Punjab & Haryana H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in cancelling the order passed by the then CWT under s. 25(2) of the WT Act, 1957 ?

High Court Of Punjab & Haryana

Commissioner Of Wealth Tax vs. Anil Tayal (HUF)

Sections WT 16A, WT 17, WT 17A(1)(b), WT 25(2)

Asst. Year 1979-80, 1980-81

G.S. Singhvi & Viney Mittal, JJ.

WT Ref. Nos. 7 & 8 of 1990

8th February, 2005

Counsel Appeared

Rajesh Bindal, for the Revenue : Suvir Sehgal, for the Assessee

JUDGMENT

G.S. Singhvi, J. :

In exercise of its power under s. 27(1) of the WT Act, 1957 (for short, ‘the Act’), Income-tax Appellate Tribunal, Delhi Bench ‘C’, Delhi (for short, ‘the Tribunal’), has referred the following question of law for the opinion of this Court in relation to asst. yrs. 1979-80 and 1980-81 : “Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in cancelling the order passed by the then CWT under s. 25(2) of the WT Act, 1957 ?”

For deciding the aforementioned question, we have taken the facts from the statement of the case sent by the Tribunal in this reference and WT Ref. No. 2 of 1999, which relates to levy of penalty under s. 18(1)(a) of the Act for the asst. yr. 1979-80, which is being disposed of by a separate order.

For the asst. yr. 1979-80, the assessee was required to file WT return on or before 31st July, 1979, but he failed to do so despite notice dt. 14th Nov., 1981, issued under s. 17 of the Act which provides for assessment of escaped wealth. He also did not respond to notices dt. 1st Sept., 1982 and 16th Dec., 1985, issued under s. 16(4) of the Act for production of records for the purpose of framing assessment. In the meanwhile, the WTO, vide his letter dt. 21st Jan., 1984, asked the DVO to value the assessee’s property under s. 16A(5) of the Act. The latter submitted report dt. 14th March, 1985, indicating therein that as on 31st March, 1979, the value of the assessee’s property was Rs. 15,62,000.

After more than one year of the submission of the valuation report, the assessee filed return dt. 7th March, 1986, declaring his net wealth at Rs. 2,26,000. The WTO, vide his order dt. 21st March, 1986, framed the assessment. He accepted the report of the registered valuer submitted by the assessee and determined the value of his property at Rs. 7,34,194. While doing so, he ignored valuation report dt. 14th March, 1985, submitted by the DVO. By taking note of this lapse, CWT, Rohtak (hereinafter described as ‘the Commissioner’), initiated proceedings under s. 25(2). He issued notice dt. 22nd Dec., 1987, to the assessee which was duly received by him. On 5th Jan., 1988, Shri Kanwal Nain Sharma appeared on behalf of the assessee and sought adjournment on the ground that the assessee had gone to Kanpur. On the next date of hearing, i.e., 19th Jan., 1988, no one appeared on behalf of the assessee. Therefore, the Commissioner proceeded ex parte and vide his order dt. 26th Feb., 1988, he enhanced the value of the assessee’s wealth by Rs. 8,24,806. The Tribunal allowed the appeal filed by the assessee and held that report dt. 14th March, 1985, could not be taken into consideration for the purpose of assessing wealth because till the filing of return, the WTO did not have the jurisdiction to make reference to the Valuation Officer under s. 16A of the Act. The Tribunal then referred to s. 17A(1)(b) of the Act and held that the WTO did not have the jurisdiction to frame assessment after expiry of 4 years from the date of filing of return or revised return. Shri Rajesh Bindal, learned counsel for the Revenue, argued that the view taken by the Tribunal on the validity of reference made by the WTO to the DVO is patently erroneous and the Commissioner did not commit any illegality by relying on report dt. 14th March, 1985, because in terms of s. 16A(1)(b) r/w s. 16A(4) of the Act, reference can be made to the Valuation Officer even if no return has been filed by the assessee. He further argued that the proceedings of assessment will be deemed to have commenced with the issuance of notice dt. 14th Nov., 1981, under s. 17 of the Act and, therefore, the WTO did not commit any illegality when he asked the DVO to value the assessee’s property. Shri Bindal also assailed the Tribunal’s conclusion on the issue of limitation and argued that it committed a serious error by holding that the assessee’s wealth could not have been assessed on the basis of return filed on 7th March, 1986. He submitted that in view of s. 17A (1)(b) of the Act, the assessment framed on 21st March, 1986, i.e., within 15 days of the filing of return cannot be treated as time-barred. Shri Suvir Sehgal, learned counsel for the assessee, emphasised that in terms of s. 16A of the Act, reference to Valuation Officer can be made only after filing of the return and argued that the Tribunal did not commit any error by recording a finding that report of the Valuation Officer could not have been relied upon for the purpose of enhancing the value of the assessee’s wealth. Shri Sehgal further argued that assessment proceedings can commence only from the date of filing of return and a reference in terms of s. 16A cannot be made to a Valuation Officer where no return has been filed by the assessee. In support of this argument, Shri Sehgal relied on the judgment of Madhya Pradesh High Court in Onkarji Kasturchand (HUF) vs. WTO (1982) 135 ITR 188 (MP), V.K. Jain vs. WTO & Anr. (1992) 193 ITR 89 (All) and Laxmi Devi Jain vs. WTO (1992) 193 ITR 154 (All). He also supported the conclusion recorded by the Tribunal that the order passed by the WTO in the assessee’s case was time-barred and argued that assessment could not have been framed after 4 years from the date of filing of return.

