Income Tax Appellate Tribunal - Patna
Sau Jamnadevi Balkisan Jaju vs First Wealth-Tax Officer on 12 September, 1986
Equivalent citations: [1987]20ITD209(PAT)
ORDER
R.N. Puri, Accountant Member
1. The abovementioned two appeals filed by the assessee pertain to the assessment years 1979-80 and 1980-81. The valuation dates relevant to these two assessment years are 31-3-1979 and 31-3-1980. As these appeals had raised similar issues, they were consolidated and heard together. After hearing the rival submissions, these appeals are being disposed of by a common order as under.
2. The main issue to be decided in these appeals is whether the reassessment proceedings are valid.
3. The facts giving rise to these appeals may be stated. The original assessments for these two years were completed on net wealth as disclosed by the assessee in her returns. For the assessment year 1979-80, the assessee had filed her wealth-tax return on 6-11-1979 showing net wealth of Rs. 2,53,128. The WTO completed the assessment on 28-10-1980 on the same wealth. For the assessment year 1980-81, the assessee had filed her return showing net wealth of Rs. 2,10,947 and the WTO completed the assessment on 28-10-1980 on the same wealth as shown by the assessee. The assessee had owned certain agricultural land. In respect of both the years, the assessee had shown the value of this agricultural land at Rs. 62,300. While completing the assessments, the WTO adopted the same value. Subsequently, the WTO found that the assessee had sold a portion of that agricultural land on 25-2-1982 and 3-7-1982 for a total consideration of Rs. 8,50,000. In view of this, the WTO felt that the value of the agricultural land, as disclosed by the assessee for Rs. 62,300 on the valuation dates 31-3-1979 and 31-3-1980, was low. The WTO, hence, came to believe that by reason of failure on the part of the assessee to disclose truly the value of the agricultural land, the net wealth chargeable to tax had escaped assessment. The WTO initiated proceedings under Section 17(1)(a) of the Wealth-tax Act, 1957 ('the Act') to assess the the wealth that had escaped assessment. The reassessment for both the years were completed by the WTO on 19-5-1984. In these reassessments, the WTO adopted the value of the agricultural land at Rs. 6 lakhs in respect of both the years. The reassessment for the assessment year 1979-80 was completed on a net wealth of Rs. 6,96,700 and for the assessment year 1980-81 on a net wealth of Rs 6,55,100. The assessee had returned the same wealth during the course of the reassessment proceedings, as had been shown by her in the returns filed originally.
4. Having felt aggrieved with the orders of reassessment, the assessee went up in appeal in respect of both the years before the AAC. The assessee challenged the reopening of the assessments by the WTO under Section 17(1)(a). It was contended that there was no basis for the WTO to have reason to believe that any wealth chargeable to tax had escaped assessment. It was stated that the value of the land shown by the assessee at Rs. 62,300 for the relevant valuation dates could not be regarded as an undervaluation. It was stated that subsequent to these valuation dates, a lot of development had taken place in the area and it was on account of this development that the price of land had arisen sharply. It was stated that lot of industrialisation had taken place and the Government of Maharashtra had acquired lands at village Lohara for putting up Maharashtra Industrial Development Corpn. It was further stated that the lands in the area were also acquired by the housing societies for the construction of housing colonies. It. was pointed out that it was on account of the effect of sudden develonment in the area that the prices of land had shot up. It was pointed out that from the sale of land for Rs. 8,50,000 in 1982, it could not be inferred that the value of land for Rs. 62,300 as shown by the assessee on 31-3-1979 and 31-3-1980 was an undervaluation. It was further contended that there was no failure on the part of the assessee to disclose all material facts necessary for her assessment and hence the WTO was not justified to reopen the assessments under Section 17(1)(a).
5. The AAC did not agree with the assessee that the reopening of the assessments was not valid. He, however, held that since the assessee had disclosed all the material facts relevant for the assessment, the reopening of the assessments could not be under Section 17(1)(a), but the provisions of Section 17(1)(b) were applicable to the facts of the case. The AAC, however, felt that the valuation of land had not been properly made. He hence set aside the assessments with a direction to the WTO to make the assessments afresh after referring the matter of valuation of land to the departmental valuer. Being aggrieved with the decision of the AAC, the assessee has now come up in appeal before us. The contention of the assessee is that the AAC had erred in holding that the provisions of Section 17(1)(b) were applicable to the facts of the case. It is further contended that, in any event, since the WTO had proceeded under Section 17(1)(a), the AAC was not justified to convert those proceedings into proceedings under Section 17(1)(b). It was stated that the AAC, after having held that the proceedings under Section 17(1)(a) were not justified, should have proceeded to cancel the reassessment proceedings. The submission of the assessee before us is that the reassessment proceedings, should be struck down as being illegal and void ab initio.
