2003 (2) TMI 56 - HC - Wealth-tax

Whether, in the facts and circumstances of the case, the Tribunal was correct in coming to the conclusion that the conditions precedent for assuming jurisdiction under section 25(2) of the Wealth-tax Act are not satisfied in the case ? -A plain reading of the provision of section 25(2) makes it abundantly clear that it confers suo motu jurisdiction upon the Commissioner to call for and examine the records of any proceeding under this Act and if he considers that any order passed therein is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard, pass appropriate orders. - we hold that the Commissioner of Wealth-tax in this case was justified in interfering with the order of the Wealth-tax Officer under section 25(2) of the Act. The Tribunal s order, reversing the Commissioner s decision, was based on a misconception of the provisions of section 25(2) of the Act. On this basis, we answer the question of law in favour of the Revenue.

Issues Involved:
1. Jurisdiction under Section 25(2) of the Wealth-tax Act.
2. Inclusion of annuity policies in net wealth.
3. Errors and prejudice in the assessment orders.
4. Correct application of Section 5(1)(vi) of the Wealth-tax Act.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 25(2) of the Wealth-tax Act:
The primary issue was whether the Tribunal was correct in concluding that the conditions precedent for assuming jurisdiction under Section 25(2) of the Wealth-tax Act were not satisfied. The Tribunal had observed that the Commissioner did not indicate the error in the assessment orders which resulted in prejudice to the interests of the Revenue. The High Court clarified that Section 25(2) confers suo motu jurisdiction upon the Commissioner to call for and examine records if an order is erroneous and prejudicial to the interests of the Revenue. The High Court disagreed with the Tribunal, stating that the Commissioner had the jurisdiction to interfere if both error and prejudice co-exist.

2. Inclusion of Annuity Policies in Net Wealth:
The assessee claimed exemption for the value of annuity policies based on previous orders. The Wealth-tax Officer accepted this claim and did not include the annuities in the net wealth. However, the Commissioner found this to be erroneous, stating that the annuities should be included in the net wealth, as the exemption was only to the extent specified in Section 5(1)(vi) of the Wealth-tax Act. The High Court upheld the Commissioner's view that the entire value of the annuities should not be exempted and only one-tenth of the value should be considered.

3. Errors and Prejudice in the Assessment Orders:
The Tribunal had set aside the Commissioner's order, stating that the Commissioner had not established the errors and prejudice caused by the assessment orders. The High Court, however, emphasized that an erroneous order resulting in prejudice to the interests of the Revenue need not be motivated or mala fide. The High Court referenced several precedents to support that an error, whether in law or fact, causing revenue loss, is sufficient for the Commissioner to invoke jurisdiction under Section 25(2). The High Court concluded that the Commissioner's finding of error and prejudice was justified.

4. Correct Application of Section 5(1)(vi) of the Wealth-tax Act:
The Commissioner argued that the Wealth-tax Officer's exemption of the entire value of the annuities was incorrect. According to the Commissioner, as per the proviso to Section 5(1)(vi), the exemption should be limited to one-tenth of the policy value if the premium was paid in a lump sum. The High Court agreed with this interpretation, stating that the Commissioner's decision was correct and the Wealth-tax Officer's order was erroneous and prejudicial to the interests of the Revenue.

Conclusion:
The High Court held that the Commissioner of Wealth-tax was justified in interfering with the Wealth-tax Officer's order under Section 25(2) of the Wealth-tax Act. The Tribunal's order reversing the Commissioner's decision was based on a misconception of the provisions of Section 25(2). The question of law was answered in favor of the Revenue, with no order as to costs.

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