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Commissioner of Wealth Tax Vs. Late C. Seshachalam Chetty. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberT.C. Petn. Nos. 466 to 469 of 1984
Reported in(1985)44CTR(Mad)216
AppellantCommissioner of Wealth Tax
RespondentLate C. Seshachalam Chetty.
Excerpt:
- - he also owned a number of house properties as well as lands situate in and around the city of madras. 1965-66, 1966-67 and 1967-68. under the wt act, each assessment year is an independent unit and, therefore, the assessee is bound to show the asset in his returns for those years as well and claim it as agricultural land if possible. 17 will come into play only when the assessee has omitted or failed to make a return under s. 17(1)(a) can be made only if the assessee has failed to disclose fully and truly all material facts necessary for the assessment of his net wealth. 17(1)(b), if the conditions set out in that clause are satisfied......wt authorities in all the three years. the assessee has also been showing the income from those lands as agricultural income in his it returns and claiming exemption in relation thereto. since his claim that the lands in taylors road are agricultural lands had been accepted by the wto, in the asst. yrs. 1962-63 to 1964-65, the assessee did not disclose these lands in the returns filed under the wt act for the asst. yrs. 1965-66 to 1968-69. original assessments were made for all the said asst. yrs. 1965-66 to 1968-69 under the wt act without reference to the lands in taylors road. subsequently there was an audit report stating subsequently there was an audit report stating that the lands in taylors road had been subjected to urban land tax, that in the land acquisition proceedings a.....
Judgment:
ORDER

: Ramanujam, J. - In reference petitions T.C.P. Nos. 466 to 468 of 1983 the revenue seeks a direction from this court to the ITAT to refer the following three questions with reference to asst. yrs. 1965-66, 1966-67, 1967-78 :

1. Whether, on the facts and in the circumstances of case, the Appellate Tribunal was justified in holding that the provisions of s. 17(1)(b) of the WT Act alone are applicable for the asst. yrs. 1965-66, 1966-67, 1967-68 and subsequent completion of the assessment WTO is barred by the limitation of time ?

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that there was no material or information for the WTO for reopening the assessment under s. 17 of reopening the assessment under s. 17 of the WT Act and in cancelling the assessment as not valid in law ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding and had valid materials to hold that the lands belonging to the assessee and situated in Taylors Road, Kilpauk, Madras, were only agricultural lands on the relevant valuation dates ?

Similarly, the revenue has sought a direction to the Tribunal to refer the following two questions with reference to the asst. yr. 1968-69 in T.C.P. No. 469 of 1983 :

1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that there was no material or information for the WTO for reopening the assessment under s. 17 of the WT Act and in cancelling the assessment as not valid in law ?

2. Whether, on the facts and in the circumstaces of the case, the Tribunal was justified in holding and had valid material to hold that the lands belonging to the assessee had situated at Taylors Road, Kilpauk, Madras, were only agricultural lands on the relevant valuation dates ?

2. However, on the facts and in the circustances of all these cases and after hearing the ld. counsel on both sides, we think that no refernece need be directed in relation to asst. yrs. 1965-66, 1966-67 and 1967-68 and a reference could be directed in relation to the asst. yr. 1968-69.

3. The late C. Seshachala Chetty was the proprietor of Messrs Curzon and Company, leading manufacturers of wooden furniture, cabinet, etc. He also owned a number of house properties as well as lands situate in and around the city of Madras. For the asst. yrs. 1962-63, 1963-64 and 1964-65, WT returns were filed by the assessee showing extensive lands of 89 acres in Taylors Road, Madras, but claiming them as agricultural lands. This claim that the lands were agricultural was accepted by the WT Authorities in all the three years. The assessee has also been showing the income from those lands as agricultural income in his IT Returns and claiming exemption in relation thereto. Since his claim that the lands in Taylors Road are agricultural lands had been accepted by the WTO, in the asst. yrs. 1962-63 to 1964-65, the assessee did not disclose these lands in the returns filed under the WT Act for the asst. yrs. 1965-66 to 1968-69. Original assessments were made for all the said asst. yrs. 1965-66 to 1968-69 under the WT Act without reference to the lands in Taylors Road. Subsequently there was an audit report stating Subsequently there was an audit report stating that the lands in Taylors Road had been subjected to urban land tax, that in the land acquisition proceedings a sum of Rs. 27,00,000 had been claimed by the assessee as compensation and that these indicated that the lands could not be agricultural lands during the said assessment years. Based on the audit report, the WTO reopened the assessments under s. 17 and brought the value of the lands in Taylors Road to charge under the WT Act for the asst. yrs. 1965-66 to 1968-69.

