1998 (2) TMI 148 - AT - Wealth-tax

Reassessment Fresh Material On Record Valuation Of Immovable Property Rectification Proceedings Escapement Of Wealth Change Of Opinion

Summary

Issues Involved:
1. Validity of the reassessment proceedings under Section 17 of the Wealth Tax Act.
2. Correctness of the valuation of the immovable property.

Issue-wise Detailed Analysis:

1. Validity of the Reassessment Proceedings under Section 17 of the Wealth Tax Act:
The primary issue in both appeals was whether the reassessment proceedings initiated by the Assessing Officer (AO) under Section 17 of the Wealth Tax Act were valid. The original assessments had accepted the valuation of the property based on four months' rent, but the AO later proposed rectification, which was dropped without a specific order. Subsequently, the AO issued notices for reassessment, valuing the property based on twelve months' rent, which significantly increased the valuation.

The assessee contended that the reassessment was based on a mere change of opinion and lacked fresh material to justify the reopening. The assessee argued that the original computation was done under the belief that Rule 8(a) of Schedule-III to the Wealth Tax Act applied, allowing for estimation when it was not practicable to apply Rule 3. The assessee cited several cases, including Garden Silk Mills Ltd. v. Dy. CIT and CIT v. Bhanji Lavji, to support their position.

The Tribunal held that the AO's belief regarding the escapement of wealth from assessment could emanate from facts already on record, not necessarily from fresh material. It was noted that the original assessment had accepted the valuation without consciously considering the facts, which was a mistake. The Tribunal found that the AO's realization of this mistake justified the reassessment under Section 17(1), which does not require fresh material but allows for reassessment if there is under-assessment or otherwise. The Tribunal also distinguished the present case from P. Palaniswami's case, where a clear finding had become final, which was not the situation here.

2. Correctness of the Valuation of the Immovable Property:
The second issue was whether the valuation of the immovable property at Rs. 3,76,550 based on four months' rent was correct. The revenue argued that the valuation should be based on twelve months' rent, resulting in a higher valuation of Rs. 11,42,438 for one assessee and Rs. 11,41,550 for the other.

The Tribunal found that the assessee's computation using four months' rent was not in accordance with the law. It held that Rule 8(a) of Schedule-III to the Wealth Tax Act, which allows for estimation, did not apply because it was practicable to determine the annual rent and net maintainable rent. The Tribunal emphasized that the AO's acceptance of the four-month rent valuation in the original assessment was clearly a mistake. The Tribunal concluded that the AO's action in reassessing the property value based on twelve months' rent was correct and justified.

Conclusion:
The Tribunal reversed the orders of the Deputy Commissioner of Wealth Tax (Appeals) [DCWT(A)], which had directed the AO to accept the original valuation of Rs. 3,76,550. The Tribunal restored the AO's reassessment orders, valuing the property at Rs. 11,42,438 and Rs. 11,41,550, respectively. The Tribunal allowed both revenue's appeals, validating the reassessment proceedings and the revised property valuations.