TMI Blog1982 (6) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... able property. The assessment was completed on net wealth of Rs. 1,45,050 vide order dt. 20th October 1976. For the asst. yr. 1976-77 the wealth-tax return was filed in 1976 disclosing net wealth of Rs. 1,72,548. In this year also the assessee disclosed net value of immovable property at Rs. 1,80,000. After claiming exemption of Rs. 90,000 the value of the immovable property was completed on net wealth of Rs. 1,72,500 on 22nd November 1976. In respect of asst. yr. 1977-78 wealth-tax return was filed by the assessee in 1977 and the assessment was completed on 26th September 1977 on a total wealth of Rs.1,80,000. The WTO completing the assessment for the asst. yr. 1978-79 came to know that the value of the immovable property disclosed by the assessee in asst. yr. 1974-75 was very low. Accordingly the WTO had reason to believe that by reason of failure or omission on the part of the assessee to disclose fully and truly all material facts the wealth chargeable to tax has escaped assessment. Consequently, he issued notice u/s 17(1) (a) on 20th March 1979. It was served on 20th April 1979. In pursuance of service of notice return was field on 9th Feb 1980. The WTO made reference u/s 16A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75 disclosing net wealth of Rs. 1,99,771. In this year the value of the immovable property was declared at Rs. 1,05,000 and after allowing exemption of Rs. 60,000 the net value of this property was taken at Rs. 45,000. The assessment was completed on 23rd October 1976 u/s 16(3) on new wealth of Rs. 2,70,900. similarly, for the asst. yr. 1976-77 the return of wealth was filed declaring net wealth of Rs. 1,92,380. In this year also the value of the immovable property was declared at Rs. 1,22,000. The value of the immovable property was disclosed by the assessee on the basis of the valuer s report of the assessee. The assessment was completed on 22nd Feb 1978 on net wealth of Rs. 3,00,376. 4. In the case of prixyusp J. Contractor for the asst. yr. 1974-75a notice u/s 17(1)(a) of the WT Act was issued. Reference was made u/s 16A of the Act. On the basis of the VO s report the value of the immovable property was taken at Rs. 5,49,000. After allowing exemption of Rs. 1,00,000 the value of the immovable property was taken at Rs. 4,49,000. Consequently net wealth was computed at Rs. 6,02,450 vide order dt. 28th March 1981. Similarly for the asst. yr. 1975-76 a notice u/s 17(1)(a) was iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AC for this year also set aside the reassessment order and directed the WTO to the complete same afresh after hearing the assessee. 9. Being aggrieved with the orders of the ld. AAC for all the years under consideration the assessee is in appeal before the Tribunal. The first submission of the ld. counsel for the appellant was that the WTO was not justified in starting proceedings either u/s 17(1)(a) or u/s 17(1)(b) of the WT Act, 1957. In all the years the assessee filed wealth-tax return some-where in 1976 and along with returns the assessee also filed report of the authorised valuer. The WTO in all the years after considering all the material including the report of the valuer completed the assessments. The assessee has disclosed all the material facts truly and correctly. The mere fact that the valuation stated by the assessee in his report for the years under consideration was inadequate was not sufficient to assume jurisdiction and to issue notice u/s 17 of the WT Act, 1957, for reopening the assessments. As a matter of fact when notice u/s 17(1)(a) was issued there was no material before the WTO for coming to the prima facie conclusion that the value of the immovable prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re on the part of any person to make a return u/s 14 of his net wealth or net wealth of any other person in respect of which he is assessable under the WT Act, 1957, for any assessment year or disclosed fully and truly all material facts necessary for assessment of his net wealth or the net wealth of such other person for that year, the net wealth chargeable to tax has escaped assessment in that year whether by reason of underassessment or assessment at too low rate or otherwise. Under s. 17(1)(B) of the Act, 1957, if the WTO, in consequence of any information in his possession has reason to believe notwithstanding that there has been no such omission or failure as is referred to in cl. (A) that the net wealth chargeable to tax has escaped assessment for any year whether by reason of underassessment or assessment at too low rate or otherwise. It would appear from the perusal of the provision reproduced above that grounds or reason which led to the formation of belief contemplated by s. 17 (1)(a) of the WT Act, 1957, must have a material bearing on the question of escapment of net wealth of the assessee from the assessment because of this failure or omission to disclose fully and tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quirements of the law should be satisfied. 14. We may add that the duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the WTO to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the WTO with regard to the inference which he should draw from the primary facts. If the WTO draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. Reference may be made to the ratio of decision in the case of Lakhmani Mewal Das, p. 445. 