COMMISSIONER OF WEALTH TAX VS D. R. VADERA
2001 P T D 1914
[246 I T R 348]
[Delhi High Court (India)]
Before Arijit Pasayat, C. J. and D. K Jain, J
COMMISSIONER.OF WEALTH .TAX
Versus
D.R. VADERA
(Legal. Heir of late Hans Raj Vadera)
Wealth Tax References Nos.92 and 93 of 1982, decided on 06/07/2000.
Wealth tax‑‑‑--
‑‑‑‑ Reassessment --‑‑Effect, of reopening of reassessment ‑‑‑Previous order of underassessment is set aside and Assessing Officer has jurisdiction and duty to levy tax on entire wealth that has escaped assessment ‑‑‑Indian Wealth Tax Act, 1957, S.17.
Once an assessment is reopened the previous under‑assessment is set aside and the whole assessment proceedings start afresh. What is set aside is only the previous, underassessment and not the original assessment proceedings. An order made in respect of the escaped item does not affect the operative force of the original assessment, particularly if it has acquired finality, and the original order retains both its character and identity. It is only in case of "underassessment", that the assessment of net income/wealth and tax due has to be re‑computed on the entire taxable wealth/income, as the case may be.
For the assessment years 1966‑67 and 1967‑68, the assessee had wealth disclosing net wealth of Rs.3,71,188 and respectively. The original assessments were completed under section 16(3) of the Wealth Tax Act, 1957, accepting the net wealth declared. Subsequently, the assessments were reopened. The net wealth in respect of the two years was determined at Rs.14,96,612 and Rs.16,29,924 respectively. In the reassessment proceedings, the value of certain immovable property was taken to be Rs.12,54,100 for the first year and Rs.13,53,100 for the subsequent year. The value of certain other property was taken at Rs.1,00,000 and Rs.1,20,000, respectively, for the two years. The reassessment orders were assailed before the Appellate Assistant Commissioner on the ground, inter alia, that the re‑assessment proceedings were initiated in relation to shares in various companies and it was not permissible to make enhancement of valuation in relation to the properties referred to above. The Appellate Assistant Commissioner held that the enhancement of valuation in respect of the two properties indicated above, was beyond the scope of reassessment under section 17(1)(a) of the Act. This conclusion was affirmed by the Tribunal. On a reference:
Held, that the Wealth Tax Officer had jurisdiction to consider in the present reassessment proceedings initiated under section 17(1)(a) of the Wealth Tax Act, 1957, for the two assessment years 1966‑67 and 1967‑68, the question of valuation of the two immovable properties and enhance the valuation of the said two properties while completing the said reassessments under section 17(1)(a).
Jaganmohan Rao (V.) v. CIT and EPT (1970) 75 ITR 373 (SC) and CIT v. Sun Engineering Works (P.) Ltd. (1992) 198 ITR 297 (SC) ref.
Sanjiv Khanna and Ajay Jha for the Commissioner.
Anoop Sharma with R.K. Raghavan and M. Husain for the Assessee.
JUDGMENT
ARIJIT PASAYAT, C.J.‑‑‑These two reference applications involve identical questions and this common judgment shall dispose of each of the cases.
At the instance of the Revenue, the Income Tax Appellate Tribunal, Delhi Bench B (for short "the Tribunal"), has referred the following questions under section 27(1) of the Wealth Tax Act, 1957, for opinion of this Court:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in concluding that the Wealth Tax Officer had no jurisdiction to consider in the present reassessment proceedings initiated under section 17(1)(a) of the Wealth Tax Act for the two assessment years 1966‑67 and 1967‑68 the question of valuation of the two immovable properties the one at 15, Barakhamba Road, and the other at Pharaganj at New Delhi and enhance the valuation or the said two properties while completing the said reassessments under section 17(1)(a) of the Act?"
