1992 (2) TMI 30 - HC - Wealth-tax

Summary

Issues:
Challenge to notice under Wealth-tax Act, Jurisdiction of non-petitioner, Cancellation of firm registration, Validity of impugned notice, Justification of notice under section 17

Analysis:
The case involves a writ petition seeking to quash a notice dated March 28, 1981, issued under section 17(1) of the Wealth-tax Act, 1957, for the assessment year 1972-73. The petitioner, along with his mother, formed a partnership firm, which was registered under the Indian Partnership Act. The Income-tax Officer canceled the firm's registration, alleging the mother was a benamidar and directed assessment of the firm's income solely in the petitioner's hands. The basis of the impugned notice was the canceled registration, which was later set aside by the Income-tax Appellate Tribunal and confirmed by the High Court. The non-petitioner admitted these facts. The petitioner argued that since the foundation for the notice no longer existed post the cancellation reversal, the notice should be quashed.

The non-petitioner acknowledged that the cancellation of firm registration formed the basis of the impugned notice, which was subsequently overturned on appeal. The non-petitioner contended that the notice was justified due to the alleged benami nature of the mother's involvement in the firm. However, with the cancellation reversal upheld by the High Court, the foundation for the notice was deemed non-existent, leading to the conclusion that the notice was unjustified and should be quashed. The court found merit in the petitioner's argument and allowed the writ petition, ordering the quashing of the notice and all related proceedings under section 17 of the Wealth-tax Act.

In conclusion, the High Court ruled in favor of the petitioner, holding that the notice issued under the Wealth-tax Act was invalid due to the reversal of the firm registration cancellation on appeal. The court found that the impugned notice lacked a valid foundation following the appellate decision, leading to the quashing of the notice and associated proceedings.