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Subhash Vithalrao Kawde Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Nagpur
Decided On
Judge
Reported in(1982)2ITD322(Nag.)
AppellantSubhash Vithalrao Kawde
RespondentWealth-tax Officer
Excerpt:
.....the status of a huf and he was assessed as such. similarly, he filed the return of wealth for the assessment years 1973-74 to 1975-76 and he was assessed accordingly as under :assessment year date of assessment wealth assessed as returned rs.1973-74 11-2-1974 1,82,8701974-75 15-1-1975 1,63,3001975-76 25-11-1975 1,97,120 the wto reopened the assessments on recording his reasons for his belief that the wealth of the assessee had escaped the assessments for the years under consideration vide his order dated 7-10-1977 which is reproduced hereinafter : assessee was married on 2-5-1976. hence for this assessment year his correct status is individual. he has been wrongly assessed in the status of huf and assessment was filed n.a. as the value of wealth was less than rs. 2 lakhs. issue notice.....
Judgment:
1. The assessee has made these appeals against the consolidated order, dated 1-8-1978, of the AAC who dismissed the appeals, against the orders dated, 27-1-1978 of the WTO, A Ward, Yavatmal.

2. We are deciding these appeals ex parte ', since the assessee in spite of service of the notices has failed to appear on the date of the hearing of these appeals ; hence his failure to appear on the date fixed for hearing of the appeals is without sufficient cause and reason ; as there is neither any application nor the telegram for an adjournment.

3. We are disposing of these appeals, by way of passing a consolidated order, on consolidating these together for the sake of convenience, since the issue involved in these appeals is common and the contentions and the submissions of the parties are common.

4. The facts, in brief, leading to these appeals are that the assessee was a coparcener of the HUF which was partitioned on Diwali 1969. The assessee was married on 2-5-1976. However, he filed the return of wealth for the assessment year 1971-72 in the status of a HUF and he was assessed as such. Similarly, he filed the return of wealth for the assessment years 1973-74 to 1975-76 and he was assessed accordingly as under :Assessment year Date of assessment Wealth assessed as returned Rs.1973-74 11-2-1974 1,82,8701974-75 15-1-1975 1,63,3001975-76 25-11-1975 1,97,120 The WTO reopened the assessments on recording his reasons for his belief that the wealth of the assessee had escaped the assessments for the years under consideration vide his order dated 7-10-1977 which is reproduced hereinafter : Assessee was married on 2-5-1976. Hence for this assessment year his correct status is individual. He has been wrongly assessed in the status of HUF and assessment was filed N.A. as the value of wealth was less than Rs. 2 lakhs. Issue notice under Section 17(1)(b) as the assessee failed to file return in the status of individual.

In view of the Supreme Court decision in the case of C. Krishna Prasad v. CIT[1974] 97 ITR 493 till his" marriage, assessee's correct status would be that of individual Action under Section 17(1)(b) is necessary. Issue notice.

5. The assessee took the stand before the WTO vide his written reply that the assessee's regular status was of a HUF as all the properties were acquired on partition of HUF styled as Vithal Ramji Kawade ; and that the status as returned by the assessee was considered and verified at the time of the original assessment, and hence, no action under Section 17 of the Wealth-tax Act, 1957 ('the Act') could be taken.

The WTO did not accept the aforesaid stand of the assessee ; hence he rejected it and took the status of the assessee as that of an individual in place of a HUF on the plea that the assets returned for wealth-tax assessment were received by the assessee at the time of the partition on Diwali 1969 and on that date, the assessee was unmarried ; and there was no other member in the family ; hence in view of the Supreme Court decision in the case of C. Krishna Prasad (supra), the assessee's correct status would be that of an individual. So, he concluded that the decision of the Supreme Court is an information on the basis of which he is within his jurisdiction to reopen the assessment and he placed further reliance on the Supreme Court decision in the case of CIT v. A. Raman & Co. [1968] 67 ITR 11.

6. The matter was agitated in appeals before the AAC who dismissed the appeals of the assessee ; and thereby upheld the action of the WTO.7. The assessee being aggrieved and dissatisfied with the orders of the AAC, has preferred these appeals.

8. In view of our above exparte order, we have to depend upon the memorandum of appeals. The grounds of appeal in all these three appeals in the memorandum of appeals are the same and as such we are reproducing the grounds for the assessment year 1 975 which are there in WT Appeal No. 220 (Nag.) of 1978-79. The grounds of appeals are as under : 1. That the Wealth-tax Officer erred in taking the status of the assessee as individual though the status of the assessee has been declared as HUF and the learned AAC erred in upholding the same. On facts and circumstances of the case, the status of the assessee may kindly betaken as HUF. 2. The proceedings under Section 17(1)(b) are also illegal and not applicable in the present case. Therefore, the proceedings may kindly be quashed.

