2013 (10) TMI 1469 - AT - Income Tax

Summary

Issues Involved:
1. Validity of notice issued u/s. 17 of the Wealth Tax Act.
2. Protective assessment of wealth tax.

Summary:

Validity of Notice Issued u/s. 17 of the Wealth Tax Act:

The assessee HUF, a co-owner of a property in Vadgaon Sheri, Pune, received a notice u/s. 17 of the Wealth Tax Act on 30.03.2005 for the assessment year 1998-99, alleging that certain net wealth chargeable to tax had escaped assessment. The Assessing Officer (AO) considered the land as an 'asset' u/s. 2(e) of the W.T. Act, valued at Rs. 15,00,00,000/-, and issued the notice after recording reasons. The assessee challenged the initiation of proceedings, arguing that the reopening was based on a potential escapement of income, contingent upon the outcome of income-tax proceedings for the same assessment year. The Tribunal found that the AO's belief of escapement was based on a hypothesis or contingency, which is impermissible u/s. 17 of the W.T. Act. Citing the Bombay High Court's judgment in DHFL Venture Capital Fund vs. ITO, the Tribunal quashed the notice and the consequent assessment order, stating that the reopening was not well-founded and suffered from a jurisdictional defect.

Protective Assessment of Wealth Tax:

The AO made a protective assessment of the land's value, considering the assessee's position that the property was transferred in the assessment year 2002-03. The Commissioner of Wealth Tax (Appeals) upheld the initiation of proceedings but set aside the protective addition, as the capital gain addition for the assessment year 1998-99 was substantively confirmed in income tax proceedings. The Revenue's cross-appeal against the deletion of the protective addition was rendered infructuous as the Tribunal quashed the entire assessment.

Conclusion:

The Tribunal allowed the assessee's appeal, quashing the notice u/s. 17 of the W.T. Act and the consequent assessment order, while dismissing the Revenue's cross-appeal. The judgment emphasized that reopening an assessment based on a potential future contingency is impermissible.

Order pronounced in the open Court on 31st October, 2013.