6. First of all, we will examine whether the provisions of Section 17(1)(b) can be considered to be applicable to the facts of the present case or not. The AAC has held that the provisions of Section 17(1)(b) were applicable in the facts of the case and hence the reassessment proceedings were justified. The objection of the assessee that the proceedings for reassessment, having been taken by the WTO under Section 17(1)(a), could not be sustained by invoking provisions of Section 17(1)(b), will be examined later.
7. The reason advanced by the assessee for her contention that Section 17(1)(b) was not applicable in the facts of the case was that there was no information pertaining to the assessment years under consideration on the basis of which the WTO could form the belief that wealth had escaped assessment. It is pointed out by the assessee that on the basis of information of the sale of the agricultural land in 1982, action could not be taken for the assessment years 1979-80 and 1980-81. The assessee had relied on the decision of the Bombay High Court in the case of Ramkrishna Ramnath v. ITO [1970] 77 ITR 995. In that case, in the income-tax assessment of the assessee for the assessment year 1960-61, as originally made, a deduction of Rs. 49,440 in respect of advertisement expenses in the form of the printing and distribution of calendars, as had been claimed by the assessee, was given. Subsequently, for this assessment year, the ITO took reassessment proceedings. The reason recorded by the ITO for the issue of notice under Section 148 of the Income-tax Act, 1961 ('the 1961 Act') was that he had occasion to critically examine such a deduction claimed in respect of advertisement expenses for the assessment year 1963-64 and it was noticed that the sum of Rs. 63,000 which had been claimed in respect of those expenses for that assessment year was totally bogus, and, hence, he had every reason to believe that fictitious expenses in the form of calendar distributions were made to the profit and loss accounts to reduce the profit. In short, on the basis of what the ITO had discovered in respect of the assessment year 1963-64 with regard to advertisement expenses, action for reopening the assessment was taken for the assessment year 1960-61. The contention of the assessee before the High Court was that the information on which the ITO issued notice under Section 148 being information relating to a different year, and not to the year in respect of which the notice was issued, it could not be said that the ITO had any reason to believe that income chargeable to tax had escaped assessment in the year in respect of which the notice had been issued. It was contended by the assessee that the circumstances existing in a later year may not exist in a previous year and hence there was no justification to issue a notice for the assessment year 1960-61 on the basis of some information which pertained to the assessment year 1963-64. This contention of the assessee was accepted.
8. But, according to us, this case will not be of any help to the assessee. On the valuation dates 31-3-1979 and 31-3-1980 relevant to the assessment years 1970-80 and 1980-81, the assessee had shown the value of a certain land at Rs. 62,300. Subsequently, it was found that a portion of that land was sold on 25-2-1982 and 3-7-1982 for Rs. 8,50,000. Will this fact of the sale of land for a sum of Rs. 8,50,000 within two to three years of the valuation dates under consideration not lead to a reasonable inference that the value of land as shown by the assessee at Rs. 62,300 for these valuation dates was low ? This fact of the sale of land at a much higher price is definitely information telling that the value of land on the valuation dates under consideration was much more than the mere Rs. 62.300 which had been shown by the assessee. Information means 'instruction or knowledge derived from external source concerning facts or particulars, or as to the law relating to a matter bearing on the assessment'. In the case decided by the Bombay High Court on which the assessee has relied, income-tax assessment was involved and, on the basis of information pertaining to the assessment year 1963-64, the ITO had sought to reopen the assessment for the assessment year 1960-61 and it was argued by the assessee that there being nothing to show that the circumstances existing in 1963-64 had also existed in 1960-61, the action for reassessment was bad in law. This argument of the assessee was accepted. But in the present case, the information was that land had been sold at a price much higher than the value which had been disclosed by the assessee. The sale price which the land fetched in 1982 definitely instructed the WTO about its likely value on the valuation dates, 31-3-1979 and 31-3-1980. We are hence of the view that there was information in consequence of which the WTO came to believe that wealth chargeable to tax had escaped assessment. We hold that the provisions of Section 17(1X6) are applicable to the facts of the case in respect of both the assessment years.
