Rajasthan H.C : Wealth Tax Intimation is an order and, therefore, revision is maintainable under section 25

High Court Of Rajasthan

Lake Palace Hotels And Motels Ltd. Vs. Commissioner Of Wealth-Tax

Assessment Years : 1997-98 & 1999-2000 To 2004-05

Section : 25

Dr. Vineet Kothari, J.

S.B. Civil Writ Petition Nos. 4401 To 4407 Of 2010

November 8, 2011

JUDGMENT

1. By these writ petitions, the petitioner-Lake Palace Hotels and Motels Ltd., Udaipur, has challenged the order of the Commissioner of Wealth-tax, Udaipur, rejecting the revision petition under section 25 of the Wealth-tax Act, 1957, for the assessment years 1997-98, 1999-2000, 2000-01, 2001-02, 2002-03, 2003-04 and 2004-05. The Commissioner of Wealth-tax held that the revision petition under section 25 of the Wealth-tax Act against intimation issued under section 16(1) of the Act is not an “order” and, therefore, the revision petition under section 25 of the Act is not maintainable. Being aggrieved by the same, the petitioner-assessee has approached this court by way of present writ petitions.

2. The learned counsel for the petitioner, Mr. Sanjeev Johri, urged that section 25 of the Act of 1957 permits the revision by the Commissioner of an order which has been passed by any authority subordinate to him and the learned Commissioner may either on his own motion or on an application made by the assessee in this behalf, call for the record of any proceedings under this Act and revise such orders on the stated grounds. He submitted that the learned Commissioner of Wealth-tax has fallen into error in rejecting the contention of the assessee that akin to section 16(1) of the Act, the provisions of section 143(1) of the Income-tax Act, 1961, were amended by the Finance (No. 2) Act of 1991 and again on June 1, 1994, by the Finance Act of 1994 which was ultimately omitted with effect from June 1, 1999, by the Finance Act, 1999, and “intimation” sent to the assessee, inter alia, under section 143(1)(a) of the Income-tax Act would be deemed to be an “order” between the period from October 1, 1991, to May 31, 1999. He submitted that similar amendments were also made in the Wealth-tax Act and, therefore, the learned Commissioner has erred in holding that the assessment periods in question even though falling outside the period from October 1, 1991, to May 30, 1999, such intimation were not orders and, therefore, the revision petitions were not maintainable. He, therefore, prayed that the impugned orders dated March 31, 2010, passed by the learned Commissioner of Wealth-tax deserve to be set aside.

3. On the other hand, the learned counsel for the Revenue, Mr. K.K. Bissa, submitted that the impugned order is justified and an “intimation” cannot be construed as an “order” since the amendment in law was not in force in the assessment periods in question. He, however, fairly submitted that section 143(1)(a) of the Income-tax Act was amended to construe such “intimation” as an “order” for the assessment years in question as given in the order by the learned Commissioner and even the appeal against such “intimation” was maintainable before the appellate authority under section 246A of the Income-tax Act. He also submitted that section 16 of the Wealth-tax Act also provides that such “intimation” shall have effect or being notice for demand and shall be enforced for recovery of wealth-tax dues, if any.

4. The bone of the contention between the parties in the present case is as to whether the interest-bearing security deposit taken by the assessee-the Lake Palace Hotels and Motels Ltd. from M/s. East India Hotel Ltd., which was refundable after a period of lease of 72 years and it was a debt deductible, while computing the net wealth of the assessee under section 2(m) of the Act or not and the High Court had already held in favour of the assessee that the said debt of Rs. 2.5 crores was a deductible liability from the valuation of the assets for determining the “net wealth” of the assessee and copies of one such order of the Income-tax Appellate Tribunal in W. T. A. No. 05/JU/2002 for the assessment year 1998-99-Lake Palace Hotels and Motels Pvt. Ltd. v. Asst. CWT dated November 4, 2004, and the Division Bench order dated July 2, 2008, in Appeal No. 1 of 2008 have been placed on record before this court in support of this contention.

5. It appears that that the issues about deduction of this debt for determining the net wealth under section 2(m) of the Act has been finally decided. The Income-tax Appellate Tribunal in its order dated November 4, 2004, delivered in W. T. A. No. 05/Ju/2002 (the assessment year 1998-99) in the case of the assessee himself in paragraphs 20 and 21 held as under :

“This is undeniable fact that the lease money is in the form of security. Both the Commissioner of Wealth-tax (Appeals) and the Wealth-tax Officer have accepted this deposit as ‘security deposit’. This has to be refunded back with interest. We reproduce clause (15.3) of this agreement :

‘That as stipulated hereinabove, the Lake Palace Hotels and Motels Pvt. Ltd. will pay interest at 9 per cent. per annum simple from the date of receipt of payment. That the interest will be charged and payable on the first day of May of each year for the previous year. That the principal amount of the said advance lease deposit shall be payable in 10 yearly instalments of Rs. 25 lakhs each from May 1, 2055.

