Act, the gross maintainable rent in respect of the property in question had been adopted at Rs. 22,000 which represented rent for two months only and not rent for the whole year. Thus, he could not dispute the fact that the property had indeed been undervalued. He, therefore, confined his challenge to the validity of the proceedings under s. 17 of the Act. He contended that all the relevant facts had duly been disclosed by the assessee in the original return and as such the escapement of wealth was attributable to the failure of the AO to draw correct inferences from the facts disclosed. He then contended that the AO had no jurisdiction to issue notice under s. 17 of the Act on 4th March, 1994, when the proceedings on the basis of the earlier notice dt. 22nd July, 1993, were still pending. He also submitted that even otherwise before issuing notice under s. 17 of the Act on 4th March, 1994, the AO had not recorded any reasons as required under the proviso to sub-s. (1) of s. 17 of the Act.
We have heard counsel for the appellant and have perused the impugned orders and find no merit in the contentions raised by him. The determination of value of the immovable property is governed by the arithmetical formula prescribed in Sch. III to the WT Act. It has not been disputed before us that the gross maintainable rent had not been correctly shown for computing the value of the immovable property at Rs. 15,23,775. It is also not in dispute that on the basis of the correct gross maintainable rent, the correct value works out to Rs. 26,92,125. Thus escapement of wealth is not disputed. It also stands proved that the assessee had not correctly disclosed the net maintainable rent which is the basis for computation of value of the property. In the computation of wealth filed along with the return, it had not been disclosed that the net maintainable rent in respect of the property in question was only for two months and not for the whole year. The assessee, therefore, cannot claim to have made true and full disclosure of the material facts necessary for his assessment.
We also do not find any merit in the other objections raised against the validity of the notice dt. 4th March, 1994, under s. 17 of the Act. The earlier notice under s. 17 issued by the AO on 22nd July, 1993, was admittedly not a valid notice as it had been issued without the approval of the higher authority as required by sub-s. (1B) of s. 17 of the Act. Thus notice dt. 22nd July, 1993, was void ab initio and did not give rise to any valid proceedings. Therefore, it cannot be said that when notice under s. 17 was issued on 4th March, 1994, any earlier reassessment proceedings were pending. Similarly, it is not disputed that the AO had duly recorded reasons about the escapement of income on 22nd July, 1993, whereas notice under s. 17 of the Act was issued subsequently on 4th March, 1994. The proviso to sub-s. (1) of s. 17 of the Act provides that before issuing any notice under this section, the AO shall record his reasons for doing so. Thus, the only requirement is that the reasons have to be recorded “before” issuing notice under s. 17 of the Act. In the present case, this requirement stands duly complied with. We are, therefore, satisfied that the Tribunal was justified in upholding the validity of the reassessment proceedings.
6. No other point has been raised. Accordingly, the appeal being devoid of any merit, is dismissed in limine.
[Citation : 270 ITR 245]
