Income Tax Appellate Tribunal - Hyderabad
B. Chandramouli vs Wealth-Tax Officer on 29 August, 1986
Equivalent citations: [1987]20ITD245(HYD)
ORDER
K.S. Viswanathan, Accountant Member
1. We find it convenient to dispose of both the appeals by a common order. The appeals arise from the reassessment for the year 1972-73. The assessee is aggrieved by the finding of the AAC that the reassessment proceedings were validly initiated ; the department is objecting to the valuation in respect of some of the properties. Since the assessee's objection goes to the root of the assessment, we will first consider their appeal.
2. The assessee is a HUF. The valuation date is Diwali 1971, i.e., 18-10-1971. The family has several immovable properties. The original assessment was completed on a net wealth of Rs. 6,33,660 as filed by the appellate authorities.
3. There was a partial partition in the assessee's family. For the purpose of the partial partition, these properties are revalued. On the basis of the partition deed the worth of the properties was Rs. 7,64,040. The partition was effective as on 14-12-1971 which was only about two months after the valuation date.
4. On the basis of the valuation given by the assessees themselves in the partition deed, the valuation as per the wealth-tax assessment was lower by more than Rs. 1 lakh. The WTO, therefore, felt that it was a case of escapement of income. He, therefore, reopened the assessment. In the reopened assessment, he got the properties totally revalued by the Valuation Officer and on that basis fixed the value at Rs. 9,33,200.
5. The assessee appealed. The AAC found that the reopening of the assessment was entirely based on the valuation of these very properties in the partition deed. Apart from that, he also noticed that the WTO had referred to a plot of land admeasuring 195 sq. yards valued at Rs. 1,800 which was not included in the net wealth admitted by the assessee. The AAC was, therefore, satisfied that there was an omission by the assessee to disclose fully and truly the materials for the purpose of assessment. He, therefore, upheld the reopening of the assessment.
6. In the assessee's appeal before us, Shri A. Satyanarayana, the learned Counsel, submitted that the reasons recorded did not justify reopening of the assessment under Section 17(1)(a) of the Wealth-tax Act, 1957 ('the Act'). The WTO had based his case for reopening on the valuation given in the partition deed. He submitted that the valuation given in the partition deed is of no consequence. He pointed out that the original assessment was completed after a thorough scrutiny and after the WTO had satisfied himself regarding the market value of the properties. His finding regarding the value is the market value of the properties. The assessee may for certain purposes of partition equation of shares among the coparceners, etc., may fix different values of the properties. This value fixed in the partition deed will be governed by the desire of the individual coparceners to get certain specific immovable properties. For that purpose, it is possible that the members might have hiked up the value. It would not be correct to say that such valuation represents the market value.
7. With regard to the submission that the assessee had omitted to include one or two small properties, he submitted that there has been no omission at all. He placed before us the correspondence between the assessee and the department regarding the valuation for the earlier years. He drew our attention to the letter of the assessee written to the AAC dated 25-11-1981 in connection with the original wealth-tax appeals for the assessment years 1972-73 to 1975-76. In that letter, it is stated that the values of these properties were included and considered in the earlier assessments from 1968-69. These two properties were in the cantonment limits and had no market value since prior permission of the cantonment authorities have to be taken for sale and no such permission had been made available. It is further pointed out therein that this fact was considered by the WTO for the assessment of 1968-69 and the assessment orders were completed after due consideration of these properties and the value of immovable properties were taken for the assessment years 1967-68 to 1971-72 at Rs. 5,02,944. It was, therefore, submitted by Shri Satyanarayna that for this original assessment also the return was filed showing the value which included the value of these two properties. Therefore, the finding of the WTO and the AAC that these two properties were omitted to be included is not correct.
8. Shri Santhanam, for the department, submitted that the reopening under Section 17(1)(a) will be valid if the assessee had omitted to include any property. The value of the property admitted need not be considerable. It is enough if property having some value has been omitted. He then referred the return of income filed by the assessee in the reassessment proceedings. The statement of total wealth as given by the assessee reads as follows :
STATEMENT OF TOTAL WEALTH Return in response to notice under Section 17 of the Wealth-tax Act.
Wealth already admitted in the original return filed.
Rs.
Rs. 4,72,944 wealth determined as per the
M.O. dated 23-8-1974. Consequent upon
orders passed by AAC. Original assessment
completed on 18-1-1973 5,93,379
Add: Rs.
1. 47/6 open plot Mareedpalli 195.20 sq.
yards value 1,800
2. 266 Basareddi Guda WTO intimated
vide letter dated 9-11-1973 2,000
3,800 3,800
5,97,179
or
5,97,180
The assets which escaped assessments are the two assets which are being added now. This fact was brought to the knowledge of the department before the department could point out vide our letter dated 9-11-1973. It was Santhanam's case that the assessee himself had admitted that there was an omission.