We have given serious thought to the respective arguments. Secs. 16A(1) to (4), 17(1) and 17A (1) of the Act, which have bearing on the decision of the question referred in this case, read as under : “Sec. 16A of the Act 16A. (1) For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, the WTO may refer the valuation of any asset to a Valuation Officer— (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer, if the WTO is of the opinion that the value so returned is less than its fair market value : (b) in any other case, if the WTO is of opinion— (i) that the fair market value of the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. (2) For the purpose of estimating the value of any asset in pursuance of a reference under sub-s. (1), the Valuation Officer may serve on the assessee a notice requiring him to produce or cause to be produced on a date specified in the notice such accounts, records or other documents as the Valuation Officer may require. (3) Where the Valuation Officer is of opinion that the value of the asset has been correctly declared in the return made by the assessee under s. 14 or s. 15, he shall pass an order in writing to that effect and send a copy of his order to the WTO and to the assessee. (4) Where the Valuation Officer is of opinion that the value of the asset is higher than the value declared in the return made by the assessee under s. 14 or s. 15, or where the asset is not disclosed or the value of the asset is not declared in such return or where no such return has been made, the Valuation Officer shall serve a notice on the assessee intimating the value which he proposes to estimate and giving the assessee an opportunity to state, on a date to be specified in the notice, his objections either in person or in writing before the Valuation Officer and to produce or cause to be produced on that date such evidence as the assessee may rely in support of his objections. Sec. 17(1) of the Act 17. (1) If the WTO— (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 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; he may, in cases falling under cl. (a) at any time within eight years and in cases falling under cl. (b) at any time within four years of the end of that assessment year, serve on such person a notice containing all or any of the requirements which may be included in a notice under sub-s. (2) of s. 14, and may proceed to assess or reassess such net wealth, and the provisions of this Act shall, so far as may be, apply as if the notice had issued under that sub-section.” Sec. 17A(1) 17A(1). No order of assessment shall be made under s. 16 at any time after the expiration of a period of— (a) four years commencing on and from the 1st day of April, 1975, or one year from the date of the filing of a return or a revised return under s. 15, whichever is later, where the assessment year is an assessment year commencing before that date; (b) four years from the end of the assessment year in which the net wealth was first assessable, or one year from the date of the filing of a return or a revised return under s. 15, whichever is later, where the assessment year is an assessment year commencing on or after the 1st day of April, 1975.”

8. An analysis of s. 16A of the Act makes it clear that for the purpose of making assessment, the WTO can refer the valuation of any asset to a Valuation Officer. Clause (a) of s. 16A(1) empowers the WTO to make reference if he is satisfied that value of the asset returned by the assessee is less than its fair market value. Clause (b) contemplates making of reference in any other case if the WTO is satisfied that fair market value of the asset exceeds the value disclosed in the return filed by the assessee by a particular percentage or amount as may be prescribed in that behalf or having regard to the nature of the asset and other relevant circumstances, he considers it necessary to do so. Sub-s. (4) of s. 16A lays down that where the Valuation Officer is satisfied that value of the asset is higher than the value declared in the return or where the asset is not disclosed or value of the asset is not declared in such return or where no such return has been made, he shall serve a notice on the assessee intimating the value which he proposes to estimate and give an opportunity to the latter to state his objection to the proposed valuation.

