Madhya Pradesh High Court
Commissioner Of Income-Tax vs Malhar Rao Tatya Saheb Holkar on 24 January, 1996
Equivalent citations: [1996]220ITR466(MP)
Author: S.B. Sakrikar
Bench: S.B. Sakrikar
JUDGMENT A.R. Tiwari, J.
1. At the instance of the Commissioner of Wealth-tax, Bhopal, the Tribunal has stated the case and referred the undernoted question under Section 27(1) of the Wealth-tax 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 Wealth-tax Officer 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 the material facts necessary for assessment of his net wealth the net wealth chargeable to tax has escaped assessment ?"
2. Briefly stated, the facts of the case are that the assessments for the assessment years 1971-72 to 1973-74 were made on March 28, 1974. Thereafter, the Wealth-tax Officer referred the matter to the Valuation Officer to ascertain the value of agricultural land and house as on the valuation date. Thereafter, notice under Section 17 of the Act was served on the assessee on March 25, 1980. The non-applicant-assessee did not file any return in response to the notice. The Wealth-tax Officer, accordingly, made a best judgment assessment under Section 16(5) of the Act, vide consolidated order dated March 12, 1984 (annexure-A). The assessee filed the appeal before the Commissioner of Wealth-tax (Appeals) who sustained the order (annexure-B). The assessee then filed a 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 Section 27(1) of the Act. The Tribunal referred the abovenoted question.
3. We have heard Shri D.D. Vyas, learned counsel for the applicant, and Shri Subhash Samvatsar, learned counsel for the non-applicant.
4. The Assessing Officer makes assessment of net wealth of the assessee and determines the amount of wealth-tax payable by the same in terms of Section 16 of the Act. Reference could be made to the Valuation Officer under Section 16A of the Act for the purpose of making an assessment under the Act. Under Section 17, the Assessing Officer may reassess the net wealth if he has reason to believe that net wealth chargeable to tax has escaped assessment for that year.
5. In the instant case, the assessment was completed under Section 16 of the Act. Reference was not made to the Valuation Officer under Section 16A of the Act for the purpose of making the assessment. After completion of the assessment, the Assessing Officer 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 net wealth chargeable to tax has escaped assessment. He, therefore, issued notice under Section 17 of the Act. The assessee questioned the validity of the proceeding. The Commissioner of Wealth-tax (Appeals), however, rejected the contention and upheld the order of the Wealth-tax Officer. 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 the original assessment.
7. Section 17 of the Act clearly stipulated that the power can be exercised if the Assessing Officer has reason to believe that net wealth chargeable to wealth-tax has escaped assessment. The material to form such a view must be available with the Assessing Officer. In the instant case, no such material was available with the Assessing Officer. In fact, he referred the matter to the Valuation Officer to collect the material and then initiated proceedings. Such a procedure is not shown to be backed by any provision under the Act. The proceedings initiated by the Wealth-tax Officer and upheld by the Commissioner of Wealth-tax (Appeals) were manifestly vitiated on account of procedural impropriety.
8. In Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 ; AIR 1977 SC 429, it is held as under (headnote of AIR 1977 SC) :
"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 issues 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 Wealth-tax Officer 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.
13. A copy of this order shall be transmitted to the Tribunal in accordance with rules.