9. So, from the above, it is clear to us that the assessee is challenging the status taken by the authorities below as individual in place of HUF as well as the re-opening of the assessments.

On the other hand, Shri K.S. Krishnamurthy the learned departmental representative, contended that the lower authorities are justified in arriving at their respective conclusions and that the re-opening of the assessments are justified in view of the decision of the Supreme Court referred to above. He relies on the decision of the Supreme Court.

10. We have heard Shri K.S. Krishnamurthy, the learned departmental representative, and gone through the record before us.

11. We are of the opinion that the assessee is to fail. The reason is that the partition of the HUF in which the assessee was coparcener took place on Diwali 1969 and he was married on 2-5-1976 ; therefore, he was to be assessed in the status of an individual in view of the decision of the Supreme Court in the case of Krishna Prasad (supra), where their Lordships held that the assessee remaining unmarried when the HUF was divided in which he was a coparcener, the assessee obtained the shares after partition, thus the assessee should be assessed in the status of an individual and not that of a HUF.12. The aforesaid decision of the Supreme Court was passed on 12-11-1974, while the assessment for the year 1973-74 was made on 11-2-1974. Therefore, the aforesaid decision of the Supreme Court is an information on the basis of which the WTO has reopened the assessments, was based on the subsequent facts and also on the material of the original assessment.

Apart from it, it is settled law that the provisions of section would apply to the case where the information is as to the true and correct state of the law derived from the relevant judicial decisions.

13. We are further of the opinion that the action of the WTO for reopening the assessments for the assessment years 1974-75 and 1975-76 is also valid because the aforesaid decision of the Supreme Court was passed on 12-11-1974, when the original assessment for the year 1973-74 was made on 1 1-2-1974. Though the original assessments for the assessment years 1974-75 and 1975-76 were made on 15-11-1975 and 25-5-1975 after the date of the Supreme Court decision, because these reassessments are opened by the WTO by recording the reasons for his belief that the assessment of wealth has escaped on the same date, i.e., on 7-10-1977. Therefore, it is clear to us that no sooner, the WTO came to know about the aforesaid decision of the Supreme Court, than on the basis of it he reopened the assessments ; and as such, it cannot be said that the reopening of the assessments for the assessment years 1974-75 and 1975-76 is bad in law since the decision of the Supreme Court was there on 12-11-1974, as subsequent and preceding decisions of the High Court and the Supreme Court are immaterial, because the assessment can be reopened where the information as to the true and correct state of law derived from the relevant judicial decisions is there.

14. In view of our above discussion and on the totality of the facts and circumstances of the case, we hold that the reopening of the assessment by the WTO is justified and the status of the assessee is rightly taken by the WTO as that of an individual in place of a HUF.Hence we hold that the AAC was justified in confirming the action of the WTO and being so, we confirm the order of the AAC for the years under consideration.

1. I have perused the order passed by my learned brother, the Judicial Member, in these appeals on 8-2-1980. But I do not agree with the views expressed by him as to the final disposal of the Wealth-tax Appeals Nos. 221 and 222 (Nag.) of 1978-79 for the assessment years 1974-75 and 1975-76 in this case, hence this dissenting order : 2. The facts of the case lie within a very narrow compass. The assessee was a coparcener of a HUF which partitioned on Diwali, 1969. He was a bachelor at that time. Later on, he got married on 2-5-1976. He, however, filed the returns of wealth in the status of HUF for the assessment years 1973-74 to 1975-76. The assessments were made in this case on the following dates in the status of HUF : Thereafter, the WTO recorded the following note in respect of each of the three assessment years on 7-10-1977 : Assessee was married on 2-5-1976. Hence for this assessment year his correct status is individual. He has been wrongly assessed in the status of HUF and assessment was filed as N.A. as the value of wealth was less than Rs. 2 lakhs. Issue notice under Section 17(1)(b) as the assessee failed to file return in the status of individual.

In view of the Supreme Court decision in the case of C. Krishna Prasad (supra) till his marriage assessee's correct status would be that of individual Action under Section 17(1)(&) is necessary. Issue notice.

The assessee objected to the action under Section 17(1)(6) on the ground that his status was that of a HUF as the properties acquired by him were on partition of a HUF. Further, it was contended by him at the assessment stage before the WTO that the status as declared by him was considered and verified at the time of the original assessment and, hence, no action under Section 17 could be taken now. The WTO, however, overruled the assessee's objection on the basis of the Supreme Court's decision in the case of Krishna Prasad (supra) and held that the proper status of the assessee was of an individual till the assessee got married.

