1. This appeal by the department is directed against the order dated 24-1-1983, passed by the AAC.2. The assessee is an individual. The assessment year is 1976-77. In the return of wealth-tax filed by the assessee, he described his status as 'individual, not citizen of India and non-resident in India.' 3. Rule 3 of Part II of Schedule I to the Wealth-tax Act, 1957('the Act') lays down that where an assessee is an individual who is not a citizen of India and is not resident in India, the wealth-tax payable by him, computed in accordance with the rates specified in the said Schedule shall be reduced by an amount equal to 50 per cent thereof.
4. In view of the said rule, the tax payable by the assessee would be 50 per cent of the tax otherwise payable, if his status, as disclosed in the return, is accepted by the WTO.5. The WTO completed the assessment under Section 16(1) of the Act, and in the assessment order he mentioned the status of the assessee as 'individual, citizen of India.' He, thus, impliedly, rejected the status of the assessee as disclosed in the return. However, no reason for this implied rejection was mentioned in the assessment order.
6. The assessee filed an appeal before the AAC and challenged the modification made by the WTO about his status. The AAC relied on the order of her predecessor for the earlier year where it had been held that the assessee was entitled to deduction of 50 per cent in the tax.
He, therefore, upheld the claim of the assessee. The department has now come in appeal before us.
7. The contention on behalf of the department is that in the assessment for income-tax for the assessment year 1976-77, the status of the assessee had been treated by the ITO as 'resident and ordinarily resident' and, as such, for the assessment to wealth-tax also, the same status should be adopted. Reliance was placed on Explanation 1 below Section 6 of the Act.
8. The contention on behalf of the assessee, on the other hand, was that while assessing the assessee under Section 16(1), the WTO had no jurisdiction to change the status as shown in the return. If he had any doubt on the point that the status declared in the return was not correct, he should have issued notice under Section 16(2) and should have completed the assessment under Section 16(3), after giving opportunity to the assessee to prove that the status mentioned by him in the return was correct. On merits, it was submitted that in the year relevant to the assessment year 1976-77, the assessee was not a citizen of India and was not resident in India. Reliance was placed on the certificate granted by the Notary Public of Port Louis (Mauritius) and also on the fact that in prior years, he had been assessed in the status of a non-resident under the Income-tax Act, 1961 ('the 1961 Act'). It was submitted that nothing had happened in the year relevant to the assessment year 1976-77 to modify that status. According to the assessee, Explanation I below Section 6 was of no assistance to the department in the present case.
9. We have considered the rival contentions and the facts on record.
Section 16(1) lays down that if the WTO is satisfied without requiring the presence of the assessee or production by him of any evidence that a return made under Section 14 or under Section 15 of the Act is correct and complete, he shall assess the net wealth of the assessee and determine the amount of wealth-tax payable by him or refundable to him on the basis of such return.
10. It is obvious from the above provision that while making the assessment under Section 16(1), the WTO is bound to treat the return as correct and complete, as far as material facts mentioned therein are concerned. If he has any doubt about the correctness of any material fact, as mentioned in the return, he is bound to issue notice under Section 16(2) and make assessment under Section 16(3) thereof.
11. In the present case, the WTO has assessed the assessee under Section 16(1). He has not issued any notice under Section 16(2) and, consequently, he had no jurisdiction to modify the status as disclosed in the return. On this ground alone the order of the WTO is unsustainable and, as such, the assessee is bound to succeed.
12. We now come to merits. As already stated, the assessee had declared his status in the wealth-tax return as 'not citizen of India and non-resident in India.' The WTO has not brought any fact on record which would indicate that he was 'citizen of India' or that 'he was resident and ordinarily resident in India' in the relevant accounting year. On the other hand, a certificate issued by the Notary Public of Port Louis (Mauritius) and singed by the said Notary Public before the first secretary of the Indian High Commission at Port Louis has been filed on behalf of the assessee. It is mentioned therein that the assessee was 'citizen of Mauritius and was permanent resident of Mauritius until his death.' From the relevant passport entries, he has certified as to on what dates the assessee was in India and as far as the relevant year was concerned, the assessee was in India from 1-4-1975 to 4-4-1975 and from 30-4-1975 to 17-5-1975.
13. We had given an opportunity to the learned departmental representative to obtain comments of the department regarding the contents of this certificate. The learned departmental representative stated before us that since the passports were not available, no comments could be made by the department.
14. However, we are satisfied that the certificate issued by Notary Public of Mauritius was wholly reliable and that facts mentioned therein should be readily accepted as correct. The assessee is now dead and no better proof on his behalf can be furnished. We accept the facts mentioned therein as correct. On the basis of these facts, the assessee was bound to succeed.
15. Section 6 enumerates the properties which shall not be taken into account in computing the net wealth of the individual who is not a citizen of India or who is not resident in India or who is resident but not ordinarily resident in India. The Explanation 1 below that section gives deeming definition of the terms 'not resident in India' and 'resident but not ordinarily resident in India.' That Explanation states that if a person was 'not resident in India' or 'resident but not ordinarily resident in India' within the meaning of these expressions in the 1961 Act in the year ending on the valuation date, he shall be deemed to be 'not resident in india' or 'resident but not ordinarily resident in India' for the purposes of Section 6.
16. The above provisions, which are relied on by the department, are of no assistance in this case. Explanation I governs the main provision in Section 6 only. As already stated, the main provision deals with properties which shall not be taken into account in computing the net wealth of the individual who is not citizen of India or who is non-resident in India or who is resident but not ordinarily resident in India. We are not concerned here with ascertaining the properties which are not to be taken into account. We are concerned with the Rules of Part II of Schedule 1. Consequently, the provisions of Section 6 are not relevant.
17. Besides, Explanation 1 does not say that status determined in income-tax proceedings is conclusive evidence about status for wealth-tax proceeding, what the Explanation, in substance lays down is that the terms 'non-resident in India' and 'resident but not ordinarily resident in India' would have the same meaning as those terms have in the 1961 Act. Consequenly, an independent finding is expected to be given in the wealth-tax proceedings about the status on the basis of materials brought on record in the wealth-tax proceedings. As already stated, no materials have been brought on record to indicate that the status disclosed in the wealth-tax return was incorrect.
18. In view of the above legal position, the fact that in the income-tax assessment the ITO treated the assessee as 'resident and ordinarily resident' in the relevant assessment year is of no avail because of the other facts to which we have made reference. The assessee may not have appealed against the income-tax assessment order because of absence of substantial tax liability. That would not estop him from raising the point in the wealth-tax proceedings. As already stated, the finding in the wealth-tax proceedings should be recorded independently on the basis of material in that proceeding.
19. Before parting, we may mention that the assessee was being assessed as non-resident even in the income-tax proceedings for last several year and nothing was brought to our notice on behalf of the department to show as to in what manner the status suddenly changed in the assessment year 1976-77.
20. For reasons given above, we uphold the claim made on behalf of the assessee to the effect that he was not 'citizen of India and non-resident in India' in the year ending on the relevant valuation date and, as such, Rule 3 of Part II of Schedule I applied to him. The order of the AAC must be upheld.