The factual position as indicated in the statement of the case is essentially as follows. For the assessment years 1966‑67 and 1967‑68, the assessee's father, the late Hans Raj Vadera, filed returns of wealth on August 5, 1966, and October 31, 1967, disclosing net wealth of Rs.3,71,188 and Rs.3,47,924, respectively. The original assessments were completed under section 16(3) of the Act on May 15, 1968, accepting the net wealth declared. Subsequently, the assessments were reopened under section 17 of the Act. As in the meantime Shri H.R. Vadera had expired, notices were served on his son, Shri D.R. Vadera (hereinafter referred to as "legal heir"). In response to the notices, he submitted the returns and marked them as "returns under protest". The Wealth Tax Officer rejected the objections raised about the maintainability of the proceedings and completed the reassessments. .The net wealth in respect of the two years was determined at Rs.14,96,612 and Rs.16,29,924, respectively. In the reassessment proceedings, the value of the immovable property at 15, Barakhamba Road, New Delhi, was taken to be Rs.12,54,:00 for the first year and Rs.13,53,100 for the subsequent year. The vale of the other property at Paharganh was taken at Rs.1,00,000 and Rs.1,20,0C ,respectively, for the two years. The reassessment orders were assailed before the Appellate Assistant Commissioner ("the AAC "for short) on several grounds. The main grounds of challenge were that: (a) the reassessment proceedings were initiated in relation to shares in various companies and it was not permissible to make enhancement of valuation in relation to the properties referred to above, and (b) the proceedings for reopening assessments were not valid. Though the challenge was to the legality of the reopening, it was observed by the Appellate Assistant Commissioner that action under section 17(1)(a) of the Act was validly initiated to reassess wealth in so far as the shares in various companies were concerned and to that extent the reassessments made were valid. With regard to enhancement of valuation in respect of the two properties indicated above, it was held to be beyond the scope of reassessment under section 17(1)(a) of the Act. These conclusions were affirmed by the Tribunal. It has to be noted that the assesses did not assail the conclusions of the Appellate Assistant Commissioner about the valued initiation of proceedings under section 17(12)(a) of the Act relating to the shares.
On being moved by the Revenue, the Tribunal has referred the question indicated above.
Mr. Sanjiv Khanna, learned counsel for the Revenue, submitted that once assessment proceedings are reopened, the entire gamut can be taken note of by the Assessing Officer and reassessment proceedings are not restricted to only those items for which initially notice was given. Learned counsel appearing for the assesses, on the other hand, submitted that the scope of reassessment is restricted to items in respect of which notice was initially issued.
Once the Assessing Officer decides to reopen the assessment, the previous assessment is wiped out and the whole assessment proceedings start afresh. Once the valued proceedings are started for reassessment, the Assessing Officer not only has the jurisdiction but also has a duty to levy tax on the entire income or wealth, as the case may be, that had escaped assessment during that year. This position was highlighted by the apex Court in Jaganmohan Rao (V.) v. CIT and EPT (1970) 75 ITR 373. Once the assessment is reopened no distinction can be made between those items in respect of which reassessment proceedings are initiated, and those which form part of the wealth or income, as the case may be, will have to be taxed the reopening is done to bring into the net of taxation an item which has escaped assessment. The position was succinctly stated by the apex Court in CIT v. Sun Engineering Works (P.) Ltd. (1992) 198 ITR 297. It is manifest that once an assessment is reopened, the previous under assessment is set aside and the whole assessment proceedings start afresh. What is set aside' is only the previous under assessment and not the original assessment proceedings. An order made in respect of the escaped item does not affect the operative force of the original assessment. particularly if it has acquired finality, and the original order retains both its character and identity. It is only in a case of "under assessment", that the assessment of net income/wealth and tax due has to be recomputed on the entire taxable wealth/income, as the case may be.
That being the position, our answer to the identical question referred in the two reference applications is in the negative, i.e., in favour of the Revenue and against the assessee.
M.B.A./510/FC ????????????????????????????????????????????????????????????????????????????????? Reference answered.