3. On an appeal by the assessee before the AAC, the AAC agreed with the WTO that the proper status should be that of a HUF because the assessee had neither a wife nor any family. He, therefore, upheld all the three assessments under Section 17(1)(b).

4. The assessee has, therefore, filed these appeals objecting to the assessments being reopened under section I7(\)(b) and the status being taken as that of a HUF.5. At the time of the hearing, no appearance has been put in on behalf of the assessee. On behalf of revenue, however, the action of the lower authorities is supported on the ground that the status of the assessee could not be taken as that of a HUF since he was an unmarried individual, though the properties held by him were acquired by him on partition of a HUF. Since, however, the assessee had objected to the proceedings under Section 17(1)(b), we enquired from the learned departmental representative whether the WTO had received any information subsequent to the original assessments made by the WTO, in consequence of which information the WTO had reasons to believe that the net wealth chargeable to tax had escaped assessments for the years under consideration. The learned departmental representative stated that the Supreme Court decision in the case of Krishna Prasad (supra) was the information within the meaning of Section 1(1)(b) on the basis of which the assessments were reopened. As stated earlier, the assessment for the year 1973-74 was made on 11-2-1974. The Supreme Court delivered the judgment in the case of Krishna Prasad (supra) on 12-11-1974. The exposition of the law on the subject by the Supreme Court in the case of Krishna Prasad (supra) would constitute 'information' within the meaning of Section 17(1)(6). About this, there can be no two opinions. However, if authority is needed, we may refer to the Supreme Court decision in the case of Kalyanji Mavji & Co. v.CIT [1976] 102 ITR 287. The assessment for the year 1973-74 having been made prior to that, the WTO could have reopened the assessment for the year 1973-74 acting under Section 11(1)(b). Further, on the basis of the Supreme Court decision in the case of Krishna Prasad (supra), the assessee's status has to be taken as that of an individual. Therefore, I am in entire agreement with my learned brother that the assessee's appeal for the year 1973-74 has to be dismissed.

6. Coming to the question of the appeals for the years 1974-75 and 1975-76, these two original assessments were made by the WTO on 15-1-1975 and 25-11-1975. While framing these two assessments, the WTO was deemed to have taken into consideration the law as it stood then on the statute book as explained by the Supreme Court in the case of Krishna Prasad (supra) on 12-11-1974. He expected to have taken judicial notice of the Supreme Court decision under Section 57(1) of the Indian Evidence Act. Neither in the assessment orders as passed by the WTO nor during the course of the arguments of these appeals before the Tribunal (as it was the case of revenue), that the WTO physically came to be aware of the Supreme Court's decision after the original assessments for these two assessment years were made. The only argument advanced on behalf of revenue was that the WTO's original assessments were erroneous in the light of the Supreme Court decision and, therefore, the assessments were liable to be reopened under Section 17(1)(6) within the time laid down under that section. Apart from the arguments on behalf of revenue, on a perusal of the date of the decision of the Supreme Court in the case of Krishna Prasad (supra), i.e., 12-11-1974, and the reference made by the WTO in his note reopening the assessment, it would be found that he has apparently derived knowledge of this decision from the Income-tax Reports of 1974, i.e., before 31-12-1974. Therefore, it cannot be said that the WTO derived knowledge of the Supreme Court decision after the original assessments were made on 15-1-1975 and 25-11-1975, respectively.

Further, the provisions of Section 57(1) of the Indian Evidence Act stand in the way. Therefore, in my opinion, the WTO could not have reopened these assessments under Section 17(1)(b) for these two years and are, therefore, without jurisdiction and requires to be annulled.

7. In the result, the appeal for the year 1973-74 is dismissed whereas the appeals for the years 1974-75 and 1975-76 are allowed.

Reference under Section 255(4) of the Income-tax Act read with Section 24(11) of the Wealth-tax Act : Whereas a difference in opinion has arisen in the members of this Bench of the Tribunal on the question of the allowability or otherwise of the appeals filed by the assessee for the assessment years 1974-75 and 1975 76, the case is hereby referred to the President of the Tribunal on the following questions under Section 255(4) read with Section 24(11) for necessary action : 1. Whether, in the facts and circumstances of the case, the AAC was justified in holding that the Supreme Court's decision in the case of Krishna Prasad (supra) constituted valid 'information' for the purposes of Section 17(1)(6) for the assessment years 1974-75 and 1975-76 2. Whether, in the facts and circumstances of the case, the AAC was justified in upholding the orders passed by the WTO by re-opening the assessments under Section 17(1)(6) for the assessment years 1974-75 and 1975-76 and 3. Whether a decision of the Supreme Court or the High Court, whether preceding or succeeding, is 'information' for the purposes of section or only the succeeding decision 1. These two appeals which have come up before me as Third Member for decision on a difference of opinion between the two learned members who heard the appeals originally, raise a very interesting question.

