Income Tax Appellate Tribunal - Kolkata
Shyamsunder Musahib vs Wealth-Tax Officer on 25 August, 1993
Equivalent citations: [1994]48ITD109(KOL)
ORDER
N. Pachuau, Accountant Member
1. These eight appeals filed by the assessee against the consolidated appellate order of the Deputy Commissioner (Appeals), Range-XVI, Calcutta relate to assessment years 1973-74 to 1980-81. Since the grounds of appeal taken are more or less common in all the assessment years, the appeals are disposed of by a consolidated order for the sake of convenience.
2. At the out-set it may be stated that the assessments for the assessment years 1973-74 and 1974-75 were made under Sections 16(3)/17(1)(a) of the Wealth-tax Act, 1957 on 28-2-1986. The assessments for the assessment years 1975-76 and 1976-77 were made on the above date under Sections 16(3)/25(2) of the Wealth-tax Act. The assessments for the assessment years 1977-78 and 1978-79 were made under Section 16(3) of the Act, on 15-2-1988, whereas, the assessments for the assessment years 1979-80 and 1980-81 were made under Section 16(3) of the Wealth-tax Act, 1957 on 6-10-1984.
3. As regards assessment years 1973-74 and 1974-75 the first objection taken by the assessee is against the reopening of the assessment proceedings by the Assessing Officer under Section 17(1)(a) of the Wealth-tax Act, 1957. The brief facts of the case are that the assessee was an individual/citizen of India. Valuation date was 30th June every year. The original assessments for the assessment years 1973-74 and 1974-75 were completed on 30-3-1979 under Section 16(1) of the Wealth-tax Act. Subsequently, the assessment proceedings for the two assessment years were reopened under Section 17 of the Wealth-tax Act, by issuing a notice dated 22-2-1982 which was duly served upon the assessee on 3-3-1982. In response to the said notice, the assessee filed a return of net wealth showing the same amount of net wealth marking the return as "Under protest". Notice under Section 16(2) and 16(4) of the Wealth-tax Act, were complied with. Reopening of the assessment proceedings was challenged stating that the notice issued by the Assessing Officer did not specifically mention as to whether the reopening was under Section 17(1)(a) or under Section 17(1)(b) of the Act. The objection was rejected by the Assessing Officer stating that it is a settled fact that any technical mistake in a statutory notice does not invalidate the main proceedings. The Assessing Officer found that the assessee disclosed in both the assessment years in the original returns that his share in the property known as M/s. Durga Trading Corporation was Rs. 63,250. On a perusal of the records he found that the value of the interest of the assessee in the abovenamed firm where he was a partner was of much higher amount than what was disclosed by the assessee in the wealth-tax returns. The WTO had, therefore, reason to believe that the assessee wilfully failed to disclose fully and truly all material facts necessary for the assessment of his net wealth and the provisions of Section 17(1)(a) of the Wealth-tax Act, 1957 was attracted. The objection raised by the Authorised Representative of the assessee was rejected on this ground also. The WTO then proceeded to determine the value of the assessee's interest in the firm M/s. Durga Trading Corporation by applying Rule 2(1) of the Wealth-tax Rules 1957 where the assessee had 12.5 per cent interest. The value of the assessee's interest in the said firm was computed at Rs. 6,18,233 in the assessment year 1973-74 and at Rs. 6,43,673 in the assessment year 1974-75.
4. Being aggrieved the assessee carried the matter in appeal before the Deputy Commissioner (Appeals). It was submitted that the reopening of the assessment proceedings for the assessment years 1973-74 and 1974-75 were on the basis of a mere change of opinion on the part of the WTO. The assessee had duly shown the value of his interest in the firm M/s. Durga Trading Corporation on the basis of valuation by an Approved Valuer which was duly accepted when the original assessment was made. There was no basis or material with the WTO to hold that the provisions of Section 17(1)(a) of the Wealth-tax Act, 1957 are attracted in the assessee's case.
