COMMISSIONER OF WEALTH TAX VS L.K. KASLIWAL
1995 P T D 1323
[211 I T R 153]
[Rajasthan High Court (India)]
Before K.C. Agarwal CJ. and V.KSinghal, J
COMMISSIONER OF WEALTH TAX
versus
L.K. KASLIWAL
D.B. Wealth Tax References Nos.65 and 68 of 1983, decided on 09/12/1993.
Wealth tax---
----Reassessment---Valuation of assets---Firm---Partner---Assessment of partners completed---Reference to registered value for valuing property belonging to firm---Not valid---Reassessment of partners based on valuation of assets of firm by registered value ---Not valid---Indian Wealth Tax Act, 1957, Ss. 16-A & 17(1)(b).
Reference to the Valuation Officer in respect of the assets of a firm for ascertaining the value of the partner's interest is permissible but that power can be exercised if the assessment is pending. Where no proceedings are pending before the Wealth Tax Officer, no reference to the Valuation Officer can be made under section 16A of the Wealth Tax Act, 1957. Section 17(1)(b) of the Wealth Tax Act, 1957, is applicable if the Wealth Tax Officer 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 any year, whether by reason of under assessment or assessment at too low a rate or otherwise and he may proceed to assess or reassess. This provision makes it clear that there should be information "and reason to believe" for the exercise of such power. If there is no information as contemplated by section 17(1)(b) then there could not be a valid initiation of proceedings.
Held, on the facts, that since assessments of the partners/ assessees had already been completed, the reference by the Wealth Tax Officer under section 16-A for valuing the property of the firm in respect of a cinema could not have given any right to reopen the completed assessment of the partners. The Tribunal was justified in holding that the Wealth Tax Officer did not have jurisdiction to initiate reassessment proceedings against the partners.
CWT v. Master Kairas'Tarapore (1987) 163. 1TR 311 (Raj); Sardar Kehar Singh v. CIT (1992) 195 ITR 769 (Raj) and Tulsidas Kilachand v. D.R. Chawla (1980) 122 ITR 458 (Boom) fol.
Amrut Talkies v. ITO (Second) (1984) 150 ITR 386 (Kar).; Brig. B. Lall v. WTO (1981) 127 ITR 308 (Raj.) and Nawal Kanwar (Smt.) v. WTO (1981) 127 ITR 308 (Raj) ref.
N.M. Ranka and B.S. Yadav for Assessee.
N.R. Saran for Commissioner.
JUDGMENT
V.K. SINGHAL J.---The Income Tax Appellate Tribunal has referred the above two cases under section 27(1) of the Wealth Tax Act, 1957, in respect of the assessment years 1972-73 and 1973-74, which arise from its order dated August 27, 1981.
The jurisdiction of the Wealth Tax Officer to, initiate reassessment proceedings is in dispute.
The Wealth Tax Officer made a reference under section 16-A of the Wealth Tax Act to the Departmental Valuation Officer on May 20, 1975, for valuation of immovable property (Gems Cinema) owned by the firm, Messrs, Maniram and Sons, for the relevant assessment years 1971-72 and 1974-75. The valuer submitted his report on April 30, 1976, determining the value at Rs.15,45,000 and Rs.20,20;000 as on Diwali, 1970, and Diwali, 1973, respectively. The Wealth Tax Officer issued notice for the assessment years 1972-73 and 1973-74 for escaped assessment under section 17(1)(b). The reassessment order was accordingly framed. In appeal, the Appellate Assistant Commissioner of Wealth Tax, relying upon the decision of this Court in the case of Brig. B. Lall v. W.T.O. (1981) 127 ITR 308, held that the power to refer the question of valuation of .property in a completed assessment, after accepting the valuation by a registered value, could not be exercised and that the firm, Maniram & Sons, is not an assessee under the Wealth Tax Act and thus there was no valid reference.
In the second appeal before the Income Tax Tribunal, it was observed that no wealth tax proceedings were pending for the two partners, namely, Shri L.K. Kasliwal and Shri R.K. Kasliwal, and even if the wealth tax assessment of the third partner, namely, Smt. Ratan Prabha, were pending for 1971-72 and 1972-73, the assessment which - has been completed could not be reopened under section 17(1)(b) of the Act on the basis of the report of the Valuation Officer. This Court in Smt. Nawal Kanwar v. W.T.O. (1981) 127 ITR 308 has held (at page 323):
"We are of the opinion that the foundation or bedrock of the jurisdictional facts necessary for giving jurisdiction under section 16-A is that the Wealth Tax Officer must be seized of a return filed by the Assessee containing valuation of his assets for which he is to apply his mind and adjudicate the valuation for-completing the assessment. The situation contemplated in clauses (a) and (b) of subsection (1) of section 16A can be visualised only in a case of pending assessment and not a completed assessment. Once the assessment is completed and before the reassessment commences, the Wealth Tax Officer becomes fonts officio for the purposes of section 16-A, as he is not in the process of completing any assessment, for the purpose of which he wants to check up from the Valuation Officer, the correctness of the valuation of the assets disclosed by the Assessee in the return and which, according to him, are undervalued, looking to the fair market value or as per the standards laid down in clause (a) or clause (b) of sub-section (1):"
In C.W.T. v. Master Kairas Tarapore (1987) 163 ITR 311, this Court had held that the reference under section 16A, after completion of assessment, is without jurisdiction and is not valid. In Brig. B. Lall v. W.T.O. (1981) 127 ITR 308, it was held that the Valuation Officer's report under section 16-A could not form the basis for reassessment proceedings. Similarly, in Sardar Kehar Singh v. CIT (1992) 195 ITR 769 (Raj), it was held that the valuation report cannot be a valid basis for reassessment under section 147(a) of the Income-tax Act, 1961.
We have considered the matter. Reference to the Valuation Officer in respect of the assets of a firm for ascertaining the value of partners' interest is permissible but that power could be exercised if the assessment is pending. Section 17(1)(b) of the Wealth Tax Act is applicable, if the Wealth Tax Officer 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 any year, whether by reason of underassessment or assessment at too low a rate or otherwise and he may proceed to assess or reassess. This provision makes it clear that there should be information "and reason to believe" for the exercise of such power.
The Bombay High Court in the case of Tulsidas Kilachand v. D.R. Chawla (1980) 122 ITR 458 has held that the assessment completed on the basis of the valuation report of an approved value cannot be reopened on the basis of the valuation given by the Departmental Valuation Officer giving a higher figure. The view of the Bombay High Court has been dissented from by the Karnataka High Court in Am rut Talkies v. ITO (Second) (1984) 150 ITR 386. The view of this Court consistently had been that where no proceedings are pending before the Wealth Tax Officer, then no reference to the Valuation Officer can be made under section 16-A. If there is no information as contemplated by section 17(1)(b), then there could not be valid initiation of proceedings. In the present matter, since the assessments of the above two had already been completed, the reference by the Wealth Tax Officer under section 16-A for valuing the property of the firm, Messrs. Maniram & Sons, in respect of Gem Cinema, cannot be considered to have given any right for reopening the completed assessments. Accordingly, it is held that the Tribunal was justified in holding that the Wealth Tax Officer did not have jurisdiction to initiate the reassessment proceedings and in cancelling the assessments made under section 17(1)(b) of the Wealth Tax Act, 1957. The reference is accordingly answered in favour of the Assessee and against the Revenue. .
M.BA./963/T.F.Reference answered.