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Commissioner of Wealth-tax Vs. Subakaran Gangabhishan - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 39 of 1976
Judge
Reported in[1980]121ITR69(AP)
ActsWealth Tax Act, 1957 - Sections 14(2) and 17(1)
AppellantCommissioner of Wealth-tax
RespondentSubakaran Gangabhishan
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateT. Ramachandra Rao and ;T.V. Raghavan, Advs.
Excerpt:
.....did not disclose material facts necessary for assessment of his net wealth chargeable to tax for assessment years 1963-64 to 1967-68 - wealth tax officer (wto) started assessment proceedings for those years - reopening of assessment proceedings opposed by assesee on grounds of want of jurisdiction - wto had jurisdiction to reopen assessments for years 1964-65 to 1966-67 under section 17 (1) (a) - held, reopening of assessment valid. (ii) revision of value of property - whether wto competent to revise value of property in reassessment when limitation under section 17 (1) (b) had expired - wto had jurisdiction to assess or reassess entire escaped net wealth chargeable to tax irrespective of fact that items fell under section 17 (1) (a) or section 17 (1) (b) - on basis of precedents..........the issuance of a notice under clause (b), but that it will not debar a reassessment in respect of items falling under clause (b) after four years, if those items come to the knowledge of the income-tax officer in connection with the proceedings validly initiated by the issuance of a notice under clause (a). the object of a time-limit for the issuance of a notice under clause (b) is in effect to take away the power of the income-tax officer to deal with items falling under clause (b) after the said period of four years. the further contention of the revenue is that the period of four years mentioned in respect of cases falling under section 34(1)(b) cannot be considered to be a period of limitation so as to create a vested right in the assessee. even if this contention were to be.....
Judgment:

ORDER OF THE DIVISION BENCH

S. Obul Reddy , C.J. and M. Ramachandra Raju, J.

1. The WTO issued a notice under Section 17(1)(a) of the W.T. Act to the assessee on the ground that the assessee failed to disclose fully and truly all material facts necessary for assessment of his net wealth chargeable to tax for the assessment years 1963-64 to 1967-68. That notice was issued in December, 1971. The notice has specified that the assessee failed to include 81/2 acres of land in Maredpalli in his wealth-tax returns for all the relevant assessment years. It so happened that when the WTO reopened the assessments he found that the Begumpet house property of the assessee was under-valued in all the assessment years and a bad debt of Rs. 2,36,985 for the assessment years 1966-67 and 1967-68 was wrongly allowed. An objection was taken by the assessee before the AAC and before the Appellate Tribunal that, in so far as the two items, viz., the house property in Begumpet and the bad debt are concerned, the WTO was not competent to reopen the assessment proceedings for the first four years, as the time prescribed for taking action in respect of cases falling under Clause (b) of Section 17(1)(a) is at any time within four years of the end of that assessment year. This contention of his was negatived throughout.

2. Mr. T. Ramachandra Rao's contention is that, while it is open to the WTO, when he issues a notice under Section 17(1)(a), to also consider matters falling under Section 17(1)(a), viz., whether 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, he cannot exercise the jurisdiction vested in him under Section 17(1)(a) after the expiry of the period of limitation of four years prescribed for proceedings under Section 17(1)(a). In support of his contention, he relied upon a decision of the Madras High Court in A.L. VR. ST. Veemppa Chettiar v. CIT : [1973]91ITR116(Mad) . That was a case where the ITO initiated reassessment proceedings by issuing a notice under Section 34(1)(a) of the Indian I.T. Act, 1922, in respect of a particular item. While so reopening he also sought to reopen the assessment under Section 34(1)(b). The Madras High Court, after referring to the decision in V. Jaganmohan Rao v. CIT : [1970]75ITR373(SC) , observed that the ITO cannot directly issue a notice for reassessment in cases falling under Clause (b) after the four year period. But those cases can be brought in indirectly by issuing a notice purporting to be under Clause (a). It was further observed at page 126 of the report:

'We are not inclined to accept the contention of the learned counsel for the revenue that the period of four years mentioned in the section is only for the issuance of a notice under Clause (b), but that it will not debar a reassessment in respect of items falling under Clause (b) after four years, if those items come to the knowledge of the Income-tax Officer in connection with the proceedings validly initiated by the issuance of a notice under Clause (a). The object of a time-limit for the issuance of a notice under Clause (b) is in effect to take away the power of the Income-tax Officer to deal with items falling under Clause (b) after the said period of four years. The further contention of the revenue is that the period of four years mentioned in respect of cases falling under Section 34(1)(b) cannot be considered to be a period of limitation so as to create a vested right in the assessee. Even if this contention were to be accepted, the object of providing a time limit before which the proceedings are to be initiated cannot be overlooked. As pointed out by the Supreme Court in S.S. Gadgil. v. Lal & Co. : [1964]53ITR231(SC) , the period prescribed by Section 34 for assessment may not be a period of limitation. However, the section in terms imposes a fetter upon the power of the Income-tax Officer to bring to tax escaped income. It prescribes different periods in different classes of cases for enforcement of the right of the State to recover tax.'

3. The learned counsel for the revenue invited our attention to a decision of this court in Pulavarthi Viswanadham v. CIT : [1963]50ITR463(AP) where a contrary view has been taken. This court expressed the view that the position obtaining after invoking Section 34(1)(a) of the Indian I.T. Act, 1922, is the same as it was prior to the completion of the original assessment and the ITO would have jurisdiction to assess items falling under Section 34(I)(b). What Mr. Ramachandra Rao contends is that there is no, discussion as such on the question of limitation provided under Section 34(1)(b) and, therefore, that decision requires reconsideration. The view expressed in Pulavarthi Viswa-nadham v. CIT : [1963]50ITR463(AP) was followed by another Bench of this court in CIT v. Jeskaran Bhuvalka : [1970]76ITR128(AP) . There, as pointed out by Mr. Ramachandra Rao, the question as to whether the period of four years provided in Section 34(1)(b) operates as a bar after the expiry of that period for reopening the assessment in respect of the items referred to in Section 34(1)(b) did not arise for consideration. The language of Section 34 is in pari materia with the language of Section 17(1)(a) of the W.T. Act. Since the question involved is an important one and is likely to arise quite often, we are of the opinion that there should be an authoritative pronouncement of this court. We, therefore, refer question No. 2, which reads as follows :

'If the answer to the above question is in the affirmative, whether the Wealth-tax Officer was competent to revise the value of the Begnmpet property in the reassessments for 1963-64 to 1966-67 and to disallow theassessee's claim for bad debt of Rs. 2,36,985 in the reassessment for 1966-67 when the limitation under Section 17(1)(a) had expired in respect of these two items ?'

4. Question No. 1 will have to be answered in the affirmative and in favour of the revenue and, therefore, question No. 2 alone is referred as it raises the question of limitation. Post the R.C. after the opinion of the Full Bench is received.


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