5. The Deputy Commissioner (Appeals) considered the facts of the case, orders of the WTO and the submissions made on behalf of the assessee. He found that in the assessee's case, the value of interest of the assessee in the aforesaid firm as disclosed in the return of wealth was on the basis of valuation by an Approved Valuer in 1963. He, therefore, took a view that the disclosure by the assessee was not a true disclosure. Even if while making the original assessment, facts were disclosed fully, admittedly it was not a true disclosure. The WTO, therefore, acted under a genuine belief that in the return of net wealth the assessee had not disclosed the true value of the property which had resulted in escapement of net wealth. He, therefore, rejected the objection raised by the assessee's Authorised Representative.
6. Being aggrieved, the assessee is in appeal before the Tribunal. Shri S.P. Choudhury, learned Counsel of the assessee while objecting to the orders of the Deputy Commissioner (Appeals) reiterated the facts of the case. It was submitted that the returns of net wealth for the assessment years 1973-74 and 1974-75 were submitted by the assessee on 20-7-1974 and 16-8-1974 respectively. The assessee correctly disclosed his net wealth and all the facts relate thereto. Valuation of the house property of M/s. Durga Trading Corporation where the assessee was a partner was also shown on the basis of Valuation Report of an Authorised Valuer. Therefore, the reopening of the assessment proceedings under Section 17(1)(ct) of the Wealth-tax Act, 1957 was void and illegal. The original assessments were made for the two assessment years on 30-3-1979 on the basis of the original return of net wealth filed accepting the net wealth shown by the assessee as correct. The assessee had duly shown the value of his interest in the firm M/s. Durga Trading Corporation where he had 12.5 per cent shares. Since the assessee had duly disclosed the value of his interest in the above firm in the original return of net wealth, there is no justification to reopen the assessment proceedings on the part of the WTO. In support of his arguments, the learned Counsel of the assessee placed reliance on the decision of the Bombay High Court in the case of Acchut Kumar S. Inamdar v. P.R. Hajarnavis [1981] 132 ITR 331 to the proposition that inaccurate valuation of assets by an assessee in the return of net wealth does not justify the reopening of the assessment proceedings under Section 17(1)(a) of the Wealth-tax Act, 1957.
7. On the other hand, Shri R.P. Rajesh, learned Departmental Representative supports the order of the Deputy Commissioner (Appeals). Learned Departmental Representative has submitted that the assessee had shown his interest in the firm M/s. Durga Trading Corporation on the basis of Valuer's Report in 1963 which is about 10 years before. The assessments for the two assessment years were also completed under Section 16(1) of the Wealth-tax Act, 1957, without proper examination and scrutiny of the returns of net wealth. Further, the WTO found on perusal of the records that the interest of the assessee in the aforesaid firm was much higher than what was disclosed in his returns of wealth. The Deputy Commissioner (Appeals) was, therefore, perfectly justified in holding that the disclosure of interest in the above firm by the assessee was not a true disclosure and the action taken under Section 17 of the Wealth-tax Act, was in order. The appeal by the assessee is without any merit and liable to be dismissed.
8. We have carefully considered the rival submissions. We have also perused the orders of the authorities below. We find that the facts of the case as discussed above, are not disputed by the rival parties. They are, therefore, not being reproduced here for the sake of brevity. Suffice it to say that the assessee is an individual and he filed the returns of net wealth for the two assessment years on 20-7-1974 and 16-8-1974. The assessments were made under Section 16(1) of the Wealth-tax Act, on 30-3-1979. The assessee had 12.5 per cent interest in the partnership firm M/s. Durga Trading Corporation. The said firm had both movable and immovable properties. Subsequently, after the completion of the assessments, the WTO found on perusal of the records that the interest of the assessee in the aforesaid firm was much higher than what was disclosed by the assessee in his wealth-tax returns. It is not disputed that the basis of the assessee for showing his interest in the aforesaid firm was as per valuation made by an Authorised Valuer in the year 1963. It may be mentioned and useful to reproduce the reasons for reopening the assessment proceedings under Section 17{l)(a) of the Wealth-tax Act, 1957 recorded by the WTO for the two assessment years as below:
On perusal of records it appears that the shares of partnership interest of the assessee in the value of House Property owned by the firm M/s. Durga Trading Corpn. (in which the assessee is a partner) is of a much higher amount than that disclosed by the assessee in his wealth-tax returns.