9. Another contention raised by the assessee before us was that the WTO was not justified to infer from the fact of the sale of land for Rs. 8.50,000 in 1982 that the value of the land on the relevant valuation dates, namely, 31-3-1979 and 31-3-1980 was much higher than the value of Rs. 62,300 which had been disclosed by the assessee. It was thus stated that it could not be said that there was any information about the value of the property being in fact higher than the value that had been disclosed by the assessee. It was hence stated that action for reassessment was uncalled for, as there was no reason to believe that any wealth had escaped assessment. It is held by us that it was not necessary for the WTO to come to a definite conclusion about the value of land on the valuation dates, prior to taking up reassessment proceedings. The only thing that is necessary is that there must be a reasonable ground for his coming to believe that there has been escapement of assessment of wealth. The sale of the land at Rs. 8,50,000 within two years of the valuation dates under consideration afforded a reasonable ground for such belief. Whether the reason was adequate or sufficient for such a belief is not required to be gone into. We, hence, uphold the action for reassessment.
10. Now the further question whether the reassessment proceedings, which had been initiated under Section 17(1)(a), could be sustained by treating the notice as being one under Section 17(1)(b), will be examined. The contention of the assessee is that the AAC having found that conditions for initiating reassessment proceedings under Section 17(1)(a) were not satisfied, the AAC was not justified to still sustain the reassessment proceedings on the ground that conditions laid down under Section 17(1)(b) were satisfied. The assessee has on this behalf relied on the decision of the Bombay High Court in the case of New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. v. CIT [1977] 107 ITR 760. The High Court has observed :
The propositions that emerge from a consideration of the above authorities are as follows :
(1) If a notice under Section 34(1) expressly specifies that it is under Clause (a) thereof, no reassessment in respect of any item can be made under Clause (b) of that section under the jurisdiction to reassess acquired by that notice. In such a case, no question of the period of limitation in respect of Clause (b) being applicable would, therefore, arise. I do not approve of the view taken by the Madras High Court in Veerappa Chettiar's case [1973] 91 ITR 116 (Mad.) (at page 127) and by the Calcutta High Court in P.R. Mukherjee's case [1956] 30 ITR 535 (Cal.) (at page 547), both of which have been cited above, that the Income-tax Officer has jurisdiction in such a case to reassess items under Clause (b) also provided that the reassessment proceedings were initiated within the period of four years laid down in regard to Section 34(1)(b).
In this case decided by the Bombay High Court, the reassessment proceedings under Section 34(1)(a) of the Indian Income-tax Act, 1922 ('the 1922 Act'), had been initiated. The question that had arisen was whether in the reessessment such items which satisfied the conditions of Section 34(1)(b) and not of Section 34(1)(a) could also be brought to tax.
The question of law which was referred to the High Court was whether in the course of making reassessments after having validly initiated the reassessment proceedings under Section 34(1)(a) in respect of certain other items of escaped income, the ITO could also add back, in computing the business income under Section 10 of the 1922 Act, the sum of Rs. 66,850 (for the assessment year 1947-48) and Rs. 24,606 (for the assessment year 1950-51) which were allowed at the time of original assessments, it being common ground that the said amounts were not permissible deduction under Section 10.
The question of adding back the sums of Rs. 66,850 and Rs. 24,606 could arise under jurisdiction assumed under Section 34(1)(b). On behalf of the assessee, it was contended that in an assessment reopened under Section 34(1)(a), only such items as satisfied the conditions of Section 34(1)(a) could be brought to tax.
The original assessments for the assessment years 1947-48 and 1950-51 were made on 20-2-1950 and 29-2-1952, respectively, and in those assessments the ITO had allowed the claim of the assessee to deduct interest payable to one V.M. & Co. In respect of the assessment for the assessment year 1951-52, however, the Tribunal held that the interest payable by the assessee to V.M. & Co. was not a permissible deduction in computing the assessee's income from business under Section 10. In the meantime, in respect of some other items, the ITO had initiated reassessment proceedings for the assessment years 1947-48 and 1950-51 under Section 34(1)(a). In the reassessments framed by him, he also disallowed the interest payable to V.M. & Co. which had been allowed as a deduction in the original assessments. It was observed by the High Court that in the course of making reassessment after having initiated reassessment proceedings under Section 34(1)(a) in respect of certain items of escaped income, the ITO could not rope in such items which did not satisfy the conditions of Section 34(1)(a), but satisfied the conditions of Section 34(1)(b). It was observed that under the jurisdiction to reassess under Clause (a) of Section 34(1), no reassessment of any item could be made under Clause (b).
