DR. KARNI SINGH JI OF BIKANER VS DEPUTY COMMISSIONER OF INCOME-TAX
1999 P T D 3773
[237 I T R 505]
[Delhi High Court (India)]
Before Arun Kumar and J. B. Goel, JJ
Dr. KARNI SINGH JI OF BIKANER
Versus
DEPUTY COMMISSIONER OF INCOME-TAX and another
C. W. P. Nos.to 2481 of 1992, decided on 05/03/1999.
Wealth tax---
----Reassessment---Condition precedent---Reason to believe that wealth had escaped assessment ---W.T.O. seeking valuer's report while assessment was pending---Valuer's Report received subsequent to assessment---Reassessment proceedings on the basis of valuer's report were valid---Indian Wealth Tax Act, 1957, S.17.
If there are reasons to reopen an assessment, like fresh facts coming to light or some information becoming available to the Assessing Officer showing that facts disclosed by the assessee and accepted by the officer earlier, were not true, the notice of reassessment will be fully justified. The rule of prudence and the requirement of finality to be attached to assessment orders, so far as the officer passing the same is concerned, enjoin that Assessing Officers should not be allowed to lightly reopen the assessments already completed by them or their predecessors. The requirement that the officer should have "reason to believe", contains the safeguards in this behalf. No elaborate reasons are required to be recorded nor will the Court go into the sufficiency of the reasons for forming the belief by the officer. The assesee has a limited right to challenge the notice of assessment by saying that either there was no reason for the belief or the reasons were based on irrelevant or extraneous material or fact, etc.:
Held, that in the instant case, the Assessing Officer had sought for the valuer's report while the assessment was still pending before him. The report though received subsequent to completion of assessment, would be sufficient ground to reopen the assessment and the notice of reassessment under section 17 of the Wealth Tax Act, 1957, was valid.
CWT v. V. Cleetus (1995) 213 ITR 14 (Ker.).fol.
CWT v. Raghunandan Saran Ashok Saran (1987) 60 CTR 175 (Delhi); Jindal Photo Films Ltd. v. Deputy CIT (1998) 234 ITR 170 ,(Delhi) and Phool Chand Bajrang Lal v. ITO (1993) 203 ITR 456 (SC) ref.
C. S. Aggarwal for Petitioner.
R. D. Jolly with Ms. Prem Lata Bansal for Respondents.
JUDGMENT
ARUN KUMAR, J.---This batch of writ petitions challenges the action of the respondents in issuing notices for reassessment under section 17 of the Wealth Tax Act (hereinafter referred to as "the Act"}. The notices for reassessment were issued with respect to the assessment years 1985-86, 1986-87, 1987-88 and 1988-89. The case of the petitioner is that the notices for reassessment are without jurisdiction and as such are liable to be quashed.
The assessee filed returns with respect to his wealth for the relevant assessment-years as under:
| Assessment year | Return filed on | Assessment under section 16(3) of the Act completed on |
| 1985-86 | August 2, 1985 | March 26, 1990 |
| 1986-87 | August 12, 1986 | August 12, 1990 |
| 1987-88 | August 17, 1987 | August 12, 1990 |
| 1988-89 | August 3, 1988 | August 12, 1990 |
The controversy in the present batch of writ petitions centers around three properties belonging to the assessee. they are:
In the original assessment. completed under section 16(3) of the Act, the value of these immovable properties was assessed on the basis of the order of the Settlement Commission, dated March 14, 1990, which was with respect to the assessment years 1978-79 to 1981-82. The Assessing Officer, 'however, had sought the report of the Valuation Officer with respect to these properties before finalising the assessment. The valuation report was received on. March 26, 1991. On the basis of the valuation report, the notices for reassessment were issued under section 17 of the Act on March 31, 1992. The table given below shows the difference between the value of the properties as per the assessment completed and as per the report of the valuer.