I have reason to believe that the assessee did not disclose fully and truly all material facts necessary for assessment of his net wealth which resulted under-valuation and consequent under-assessment of the net wealth of the assessee. I am satisfied that provisions under Section 17(1) (a) is clearly attracted in this case for the year 1973-74.
Issue notice under Section 17.
9. It can be seen from the reasons recorded by the WTO that he had reasons to believe that the assessee did not disclose fully and truly all material facts necessary for assessment of his net wealth resulted in an under-valuation and consequently under-assessment of the net wealth of the assessee. The Assessing Officer was, therefore, satisfied that the provisions of Section 17(1)(a) was clearly attracted in this case for the assessment years 1973-74 and 1974-75. Accordingly, notice under Section 17 of the Wealth-tax Act, 1957 was issued which was served on the assessee on 3-3-1982 and this fact was not disputed. We, therefore, find that the objection by the assessee that the notice under Section 17 issued by the WTO did not specifically mention as to whether it was Under Clause (a) or (b) of Sub-section (1) of Section 17 of the Wealth-tax Act, 1957 has to be rejected. The said notice was also issued and served on the assessee on 3-3-1982 for both the assessment years i.e., within 8 years from the end of the assessment year and in view of this fact the contention that the proceeding is barred by limitation has to be rejected. In fact, the learned Counsel of the assessee was fair enough not to press this point during the course of hearing the appeal. As regards the contention that the assessee had duly disclosed all material facts truly and correctly in the original return of income and the WTO had no materials to justify in reopening the assessment proceedings, we have already stated earlier, the assessee had 12.5 per cent interest-in the firm M/s. Durga Trading Corporation which had both movable and immovable properties. The assessee had disclosed his interest in the said firm at Rs. 63,250 in each year on the basis of Valuation Reports of an Approved Valuer in 1963, which is about 10 years earlier to the valuation dates relevant to the assessment years 1973-74 and 1974-75. Further, we find that the findings made by the authorities below that the value of interest of the assessee in the aforesaid firm was much higher than what was disclosed in his return of net wealth as per the records has not been controverted by the assessee. On going through Section 17(1) of the Wealth-tax Act, 1957, we find that the Assessing Officer must have "reason to believe that the net wealth chargeable to tax has escaped assessment" etc., and the words "reasons to believe" comprehend some material or materials and not mere suspicion, imagination etc. There has also to be a nexus between such material and formation: of belief of escapement of wealth. The Assessing Officer also should properly apply his mind to such material and he must draw an inference based on reason, that the wealth has escaped assessment. The belief must be an honest and reasonable belief on the basis of reasonable ground. While forming such belief the Assessing Officer should consider all facts cumulatively. Reliance may be placed on the decision of the Supreme Court in the case of Sheo Nath Singh v. AAC [1971] 82 ITR 147 and in the case of Ramniwas Kanailal v. S.P. Shende, ITO [1965] 56 ITR 659 (Bom.). The reason for reopening must have a direct nexus and live link between the material coming to the notice of the WTO and the formation of belief as held by the Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437. As regards the disclosure of material facts and failure to do so, it may be stated that material facts are held to be primary facts. The assessee knows all material and relevant facts. As held by the Hon'ble Supreme Court in the case of Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. v. CIT [1986] 159 ITR 624 that if some material for the assessment lay embedded in the evidence which the revenue could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the Assessing Officer. It was also held by the Supreme Court in the case of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 that the disclosure of primary and material facts must be full and true and the duty of the assessee is not merely to make full disclosure of all material facts. It is also the duty of the assessee to make a true disclosure of facts, and not to mislead the Assessing Officer by disclosing certain facts which do not represent truth or reliable facts. It has also been held by the Calcutta High Court in the case of ITO v. Mahadeo Lel Tulsyan [1978] 111 ITR 25 that if the facts are untrue and the facts are not genuine, there is no true disclosure of primary facts. While considering the facts and circumstances of the present case under consideration, in the light of the few important decisions briefly narrated above, it has to be held that the assessee has failed to disclose the primary and material facts fully and truly for the purpose of his assessment inasmuch as, the basis of valuation of his interest in M/s. Durga Trading Corporation was Valuation Reports of 1963 which was about 10 years prior to the relevant valuation dates, which can under no stretch of imagination be said to be relevant on the valuation dates of assessment years 1973-74 and 1974-75 in view of the fact that the firm and its assets have undergone various changes during the period. In any case, the value of land and building as well as movable assets cannot be said to remain same for years together. The findings made by the Assessing Officer that the records show that the interest of the assessee in the above firm was much higher than what was disclosed by him having not been disputed and considering the issue in the light of the various judicial decisions, we are of the opinion that the Deputy Commissioner (Appeals) is perfectly justified in upholding the reopening of the assessment proceedings by the Assessing Officer. We, therefore, do not find any merit in the appeal filed by the assessee on this point.
