1995 P T D 393
[Karachi High Court]
Before Mamoon Kazi and Mrs, Majida Razvi, JJ
COMMISSIONER OF WEALTH TAX
Versus
MUHAMMAD FAROOQ
Income Tax Case No.279 of 1988, decided on 17/11/1994.
(a) Wealth Tax Act (XV of 1963)--
----Ss. 14(1)(2) & 17(1)(b), proviso----Case of total or' partial escapement of wealth chargeable to tax---Procedure to be followed by Wealth Tax Officer-- Wealth Tax Officer is bound to serve a notice on the assessee within time provided by law, requiring him to furnish necessary reply to satisfy him about the return filed or if any tax has escaped---Assessment by Wealth Tax Officer would be ab initio void for want of notice under S. 14(2) read with S. 17(1)(b) of the Wealth Tax Act, 1963.
Under section 14(1) of the Wealth Tax Act, 1963, every person whose net wealth on the valuation date of the previous year was of an amount by virtue of which he becomes liable to file Wealth Tax Return he should do so on his own. But under section 14(2) if in the opinion of the Wealth Tax Officer net wealth of any person is such that makes him liable to pay wealth tax under the Act then he may give notice to such person to submit his wealth tax return within 30 days of the receipt of such notice.
The Act XV of 1963 under section 14(2) has not given discretion to the Wealth Tax Officer who may or may not issue notice.
Section 17(l)(b) of the Act reveals that unlike section 17(1)(a) the escapement from tax is not owing to any omission or failure on the part of the Assessee, but wherein the Wealth Tax Officer believes, in consequence of any information which he has received or is in his possession from the facts of the case and record, that the net wealth chargeable to tax has escaped assessment in any Assessment year then he may serve a notice on the assessee at any time within a period of four years at the end of that Assessment year. The said notice will be to the effect to furnish a return of wealth for the relevant year in, the prescribed form and thereafter the Wealth Tax Officer will proceed to assess or re-assess the net wealth according to the procedure laid down by law.
The proviso to section 17(1)(b) of the Act clearly lays down the condition that any action taken under section 17(1)(b) must be based on definite information received by the Wealth Tax Officer in regard to such tax escapement or the Wealth Tax Officer should obtain prior approval in writing of tile income Tax Commissioner of Wealth Tax to take action against such assessee. Further that the Wealth Tax Officer has to act within four years of the end of the assessment year.
The word "information" used in section 17(1)(b) connotes wide meaning and covers variety of factors. Information which may have been received from external sources or from the material already on record which had escaped his attention inadvertently due to oversight.
"Information" includes an instruction or knowledge derived from external source concerning facts of particulars or as to law, relating to a matter bearing on assessment.
In the present case the order by the Wealth Tax Officer was passed in respect of both the assessment years after the expiry of four year.
If the Wealth Tax Officer had received any definite information about the total escapement of the wealth tax in respect of the said assessee then he should have served a notice as provided under section 17(1)(b) requiring assessee to give all relevant information. But in the present case neither the Wealth Tax Officer had given any reason for re-assessment of the assessee nor he had served the statutory notice to the assessee which he was bound to do as provided under tile law. Furthermore, there was no evidence on record to show if the Wealth Tax Officer had obtained prior written permission from the Commissioner of Wealth Tax as provided under the law.
The case was of total escapement and even if it was of a partial escapement of wealth chargeable to tax the Wealth Tax Officer was bound to serve a notice on the Assessee, and that too within time provided under the law, requiring him to furnish necessary reply to satisfy him about the returns filed or if any tax has escaped assessment. But none of the above legal requirements had been followed by the Wealth Tax Officer.
Therefore, assessment by Wealth Tax Officer was ab initio void for want of notice under section 14(2) read with section 17(1)(b)of the Wealth Tax Act, 1963.
CIT v. Raman & Co. (1968) 67 ITR 11 ref.
(b) Wealth Tax Act (XV of 1963)---
----S. 17(1)(b)---Word 'information' used in S. 17(1)(b), Wealth Tax Act, 1963-- Connotation.
