(a) Wealth tax---

----Reassessment---Law applicable---Effect of amendment of S.17 w.e.f. 1-4-1989---Condition precedent for initiation of reassessment proceedings-- Assessing Officer should have reason to believe that a property has escaped assessment whether by reason of under assessment or assessment at too low a rate or otherwise ---Assessee himself giving higher valuation of property in subsequent years ---Rea-asessment proceedings were valid---Indian Wealth Tax Act, 1957, S.17.

(b) Wealth tax---

---Reassessment---Limitation---Law applicable---Effect of amendment of S.1'7 w.e.f. 1-4-1989---Period of limitation is now linked to amount of wealth which has escaped assessment---Indian Wealth Tax Act, 1957, S.17.

(c) Wealth tax---

---- Valuation of assets---Reference to Valuation Officer after issuing notice of reassessment---Reference was valid---Indian Wealth Tax Act, 1957, S. 16A.

Section 17 of the Wealth Tax Act, 1957, has undergone a change with effect from April 1, 1989, under the Direct Tax Laws (Amendment) Act, 1987. After the amendment all that is necessary is that the Assessing Officer should have reason to believe that a property has escaped assessment, whether by reason of underassessment or assessment at too low a rate or otherwise. The word "otherwise" has to be given some meaning and it is not possible to contemplate or limit the circumstances under which an assessment can be reopened, because the property has not been correctly valued. All that can be said is that an Assessing Officer should not exercise the power arbitrarily or in a mala fide manner. So long as the Assessing Officer has some reason to believe that the property has escaped proper assessment, he can always exercise the power, provided lie does so within the period of limitation. The period of limitation is now linked to "the net wealth chargeable to tax, which had escaped assessment".

The appellant owned immovable properties. He had been filing voluntary returns under section 14(1) which were accepted by the Wealth Tax Officer. For the assessment year 1984-85, the appellant disclosed a net wealth of Rs.3,17,800. For the assessment year 1985-86, the assessee disclosed a net wealth of Rs.4,41,900. By a notice, dated February 15, 1991, the first respondent invoked section 17 of the Act and proposed to assess the escaped wealth both for the assessment years 1984-85 and 1985-86. By a notice, dated October 1, 1991, the first respondent referred the valuation of the properties relating to the assessment years ending with March 31, 1983, up to March 31, 1987, to the Valuation Officer. Writ petitions to quash the notices under sections 17 and 16A were dismissed. On appeal:

Held, (i) that the assessee himself had given a much higher valuation for the subsequent years. This might be due to passage of time or it may be that for the earlier years, the assessee had suppressed the correct value. These were matters, which could be examined by issue of a notice under section 17. The notice under section 17 was valid.

(ii) That as regards limitation a seven-year period was available in respect of the assessment years 1984-85 and 1985-86 and, therefore, the notice issued on February 15, 1991, was well before the last date, viz., March 31, 1992 in respect of the assessment year 1984-85. The notice was not barred by limitation.

(iii) That in response to the notice under section 16A the assessee had appeared before the authority and filed his objections. The writ petition was therefore, infructuous: Moreover, since the notice issued under section 17 was valid, the notice issued under section 16A of the Act on October 1, 1991, was also valid because, it had been issued after the reopening of the assessment proceedings.

Acchut Kumar S. Inamdar v. P. R. Hajarnavis (1981) 132 ITR 331 (Bom.) and Ganga Saran & Sons (P.) Ltd. v. ITO (1981) 130 ITR 1 (SC) ref.