Karni Bhawan
| Assessment year | Value taken as per initial assessment | Value as per valuer |
| | (Rs. in lakhs) | |
| 1985-86 | 9.50 | 45.27 |
| 1986-87 | 10.45 | 51.50 |
| 1987-88 | 10.45 | 55.75 |
| 1988-89 | 10.45 | 60.34 |
Junagarh Fort
| Assessment year | Value taken as per initial assessment | Value as per valuer |
| | (Rs. in lakhs) | |
| 1985-86 | 2.50 | 53.00 |
| 1986-87 | 3.13 | 61.20 |
| 1987-88 | 3.13 | 69.26 |
| 1988-89 | 3.13 | 85.23 |
Gajner Palace
| Assessment year | Value taken as per initial assessment | Value as per valuer |
| | (Rs. in lakhs) | |
| 1985-86 | 22.33 | 137.41 |
| 1986-87 | 11.36 | 159.02 |
| 1987-88 | 11.36 | 174.65 |
| 1988-89 | 11.36 | 194.26 |
From the above table it is clear that there is a substantial difference between the two valuations. The main question for, consideration in these writ petitions - is whether the assessments already completed could be reopened? The question of reopening of a completed assessment is governed by section 17 of the Act. Section 17 of the Wealth Tax Act was amended with effect from April 1, 1989, vide the Direct Tax Laws (Amendment) Acts, 1987 and 1989. The amended section is reproduced as under:
"(1) If the Assessing Officer has reason to believe that the net wealth chargeable to tax in respect of which any person is assessable under this Act has escaped assessment for any assessment year (whether by reason of underassessment or assessment at too low a rate or otherwise), he may, subject to the other provisions of this section and section 17A, serve on such person a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth the net wealth in respect of which such person is assessable as on the valuation date mentioned in the notice, along with such other particulars as may be required by the notice, and may proceed to assess or reassess such net wealth and also any ether net wealth chargeable to tax in respect of which such person s assessable, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section for the assessment year concerned (hereafter in this section referred to as the relevant assessment year and the provisions of this Act shall, so far as may be, apply as if the return were a return required to be furnished under section 14:
Provided that where an assessment under subsection (3) of section 16 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any net wealth chargeable to tax, has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make return under section 14 or section 15 or to response to a notice issued under sub-section (4) of section 16 or this, section or to disclose fully and truly all material facts necessary for his assessment for that assessment year ....:"
Section 17( 1A):
"(1A) No notice under subsection (1) shall be issued for the relevant assessment year,--
(a) in a case where an assessment under subsection (3) of section 16 or subsection (1) of this section has been made for .such assessment year,---
(i) if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub-clause (ii) or sub-clause (iii);
(ii) if four years, but, not more than seven years, have elapsed from the end of the relevant assessment year, unless the net wealth chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees five lakhs or more for that year;
(iii) if seven years, but not more than ten years, have elapsed from the end of the relevant assessment year, unless the net wealth chargeable to tax which has escaped assessment amounts .to or is likely to amount to rupees ten lakhs or more for that year.
According to learned counsel for the petitioner, the petitioner had made true and full disclosure of all material facts for purposes of the wealth tax assessment for the relevant year: It. is further pointed out that as a matter of fact the Department did not accept the valuation of the properties as declared by the assessee in the return. The value was taken as per the Settlement Commission order. The assessments had been duly completed. Therefore, unless it could be said to be a case of failure on the part of the assessee to truly and fully disclose all material facts, the assessments could not have been reopened. On this basis, learned counsel has challenged the very jurisdiction ,of the assessing authority to issue the notice of reassessment.