The word "information" used in section 17(1)(b) connotes wide meaning and covers variety of factors. It includes information which may have been received from external sources or from the material already on record which had escaped his attention inadvertently due to oversight.
"Information" includes an instruction or knowledge derived from external source concerning facts or particulars or as to law, relating to a matter bearing on assessment.
CIT v. Raman & Co. (1968) 67 ITR 1I ref.
Nasrullah Khan for Applicant.
Abdul Karim Mangi (absent) for Respondent
Date of hearing: 6th October, 1994.
JUDGMENT
MRS. MAJIDA RAZVI, J.--The assessee Muhammad Farooq expired on 8-5-1968. He had during his lifetime as an individual assesee, filed wealth tax returns for the years 1966-67 and 1967-68 and declared a total wealth of Rs.47,650 and 46,494 for the abovementioned year's respectively. On 20-6-1973 the Wealth Tax Officer issued a notice under section 16(2) of the Wealth Tax Act in respect of both these charge years to Mrs. Umer-un-Nisa Begum, the widow of the deceased assessee as his legal heir, appear before him on 23-6-1973.
In response to the above notice dated 20-6-1973 issued by the Wealth Tax Officer no one appeared before him and the concerned officer completed the assessment in the absence of the assessee. He computed the total wealth in respect of the deceased assessee for the years under reference as Rs.461,148 and Rs.510,000 respectively.
The assessee, being aggrieved by the above ex parte assessment, filed appeal against the said order before the Appellate Tribunal Hyderabad Bench. It was contended on behalf of the assessee that the assessments for both the years under reference were time-barred under section 17(1)(b) of the Wealth Tax Act and further that no notice under section 14(2) was served on the assessee. The Tribunal, by its consolidated order dated 10-3-1975, upheld the contention of the assessee and quashed the assessments computed by the Wealth Tax Officer as being void ab initio. The operative part of the order passed by learned Tribunal reads as under:
"After careful perusal of the provisions of section 17(b) and section 14(2) we find that the contention of the appellant's counsel is well-placed. It was a case of total escapement of assessment in respect of first two charge years under consideration and hence the Wealth Tax Officer was under a legal obligation to issue a notice under subsection (2) of section 14 as provided by section 17(b) of the Wealth fax Act at any time within four years of the end of the relevant assessment year. The Wealth Tax Officer admittedly failed to do so. No notice under section 14(2) was at all issued within the prescribed time and hence the Wealth Tax Officer obviously acted without jurisdiction in completing these assessments on 27-6-1973 for non-compliance of notice under section 16(2) which were issued on 22nd of June, 1973 for 23rd June, 1973 in both the cases. The two assessments in question having therefore, been framed after the expiry of the prescribed time limit and also without serving the statutory notices are ab initio void and hence liable to be quashed. We order accordingly."
The department, being aggrieved by this order requested the Tribunal to refer the following question for determination by this Court:
"Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in holding that the Wealth tax assessment was ab initio void for want of notice under section 14(2) read with section 17(b) of the Wealth tax Act?"
We have heard Mr. Nasrullah Awan, the learned counsel for the department. None was present on behalf of the assessee.
Mr. Nasrullah Awan has contended that in subsection (2) of section 14 of the Act the words used are "may serve a notice". As such; according to him, it was left to the discretion of the Wealth Tax Officer that if in his opinion a notice is needed, he may issue the same. It would be advantageous to reproduce section 14 of the Act, which reads as under:
"14. Return of Wealth.--(1) Every person whose net wealth on the valuation date was of such an amount as to render him liable to wealth tax under this Act shall, on or before the Ist day of October of the corresponding assessment year, furnish to the Wealth Tax Officer a return in the prescribed form and verified in the prescribed manner setting forth his net wealth as on that valuation date.
(2) If the Wealth Tax Officer is of the opinion that the net wealth of any person is of such an amount as to render him liable to wealth tax under this Act, then, notwithstanding anything contained in subsection (1), he may serve a notice upon such person requiring him to furnish within thirty days from the date of service of such notice, or such longer or shorter period as may be specified in the notice, a return in am the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be required in the notice, the net wealth of such person as on the valuation date mentioned in the notice."