9. The object of s. 16A is to enable the WTO to refer the issue relating to value of any asset to a Valuation Officer for the purpose of making assessment. To put it differently, the provision contained in s. 16A enables the WTO to take assistance of the Valuation Officer for the purpose of making assessment. In our opinion, the expression “any other case” appearing in cl. (b) of s. 16A (1) is wide enough to include a case where no return has been filed by the assessee. If we were to take a narrow view and hold that reference under s. 16A(1) can be made only where the return has been filed, the expression “any other case” appearing in cl. (b) thereof and expression “where no such return has been made” appearing in sub-s. (4) of s. 16A of the Act would become redundant. Therefore, keeping in view the well-recognised cannon that the Court should not interpret the provisions of a statute so as to render a part thereof surplus or redundant, we hold that a reference under s. 16A can be made even where no return has been filed by the assessee under s. 14 or s. 15 of the Act. As a corollary to this, we hold that the Commissioner did not commit any error by relying on report dt. 14th March, 1985, of the DVO for the purpose of revising the order of assessment passed by the WTO and the Tribunal committed a grave error by interfering with the revisional order.

10. The finding recorded by the Tribunal that the assessment was time-barred is also unsustainable. A reading of the plain language of s. 17A(1)(b) of the Act makes it clear that the time-limit for completion of assessment is 4 years from the end of the assessment year in which the net wealth was first assessable, or one year from the date of the filing of a return or a revised return, whichever is later. It is, thus, clear that the assessment can be made within one year from the date on which the return is filed. In the present case, the return was filed on 7th March, 1986 and the assessment was framed on 21st March, 1986. Therefore, the assessment made by the WTO was within limitation and by no stretch of imagination, it could be treated as time-barred.

11. The argument of Shri Suvir Sehgal that the proceedings of assessment cannot be treated to have commenced till the filing of return sounds attractive, but on a closer scrutiny, we are unable to accept the same. In Khazan Chand Nathi Ram vs. State of Haryana & Ors. (2004) 136 STC 261 (P&H), a Division Bench of this Court, while considering the question whether the right to appeal available under the Haryana General Sales-tax Act, 1973, survives after its repeal by the Haryana Value Added Tax Act, 2003, observed as under : “In civil proceedings, lis commences on the presentation of the plaint or in cases claiming compensation under the Motor Vehicles Act on filing claim application. The question is when lis can be said to commence under the taxation laws. Sec. 25 of the Haryana General Sales-tax Act enjoins a duty upon an assessee to file quarterly return and deposit tax thereon. If such returns are accepted, there is no lis. Consequently, there would be no occasion for the parties to file an appeal. However, if such returns are not accepted, the cause of action arises on the date when returns are required to be filed. The cause of action can be said to have arisen when an assessee is called upon to furnish return on his failure to do so in terms of the provisions of the old Act.”

12. Secs. 14 and 15 of the Act provide for filing of the return. Sec. 17(1)(a) empowers the WTO to serve a notice on a person who has failed to file return of net wealth or failed to disclose all material facts necessary for assessment of his net wealth or the net wealth of such person has escaped assessment requiring him to file return and then proceed to assess or reassess his net wealth. The limitation for issuing such notice is 8 years. In the present case, the assessee was required to file return on or before 31st July, 1979, which he failed to do. Notice under s. 17(1) was issued on 14th Nov., 1981, for filing return for the purpose of assessment of his wealth. Therefore, by applying the ratio of Khazan Chand Nathi Ram’s case (supra), we hold that the proceedings of assessment will be deemed to have commenced on 14th Nov., 1981.

13. In the result, it is held that the Tribunal was not right in cancelling the order passed by the Commissioner under s. 25(2) of the Act. Consequently, the reference is answered in the negative, i.e., against the assessee and in favour of the Revenue.

[Citation : 285 ITR 243]

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