9. We have considered the question. It is not necessary for us to go into the question whether the value shown for these properties in the partition deed is relevant for the purposes of reopening the assessment under Section 17(1)(a). That is because the department apart from the partition deed, has based their case on the omission of two properties. According to the assessee, there was no omission in respect of these two properties. According to the department, there is. So we have first to see whether there was such an omission. If there was an omission, then the reopening is valid. We do not have to consider the question of reopening based on the partition deed.
10. After considering the arguments on both sides, we are satisfied that in the original return filed by the assessee the two properties, i.e., 195 sq. yards situated at 47/6 Mareedpalli and 266 sq. yards of open plot at Basareddi Guda have been omitted from the original return. We have given above the statement of total wealth as given by the assessee in the reassessment proceedings. It would be seen that the value of these properties at Rs. 3,800 is added to the net wealth as fixed finally in the original proceedings. It is a clear piece of evidence and admission by the assessee that these two properties were not included in the original proceedings. Shri Satyanarayana, the learned Counsel, submitted that the statement of total wealth in the reassessment proceedings relied on by the department was signed by Shri Chandramouli who was not the karta and, therefore, it has no evidentiary value. We are unable to accept this submission. Shri Chandramouli is an adult member of an HUF, and obviously he was also concerned with the proceedings and that is why he had signed the statement of the total wealth in the reassessment proceedings. Not only this statement he has also signed the letter dated 25-11-1981 addressed to the AAC on which Shri Satyanarayana himself was relying on. Shri Satyanarayana thereafter submitted that it may be a mistaken impression. Of course, we agree that if it is a mistaken impression, it is open for the assessee to explain how the mistake had arisen. But, there is no material placed to show it was a mistake. The above paragraphs give a finding that there was an omission on the part of the assessee. A mere omission alone, however, will not be sufficient to justify reopening of the assessment. The WTO must have reason to believe that by virtue of that omission on the part of the assessee, wealth has escaped assessment. So before we hold that the reopening is valid, we must also show that wealth has escaped assessment.
11. It would appear prima facie easy to answer the question in favour of the department by pointing out that the value of Rs. 3,800 had escaped assessment and, therefore, to that extent there is an underassessment of tax also. But in our opinion the matter is not that simple. Shri Satyanarayana has one other argument. He submitted that the Wealth-tax Rules, 1957 had been amended by the inclusion of Rule 1BB which requires valuation of properties on the basis of net wealth to which a multiplier should be added. He submitted that a Special Bench of the Tribunal in the case of Biju Patnaik v. WTO [1982] 1 SOT 623 (Delhi) has held that the provisions of Rule 1BB are applicable even for assessments prior to 1979-80 provided they were pending either before the assessment authorities or before the appellate authorities. He submitted that the valuation of these properties under Rule 1BB will give a figure much less than the original figure itself. That being so there would not be any escapement of wealth-tax at all. Therefore, even if there was an omission on the part of the assessee, no wealth-tax has escaped assessment.
12. We are unable to accept this submission. The assessment order was dated 18-3-1979. Rule 1BB had come into force with effect from 1-4-1979. The WTO, therefore, could not be aware of such a rule coming into force later. We have to consider the reopening of the assessment only on the basis of the contemporary evidence. On that basis, the prima facie impression that there is an omission of Rs. 3,800 still holds good. Therefore, we hold that the reopening of the assessment was valid.
13. The next question will be the valuation of these properties. The AAC had gone into the issue thoroughly and had fixed up the values of the properties, himself. According to the department, this part of his order is erroneous because the valuation fixed by the department was based on the technical opinion of the departmental valuer. It is further submitted that the AAC has not given any opportunity of being heard to the Valuation Officer. Shri Satyanarayana, on the other hand, supporting the order of the AAC that as per ruling given in Biju Patnaik's case (supra), the provisions of Rule 1BB will be applicable.
14. We have considered the submissions. We agree with Shri Satyanarayana that the provisions of Rule 1BB should be applied in this case. However, it is subject to one limitation. If the valuation of these properties on the basis of Rule 1BB is less than the value fixed in the original assessment proceedings, then the valuation as per original order should be retained. In other words, in the reassessment proceedings, the valuation of none of the properties should be less than the value fixed in the original proceedings. Subject to this limitation, we direct the WTO to apply the provisions of Rule 1BB in valuing these properties.
15. It is true that the valuation of these properties in the reassessment proceedings is based on the report of the Valuation Officer. However, as has been held by the Special Bench of the Tribunal in Biju Patnaik's case (supra) the provisions of Rule 1BB will still be applicable.
16. In the result, the assessee's appeal is partly allowed and the departmental appeal is dismissed.