The plain reading of the section shows that under section 14(1) every person whose net wealth on the valuation date of the previous year was of an amount by virtue of which he becomes liable to file wealth tax return he should do so on his own. But under section 14(2) if in the opinion of the Wealth Tax Officer net wealth of any person is such that makes him liable to pay wealth tax under the Act then he may give notice to such person to submit his Wealth Tax return within 30 days of the receipt of such notice.
The above wording repels the contention of Mr. Nasruallh Awan that the Act under section 14(2) has given discretion to the Wealth Tax Officer who may or may not issue notice. As such in our opinion this contention has no force.
Perusal of section 17(1)(b) of the Act reveals that unlike section 17(1)(a) the escapement from tax is not owing to any omission or failure on the part of the assessee, but where the Wealth Tax Officer believes in consequence of any information which he has received or is in his possession from the facts of the case and record that the net wealth chargeable to tax has escaped assessment in any assessment year then he may serve a notice on the assessee at any time within a period of four years at the end of that assessment year. The said notice will be to the effect to furnish a return of wealth for the relevant year in the prescribed form and thereafter the Wealth Tax Officer will proceed to assess or reassess the net wealth according to the procedure laid down by law.
Now reverting to section 17(1)(b) the section reads as under:
"17. Wealth escaping assessment.--(1) If the Wealth Tax Officer--
(a) has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his net wealth under section 14 for any assessment year or disclose fully and truly all material facts necessary for the assessment for that year, the net wealth chargeable to tax has escaped assessment for that year, whether by reason of under-assessment or assessment at too low a rate or otherwise; or
(b) has, in consequence of any information in his possession, reason to believe, notwithstanding that there has been no such omission or failure as is referred to in clause (a), that the net wealth chargeable to tax has escaped assessment for the year, whether by reason of under assessment or assessment at too low a rate or otherwise, he may, in cases falling under clause (b), at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in notice under subsection (2) of section 14, and may proceed to assess or re-assess such net wealth, and the provisions of this Act shall, so far as may be, apply as if the notice had issued under that subsection:
Provided that no proceedings under this subsection shall be initiated unless definite information has come into the possession of the Wealth Tax Officer or he has obtained the previous approval of the Inspecting Assistant Commissioner of Wealth Tax in writing to do so. "
The proviso to this section clearly lays down the condition that any action taken under section 17(l)(b) must be based on definite information received by the Wealth Tax Officer in regard to such tax escapement or the Wealth Tax Officer should obtain prior approval in writing of the Income Tax Commissioner of Wealth Tax to take action against such assessee. Further that the Wealth Tax Officer has to act within four years of the end of the assessment year.
In our opinion the word information used in section 17(1)(b) connotes wide meaning and covers variety of factors. Information which may have been received from external sources or from the material already on record which had escaped his attention inadvertently due to oversights. In the case of CIT v. Raman & Co. (1968) 67 ITR 11 it was held "information" includes an instruction or knowledge derived from external source concerning facts or particulars or as to law, relating to a matter bearing on assessment.
Admittedly, the order by the Wealth Tax Officer was passed in respect of both the assessment years after the expiry of four years.
If the 'Wealth Tax Officer had received any definite information about the total escapement of the wealth tax in respect of the said assessee then he should have served a notice as provided under section 17(1)(b) requiring him to give all relevant information. But in the present case neither the Wealth Tax Officer has given any reason for re-assessment of the assessee nor he has served the statutory notice to the assessee which he was bound to do as provided under the law. Furthermore, there is no evidence on record to show if the Wealth Tax Officer had obtained prior written permission from the Commissioner of Wealth Tax as provided under the law.
In our view the facts show that the case was of total escapement and even if it was of a partial escapement of wealth chargeable to tax the Wealth Tax Officer was bound to serve a notice on the assessee, and that too within time provided under the law, requiring him to furnish necessary reply to satisfy him about the returns filed or if any tax has escaped assessment. But none of the above legal requirements have been followed by the Wealth Tax Officer.
In view of the above discussion, the question is answered in affirmative.
In the result, this reference is dismissed with no orders as to costs.
M.B.A./C-320/KReference dismissed.