Learned counsel for the assessee relied on Jindal Photo Films Ltd. v. Deputy CIT (1998) 234 ITR 170 (Delhi), to urge that in the facts of the present case the notices of reassessment are totally without jurisdiction and as such are liable to be quashed. It was held that the key words in the section which bestow power in the Assessing Officer to issue notice of reassessment are "reason to believe". If "reason to believe" is available on record, the writ Court, will not exercise its power of judicial review nor will it go into the questions of sufficiency or adequacy of the. material available. However, if it is a case of absence of any reason or the reasons not being bona fide, or being based on irrelevant material, the notice of the assessment could beheld to be without, jurisdiction. On the facts of the case this Court felt that no new material had come on record nor any fresh information had been received. There was no change of law. Therefore, it was found that it was a case of a mere change of opinion on the same given facts. It could not be said to be a case of any reason being available for the belief to reopen the assessment. The notices of reassessment were quashed. This was a case under section 147/148 of the Income-tax Act, which give powers for reopening the income-tax assessments already completed. The following observations from the, decision of the Supreme Court in Phool Chand Bajrang Lal v. ITO (1993) 203 ITR 456 were relied upon (page 477):
"An Income-tax Officer, acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Income Tax Act, 1961, only if on the basis of specific reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He, may start reassessment proceedings, either because. some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of -the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based oil vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection' or a dive link for the formation of the requisite belief. "
The above observations of the Supreme Court are equally attracted in the controversy in hand which relates to reassessment notices under the Wealth Tax Act.
Next learned counsel for the petitioner relied on CWT v. Raghunandan Saran Ashok Saran (1987) 60 CTR 175 (Delhi). This was a case in which the assessment already completed under section 16A of the Wealth Tax Act was sought to be reopened under section 1.7 of the said act on the- basis of a Report of the Valuation Officer, obtained by the Wealth Tax Officer after the original assessments were completed. This Court approved the decision of the Tribunal whereby it was held that the assessment which was already completed on proper principles could not be reopened on the basis of the valuation report obtained by the Wealth Tax Officer. Learned counsel submits that this case applied on all fours to the facts of the present case and as such should be followed.
Learned counsel for the Revenue, R. D. Jolly, raised a., preliminary objection about the maintainability of the writ petitions. He submits that in the facts of the present case it cannot be said that the notices of reassessment are without jurisdiction. For this reason, the writ petitions under Article 226 of the Constitution of India cannot be the remedy. Further, according to him, the petitioner can raise all the points which are being raised in the present proceedings before the Assessing Officer and from the order of the Assessing Officer, the petitioner has a right of appeal in accordance with the statute. Therefore, the petitioner has a right to avail of statutory remedies and the writ petitions are, therefore, not maintainable.
On the merits he contended that in view of the provisions of section 3 of the Wealth Tax Act, the petitioner is liable to pay wealth tax in respect of the net wealth of the petitioner on the corresponding valuation date. The expression "net wealth" has been defined in section 2(m) of the Act to mean:
" 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on the date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date which have been incurred in relation to the said assets;"
It may also be relevant to quote clause (q) of section 2 which defines 'valuation date'--
'valuation date', in relation to any year for which an assessment is to be made under this act, means the last day of the previous year as defined in section 3 of the Income-tax Act, if an assessment were to be made under that Act for that year: "
Thus, according to learned counsel, it is the obligation of the assessee to disclose his net wealth as on the valuation date. In the present case apparently the Assessing Officer was not satisfied with the valuation of the properties in question disclosed by the assessee and that is why he sought for the report of the Valuation Officer. The report of the Valuation Officer was sought during the pendency of the assessment proceedings and not after the completion of the assessment under section 16(3) of the Act. However, before the report of the Valuation Officer was received, the valuation was completed under section 16(3) of the Act. This was also done not as per the valuation of the properties disclosed by the assessee but as per the order of the Settlement Commissioner, dated March 14, 1990. This, according to learned counsel for the Revenue, shows that in the first instance itself, the Assessing Officer was not satisfied that there was a true and full disclosure of the value of assets by the assessee and that is why he sought report of the valuer. Learned counsel submits that the report of, the valuer was received subsequent to the completion of the assessment and in these circumstances the Assessing Officer was justified in accordance with the provisions of section 17 of the Act to issue notice of the reassessment. Learned counsel relied on a Full Bench decision of the Kerala High Court in CWT v. V. Cleetus (1995) 213 ITR 14 in support of his case. In this case it was held (head noted):
"that merely because the order of the Valuation Officer reached the Wealth Tax Officer after the completion of the assessment proceedings, it did not lose the character of information as envisaged under section 17(1)(b). In a case where the assessment proceedings were completed, the Wealth Tax Officer could not call for the order of the Valuation Officer. As the order of the Valuation Officer was called for during the pendency of the assessment proceedings, it could not be equated to a case where the order was sought after the completion of the assessment. As section 17(1)(b) in clear terms mentioned any information in the possession of the Wealth Tax Officer' for initiating the reassessment proceedings, the Valuation Officer's order which was certainly an information in the possession of the Wealth Tax Officer could not be considered to be devoid of any value or significance. The Wealth Tax Officer could certainly act on the information, though subsequently received, for initiating reassessment proceedings."
