2006 (3) TMI 123 - HC - Wealth-tax

Reopening of assessment u/s 147 - Omission To Disclose Fully And Truly material fact - Powers u/s 17(1)(a) of the Wealth-tax Act - HELD THAT - In the present case the assessee has disclosed gold ornaments and silver utensils. The only ground for reassessment is that he has claimed impurity at the rate of 25 per cent. for gold ornaments and 30 per cent. for silver utensils when as per the Wealth-tax Officer it should be not more than 15 per cent. in gold ornaments and 20 per cent. in silver utensils. Thus, it cannot be said in the present case that the assessee has not truly and fully disclosed the material fact relevant for the assessment. Similarly, as regards the valuation of flat is concerned, the Wealth-tax Officer while reopening has merely adopted some other system for valuation. The material facts which the assessee was required to place in his return was the details of the flat. Merely because the valuation can be arrived at by some other method does not mean that the assessee has not truly and correctly disclosed all material facts required to be disclosed by him and in such a situation the Tribunal has found by the impugned judgment that there was no further information made available to the Wealth-tax Officer for reopening of the case and there is no material on record to show that the assessee did not fully disclose the material facts which led to escapement or undervaluation of wealth or the wealth was assessed at a lower figure. This apart, the audit report could not form the basis for invoking the provisions of section 17(1)(b) of the Wealth-tax Act. In such situation in answer to questions Nos. (b) and (c) we hold that the Tribunal was right in dismissing the appeal filed by the Department and maintaining the order of the appellate authority. We do not find any merit in these appeals. Hence, all the appeals, stand dismissed on the merits as well as on the ground of maintainability with no order as to costs.

Issues Involved:
1. Validity of the impugned order based on a decision set aside in another case.
2. Whether there was underassessment requiring reopening of the assessment under section 17 of the Wealth-tax Act.
3. Whether the Tribunal's finding on net wealth variations was erroneous.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Order:
The first issue addressed whether the impugned order was vitiated due to reliance on a decision in the case of Smt. Asha Digvijay Singh, which was set aside. The court clarified that the judgment in Smt. Asha Digvijay Singh was not set aside but merely had questions of law formulated for reference to the High Court. Therefore, it was incorrect to state that the Tribunal's decision was set aside by the High Court. The court concluded that the impugned order was not vitiated on this ground.

2. Underassessment and Reopening of Assessment:
The second issue examined whether the Income-tax Appellate Tribunal erred in holding that there was no underassessment requiring reopening of the assessment under section 17 of the Wealth-tax Act. The court referred to section 17, which allows reopening of assessments if there is reason to believe that wealth chargeable to tax has escaped assessment due to underassessment or other reasons. The reasons for reopening in this case included the value of ornaments and the correct valuation of a flat in Delhi. The court noted that the assessee had disclosed gold ornaments and silver utensils, claiming impurity rates which the Wealth-tax Officer believed were too high. However, the court found that the assessee had fully disclosed all material facts, and the reassessment was based on a different valuation method rather than new information. The court cited precedents, including Phool Chand Bajrang Lal v. ITO and Indian and Eastern Newspaper Society v. CIT, to support its conclusion that the reassessment was not justified.

3. Tribunal's Finding on Net Wealth Variations:
The third issue was whether the Tribunal's finding that the net wealth declared in the relevant assessment years varied and was not on the same figure was erroneous. The court found that the Tribunal correctly determined that there was no new information to justify reopening the assessments. The reassessment was based on audit objections, which the court held could not be regarded as "information" for reopening assessments. The court concluded that the Tribunal was right in dismissing the Department's appeal and maintaining the order of the appellate authority.

Preliminary Objections and Maintainability:
Additionally, the court addressed preliminary objections regarding the maintainability of the appeals. The respondent argued that the total tax effect in each appeal was around Rs. 2,000, and appeals with tax effects less than Rs. 25,000 were not maintainable. The court referred to several judgments, including CIT v. Zoeb Y. Topiwala and CIT v. Cameo Colour Co., which supported the argument that appeals with low tax effects should not be entertained. The court agreed that the appeals were not maintainable due to the low tax effect but proceeded to decide on other grounds to complete the judgment.

Conclusion:
The court dismissed all the appeals on both merits and the ground of maintainability, with no order as to costs.

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