Briefly stated, the relevant facts are that the assessee has been coparcener of the HUF which was partitioned on Diwali, 1969. At the time of partition and upon some time after the end of the previous years relevant for the assessment years under appeal, the assessee has been a bachelor. However, he filed his wealth-tax returns for the assessment years 1974-75 and 1975-76 in the status of HUF and the original assessments were completed on 15-1-1975 and 25-11-1975, respectively.

2. Subsequent thereto, there was a change in the incumbent and the succeeding WTO felt that the correct status of the assessee was individual and not Hindu family'. Accordingly, on 7-10-1977 he recorded a note as under and reopened the proceedings for two years under Section 17(1)(b).

Assessee was married on 2-5-1976. Hence for this assessment year his correct status is an individual. He has been wrongly assessed in the status of HUF and assessment was filed as N. A. Issue notice under section as the assessee failed to file return in the status of individual. In view of the Supreme Court decision in the case of C. Krishna Prasad v. CIT [1974] 94 ITR 493 till his marriage assessee's correct status would be that of individual. Action under Section 11(1)(b) is necessary. Issue notice.

3. There is no dispute that the correct status of the assessee for the two years under appeal is individual in view of the Supreme Court decision in the case of Krishna Prasad (supra). There is also no dispute that the wealth of the assessee can be said to have escaped assessment in the sense that it has been assessed as HUF wrongly.

However the dispute centres round the fact that the Supreme Court's decision in Krishna Prasad (supra) as a result of which the proceedings herein are reopened was pronounced and reported on 12-11-1974, i.e., long before the assessments were completed, so much so that it should not be said that the assessments herein were reopened in consequence of an information subsequent to the completion of the original assessment.

4. In order to appreciate the rival contentions, it may be mentioned that the provisions of Section 11(1)(b) are in pari materia with those of Section 34(1)(b) and that while dealing with the provisions of Section 34(1)(6), the Supreme Court laid down in the case of Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 that "two conditions must be satisfied before the ITO can take action under Section 34(1)(&) : he must have information which comes into his possession subsequent to making of the original assessment order, and that the information must lead to his belief that income chargeable to tax has escaped assessment, has been underassessed or assessed at too low a rate, or has been made the subject of excessive relief.

The expression 'information' in the context in which it occurs again came up for consideration before the Supreme Court in the case of A.Raman (supra). It was held that the expression 'information' must mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to matter bearing on the assessment. It was further held "that information must, it is true, have come into the possession of the ITO after the previous assessment but even if the information be such that it could have been obtained during the previous assessment from an investigation of the material on record, or the facts disclosed thereby, or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the ITO is not affected.

5. The learned counsel for the assessee, it may be stated, had no quarrel with the proposition in view of the aforesaid Supreme Court decision and other decisions which we will refer in the course of our order later ; that the Supreme Court's decision is an information and that if the WTO who completed the assessment originally, was not aware of the said decision even though pronounced earlier, could be treated as an information on the basis of which reopening would be justified.

However, his contention is that there must be some material and it is for the department to produce the material that, the WTO, who originally completed the assessments, was not aware of the Supreme Court's decision when he completed the assessments. According to the learned counsel for the assessee, the fact that the succeeding WTO was aware of the Supreme Court's decision and found that the completion of the assessments in the status of HUF in the case of the assessee was wrong on the basis thereof was of no consequence. On the other hand, the departmental representative contended that the WTO who completed the assessments originally was not aware of the Supreme Court's decision, can be reasonably inferred from the fact that if he was aware of it, he would not have completed the assessments in the status of HUF. According to him, there was no necessity for a positive material.

6. While Shri Thakar, learned counsel for the assessee, strongly relied on the Supreme Court's decision in the case of Bankipur Club Ltd. v.CIT [1971] 82 ITR 831, the departmental representative also relied on some of the observations in that very case and the other decisions of the Supreme Court in the case of Kalyanji (supra), Indian & Eastern Newspaper Society v. CIT [1979] 119 ITR 996, of the Allahabad High Court in the cases of Asghar Ali Mohammad All v. CIT [1964] 52 ITR 962, Thakur Das Tej Prakash v. ITO [1970| 75 ITR 523 and of the Madras High Court in the cases of CIT v. Rathinasabapathy Mudaliar [1964] 51 ITR 204 and Beverley Estates Ltd. v. CIT [ 1979] 117 ITR 302.