10. The next objection common to all the assessment years is against the valuation of the interest of the assessee in the partnership firm M/s. Durga Trading Corporation. The Assessing Officer valued the interest of the assessee in the aforesaid firm by applying Rule 2 of the Wealth-tax Rules, 1957. The assessee had 12.5 per cent shares in the aforesaid firm. It appears that the aforesaid firm had immovable properties wherefrom rental income was derived. The Assessing Officer Under Rule 2 of the Wealth-tax Rules valued the assessee's interest by taking 12 times of the net rental income plus other assets of the firm as per the Balance Sheet as reduced by land and building, Income-tax liabilities and partner's capital. The share of the assessee was then ascertained.
11. Being aggrieved, the assessee came up in appeal before the Deputy Commissioner (Appeals). It was submitted that while arriving at the net rent of the immovable properties, the WTO did not take the Municipal tax levied on the properties. It was stated that the Tribunal "D-Bench", Calcutta in the case of the assessee for the assessment years 1981-82 and 1982-83 in their appellate order dated 16-11-1990 has held that such Municipal taxes should be deducted while arriving at the net rent. It was further stated that a multiplier of 12.5 per cent for capitalising the net rent was on the higher side in view of the fact that the properties were purchased through two separate Deeds, one for absolute rights and other for lease hold rights. It was also stated that even for properties under lease, unexpired portion of the lease period was not same for all pieces which were under lease. Therefore, different methods of valuation for different types of properties held by the firm should have been adopted.
12. The Deputy Commissioner (Appeals) considered the facts of the case and the submissions made on behalf of the assessee. He has taken a view that the interest of the assessee in the partnership firm had to be determined as per Rule 2 of the Wealth-tax Rules. He found that the assessee had disclosed the value at a figure as recommended by an Approved Valuer in his Report of 1963. This Valuation Report had to be considered. He also took a view that the correct market value has to be substituted in place of the admitted valuation and for this purpose the WTO had to consider all the facts carefully and meticulously as claimed by the assessee. The property purchased through two separate Deeds but in the purchase Deed meant for acquisition of lease-hold rights describes different pieces of land for which unexpired lease period varies. The WTO had to consider and to apply proper method of valuation by giving an opportunity of being heard to the assessee. The Deputy Commissioner (Appeals) also held that it would be advisable to refer the matter to the Departmental Valuation Cell for valuation purposes. The Deputy Commissioner, therefore, considering all the facts and circumstances of the case and taking note of complicities of the valuation, directed the Assessing Officer to refer the matter to the Departmental Valuation Cell to recommand the average of the valuation arrived at through the method of rent capitalisation and land and building. He also stated that allowability of the assessee's claim under Section 5(l)(iv) of the Wealth-tax Act, in respect of interest in the partnership firm should be examined in the light of the recent decision of the Jurisdictional High Court. For the above purposes, all the assessment orders were set aside.