The Lake Palace Hotels and Motels Pvt. Ltd. undertakes, declares and confirms that it shall promptly pay the interest and the year instalments as and when due, failing which EIH is authorised to adjust and appropriate the interest and instalment due from the lease rent payable by EIH to the Lake Palace Hotels and Motels Pvt. Ltd. as per the terms of this lease agreement.’

21. For the assessment years 1996-97 and 1994-95, the same issue was restored back to the file of the Assessing Officer with a direction to adjudicate the same in accordance with law, after affording due and reasonable opportunity of being heard to the assessee. So, after following the Tribunal order, we also restore this issue on the same lines to the Assessing Officer.”

6. The High Court in its order dated July 2, 2008, in W.T.A. No. 1 of 2008- CIT v. Lake Palace Hotels and Motels Ltd. held as under :

ORDER

Heard learned counsel for the appellant. We have perused the impugned order of the learned Tribunal.

The learned Tribunal has found that the amount of Rs. 2.5 crores is received by the assessee as a deposit, which bears interest at 9 per cent. and is liable to be refunded in accordance with the terms of the lease deed. Thus, the amount definitely has a direct nexus with the land in question, and is required to be excluded, on the face of the language of section 2(m) of the Wealth-tax Act.

In our view, the finding recorded by the learned Tribunal is fully in accordance with law, and does not require any interference, as it does not give rise to any substantial question of law.

The appeal thus, has no force, and is dismissed summarily.

(Sd.)

(Kishan Swaroop Chaudhary) J.(N. P. (Sd.) Gupta) J.”

However, for assessment years in question, namely, the assessment years 1997-98, 1999-2000, 2000-01, 2001-02, 2002-03, 2003-04 and 2004-05, since the said deduction was not given by the Assessing Officer while issuing “intimation” (order) under section 16 of the Act, the assessee preferred revision petition before the learned Commissioner of Wealth-tax which came to be dismissed as not maintainable by the impugned order dated March 31, 2010. Hence, the present writ petitions. Therefore, the limited question before this court in these writ petitions is as to whether the revision is maintainable under section 25 of the Act against an “intimation” under section 16(1) or not and whether such an “intimation” is an “order” or not.

Having heard the learned counsel, this court is of the opinion that the learned Commissioner of Wealth-tax has erred in dismissing the revision petition as not maintainable. The “intimation” issued under section 16(1) of the Wealth-tax Act, which is reproduced below has the effect of being a “notice of demand” issued under section 16 and remaining provisions of this Act including the appeal and revisional powers shall apply mutatis mutandis to “intimation” under section 16(1) of the Act also. Section 16(1) reads as under :

“16. Assessment.—(1) Where a return has been made under section 14 or section 15 or in response to a notice under clause (i) of sub-section (4),-

(i) if any tax or interest is found due on the basis of such return, after adjustment of any amount paid by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable and such intimation shall be deemed to be a notice of demand issued under section 30 and all the provisions of this Act shall apply accordingly ; and

(ii) if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee :

Provided that except as otherwise provided in this sub-section, the acknowledgment of the return shall be deemed to be intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him :

Provided further that no intimation under this sub-section shall be sent after the expiry of two years from the end of the assessment year in which the net wealth was first assessable.”

Undoubtedly, the said “intimation” is an appealable “order” under the provisions of sections 23 and 23A of the said Wealth-tax Act, 1957. If any intimation/order is appealable before the first appellate authority, there is no reason why the Commissioner cannot invoke his revisional powers under section 25 of the Act which confers upon him suo motu revisional powers as well as powers to be invoked on the application made by the assessee. He can call for the record of any proceedings under this Act, if an order has been passed by any authority subordinate to him and may make such enquiry or cause such enquiry to be made and pass such order thereon as the Commissioner thinks fit. The learned Commissioner has, therefore, clearly erred in holding that the amendment in the Income-tax Act to the effect that an “intimation” was an “order” for the limited period only and consequently holding that since those amendments were not applicable for the assessment years in question, therefore, the revision petitions were not maintainable. This escape route found by the learned Commissioner cannot be countenanced. In the opinion of this court, the revision petitions before the learned Commissioner were clearly maintainable in law and he has erred in rejecting the said revision petitions as not maintainable.

Accordingly, all these writ petitions are disposed of setting aside the impugned order of the Wealth-tax Commissioner dated March 31, 2010, and the revisions are restored back to him for decision afresh on the merits in accordance with law. No order as to costs.

[Citation : 340 ITR 449]

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