Sundar for S. T. R. Rajaraman for Appellant

S. V. Subramaniam for C.V Rajan for Respondent

JUDGMENT

J. KANAKARAJ, J.---The appellant owns immovable properties at Coimbatore as karta of a Hindu undivided family. He had been filing voluntary returns under section 14(1) of the Wealth Tax Act, 1957 (hereinafter referred to as "the Act"), and the respondents had been accepting the returns and passing orders. For the assessment year 1984-85, the appellant filed a return on June 18, 1984, disclosing a net wealth of Rs.3,17,800. The first respondent accepted the return, completed the assessment and passed orders under section 16(1) of the Act, by an order dated September 8, 1986. Similarly, for the assessment year 1985-86, a return was filed on November 29, 1985, disclosing a net wealth at Rs.4,41,900 and the same was accepted and an order was passed on September 8, 1986. By a notice dated February 15, 1991, the first respondent invoked section 17 of the Act and proposed to assess the escaped wealth both for the assessment years 1984-85 and 1985-86. By a notice dated October 1, 1991, the first respondent referred the valuation of the properties relating to the assessment years ending with March 31, 1981, up to March 31, 1987, to the Valuation Officer. Writ Petition No.4055 of 1992, seeks to quash the notice, dated October 1, 1991, issued under section 16A of the Act. Writ Petitions Nos.4053 and 4054 of 1992 seek to challenge the notices issued under section 17 of the. Act in respect of the assessment years 1984-85 and 1985-86. All the writ petitions were dismissed by Govindasamy, J. by order, dated March 19, 1992, holding that the petitioner could raise his objections before the respondent, by sending replies to the notices and thereafter, if aggrieved take remedial measures by invoking the relevant provisions of the statute. All the writ petitions were, therefore; dismissed in limine. The. writ appeals are directed against the said order. Writ Appeal No. 1094 of 1992 is directed against the order in Writ Petition No.4054 of 1992 and Writ Appeal No. 1095 of 1992 relates to the order made in Writ Petition No.4055 of 1992, relating to the 16A notice. Writ Appeal No. 1096 of 1992 relates to the order in Writ Petition No.4053 of 1992.

On behalf of the appellant, Mr. Sundar, learned Advocate, has sought to urge that the notices are without jurisdiction and that, therefore, this Court has power to interfere even at' this stage. So far as the notice issued under section 17 of the Act is concerned, the argument is that the prerequisites for invoking section 17 of the Act are not available or at any rate not referred to by the first respondent. Consequently, the first respondent lacks jurisdiction to invoke section 17 of the Act. Alternatively, learned counsel for the appellant contends that the notices are beyond the time prescribed in the Act and, therefore, the same should not be given effect to. So far as the notice issued under section 16 of the Act is concerned, the argument is that the same could be invoked, only when the assessment proceedings are, pending before the officer concerned.

At the outset, we would like to make it clear that section 17 of the Act had undergone a change with effect from April 1, 1989, by the Direct Tax Laws (Amendment) Act, 1987. Inasmuch as the impugned notices under section 17 of the Act have been issued only on February 15, 1991, it goes without saying that. it would be only the amended provisions which would govern the instant case. However, it is necessary to notice the provision of law, as it stood before April 1, 1989, because several judgments have been cited only under the unamended Act. We, therefore, refer to the unamended section 17 of the Act which provided for two contingencies, the first is where the assessee fails to make a return or fails to disclose fully and truly all the material facts. The second contingency is where the Assessing Officer gets information to suggest that there had been an escapement from assessment for the relevant year. In respect of the first contingency, the period of limitation was eight years and in respect of the second contingency the period of limitation was four years. After the amendment, whenever there is escapement of assessment, where by reason of under-assessment or assessment at too a low a rate, the Officer has powers to reopen the assessment, after giving notice. The period of limitation is important and has significance to the facts of the present case. We, therefore, quote here, the relevant provision relating to the limitation contained in section 17(1 A) of the Act:

"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;

(b) in any other case,

(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 two lakhs and fifty thousand 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 five lakhs or more for that year."