15. As stated above, for all the years under consideration, the assessee filed wealth-tax returns disclosing value of the immovable property. Such valuation was supported by the report of the valuer of the assessee. Sec. 16(1) of the WT Act, 1957 provides that if the WTO is satisfied without requiring the presence of the assessee or production by him of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment for the asst. yrs. 1968-69 and 1969-70, respectively. The notices do not indicate the reasons which have prompted respondent No.1 to reopen the assessment. The petitioner has filed the petition u/Art 226 of the constitution to challenge the legality and validity of these two notices. The Hon ble High Court on the aforesaid facts held that a mere change if opinion of the succeeding officer is not enough especially when before passing the assessment order the officer could have easily ascertained the correctness of the statements made in the return. In that also the assessment was completed by the WTO on the basis of the valuation of the properties given by the authorised valuer. Thereafter the WTO received valuation report from the Executive Engineer of the department. On the basis of such report the WTO started such proceedings u/s 17 (1) b) which was bad in law. This fact is fully applicable in on the fact of the present case. In that decision the Hon ble High Court clearly held that mere fast that two valuers have given conflict report about the true value of the properties not sufficient to reopen the assessment u/s 17(1) (b) of the WT act 1957. Similar view was ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, it was not included in the returns that only after discussion with the petitioner s IT consultants, the ITO framed assessment for the relevant assessment of the years, that the action taken u/s 147 (a) of the Act and u/s 17 of the WT Act was without jurisdiction and in as much as it amounted only to a change of opinion on the part of the ITO concerned as regards the taxability of the income and wealth of the petitioner and there was no default on the part of the petitioner which could warrant an action under the provisions of the IT/WT Acts and that since the petitioner maintained his accounts on cash basis, the interest on the amount of compensation which had not been paid was otherwise also not includable in his income. The respondent contented that the entries in the returns were ineligible, cryptic and suspicious and were in a different ink and the petitioner did nor disclose fully and truly all material facts for the assessment. The Hon ble High Court held that on perusal of the copies of the returns filed with the petitions showed that the entries are not illegible and suspicious because the ITO was aware of the petitioners claim for interest on compensation to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luer of the assessee. The WTO was fully satisfied with the correctness of the report. He did not require the assessee to produce further evidence. Once he was satisfied with the market value of the property disclosed by the assessee, the WTO will have no jurisdiction either u/s 17(1) (a) or s. 17 (1) (b) of the act, 1957, to start proceedings on the basis of subsequent report which was obtained after many years of the filings of the original returns. 19. Looking to the aforesaid facts, we are fully satisfied that the initiation of proceedings either u/s 17(1)(b) are bad in law. 20. The other contention of the learned counsel for the assessee was that the WTO was having no jurisdiction to make reference u/s 16A, of the WT Act, 1957. It is noteworthy that the assessee has challenged the validity of the reference u/s 16a before the authorities below. Even before the reference was made u/s 16a the assessee filed the detailed objection challenging the validity of such reference. On behalf of the assessees it was contended that the situation contemplated u/cls (a) (b) of sub-s (1) of s 16A can be visualised only in case of pending assessment and not completed assessment. Once asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o consequence where the revenue may allege that there would be avoidance of some taxes. In the case of CIT v VA Raman co (1968) 67 ITR 11 (SC), the supreme ruled as under. "Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed, is not prohibited. A tax payer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon consideration of morality, but on the operation of the IT Act, Legislative injunctions in taxing statutes may not, exempt on peril of penalty, be violated, but it may lawfully be circumvented." Similarly in the case Aruna group of estate vs. State of Madras (1955) 55 ITR 642 (mad), the Hon ble High Court at p.648 observed as under. "Avoidance of tax is not tax evasion and it carries no ignominies with it, for, it is sound law and certainly, no bad morality, for anybody to so arrange his affairs to reduce the burnt of taxation to a minimum. 23. We may point out that the legislature might have thought that so far as the question of a reopening of a completed assessment is concerned, it should be resorted to vary rare and extraordinary cases and if s. 16A i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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