TMI Blog1979 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner and his two brothers brought into the firm their share in the lands at Valnai, while their mother brought certain lands situated at Wedhwan belonging to her. The partnership concern entered into a certain agreement of lease dated April 22, 1963, in favour of M/s. United Investment Corporation, after securing the requisite permission from the Municipal Corporation for bifurcating the lands at Valnai and also securing the permission for converting its use to non-agriculture. The firm filed an application in this court seeking permission to enter into a contract of lease as one of the members of the petitioner's undivided Hindu family was a minor. The petitioner valued the lands after valuing it by an authorised valuer and this court granted permission to enter into a lease. The agreement of lease could not be gone through for certain reasons and a fresh application was made subsequently in the year 1969, supported by fresh valuation and the requisite permission was secured for entering into an agreement of lease, from this court. The HUF of the petitioner was assessed to income-tax and wealth-tax and the petitioner filed returns for the relevant years, i.e., assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1970-71 under s. 25(2) of the W.T. Act, but in respect of this assessment year an order was passed by the Commissioner of Wealth-tax on October 18, 1972, cancelling the assessment order passed in respect of the assessment year 1970-71 and directing that a fresh assessment should be made after taking into consideration the various facts including the fact that the Land Acquisition Officer had awarded Rs. 15 per yard in respect of the acquisition of part of the Valnai lands. The petitioner received a notice on November 30, 1972, calling upon the petitioner to show cause why the assessment orders in respect of the W.T. returns filed by the petitioner for the assessment year 1965-66 to assessment year 1970-71 should not be cancelled. The notice was issued under the provisions of s. 17 of the W.T. Act. The notice, inter alia, stated that the officer had reason to believe that the income of the petitioner had escaped assessment within the meaning of s. 17 of the W.T. Act and that the officer proposed to reassess the net wealth that had escaped the assessment. The petitioner was called upon to file a fresh return within 35 days of the receipt of the notice. The notices were served upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dly true that the notice served upon the petitioner did not disclose whether the WTO proposed to take action under the provisions of s. 17(1)(a) or s. 17(1)(b) of the W.T. Act. On behalf of the revenue, a return was filed to the petition on March 21, 1979, and the return is sworn to by one Subray Laxminarayan Bhat, an ITO. This officer has neither issued the original assessment order, nor has issued the notices under s. 17 of the W.T. Act, but he has sworn to the affidavit on the basis of the records in his possession. The learned counsel for the petitioner had several things to say in connection with this affidavit, but one need not go into all the grievances of the learned counsel as it is obvious from the contents of the return and especially from paras. 21, 23 and 26 that the WTO had issued the notice by relying upon the provisions, of s. 17(1)(a) only. There is no reference in this return to the provisions of s. 17(1)(b) of the Act and the entire action taken by the revenue is dependent upon the satisfaction of the terms and conditions mentioned in s. 17(1)(a) of the W.T. Act. To determine the true scope and ambit of the provisions of s. 17(1)(a), the learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations of the Supreme Court are crucial and they are as follows (p. 445) "The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not matter for the court to investigate. The sufficiency of the grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression 'reason to believe' does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely pretence. It is open to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary for the assessment and it was for the ITO to decide whether the documents produced by the assessee were genuine or false. The Supreme Court approving its earlier decision held that the ITO had no jurisdiction to issue notice for reopening the assessments. In view of these two decisions of the Supreme Court, the learned counsel submitted that, in the present case, the WTO had no jurisdiction to reopen the assessment for the years 1965-66 to 1970-71, as the assessee had not failed to disclose truly and faithfully all material facts necessary for the assessment. In view of the dictum laid down by the Supreme Court, the question which really falls for determination in this petition is whether the petitioner had made a full and true disclosure of all material facts necessary for the assessment in the relevant assessment years. The learned counsel placed reliance upon the returns filed by the petitioner in the respective years and especially on the annexure to the return which states that the assessable income of the petitioner was a share in the firm of M/s. Associated Lands and Development Corporation. The learned counsel contended that the petitioner wanted the WTO to assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. The learned counsel for the petitioner is right in his contention that nothing further is required to be done by the assessee and no material was suppressed from the WTO in the return filed by the petitioner. The contention of the learned counsel is just and deserves to be accepted. On behalf of the revenue, reliance was placed upon two or three facts to support the order issued by the WTO under s. 17(1)(a) of the W.T. Act. As mentioned earlier, the revenue relies solely upon the provisions of s. 17(1)(a) of the Act and it is the case of the revenue that the assessee has not disclosed the true and material facts in its return and that fact has resulted in the escapement of the assessment for the relevant assessment years. Turning to the return filed on behalf of the revenue, I find that 4 grounds are made out in support of the notices issued by the WTO under s. 17 of the W.T. Act. In the first instance, it is stated that in the return submitted by the 4 assessees, i. e., the petitioner, his two brothers and their mother, no immovable property was shown. The statement is obviously inaccurate. On behalf of the revenue, the original returns filed by the petitioner, his two bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision under the Act which requires the assessee to produce his evidence along with the return and the contention of Mr. Kotval that failure to produce the balance-sheet amounts to nondisclosure of the true and material facts is without any substance and must be repelled. In this connection, Mr. Kotval also placed reliance upon the provisions of r. 3(2) of the W.T. Rules which require that where the assessee is carrying on a business, a copy of the balance-sheet shall also be furnished along with the return of the net wealth. It requires to be stated that the failure to produce the balance-sheet along with the return of the net wealth is not so fatal as to hold that the assessee had failed to disclose the material and true facts in his return. It cannot be overlooked that the filing of the balance-sheet would only enable the WTO to find out the truth of the statements made in the return and it is not a primary fact to find out the assets of the assessee. Mr. Dastur, the learned counsel appearing for the petitioner, in this connection, pointed out that the provisions of sub-r. (2) of r.3 is attracted provided the assessee was carrying on a business and, in the present case, it cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e finds that the earlier assessment order made by him was inaccurate, because the valuation of the property was not proper. The mere fact that the valuation stated by the assessee in its return was inaccurate is not sufficient to assume jurisdiction and issue notice under s. 17 of the W.T. Act for reopening the assessment. In my judgment, the grounds given by the WTO in the return for issuing the notices under s. 17 of the W.T. Act are totally incorrect and unwarranted and the notices were issued by assuming jurisdiction when there was none. Obviously, the notices issued by the WTO deserve to be quashed. In the petition which was filed on January 24, 1973, the petitioner has sought the relief of quashing and setting aside the notices dated November 13, 1972, issued by the ITO under s. 148 of the I.T. Act and the notices issued by the WTO under s. 17 of the W.T. Act. As stated hereinabove, the department has categorically stated that they are not proceeding with the notices issued under the I.T. Act and, consequently, no relief is given to the petitioner in that connection. The petitioner is obviously entitled to the relief of quashing the notices under the W.T. Act and, according ..... X X X X Extracts X X X X X X X X Extracts X X X X
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