1987 (2) TMI 15 - HC - Wealth-tax

Summary

Issues:
Validity of reopening assessments under section 17(1)(b) of the Wealth-tax Act, 1957 based on change of opinion.

Analysis:
The High Court of Madhya Pradesh addressed the issue of whether the assessments for the years 1971-72, 1972-73, and 1973-74 were rightly reopened by the Wealth-tax Officer under section 17(1)(b) of the Wealth-tax Act, 1957. The assessments were initially completed by the Wealth-tax Officer but later reopened on the grounds that the value of a property had not been included in the net wealth of the assessee. The Appellate Assistant Commissioner held that the reassessment was initiated due to a change of opinion, which was not a valid reason. The Revenue then appealed to the Tribunal, which allowed the appeals. The High Court noted that the Wealth-tax Officer's sole reason for reopening the assessments was based on a change in opinion due to information from the Central Board of Direct Taxes. The court cited the decision in Indian & Eastern Newspaper Society v. CIT, emphasizing that the law referred to in section 17(1)(b) must be from a formal source. The court found that the Wealth-tax Officer changed his opinion based on an audit objection approved by the Central Board of Direct Taxes, which was not a valid reason for reopening the assessments. The Tribunal's justification for the reopening based on a valuation report was deemed invalid as the report postdated the reasons recorded by the Wealth-tax Officer. Therefore, the High Court concluded that the Wealth-tax Officer was not justified in reopening the assessments, ruling in favor of the assessee.

In conclusion, the High Court held that the Wealth-tax Officer's reopening of the assessments under section 17(1)(b) of the Wealth-tax Act, 1957 was not valid. The court emphasized that a change of opinion based on external factors such as an audit objection was not sufficient grounds for reassessment. The court referred to established legal principles to determine that the Wealth-tax Officer's actions were not in line with the law. The Tribunal's reliance on a valuation report that postdated the reasons for reopening was also deemed unjustified. As a result, the court answered the question referred in the negative and in favor of the assessee, directing that each party bear their own costs in the matter.