2011 (9) TMI 673 - HC - Wealth-tax

Principle of natural justice - wealth escaped assessment. - Assessment made without issue of show cause notice - AO demanded books of accounts - Held That - The Assessing Authority has not taken note of the said returns filed. He has no other material on record. Even if we were to make an order on best judgment assessment, the proviso to Section 16(5) of the Act mandates that a notice is to be given. The Assessing Authority has neither given a notice under Section 16(2) nor a notice as contemplated in the proviso to Section 16(5) of the Act and has passed the impugned order. Hence, not only the impugned order violates the mandatory provisions of law inasmuch as Section 16(2) of the Act. as rightly held by the Tribunal, but also the order is also violative of principles of natural justice.

Summary

Issues:
Challenge to assessment orders passed without issuing notice under Section 16(2) of the Wealth Tax Act, 1957.

Analysis:
The appeals were filed by the Revenue against the Tribunal's decision stating that assessment orders passed without issuing a notice under Section 16(2) of the Wealth Tax Act were void ab initio. The Tribunal held that the orders of assessment were illegal and violated the principles of natural justice. The Appellate Commissioner had dismissed the appeal, considering the notice issued under Section 16(4) as sufficient. However, the Tribunal upheld the assessee's contention, setting aside the assessment orders as bad in law.

The Revenue contended that issuing a notice under Section 16(4) to produce documents satisfied the law's requirements when the assessee did not file a return in response to a notice under Section 17. However, the Assessing Authority did not consider the returns filed under Section 16(4)(i) and lacked any other material for assessment. The absence of a notice under Section 16(2) or the proviso to Section 16(5) made the impugned order not only a violation of mandatory provisions but also of natural justice.

The Tribunal's decision was deemed correct as the order passed could not be faulted. The appeals were dismissed, and the substantial questions of law were answered in favor of the assessee and against the Revenue. The judgment highlighted the importance of complying with statutory provisions and principles of natural justice in assessment proceedings under the Wealth Tax Act, 1957.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the necessity of issuing proper notices under the relevant sections of the Act before passing assessment orders to ensure procedural fairness and adherence to legal requirements.