It will, thus, be seen that the period of limitation is linked to the net wealth chargeable to tax which had escaped assessment. These are all the jurisdictional facts, which have got to be ascertained before it could be stated that the notice is barred by limitation or not. It is contended, for and on behalf of the respondents, by Mr. S.V. Subramaniam, learned Senior Central Government standing counsel (income-tax) that in respect of the assessment years in question the seven year period alone is applicable and, therefore, for the assessment year 1984-85, they have got time till March 31, 1992, and for the assessment year 1985-86, they have got time till March 31, 1993. Inasmuch as the notices were issued on February 15, 1991, they are perfectly valid and not liable to be quashed. So far as the question of the authority, having reason to believe, it is pointed out that in the subsequent assessment years, the appellant himself -had disclosed the net wealth at very huge amounts, like Rs.7,57,900 for the assessment year 1986-87 and Rs.6,50,800 for the assessment year 1987-88. The argument of Mr. Sundar, learned counsel for the appellant, is based on the judgment of the Supreme Court in Ganga, Saran & Sons (Pvt.) Ltd. v. ITO (1981) 130 ITR 1. It has to be remembered that the said Judgment arose out of the unamended provisions of the Income-tax act, which contained similar provisions of law like the Wealth Tax Act. It was with reference to the said provisions of law the Apex Court pointed out that unless the ingredients are available for reopening an assessment, the power cannot be exercised. Learned counsel for the appellant also relies on the judgment in Acchut Kumar S. Inamdar v. P.R. Hajarnavis (19$1).132 ITR 331 (Born.) for the proposition that mere under valuation of a property cannot give rise to reopening of assessment. We are of the opinion that after the amendment of section 17 of the Act with effect from April 1, 1989, the position is slightly different. All that is necessary is that the Assessing Officer should have every reason to believe that a property has escaped assessment, whether by reason of underassessment or assessment at too low a rate or otherwise. The word "otherwise" has to be given some meaning and it is not possible to contemplate or limit the circumstances under which an assessment can be reopened, because the property has not been correctly valued. All that can be said is that an Assessing Officer should not exercise the power arbitrarily or in a mala fide manner. So long as the Assessing Officer has some reason to believe that the property had escaped proper assessment, he can always exercise the power provided he does so within the period of limitation. In this case, learned senior counsel for the respondent says that the assessee himself had given a much higher valuation for the subsequent year. It may be due to passage of time or it may be that for the earlier years, the assessee had suppressed the correct value. These are matters, which could be examined by issue of a notice under section 17 of the Act. At the stage of a notice, it may not be proper to interfere unless the Assessing Officer lacks total jurisdiction to exercise the power. Where certain jurisdictional facts have got to be ascertained, it cannot be said that the Assessing Officer lacks jurisdiction, he can always issue a notice and ascertain whether such jurisdictional facts to invoke the provisions of section 17 of the Act are available.

On the question of limitation, we accept the argument of learned senior counsel appearing for the respondent that a seven year period is available in respect of the assessment years 1984-85 and 1985-86 and, therefore, the notice issued on February 15, 1991, is well before the last date, viz., March 31, 1992, in respect of the assessment year 1984-85. Consequently, the argument based on the question of limitation also fails.

We have only to consider the notice issued under section 16A of the Act. So far as this notice is concerned, it is brought to our notice that theassessee appeared before the authority and filed his objections on March 23, 1992. The Valuation Officer had determined the value and had sent his report on March 25, 1992. Therefore, the Writ Appeal No.1095 of 1992, which is directed against Writ Petition No.4055 of 1992 has really become infructuous. That apart, inasmuch as we have held that the notice issued under section 17 of the Act, dated February 15, 1991, is valid, the notice issued under section 16A of the Act on October 1, 1991, is also valid because, it has been issued, after the reopening of the assessment proceedings.

For all the above reasons, we do not find any substance in the writ petition and we agree with the learned Single Judge that the petitioner could put forth all his objections before the Assessing Officer and the Assessing Officer shall deal with the objections of the petitioner, in accordance with law, after affording all statutory safeguards to him. The writ appeals are dismissed. However, there will no order as to costs.

M.B.A./4203/FCPetition dismissed.