1984 (2) TMI 82 - HC - Wealth-tax

Summary

Issues Involved:
1. Jurisdiction of the WTO to issue notices under Section 17 of the Wealth Tax Act.
2. Applicability of Section 17(1)(a) and Section 17(1)(b) of the Wealth Tax Act.
3. Disclosure of material facts by the assessees.
4. Validity of invoking Article 226 of the Constitution by the petitioners.

Issue-wise Detailed Analysis:

1. Jurisdiction of the WTO to Issue Notices under Section 17 of the Wealth Tax Act:
The petitioners challenged the jurisdiction of the Wealth Tax Officer (WTO) to issue notices under Section 17 of the Wealth Tax Act for reassessment of wealth for the years 1969-70 and 1970-71. The court examined whether the WTO had the legal authority to issue such notices based on the conditions precedent stipulated by the Act.

2. Applicability of Section 17(1)(a) and Section 17(1)(b) of the Wealth Tax Act:
The petitioners contended that if the proceedings were under Section 17(1)(b), they were barred by time as more than four years had elapsed. If under Section 17(1)(a), the assessees had already furnished returns and disclosed all material facts, thus, the second part of Section 17(1)(a) was not applicable. The court observed that the jurisdiction to issue notices under Section 17 is akin to Section 34 of the Indian Income Tax Act, 1922, requiring two conditions: (1) reason to believe that income was under-assessed, and (2) such under-assessment was due to omission or failure to disclose fully and truly all material facts.

3. Disclosure of Material Facts by the Assessees:
The court held that the assessees had disclosed all primary facts fully and truly in their returns, including the valuation of jewellery based on the report of an approved valuer. The WTO's failure to make further inquiry at the time of the original assessment could not be attributed to the assessees. The court referenced the Supreme Court's rulings in Calcutta Discount Co. Ltd. v. ITO and ITO v. Lakhmani Mewal Das, asserting that once primary facts are disclosed, the assessees have fulfilled their duty.

4. Validity of Invoking Article 226 of the Constitution by the Petitioners:
The Revenue argued that the petitioners should exhaust departmental remedies before invoking Article 226 of the Constitution. The court dismissed this objection, citing the Supreme Court's decision in Calcutta Discount Co. Ltd. v. ITO, which allows the High Court to grant relief when conditions precedent for jurisdiction are not met. The court emphasized its duty to provide relief when jurisdictional conditions are not satisfied, as in the present case.

Conclusion:
The court concluded that the WTO did not have jurisdiction to issue notices under Section 17(1)(a) of the Wealth Tax Act as the assessees had fully and truly disclosed all material facts. The notices issued were thus quashed, and the WTO was restrained from taking any further proceedings based on those notices. The writ petitions were accepted, and no order as to costs was made.