11. The facts of the case of New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. (supra) go to show that the proceedings under Section 34(1)(a) were, in that case, validly initiated and in the reassessment, it was not only the items which satisfied the conditions of Section 34(1)(a) which were brought to tax, but also such items which satisfied the conditions of Section 34(1)(b). The question which had arisen in that case was whether under the jurisdiction to reassess, assumed under one of the clauses, could items pertaining to the other clause also be brought to tax ? The High Court had stated that it could not be done. In that case, the jurisdiction to reassess had been validly assumed under one of the clauses. There were items satisfying conditions of Clause (a) and also items satisfying the conditions of Clause (b), for reassessment. The question that had arisen was whether, under the jurisdiction assumed to reassess items that fell under one of the clauses, could the items falling under the other clause be also brought to tax. But in the case under consideration, there are no such two sets of items, some falling under Clause (a) and some falling under Clause (b).
12. In the instant appeals, it is not the case that the items satisfying the conditions of both the Clauses (a) and (b) of Section 17(1) were sought to be taxed in the course of the reassessment proceedings initiated under one of the clauses. In the cases under consideration, reassessment proceedings had been initiated under Clause (a) of Sub-section (1) of Section 17. It was subsequently held at the appellate stage by the AAC that action for reassessment under Clause (a) was not valid, on the ground that there was no failure on the part of the assessee to disclose the material facts necessary for assessment. But the AAC, however, held that the reassessment proceedings were justified, as Clause (b) of Section 17(1) became applicable to the facts of the case. He, hence, sustained the reassessment proceedings. It will thus be obvious that here the question is not that items satisfying the conditions of both the Clauses (a) and (b) are sought to be brought to tax, in the reassessment proceedings initiated under one of the clauses. Hence, in all humility, we feel that the decision of the Bombay High Court in the case of New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. (supra), which was given in a different context, will not be applicable to the facts of the present case. In that case reassessment proceedings under Clause (a) of Section 34(1) had been validly taken. Hence the question that had arisen was whether in the reassessment only such items were to be brought to tax which satisfied the conditions of Section 34(1)(a) or whether such other items which satisfied the conditions of Section 34(1)(b) could also be brought to tax. In the case under consideration, the appellate authority is of the view that action under Clause (a) of Section 17(1) has not been validly taken. Hence the question that arises for consideration is whether the action for reassessment, in case it is maintainable under Clause (b), should be sustained or not. It is a question different from the one which had been referred to the Bombay High Court in the case of New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. (supra).
13. We will draw attention of the Gujarat High Court in the case of CWT v. Chhatrshal Sinhji D. Zala [1982] 135 ITR 826. In that case, for the assessment years 1961-62 to 1967-68, the WTO completed the assessments of the assessee accepting the value of the property declared by the assessee at Rs. 1 lakh. For the assessment year 1968-69, the assessee declared the market value of the property at Rs. 3,77,200 on the basis of the valuer's report. In view of the valuation made by the valuer, the WTO reopened the assessments under Section 17(1)(a) on the ground that the assessee had failed to disclose fully and truly all material facts necessary for the assessment of his net wealth for the assessment years 1961-62 to 1967-68, and reassessed the net wealth taking into account the enhanced value of the property. The Tribunal held that the assessee had disclosed the assets, viz., the property in his returns and its estimated value was also mentioned in the returns and it could not be said that the assessee had omitted or failed to disclose fully and truly all necessary facts and that, therefore, the assessee's case did not fall within the mischief of Section 17(1)(a). The Tribunal further held that for the assessment years 1966-67 and 1967-68, the WTO having initiated the proceedings under Section 17(1)(a), could not reopen the assessment under Section 17(1)(b). The High Court held as under:
. . . that since the assessee in his returns for the assessment years 1961-62 to 1967-68, disclosed the property as his asset and offered its estimated value for wealth-tax and the WTO accepted the valuation declared by the assessee, it could not be said that the assessee had omitted or failed to disclose fully and truly all material facts necessary for the assessment of his net wealth and the reopening of the assessment was not valid under Section 17(1)(a).
(ii) Clauses (a) and (b) of Sub-section (1) of Section 17 contemplate different situations for the exercise of jurisdiction but the same set of facts may form the basis for an inference under Section 17(1)(a) and may also constitute 'information' under Section 17(1)(b). In such a case, even if there was no omission or failure on the part of the assessee to disclose fully and truly all material facts, action could be taken under Section 17(1)(b). It is, therefore, immaterial whether the notice for the reopening of the assessments was issued under Clause (a) or Clause (b) of Section 17(1). The valuer's report submitted by the assessee himself for the assessment year 1968-69 constituted information on the basis of which the assessments could be reopened under Section 17(1)(b). Therefore, for the assessment years 1966-67 and 1967-68, the reopening of the assessments under Section 17(1)(b) was valid.
