TMI Blog2004 (11) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... -18, New Delhi, validly exercised jurisdiction to the exclusion of Joint Commissioner, Special Range-10, New Delhi, exercising jurisdiction over the appellant on the date of issue of notice under section 17 of the Act. 1.3 That the Commissioner of Wealth-tax (Appeals) erred on facts and in law in holding that the notice issued under section 17 of the Wealth-tax Act to the erstwhile Triveni Engineering and Industries Limited, which was non-existent as on the date of notice, was bad in law and the assessment framed pursuant to issue of such notice was void ab initio. 1.4 That the Commissioner of Wealth-tax (Appeals) erred on facts and in law in holding that the appellant could not, in terms of section 124(3) of the Act, seek to challenge the jurisdiction for the first time in the appellate proceedings. 2. That the Commissioner of Wealth-tax (Appeals) erred on facts and in law in holding that the reassessment was bad in law, being based on mere change of opinion. 3. That in the facts and circumstances of the case, the Commissioner of Wealth-tax (Appeals) erred in not treating the premises let out to joint venture companies as having been used for the purpose of business and, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of immovable properties: (1) Triveni Flexi Box Limited, Bangalore Rs. 12 lakhs. (2) GEC Alstham Triveni Naini Rs. 60,000. (3) GEC Alstham Triveni, Bangalore, Rs. 3,10,000. (4) Rent received from employees in respect of residential premises at Khathavli Rs. 63,093. The Assessing Officer (J.C., W.T., S.R.18, New Delhi) issued notice dated October 4, 2000, under section 17 of the Wealth-tax Act as the assessment was reopened on the ground that as per the wealth-tax provisions of Schedule-III read with section 2(ea)(i) of the Wealth-tax Act, 1957 the capitalized value of rented properties is includible in the net wealth of the assessee. The assessee-company did not file the return in response to the notice under section 17 of the Wealth-tax Act issued on October 4, 2000. The Assessing Officer issued notice under section 16(4) for the purpose of completion of the assessment. The assessee vide letter dated December 12, 2000, informed the Assessing Officer that the rent received from parties mentioned above does not fall under the mischief of section 2(ea)(i) because the above three companies are joint ventures in which the assessee is a major stake holder which leads to infer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Delhi, that on merger the erstwhile Triveni Engineering and Industries Limited had ceased to exist as a legal entity and no notice could have been validly issued and served to such a non-existent entity. On the merits, the same submissions were reiterated which were made before the Assessing Officer claiming that the joint venture companies are part of the assessee and that the rent received from the employees using the property of the assessee is exempt from tax. The Commissioner of Wealth-tax (Appeals) rejected both the contentions of the assessee and rejected the appeal of the assessee on both the issues. However, the Commissioner of Wealth-tax (Appeals) directed the Assessing Officer to make certain corrections as regards arithmetical mistakes in the assessment order by which excess addition is made. The Commissioner of Wealth-tax (Appeals) also directed the Assessing Officer to allow relief to the assessee as regards the rent received from some of the employees. The Assessing Officer was directed to make addition in respect of residential accommodation allotted to four employees who were drawing salary more than Rs. 2 lakhs. The appeal of the assessee was therefore allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hadani [1987] 164 ITR 323 (Patna) ; (5) CIT v. Fatelal [1997] 225 ITR 1061 (MP) ; [1996] 88 Taxman 320 (MP) ; (6) CIT v. Kumari Prabhawati Gupta [1998] 231 ITR 188 (MP) ; [1997] 142 CTR 72 (MP) and (7) R. C. Jain v. CIT [2005] 273 ITR 384 (Delhi) ; [2004] 140 Taxman 379 (Delhi). The learned representative of the assessee also argued that the issue of notice to the amalgamating company subsequent to the amalgamation becoming effective is bad in law and void ab initio. The learned representative of the assessee relied upon decision of the Madras High Court in the matter of CIT v. Express Newspapers Ltd. [1960] 40 ITR 38 and the order of the Bombay Bench of the Income-tax Appellate Tribunal in the matter of Makers Development Services Ltd. v. Deputy CIT [1991] 41 TTJ 301 (Bom). The learned representative of the assessee further submitted that section 124 of the Income-tax Act defines territorial jurisdiction and transfer of a file under section 127 of the Income-tax Act can be made in the case of an existing assessee, but, in this case the amalgamating company ceased to exist. Therefore, there cannot be transfer of file. The learned representative of the assessee further submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the JCIT, S.R.18, New Delhi, was transferred to the Deputy Commissioner of Income-tax, Circle 16, New Delhi, who was having jurisdiction of the same alphabet. Therefore, there is no illegality in the issue of the notice. The learned Departmental Representative submitted that the case law relied upon by counsel for the assessee is not applicable to the present case as they pertain to older law. We have considered the rival submissions and material pointed out by the learned representatives of the parties and observations of the authorities below. According to section 3 of the Wealth-tax Act, there shall be charged for every assessment year, a tax in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule-I. The definition of the net wealth is provided in section 2(m) of the Wealth-tax Act and provides net wealth means, the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applicable. Therefore, the Assessing Officer has no jurisdiction to issue notice under section 17 of the Wealth-tax Act. In this case, the assessee has filed a return of wealth-tax for the assessment year 1997-98 under appeal showing the net wealth that is movable assets (value of the motor vehicles). No value of the immovable property was shown in the return of wealth-tax. The Assessing Officer accepted the value of motor vehicles as per valuation report and completed the assessment vide order dated February 4, 2000. The Assessing Officer reopened the assessment on the ground that as per wealth-tax provisions of Schedule-III read with section 2(ea)(i) of the Wealth-tax Act the capitalised value of the rented property is includible in the net wealth of the assessee. This fact was brought to his notice by the internal audit party and the Assessing Officer duly recorded the reasons for the same and issued notice under section 17 of the Wealth-tax Act to the assessee. The showcause notice dated October 4, 2000, under section 17 (copy of which is filed at page 74 of the paper book) shows that it was issued and addressed to the assessee-company M/s. Triveni Engineering and Industrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter of the erstwhile co., M/s. Triveni Engineering and Industries Limited proposing to reopen the