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Commissioner of Wealth-tax Vs. Kaviraj Mahipat Singh - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Wealth-tax Reference Case Nos. 95 to 98 and 226 of 1982
Judge
Reported in[1987]165ITR705(Raj)
ActsWealth Tax Act, 1957 - Sections 17(1), 27(1) and 27(3)
AppellantCommissioner of Wealth-tax
RespondentKaviraj Mahipat Singh
Appellant Advocate R.N. Surolia, Adv.
Respondent Advocate N.M. Ranka, Adv.
Excerpt:
.....dated july 24, 1980, that the wealth-tax officer was not competent to initiate proceedings for reassessment under section 17(1)(a) of the act, as the necessary material had already been disclosed by the assessee and there was no omission or failure on his part which could authorise the wealth-tax officer to initiate reassessment proceedings. the commissioner of wealth-tax, jaipur, filed applications under section 27(1) of the wealth-tax act before the income-tax appellate tribunal, jaipur bench, jaipur, for making references to this court in respect of the following common question which was said to arise out of the order of the income-tax appellate tribunal dated july 24, 1980 :whether, on the facts and in the circumstances of the case, the tribunal was justified in upholding the..........of the assessee in respect of the assessment years 1971-72 to 1975-76 were completed, initiated reassessment proceedings under section 17(1)(a) of the wealth-tax act, 1957, by issuing notices dated march 15, 1978. the wealth-tax officer expressed the opinion that the value of the portion of the mardana mahal and compensation money aggregating to rs. 6,60,000, representing the difference between the value of the properties as shown by the assessee and as determined by the valuation cell, had escaped assessment by the assessing authority. the wealth-tax officer then made reassessment orders after adding the value of the mardana mahal and the amount of compensation received by the assessee. it may be observed that the reassessment proceedings were initiated on the basis of the report of.....
Judgment:

Dwarka Prasad, J.

1. These five applications relate to consecutive assessment years 1971-72 to 1975-76 in respect of the assessment of wealth-tax of Kaviraj Mahipat Singh, Kota (hereinafter referred to as ' the assessee')' As these five applications arise in similar circumstances and raise a common question, they are disposed of by a common order.

2. The Wealth-tax Officer, after the assessments of the assessee in respect of the assessment years 1971-72 to 1975-76 were completed, initiated reassessment proceedings under Section 17(1)(a) of the Wealth-tax Act, 1957, by issuing notices dated March 15, 1978. The Wealth-tax Officer expressed the opinion that the value of the portion of the Mardana Mahal and compensation money aggregating to Rs. 6,60,000, representing the difference between the value of the properties as shown by the assessee and as determined by the valuation cell, had escaped assessment by the assessing authority. The Wealth-tax Officer then made reassessment orders after adding the value of the Mardana Mahal and the amount of compensation received by the assessee. It may be observed that the reassessment proceedings were initiated on the basis of the report of the revenue audit party. On appeal by the assessee, the Appellate Assistant Commissionerof Income-tax, Kota Range, Kota, held that the proceedings under Section 17 were not validly initiated by the assessing authority as in his view all the material facts necessary for assessment in respect of the value , of the Mardana Mahal were duly disclosed by the assessee to the Wealth-tax Officer at the stage of the original assessment and there is no omission or failure on the part of the assessee in disclosing any material fact necessary for making the assessment. As regards the amount of compensation, it was held that the assessee had disclosed the amount of compensation received by him under the voluntary disclosure scheme and that the amount of compensation had already been taxed by the Department both for the purpose of income-tax and wealth-tax. The Appellate Assistant Commissioner held that it could not be held that a part of the wealth of the assessee had escaped assessment due to any failure or omission on his part to disclose the material facts.

3. The assessing authority filed appeals before the Income-tax Appellate Tribunal, Bombay Bench A, Camp at Jaipur, in respect of the aforesaid assessment years. The Appellate Tribunal, after discussing the entire material on record, agreed with the Appellate Assistant Commissioner and held by its order dated July 24, 1980, that the Wealth-tax Officer was not competent to initiate proceedings for reassessment under Section 17(1)(a) of the Act, as the necessary material had already been disclosed by the assessee and there was no omission or failure on his part which could authorise the Wealth-tax Officer to initiate reassessment proceedings. It was observed by the Appellate Tribunal that a mere change of opinion could not give rise to proceedings for reassessment under Section 17(1)(a) of the Act. The Commissioner of Wealth-tax, Jaipur, filed applications under Section 27(1) of the Wealth-tax Act before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, for making references to this court in respect of the following common question which was said to arise out of the order of the Income-tax Appellate Tribunal dated July 24, 1980 :

' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the finding of the Appellate Assistant Commissioner that initiation of proceedings under Section 17 of the Wealth-tax Act, 1957, is bad in law '

As regards the addition of the value of the Mardana Mahal, it was submitted on behalf of the assessee that an oral family settlement had taken place on October 24, 1968, by which a portion of the Mardana Mahal was allocated to the assessee's mother, Smt. Uma Devi, and, subsequently, the settlement was reduced into writing on October 28, 1969. It was pointed out by learned counsel for the assessee that the fact of family settlement was already within the knowledge of the Wealth-tax Officer atthe time of assessment and the document dated October 28, 1969, was also produced before the assessing authority. The Wealth-tax Officer accepted the contention of the assessee regarding the factum of the family settlement relating to the Mardana Mahal. The revenue audit part subsequently in its report observed that as the document dated October 28, 1969, was not registered, it was ineffective and could not be treated as a valid legal document regarding partition of immovable property. On the basis of the report of the revenue audit party, the Wealth-tax Officer issued notices for reassessment under Section 17(1)(a) of the Act. The question as to whether the family settlement as envisaged by the document dated October 28, 1969, represented a genuine transaction is a matter relating to which the relevant facts have been disclosed and material was placed by the assessee before the Wealth-tax Officer at the time of assessment. The question whether the unregistered document could give rise to an honest family settlement between the assessee and his mother or that the transaction could not be accepted in view of the fact that the document dated October 28, 1969, was not registered, was the subject-matter of consideration by the Wealth-tax Officer at the time of the original assessment and it is undoubtedly a change of opinion by the Wealth-tax Officer, when subsequently at the time of reassessment he held that the oral partition which was followed by a document in writing and the partition deed involving immovable property should be registered in view of the provisions of Section 17(b) of the Indian Registration Act. It was held by the Appellate Tribunal that the report of the revenue audit party on the question that the transaction should not have been accepted as a genuine one by the assessing authority could not be considered as information within the meaning of Section 17(1)(a) of the Act nor was there any omission or failure on the part of the assessee to disclose all the material facts necessary for the assessment of wealth of the assessee in respect of the assessment years in question. The fact that an oral settlement was arrived at, which was followed by a document dated October 28, 1969, was at all times within the knowledge of the assessing authority. Whether such family settlement should be accepted as a genuine transaction or should not be accepted because the document was not registered was a matter within the jurisdiction of the assessing authority and a reconsideration of the same material on the basis of the revenue audit party report did not give jurisdiction to the assessing authority to reopen the assessment under Section 17(1 )(a) of the Act.

4. In Indian and Eastern Newspaper Society v. CIT : [1979]119ITR996(SC) , their Lordships of the Supreme Court have discussed the law relating to reassessment in consequence of the internal audit party report. In that case, it was held by their Lordships of the Supreme Court that if the Income-taxOfficer proceeded to reassess the income of the assessee on the basis of the view expressed by the internal audit party of the Income-tax Department, it would merely be a change of opinion and that the opinion rendered by the audit party in regard to law cannot add to or colour the significance of such law for the purpose of belief of the assessing authority as required under Section 147 of the Income-tax Act, which is in pari materia to Section 17(1)(a) of the Wealth-tax Act. Thus, it appears to us that the Income-tax Appellate Tribunal was justified in holding that no question of law arose out of the finding recorded by the Tribunal on the question that initiation of the reassessment proceedings under Section 17(1)(a) of the Wealth-tax Act was invalid as there was no omission or failure on the part of the assessee to disclose all material facts at the time of the original assessment.

5. As regards the amount of compensation, it is not disputed that the assessee had already made a disclosure about the amount of compensation under the voluntary disclosure scheme and in consequence thereof the assessee has been taxed by the Department in respect of wealth-tax. These facts were not challenged by the Revenue even before the Appellate Tribunal that the assessments under the voluntary disclosure scheme were made much before the reassessment notices were issued by the Wealth-tax Officer on March 15, 1978.

6. In this view of the matter, there was no justification for the Wealth-tax Officer to initiate proceedings for reassessment on the ground of nondisclosure of the amount of compensation received by the assessee in respect of the land acquired by the State Government.

7. We, therefore, agree with the Income-tax Appellate Tribunal that no question of law arises out of the order passed by the Tribunal on July 24, 1980, approving the order passed by the Appellate Assistant Commissioner setting aside the reassessment proceedings in respect of the assessment years 1971-72 to 1975-76.

8. As a result of the aforesaid discussion, all the five applications have no force and are dismissed but without any order as to costs.


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