14. Attention is also drawn to what the Punjab and Haryana High Court observed in the case of CIT v. Ess Ess Kay Engg. Co. (P.) Ltd. [1982] 137 ITR 446 :
Section 147 is not a charging section. It merely provides a machinery whereby an income which had escaped assessment or had been underassessed in the relevant assessment years could be brought into the network of taxation. The separate provisions limiting the conditions under which notices under Clause (a) or Clause (b) of Section 147 can be issued and assessment has to be completed do not indicate that Clause (a) or Clause (b) deal with two separate jurisdictions. It is true that there are separate limitations prescribed for different contingencies but some of the conditions are common and provided the conditions which are common are all fulfilled and the other limitations of the other clause are also fulfilled, then action taken in respect of one might be justified with reference to the powers under the other clause. Even though the ITO might have chosen to make the assessment under the more stringent and onerous provisions of Section 147(a), his action might be sustained under Section 147(b) provided the conditions precedent are satisfied and are found on record.
15. Attention is also drawn to the decision of the Delhi High Court in the case of CIT v. Banwari Lal & Sons Ltd. [1982] 137 ITR 91. The assessee-company had let its building to the American embassy at a rent of Rs. 3,212. During the accounting year relevant to the assessment year 1961-62, the embassy vacated the building and the building was requisitioned by the Government for its own use. The rent was in dispute. For the assessment year 1961-62, the assessee filed its return with a note appended thereto referring to the requisitioning of the building ; the question of the monthly rent being in dispute ; and the fact of the building let out to the embassy at the rent of Rs. 3,212 per month being an exceptional transaction. The ITO completed the assessments for the assessment years 1961-62 to 1965-66 calculating the annual value on the basis of the rent of Rs. 3,212. Thereafter, the ITO found that the rent fixed by the Government was Rs. 4,658 per month and he initiated reassessment proceedings under Section 147(a) of the 1961 Act, to bring to tax the difference. The Tribunal held that the assessee could not be said to have failed or omitted to disclose all material facts necessary for assessment and also that the proceedings initiated under Section 147(a) could not be saved under Section 147(b). On a reference, it was held by the Delhi High Court that escape of income from assessment was not due to the failure or omission on the part of the assessee to disclose fully and truly all material facts and, hence, reassessment could not be initiated under Section 147(a). The High Court, however, further held as under :
That, however, information about the enhanced rent was information within the meaning of Section 147(b) and the Tribunal had jurisdiction to convert or alter the assessments as assessments under Section 147(b) and maintain them as such.
16. Taking into consideration what has been stated above, we are, hence, of the view that the AAC was justified to maintain the validity of the reassessment proceedings under Section 17(1)(b). The WTO had the jurisdiction to initiate reassessment proceedings under Section 17(1)(b). The WTO, however, chose to proceed under the more stringent provisions of Section 17(1)(a) on the ground that the assessee had failed to disclose fully and truly all material facts necessary for her assessment. If the appellate authority comes to the conclusion that on the facts of the case the provisions of Clause (a) did not become applicable, it does not mean that the reassessments are to be struck down as being invalid. In case the jurisdiction assumed by the WTO for making reassessments is maintainable under Section 17(1)(b), it is to be maintained. The broad question to be decided is whether the WTO had correctly assumed jurisdiction to reassess. It may be that under some impression he has chosen to proceed under a clause, which, on examination, is not found to be applicable. But it cannot be denied that he had the competence to assume jurisdiction under the other clause. We fail to understand as to how we can, under the circumstances, say that he has not assumed jurisdiction in accordance with law. The mere mention of a different clause, which in appeal is not considered to be applicable, will not detract from the competence to assume jurisdiction to reassess which the law has conferred on him. The question which we have to consider is whether the law actually confers the jurisdiction, which he has assumed. Looked at thus, we find that the WTO has assumed jurisdiction to reassess properly. We, hence, uphold the order of the AAC and reject the assessee's ground of appeal that the assessments are ab initio invalid.
17. Another contention raised by the assessee was that the AAC was not justified to give a direction in his order that the WTO should refer the matter of the valuation of land to the departmental valuation cell before completing the assessment afresh.
18. The assessee has drawn our attention to the decision of the Tribunal, Chandigarh Bench in the case of Rattan Chand & Sons v. WTO [1984] 18 TTJ (Chd.) 267 for the assessment year 1975-76. Respectfully following this decision, we vacate the direction of the AAC on this behalf. However, it is left to the discretion of the WTO to refer the matter to the valuation cell, if he so desires.
19. Appeals are partly allowed.