7. On going through the decisions relied upon carefully, 1 am of the view that from the fact of the WTO not completing the assessments of the assessee for the assessment years 19,74-75 and 1975-76 in the status of individual, it can be reasonably inferred that the said WTO was not aware of the Supreme Court's decision in the case of Krishna Prasad (supra), or had not properly understood the implications thereof. It has been held in the Madras and Allahabad High Courts decisions relied upon by the departmental representative that where in the original assessment, the ITO omitted to consider and apply to the facts of the case, the relevant statutory provisions, which in my opinion, will include the Supreme Court's decision, it is open to the succeeding WTO when that omission is noticed by him to reopen the proceedings under Section 11(i)(b) and under the corresponding income-tax provisions. This is also evident from the Calcutta High Court's decision in the case of CIT v. Dinesh Chandra H. Shah [1971] 82 ITR 367 (SC), that even the realisation of the effect of the information later on may give to the ITO jurisdiction to proceed under Clause (b) of this section. In fact, this is what has been held by the Supreme Court in the case of Kalyanji (supra).

8. It is pertinent that this very issue recently came up for consideration before the Special Bench of the Supreme Court in the case of Newspaper Society (supra) and Justice Pathak, the learned Judge, dealt with the earlier decision of the Supreme Court in the case of Kalyanji (supra) in the following words : . . . Reliance is placed on Kalyanji Mavji & Co. v. CIT [1976] 102 ITR 287 (SC), where a Bench of two learned judges of this court observed that a case where income had escaped assessment due to the 'oversight', inadvertence or mistake of the ITO must fall within Section 34(1)(6) of the Indian I.T. Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants insofar as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the ITO discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this court in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC), CIT v. A. Raman & Co. [1968] 67 ITR 11 (SC) and Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 (SC) arid we do not believe that the law has since taken a different course Any observations in Kalycwji Mavji & Co. v. CIT[1916] 102 ITR 287 (SC) suggesting the contrary do not, we say with respect, lay down the correct law.(pp. 1004-05) As I understand from the above decision, an error discovered on a reconsideration of the same material (and no more) does not give the ITOs a power to reopen the proceedings under Section 34(1)(&). The decision of the Supreme Court in Kalyanji (supra) has been overruled to this extent only, as it is clear from the other observations (above), viz., the view taken by the Court in other cases, including the case of A. Raman (supra) has not undergone a change. In this connection, the observations of their Lordships in the case of A. Raman (supra) may be usefully quoted : Jurisdiction of the ITO to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information must, it is true, have come into the possession of the ITO after the previous assessment but even if the information be such that it could have been obtained during the previous assessment from an investigation of the material on record, or the facts disclosed thereby, or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the ITO is not affected.(p. 12) In this view of the matter, T am inclined to hold that an error discovered on a reconsideration of the same material (and no more) does not justify reopening of the proceedings under Section 17(1)(ft), but if the information as to law or facts is from external source or if a decision of the High Court or the Supreme Court, not considered originally as such, is noticed by the WTO after the completion of the assessment, reopening of assessment proceedings under that section will be justified. In this case, it may be stated that the original assessments were completed by the WTO, Mr. X, who obviously was not aware of the Supreme Court's decision in the case of Krishna Pramd (supra) otherwise he would not have completed the assessments in the status of a HUF. He was succeeded by the WTO, Mr. Y, who has noticed the Supreme Court's decision and taking a clue therefrom has reopened the proceedings for the assessment year 1973-74 and for the years under appeal under Section 17(1)(b). I thus, agree with the learned Judicial Member that the reopening of the assessment proceedings herein for the assessment years 1974-75 and 1975-76 is valid.

1. Whether, in the facts and circumstances of the case, the AAC was justified in holding that the Supreme Court's decision in the case of Krishna Prasad (supra) constituted valid 'information' for the purposes of Section 17(1)(b) for the assessment years 1974-75 and 1975-76 2. Whether, in the facts and circumstances of the case, the AAC was justified in upholding the orders passed by the WTO by reopening the assessment under Section 17(1)(b) for the assessment years 1974-75 and 1975-76 3. Whether a decision of the Supreme Court or the High Court, whether preceding or succeeding, is 'information' for the purpose of section or only the succeeding decision My answers to all the three questions are in the affirmative. The result is that I agree with the learned Judicial Member.

10. The decision will now go to the Division Bench for deciding the appeals according to the majority view.


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