TMI Blog2013 (10) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... e. A notice u/s. 17 of the W. T. Act dated 30.03.2005 was issued on the ground that certain net wealth chargeable to tax had escaped assessment. As per the Assessing Officer, the land owned by the assessee at Vadgaon Sheri was an asset within the meaning of section 2(e) of the W.T. Act which was chargeable to tax and the same having not been disclosed for the purposes of wealth tax, the same constituted escapement of wealth tax. In response, assessee filed a return of wealth on 28.04.2005 declaring NIL wealth. In the consequent assessment finalized u/s. 17 r.w.s. 16(3) of the W.T. Act, the value of such land was taken at 15,00,00,000/- and the total wealth assessable was computed at ₹ 15,00,00,000/-. The assessment so made was done on protective basis for the reason that in the income-tax proceedings for assessment year 1998-99, the Assessing Officer was of the view that such property stood transferred as on 31.03.2008 and the resultant capital gain was brought to tax. However, assessee was pleading in the income-tax proceedings that taxable event of transfer of land had taken place in the previous year relevant to the assessment year 2002-03. The Assessing Officer was of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore, became an assets chargeable to wealth tax. The market value of the assets as on 03.10.1997, as evident from agreement to sale entered into with M/s Marigold Premises Pvt. Ltd. is ₹ 11,55,00,000/-. The assessee claims that the land under reference has been sold in the month of March 2002 though the department does not agree to it. Without prejudice to proceedings in the Income Tax Act for A.Y. 1998-99 and keeping in view the assessee s stand regarding the sale of land that the sale of property situated at Vadgaon Sheri, S. No. 15 has taken place in A.Y. 2002-03, it is clear that assessee has not disclosed the wealth of this land in addition to wealth chargeable to tax in respect of plot at Lohagaon (1/6th share in 2.00 acres plot and house property situated at Nana Peth excluding one house property situated at Ahmednagar, claimed to be occupied by assessee and therefore, I am satisfied and have reason to believe that wealth at ₹ 15,00,00,000/- chargeable to tax has escaped assessment in A.Y. 1998-99. 6. The learned counsel for the assessee has objected to the basis on which the assessment is sought to be reopened by issuance of notice u/s. 17 of the W.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the land under reference was sold/transferred for the purposes of chargeability of capital gains in the month of March 2002 corresponding to assessment year 2002-03, though the said stand was not accepted by the Department in the income-tax proceedings. The learned Departmental Representative pointed out that the Assessing Officer was justified in making a protective assessment by taking recourse to the provisions of section 17 of the W.T. Act in order to safeguard the interest of the Revenue, should the income-tax proceedings for assessment year 1998-99 ultimately do not result in favour of the Revenue. 9. We have carefully considered the rival submissions. Before we proceed to adjudicate assessee s plea with regard to the validity of the notice u/s. 17 of the W.T. Act issued by the Assessing Officer, it would be appropriate to briefly touch upon the relevant facts. The assessee HUF is a co-owner of land situated at Vadgaon Sheri, Pune and it transpires that the assessee alongwith co-owners of the property entered into an agreement dated 03.10.1997 in favour of a concern MPPL. However, the assessee declared capital gains on the basis of the development agreement dated 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to issue notice u/s. 17 of the W.T. Act on the ground that the asset claimed to have been transferred by the assessee in assessment year 2002-03 continues to be held/belonged to the assessee in assessment year 1998-99 so as to constitute escapement of wealth-tax. 13. Ostensibly, the formation of belief of escapement of wealth-tax is subject to be a contingency or a hypothesis that the stand of the Revenue to charge capital gains on transfer of land in assessment year 1998-99 may eventually not be upheld and in such an eventuality, the asset in question would be liable for wealth-tax in the hands of the assessee. 14. It is quite clear that the escapement of wealth sought to be made out by the Assessing Officer is only a potential escapement of wealth-tax, which certainly is impermissible in terms of section 17 of the W.T. Act. A similar situation, though under the I.T. Act relating to initiation of proceedings u/s.147/148 of the I.T. Act was a subject-matter of consideration before the Hon ble Bombay High Court in the case of DHFL Venture Capital Fund (supra). 15. In the case before the Hon ble High Court assessee was a Venture Capital Fund registered with SEBI and consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racted as claimed by the assessee during the course of assessment proceedings for assessment year 2008-09, and the said proceedings had not attained finality. The Hon ble High Court examined the reasons recorded and held the same to be lacking in jurisdiction. The following discussion is relevant : - 14. The reasons for the reopening of the assessment clearly postulate that the reopening is based on the contingency that the provisions of Sections 61 to 63 are held to be attracted to the transactions between the contributors and the Petitioner as has been claimed by the Petitioner. The formation of a reason to believe is if the provisions of Sections 61 to 63 are attracted. It is on this hypothesis that the Assessing Officer proceeds to record that the income of ₹ 32.83 Crores arising from the investment of contributions of the contributories which has been claimed as exempt in the hands of the Petitioner has to be assessed as income in the hands of the AOP of the contributors of the petitioner. Reading the reasons as they stand, it is evident that the Revenue has sought to reopen the assessment in exercise of powers conferred by Section 148 on the hypothesis that sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e what Section 147 requires is a formation of a reason to believe by the Assessing Officer. In the present case, there is clearly a want of compliance with the jurisdictional condition. The Assessing Officer has not formed a reason to believe that income has escaped assessment since the reopening is based purely on a contingency that may arise upon a particular outcome before the appellate tribunal. 17. Ostensibly, the parity of reasoning in the aforesaid judgement of the Hon ble Jurisdictional High Court supports the plea of the assessee in the present case before us. The reopening of assessment u/s.17 of the W.T. Act on the basis of the stand of the assessee in assessment year 2002-03 which is not accepted by the Revenue is clearly impermissibly because and as explained by the Hon ble High Court, what section 17 of the W.T. Act requires is a formation of a reason to believe by the Assessing Officer of escapement of income. The recourse to section 17 of the W.T. Act is justified in a situation where the Assessing Officer has reason to believe for escapement in the present, meaning thereby, a reason which is present, and live when he forms his reasons to believe that certain w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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