13. The assessee is in appeal before the Tribunal against the aforesaid directions by the Deputy Commissioner (Appeals). We have heard Shri S.P. Choudhury, the learned Counsel of the assessee who reiterated the facts of the case. The learned Counsel has not disputed that the properties both immovable and movable of M/s. Durga Trading Corporation in which the assessee had 12.5% interest required proper valuation as per the relevant rule of the Wealth-tax Rules. However, the learned Counsel has submitted that the Deputy Commissioner (Appeals) has no powers to direct the Assessing Officer to refer the immovable properties for the purpose of valuation to the Departmental Valuation Cell in view of the decision of the Madhya Pradesh High Court (Indore Bench) in the case of M. V. Kibe v. CWT [1987] 168 ITR 82.
14. The arguments advanced by the learned Counsel of the assessee are opposed by the learned Departmental Representative Shri R.P. Rajesh, who supports the order of the Deputy Commissioner (Appeals). Learned Departmental Representative has submitted that the powers of the Deputy Commissioner (Appeals) is coterminous with the powers of the Assessing Officer, he can do what the Assessing Officer can do he can also do what the Assessing Officer can do but failed to do. There is, therefore, no infirmity in the directions issued by the Deputy Commissioner (Appeals) to the Assessing Officer to refer the issue of valuation of the immovable properties of the firm where the assessee was a partner, to the Departmental Valuation Cell and the objection by the assessee's counsel is without any force.
15. We have carefully considered the facts of the case, order of the Deputy Commissioner (Appeals) and the rival submissions. We find from the orders of the WTO that detailed particulars of valuation of the immovable and movable properties of M/s. Durga Trading Corporation where the assessee had interest were not given in the assessment orders. The exact nature of the different properties and their valuation as per rule 2 of the Wealth-tax Rules are also not stated. We find that the Deputy Commissioner (Appeals) had given different types of immovable properties of the above firm due to which he has rightly taken a view that it was necessary to consider the facts and circumstances of the case meticulously and carefully in order to arrive at the correct value of the properties and by referring it to the Departmental Valuation Cell. It may be stated at this stage that the directions issued by the Deputy Commissioner (Appeals) to the Assessing Officer to redo valuation of different types of immovable properties of the above firm was not objected to or disputed by the assessee's counsel. The only dispute raised by the assessee's counsel was the direction by the Deputy Commissioner (Appeals) to refer the matter of valuation of the immovable properties to the Departmental Valuation Cell for proper valuation. We find that the objection cannot be accepted in view of the decision of the Supreme Court in the case of Juggilal Kamlapat Bankers v. WTO [1984] 145 ITR 485 where it has been held that if a firm holds immovable property and interest of a partner is to be determined Under Rule 2, a reference for valuation of immovable properties of the firm is valid. As regards the powers of the Deputy Commissioner (Appeals) or the Commissioner of Wealth-tax (Appeals) under Sub-section (5) of Section 23 of the Wealth-tax Act, 1957, it may be stated that in deciding the appeal, the appellate authority may pass such orders as he may think fit. He has plenary powers in disposing of an appeal. The scope of his powers is coterminous with that of the Assessing Officer vide the decision of the Gujarat High Court in the case of Shrenik Kasturbhai v. CUT [1974] 95 ITR 326. The Supreme Court also held that the appellate proceeding constitutes a continuation of the assessment proceedings vide CWT v. Vimlaben Vadilal Mehta [1984] 145 ITR 11. The jurisdiction of the appellate authorities ranges over the whole assessment. He can do what the Assessing Officer can do and he can also direct him to do what he has failed to do vide the decision in the case of Guduthur Bros. v. ITO [1960] 40 ITR 298 (SC). The appellate authority has the jurisdiction as well as the duty to correct all the errors in the proceedings, in appeal. He has to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden by the statute vide Kapurchand Shrimal v. CJT [1981] 131 ITR 451 (SC). In view of the facts of the case and the various decisions briefly narrated above, we find that the Deputy Commissioner (Appeals) is perfectly justified in the directions given by him to the Assessing Officer to get the immovable properties of M/s. Durga Trading Corporation where the assessee has 12.5 per cent interest for the purpose of proper valuation. For the reasons stated above, the orders of the Deputy Commissioner (Appeals) are upheld.
16. In the result, the appeals filed by the assessee are dismissed.