PRABHAVATI B. SOLANKI VS COMMISSIONER OF WEALTH TAX
2001 P T D 1887
[243 I T R 827]
[Gujarat High Court (India)]
Before R. Balia and A.R. Dave, JJ
PRABHAVATI B. SOLANKI
Versus
COMMISSIONER OF WEALTH TAX
Wealth Tax Reference No.23 of 1983, decided on 16/12/1998.
Wealth tax‑‑‑--
‑‑‑‑Assessment ‑‑‑Limitation‑‑‑Meaning of assessment ‑‑‑Assessment includes determination of net wealth as well as computation of tax payable ‑‑‑No finding on question whether computation of tax had been made before time limit‑‑‑Matter remanded ‑‑‑Indian Wealth Tax Act, 1957, Ss. 16 & 17A.
The term "assessment" in the provision prescribing the period of limitation in the Wealth Tax Act, 1957, has been used in comprehensive sense which includes the integrated process of computation of net wealth as well as computation of tax liability thereon. The two actions need not be simultaneous; they may be taken separately and at different times but the assessment is complete only when both the processes are over, namely, determination of net wealth and determination of tax payable on such net wealth. It is only when both the processes are complete that the assessment can be said to be completed. As a result, both the processes must take place prior to the expiry of the period of limitation.
Held, that, in the instant case, neither the Appellate Assistant Commissioner nor the Tribunal had enquired whether computation of tax has taken place on March 31, 1979, or thereafter. It is a question of fact when computation of tax payable has actually, taken place. In the absence of necessary finding to that effect, it was not possible to answer the question whether the assessments in question were completed prior to March 31, 1979 or were barred by limitation. [Matter remanded].
Kalyankumar Ray v. CIT (1991) 191 ITR 634 (SC) and CIT v. Purshottamdas T. Patel (1994) 209 ITR 52 (Guj.) applied.
K. N. Raval for the Assessee.
Manish R. Bhatt for the Commissioner.
JUDGMENT
R. BALIA, J.‑‑‑The following two questions of law arising out of the Tribunal's order, dated June 11, 1981, have been referred to this Court for its opinion by the Income‑tax Appellate Tribunal, Ahmedabad Bencht' "A", at the instance of the assessee:
"(1)Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that all the assessment orders for all the years under consideration were passed within the period of limitation?
(2)Whether the Tribunal was right in law in holding that the assessment orders passed by the Wealth Tax Officer were valid and were within the prescribed period of limitation even though there was no computation of tax liability in the assessment orders passed by the Wealth Tax Officer?"
The reference relates to the assessment years 1971‑72 to 1974‑75 under the Wealth Tax Act.
Prior to April 1, 1975, the Wealth Tax Act provided no limitation for completion of assessments under it. By insertion of section 17A by the Taxation Laws (Amendment) Act, 1975, with effect from January 1, 1976, for the first tune, a period of limitation for completion of assessment was provided. For the period prior to (sic) April 1, 1975, the section as it originally was inserted provided that no order of assessment shall be made under section 16 at any time after the expiration of a period of‑‑
(a)four years commencing on and from the April 1, 1975, or one year from the date of the filing of a return or a revised return under section 15, whichever is later, where the assessment year is an assessment year commencing before that date.
For all the assessment years under consideration, which ended prior to April 1, 1975, the assessment orders were made on March 31, 1979. Notices of demand in pursuance of the assessment orders were issued on May 3/4 of 1979. The assessment order itself which forms part of the statement of case does not show computation of tax payable as per the assessment of net wealth. As the demand notices were issued after the expiry of four years after April 1, 1975, the assessee had raised an objection as to the validity of assessment orders before the Appellate Assistant Commissioner that the same are barred by time. The Appellate Assistant Commissioner had mentioned in passing that the assessment orders were required to be completed by March 31, 1979, and the demand notices which have been filed by the appellant alongwith the appeal memos. bear the dates May 3, 1979/May 4, 1979, by which time the assessment had already become time‑barred.