4. In respect of all the four years there were appeals to the CWT (Appeals) who held that since there had been no non-disclosure of any of the assets by the assessee, the reassessments for the years 1965-66, 1966-67 and 1967-68 could be taken as reassessments only under s. 17(1)(b) in which case the reassessments will be barred for the reason that the four-year period contemplated by s. 17(1)(b) had already expired. Therefore, he set aside the reassessments made for the asst. yrs. 1965-66, 1966-67 and 1967-68. As regards the reassessments for 1968-1969, which was once made within the period of four years, the CWT (Appeals) held that there was no material or information before the WTO for reopening the assessments under s. 17 and for cancelling the original assessment. He also held on merits that the lands in Taylors Road continued to be agricultural lands during the asst. yr. 1968-69 and, therefore, the reassessment for the said year could not be sustained on merits. The said view of the CIT (Appeals) has been accepted in toto by the ITAT.

5. Before us Mr. J. Jayaraman, ld. counsel for the revenue, contends that an asset may be an agricultural land in one year, but it may be converted into or it may become a non-agricultural land in another year. In the present case, the fact that the claim of the assessee that the lands are agricultural lands had been accepted during the asst. yrs. 1962-63 to 1964-65 cannot lead to the inference that those lands continued to be agricultural lands even during the asst. yrs. 1965-66, 1966-67 and 1967-68. Under the WT Act, each assessment year is an independent unit and, therefore, the assessee is bound to show the asset in his returns for those years as well and claim it as agricultural land if possible. The fact that the assessee had not disclosed the lands in Taylors Road in his returns for the asst. yrs. 1965-66, 1966-1967 and 1967-68 amy amount to non-disclosure of an asset on the part of the assessee during those years, in which case s. (17)(1)(a) can properly be invoked, and the reassessments for those years can be taken as reassessments made under s. 17(1)(a). Thus, the main contention of the revenue is that the assessee is under an obligation to disclose the lands in Taylors Road and the fact that he has not disclosed the same can be taken advantage of by the revenue for invoking s. 17(1)(a). This submission of the ld. counsel for the revenue appears to over look the definition of assets occurring in s. 2(e) of the WT Act, as it stood during the relevant assessment years. The said s. 2(e) defines 'assets', as including property of every description, movable, or immovable, but does not include agricultural lands and growing crops or standing trees on such lands. Part IV of the form of return is said to be optional and it is open to an assessee to set out in that part any assets which are not included in Parts I, II and III but of which the assessee claims to be not taxable for any reason. Thus, the inclusion, in the return of exempted items such as agricultural lands, was only optional. It is open to the assessee to include the agricultural lands in the return and claim that they are exempted under the provisions of the WT Act. Once an option is given to the assessee either to show the agricultural lands in the return and claim exmption or not to do so, it cannot be said that he is under an obligation to show the agricultural lands as an asset in the return filed under WT Act. When the assessee is not under an obligation to disclose the asset in his WT return, we do not see how the assessee could be guilty of non-disclosure of an asset. Sec. 17 will come into play only when the assessee has omitted or failed to make a return under s. 14 of his net wealth or to disclose fully and truly all material facts necessary for the assessment of his net wealth. In this case, the assessee has admittedly filed a return under s. 14. Therefore, reopening of the assessment under s. 17(1)(a) can be made only if the assessee has failed to disclose fully and truly all material facts necessary for the assessment of his net wealth. We are of the view that the assessee in this case was not under an obligation to disclose the agricultural lands in his return as they constitute an exempted item and, therefore, reopening of the assessment could not be made under s. 17(1) (a) though such reassessment could be made under s. 17(1)(b), if the conditions set out in that clause are satisfied. We are, therefore, inclined to agree with the view of the Tribunal that the reassessments for the years 1965-66 to 1968-69 could only be treated as one made under s. 17(1)(b).

6. It is not in dispute that if the assessments are taken as those having been made under s. 17(1)(b), the reassessments for 1965-66 to 1967-68 are admittedly tiem-barred, it is unnecessary to go into the other questions as to whether there is sufficient material or information before the WTO for reopening the assessments under s. 17 or whether the agricultural lands became non-agricultural lands during those years. In this view of the matter, we do not see any justification for directing a reference in relation to asst. yrs. 1965-66 to 1967-68.

7. However, since the reopening of the assessment for the year 1968-69 is not time barred, even treating the reasssments as one having been made under s. 17(1)(b), the questions as to whether there was any material or information before the WTO for reopening the assessment and whether the lands which were originally held to be agricultural by the WTO in the earlier years became non-agricultural lands in the asst. yr. 1968-69, do arise. The ld. counsel for the assessee, however, contends that the material furnished by the audit report have automatically been applied by the WTO without verification or investigation and, therefore, such reopening of assessment by the WTO without verification of investigation and, therefore, such reopening of assessment by the WTO without any relevant basic material cannot legally be substained. But all these matters cannot be gone into at this stage. We are, therefore, inclined to direct a reference on the questions as to whether there is enough material or information before the WTO to initiate action under s. 17 and whether the lands were agricultural lands during the relevant asst. yr. 1968-69. In this view of the matter we direct the Tribunal to state a case and refer question Nos. 1 and 2 in relation to asst. yr. 1968-69 set out already.

8. In the result, T.C.P. No. 469 of 1983 is ordered as indicated above and T.C.P. Nos. 466 to 468 of 1983 are dismissed. There will be no order as to costs.


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