assessment. The contents of the letter would also reveal that the amalgamated/successor company was aware of the fact that the assessment of the erstwhile company was already framed and now it was subject to reopen. The amalgamated/successor company also sought for the reasons for reopening of the assessment. Therefore, it clearly proved that the Assessing Officer issued notice to the amalgamated/successor company which was also properly responded to, which also proved that notice was served on the amalgamated/successor company having the same name and address as of the erstwhile company. Admittedly, the Assessing Officer can proceed against amalgamated/successor company and could pass order also in respect of matters of the erstwhile amalgamating company. The Commissioner of Wealth-tax (Appeals) in the impugned order at page 5 has specifically mentioned that the assessee-company was assessed with the JCIT, S.R.18, New Delhi. After reorganization of the Department, the proceedings were transferred to the Deputy Commissioner of Income-tax, Circle 16(1), New Delhi. According to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides that jurisdiction cannot be challenged where he has made no such return after the expiry of the time allowed by the notice under sub-section (1) of section 142 or under section 148 for making the return or by the notice under the first proviso to section 144 to show cause why assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier. The learned Departmental Representative submitted that notice dated October 4, 2000, was served upon the assessee on October 11, 2000. The assessee was allowed 35 days-time for filing return under section 17 of the Wealth-tax Act. The assessee however did not file the return of wealth and only filed reply dated December 4, 2000, whereby it was stated that the assessee relies on the return already filed by it and assessed earlier by the Department. Therefore, it proves that the assessee did not file return of income in response to notice under section 17 of the Wealth-tax Act within the time allowed by the Assessing Officer. The Commissioner of Wealth-tax (Appeals) was therefore justified in holding that the time-limit for calling in question and dispute the jurisdiction of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention of counsel for the assessee. Learned counsel for the assessee filed copies of the intimation in the case of Gangeshwar Ltd., showing in its case the Assessing Officer is the JCIT, S.R.10, but, in view of our finding that notice of reassessment is issued in the name of amalgamated/successor company, these orders have no relevance to the matter in dispute. Merely that the GIR No. is similarly mentioned is not enough to conclude against the Department. The Assessing Officer of Gangeshwar Ltd., is not relevant as it merged with the amalgamated company. The whole of the substance of the matter is to be considered. The hon ble Allahabad High Court in the matter of Hindustan Transport Co. v. IAC of I. T. reported in [1991] 189 ITR 326, considering the objection to the jurisdiction of the Assessing Officer held that objection cannot be raised after the assessment is completed. In this case, the assessment year under consideration was 1985-86 and the hon ble Allahabad High Court considering the provisions of section 124 of the Income-tax Act and considered the following points : (i) What is the nature of power of transfer conferred by the Act ? and (ii) How the Act itself vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that reopening is not possible on reversal of the same facts. According to him, the facts were within the knowledge of the Assessing Officer as per the audited balance-sheet. Therefore, on a mere change of opinion, the Assessing Officer cannot initiate proceedings for reopening of the assessment. He has relied upon the decision of the Delhi High Court in CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 [FB]. On the other hand, the learned Departmental Representative submitted that as per the return and valuation report filed with the return of wealth, the assessee has shown the valuation of motor vehicles. He has further submitted that in the original return the rented properties have not been shown. So, there is failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. He has submitted that the Explanation to section 17(1) is applicable to the facts of the case. The learned Departmental Representative further submitted that after amendment to section 2(ea), only three items were exempted from wealthtax, but the assessee has not shown how it was entitled for exemption in the return of wealth. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for reassessment and the internal audit report by which the factual error was pointed to by the Assessing Officer in the assessment and the Assessing Officer on that basis formed his opinion for reassessment for including the value of the rented properties for the purpose of the Wealth-tax Act. The Assessing Officer duly recorded reasons for initiating proceedings under section 17 of the Wealth-tax Act as the wealth of the assessee had escaped assessment. The decision of the hon ble Supreme Court in the matter of P. V. S. Beedies P. Ltd. [1999] 237 ITR 13, clearly supports the submission of the learned Departmental Representative in which it was held that reopening of the assessment is valid if a factual error is pointed out by audit party to the Assessing Officer. Considering the above discussion and the facts mentioned above, we do not find it to be a case of change of opinion. Nothing was brought to the knowledge of the Assessing Officer at the original assessment stage and as such the Assessing Officer cannot be said to have formed any opinion as regards the value of the immovable property for the purpose of wealth-tax. Therefore, there cannot be a change of opinion by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and rent is charged from the employees. Further, the Commissioner of Wealth-tax (Appeals), directed the Assessing Officer to make addition in respect of residential accommodation allotted to four employees who were drawing salary of more than Rs. 2 lakhs. Learned counsel for the assessee submitted that clause (3) of section 2(ea)(i) is applicable. Learned counsel for the assessee submitted that the assessee occupied the properties with joint venture companies for its business purpose and that houses are exclusively given for residential purpose to the employees of the companies. On the other hand, the learned Departmental Representative submitted that occupation of the property by the assessee is not possible as per clause (3) of section 2(ea)(i) of the Wealth-tax Act, the assessee was receiving rent for the aforesaid premises. We have considered the rival submissions and material available on record. The definition of asset as is applicable after April 1, 1993, does not include a house meant exclusively for residential purpose and which is allotted by a company to an employee or officer or a director who is in whole time employment having a gross annual salary less than Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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