The Tribunal, while examining this issue, noticed that there are three stages under the scheme of the Act before the liability of the assessee is communicated to assessee‑‑‑
(i) computation of net wealth:
(ii) computation of tax liability on the net wealth so computed, and
(iii) the communication of the tax liability so computed.
It was further of the opinion that while the first two stages are covered by limitation, the demand notice which is covered under third stage is merely an intimation to the assessee of tax liability computed as a result of assessment order. It, therefore, did not agree with the Appellate Assistant Commissioner that the date of service of notices should also be within the period of limitation.
The question is no more res integra. It has been now settled by the apex Court that the term "assessment" in the provision prescribing the period of limitation has been used in a comprehensive sense which includes the integrated process of computation of net wealth as well as computation of tax liability thereon. The communication of tax liability is not part of the assessment. We may refer to Kalyankumar Ray v. CIT (1991) 191 ITR 634 (SC) in this connection. A like question has arisen under the provisions of the Income‑tax Act and the Court has answered the question by holding that (headnote):
'Assessment' is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial as the former. That the Income‑tax Officer has to determine, by an order in writing, not only the total income but also the net sum which will be payable by the assessee for the assessment year in question and the demand notice has to be issued under section 156 in consequence of such an order.
The reason which weighed for reaching this conclusion was that section 143(3) of the Income‑tax Act which deals with the assessment of income mandates that the Income‑tax Officer shall, by an order in writing, make assessment of the total income or loss of the assessee and determine the sum payable by him on the basis of such assessment. Like provision was also contained in section 16 as it stood at the relevant period. Section 16(1) provides, "the Assessing Officer ......shall assess the net wealth of the assessee and determine the amount of wealth tax payable by him or the amount refundable to him on the basis of such return".
Following this decision in CIT v. Purshottamdas T. Patel (1994) 209 ITR 52, a Division Bench of this Court opined that the two actions need not be simultaneous; they may be taken separately and at different times but the assessment is complete only when both the processes are over namely, determination of net wealth and determination of tax payable on such net wealth. It is only when both the processes are complete that assessment can be said to be completed. As a result, one must reach the conclusion that both the, processes must take place prior to the expiry of the period of limitation.
In Kalyankurhar Ray's case (1991)191 ITR 634 (SC), the Court had further observed (headnote):
"The statute does not, however, require that both the computations (i.e., of the total income as well as of the sum payable) should be done on the same sheet of paper, the sheet that it super scribed 'assessment order'. It does not prescribe any form for the purpose. Once the assessment of the total income is complete with indications of the deductions, rebates, reliefs and adjustments available to the assessee, the calculation of the net tax payable is a process which is mostly arithmetical but generally time consuming. If, therefore, the Income‑tax Officer first draws up an order assessing the total income and, indicating the adjustments to be made, directs the office to compute the tax payable on that basis and then approves of it, either immediately, or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the Income‑tax Officer that the process described in section 143(3) will be complete."
This being the law, if we examine the facts of the present case, we find that the assessment orders determining the net wealth on which tax is payable have been signed. on March 31, 1979, which itself does not show computation of tax payable on the net wealth assessed. Demand notices have been issued and served beyond the period of limitation. ‑However, the demand notice is not the order computing tax payable, it is an act subsequent to it. The determination of the net taxable wealth has taken place on the last date before the expiry of the period of limitation. If tax computation has taken place after March 31, 1979, obviously assessments in relation to the assessment year ending before April 1, 1975, shall be barred by limitation: Neither the Appellate Assistant Commissioner nor the Tribunal has, enquired whether computation of tax has taken place on March 31‑, 1979, or thereafter. It is a question of fact when computation of tax payable has actually taken place. In the absence of necessary finding to that effect, it is not possible for us to answer the question whether the assessments in question were completed prior to March 31, 1979, or were barred by limitation. It will, therefore, be for the Tribunal when it is required to pass a fresh order in the light of decision of this Court on the questions of law referred to it to examine this question and reach its conclusion.
The reference accordingly stands disposed of. No order as to costs.
M.B.A./451/FC Order accordingly.