1994 (9) TMI 17 - HC - Wealth-tax

Summary

Issues Involved:
1. Validity of the reference to the Valuation Officer under Section 16A of the Wealth-tax Act, 1957, in reassessment proceedings initiated under Section 17.
2. Legality of the notices issued under Section 17 of the Wealth-tax Act, 1957.

Issue-wise Detailed Analysis:

1. Validity of the reference to the Valuation Officer under Section 16A of the Wealth-tax Act, 1957, in reassessment proceedings initiated under Section 17:

The petitioner challenged the references made to the Valuation Officer under Section 16A of the Wealth-tax Act, 1957, in the reassessment proceedings initiated under Section 17. The petitioner argued that the reference to the Valuation Officer for reassessment purposes was illegal and improper. The petitioner relied on previous judgments, including *K.M. Ramdas Prabhu v. First WTO* and *Onkarji Kasturchand (HUF) v. WTO*, to support the contention that Section 16A is applicable only for initial assessments and not for reassessments.

The court examined the provisions of Sections 16A and 17 of the Act. Section 16A(1) allows the Assessing Officer to refer the valuation of any asset to a Valuation Officer for the purpose of making an assessment. Section 17(1) empowers the Assessing Officer to reassess the net wealth if it has escaped assessment. The court noted that Section 16A does not mention reassessment and is intended for initial assessments. The court emphasized that the scheme of the law does not permit retrojection to a previous stage once the assessment is completed.

The court referred to the Division Bench decision in *Onkarji's case*, which held that the officer had no jurisdiction to make a reference to the Valuation Officer where the assessment for the relevant year was not pending. Similarly, in *K. M. Ramdas's case*, the Karnataka High Court held that the term 'assessment' in Section 16A should be given a restricted meaning and does not include reassessment.

The court concluded that the reference to the Valuation Officer under Section 16A in reassessment proceedings under Section 17 is impermissible. The court found that the references and consequential notices to the petitioner were invalid and illegal due to illegality, irrationality, and procedural impropriety.

2. Legality of the notices issued under Section 17 of the Wealth-tax Act, 1957:

The petitioner did not challenge the validity of the notices issued under Section 17 of the Act. The court noted that the petitioner's limited grievance was regarding the reference to the Valuation Officer under Section 16A in the reassessment proceedings. The court sustained the validity of the notices issued under Section 17, as there was no impugment against them.

The court observed that the Assessing Officer is empowered under Section 17 to reassess the net wealth if it has escaped assessment. The court emphasized that the purpose of Section 17 is to discover escapement and prevent evasion. The court noted that the Assessing Officer could demand particulars to ascertain the net wealth chargeable to tax.

Conclusion:

The court allowed the petitions in part. It quashed the references to the Valuation Officer and the consequential notices under Section 16A, holding them invalid and illegal. However, the court sustained the validity of the notices issued under Section 17, allowing the Assessing Officer to proceed with the reassessment in accordance with the law. The court ordered the refund of security costs to the petitioner after due verification.