1990 (7) TMI 57 - HC - Wealth-tax

Summary

Issues Involved:
1. Jurisdiction of the Wealth-tax Officer to reopen assessments under Section 17(1) of the Wealth-tax Act.
2. Validity of notices issued under Section 17(1)(a) versus Section 17(1)(b) of the Wealth-tax Act.
3. Applicability of judicial precedents in determining the validity of the notices.

Detailed Analysis:

1. Jurisdiction of the Wealth-tax Officer to Reopen Assessments under Section 17(1) of the Wealth-tax Act:
The petitioner, a wealth-tax assessee, challenged the notices issued under Section 17(1) for the assessment years 1979-80 to 1986-87. The Wealth-tax Officer issued these notices based on the petitioner's application for an income-tax clearance certificate, which disclosed that a plot of land was being sold for Rs. 25 lakhs, significantly higher than its previously assessed value. The petitioner argued that there was no concealment or failure to disclose material facts, thus questioning the jurisdiction of the Wealth-tax Officer to reopen the assessments.

2. Validity of Notices Issued under Section 17(1)(a) versus Section 17(1)(b) of the Wealth-tax Act:
The court examined whether the notices were issued under clause (a) or clause (b) of Section 17(1). Clause (a) pertains to cases where there is an omission or failure to disclose material facts, while clause (b) deals with cases where the Wealth-tax Officer has new information indicating that wealth has escaped assessment. The impugned notices did not specify the clause, but the reopening of assessments for eight years suggested reliance on clause (a).

The court noted that the petitioner had disclosed the asset and its value consistently with the support of an approved valuer's report, indicating no failure to disclose material facts under Section 17(1)(a). However, the information from the income-tax clearance application constituted new information under Section 17(1)(b). The court referred to the Delhi High Court's decision in Avtar Singh Sandhu v. WTO, which upheld notices under Section 17(1)(b) based on similar circumstances.

3. Applicability of Judicial Precedents in Determining the Validity of the Notices:
The petitioner relied on several judicial precedents, including the decision in Raghubar Dayal Ram Kishan v. CIT, which held that a notice under clause (a) could not be converted into a notice under clause (b). The court distinguished this case, noting that it dealt with the Tribunal's power in appeals, not the initial issuance of notices. The court also considered decisions from other high courts but found the reasoning in Avtar Singh Sandhu's case more persuasive.

The court concluded that the impugned notices should be construed as issued under Section 17(1)(b) and limited to the assessment years 1983-84 to 1986-87. The notices for earlier years were quashed.

Conclusion:
The writ petitions were allowed in part. The impugned notices were construed as issued under Section 17(1)(b) and confined to the assessment years 1983-84, 1984-85, 1985-86, and 1986-87. The notices for the assessment years 1979-80 to 1982-83 were quashed. No order as to costs was made.