We are fully in agreement with the view expressed by the Kerala High Court in the above judgment.
The legal position which emerges on the basis of the various relevant decisions is that no general rule of law can be laid down. Each case has to be examined on its own facts. If on facts it turns out to be a case of mere change of opinion by the Assessing Officer, the notice of reassessment has to be held to be void. As in the case of Jindal Photo Films Ltd. v. Deputy CIT (1998) 234 ITR 170 (Delhi), it was found that there was neither any change in law, nor there was any change in facts, nor any fresh information had come to the Assessing Officer. There was no basis to reopen the assessment . In such facts even if the Assessing Officer was to record that he had reason to believe- the statement would be totally hollow and such a notice of assessment will have to be held to be bad. But if there are reason to reopen an assessment, like fresh facts coming to light or some information becoming available to the Assessing Officer showing that the facts disclosed by the assessee and accepted by the officer earlier, were not true, the notice of reassessment will be fully justified. The rule of prudence and requirement of finality to be attached to assessment orders, so far as the officer passing the same is concerned, enjoin that Assessing Officers should not be allowed to lightly reopen the assessments already completed by them or their predecessors. The requirement that the officer should have "reason to believe", contains the safeguards in this behalf. No elaborate reasons -are required to be recorded nor will the Court go into sufficiency of reasons for forming the belief by the officer. The assessee has a limited right to challenge the notice of assessment by saying that either there was no reason for tile belief or the reasons were based on irrelevant or extraneous material or fact, etc.
As per facts already noted, the Assessing Officer had sought for the valuer's report while the assessment was still pending before him. The report though received subsequent to completion of assessment, would be sufficient ground to reopen the assessment and the notice of reassessment under section 17 of the Act cannot be said to be without jurisdiction. In the facts of the case, the notice for reassessment can be fully justified under the relevant provision authorising the Assessing Officer to issue such a notice.
In view of these facts reliance paced by the learned counsel for the assessee on Jindal Photo Films Ltd.'s case (1998) 234 ITR 170 (Delhi) and Raghunandan's case (1987) 60 CTR,175 (Delhi) is of no avail. As already noticed in Jindal Photo Films Ltd.'s case (1998) 234 ITR 170 (Delhi) there was no basis for issuance of notice of reassessment. It was a case of mere change of opinion of the Assessing Officer. Raghunandan's case (1987) 60 CTR 175 (Delhi) was a case of a completed assessment and the Wealth Tax Officer seeking the valuation report after having completed the assessment. In the present case, the valuer s report was sought while the assessment was still pending before the Assessing Officer but was received subsequent to the completionof assessment. Therefore, neither of these cases helps the petitioner. The notices of the reassessment in the case in hand cannot be said to be without jurisdiction.
It follows from the above when the notices for reassessment cannot be said to be without jurisdiction the writ petitions challenging such notices are not maintainable. The petitioner has to participate in the departmental proceedings and raise all the objections there. The petitioner will be entitled to pursue remedies in case of any adverse orders in accordance with the statute. The statute in the present case permits appeals against the orders of the Assessing Officer. The petitioner is, thus, relegated to the assessment proceedings and remedies in accordance with the statute. These writ petitions are dismissed as not maintainable. We have refrained from expressing any opinion on the merits of the controversy so that there is no prejudice to the case of the parties in the proceedings before the departmental authorities under the statute.
The writ petitions are dismissed. No order as to costs.
M.B.A./4201/FC Petitions dismissed.