1979 (6) TMI 6 - HC - Wealth-tax

Summary

Issues Involved:
1. Validity of notices issued under Section 17 of the Wealth-tax Act (W.T. Act).
2. Full and true disclosure of material facts by the assessee.
3. Jurisdiction of Wealth-tax Officer (WTO) to reopen assessments.
4. Grounds for reopening assessments under Section 17(1)(a) of the W.T. Act.
5. Compliance with procedural requirements for filing returns and supporting documents.

Issue-wise Detailed Analysis:

1. Validity of Notices Issued Under Section 17 of the W.T. Act:
The sole contention in this petition revolves around the validity and legality of the notices served upon the petitioner under Section 17 of the W.T. Act. The petitioner challenged the notices on the grounds that they did not specify whether the action was proposed under Section 17(1)(a) or Section 17(1)(b) of the W.T. Act. The court observed that the notices did not disclose whether the WTO proposed to take action under Section 17(1)(a) or Section 17(1)(b). The court concluded that the entire action taken by the revenue was dependent upon the satisfaction of the terms and conditions mentioned in Section 17(1)(a) of the W.T. Act.

2. Full and True Disclosure of Material Facts by the Assessee:
The court examined whether the petitioner had made a full and true disclosure of all material facts necessary for the assessment in the relevant assessment years. The petitioner contended that the returns filed included all necessary disclosures, including the ownership of lands and the valuation thereof. The court agreed, noting that the petitioner had disclosed the primary fact of ownership of lands and that any further evidence, such as the balance-sheet, could be called for by the WTO during the assessment process.

3. Jurisdiction of WTO to Reopen Assessments:
The court referred to Supreme Court decisions to determine the true scope of Section 17(1)(a). It was emphasized that two conditions must be satisfied: (1) the officer must have reason to believe that the income chargeable to tax had escaped assessment, and (2) such income had escaped assessment due to the omission or failure of the assessee to disclose fully and truly all material facts. The court concluded that the WTO had no jurisdiction to reopen the assessment if these conditions were not met.

4. Grounds for Reopening Assessments Under Section 17(1)(a) of the W.T. Act:
The revenue relied on several grounds to support the notices issued under Section 17(1)(a). These included allegations that the petitioner had not disclosed immovable property, had not produced the balance-sheet of the firm, and had not declared the value of ownership flats. The court found these grounds to be inaccurate and misleading. For instance, the court noted that the returns did disclose the ownership of lands and that the failure to produce the balance-sheet along with the return did not amount to suppression of material facts. The court also found that the statement regarding ownership flats was inaccurate.

5. Compliance with Procedural Requirements for Filing Returns and Supporting Documents:
The court examined whether the petitioner had complied with procedural requirements, such as filing the balance-sheet along with the return. The court concluded that while Rule 3(2) of the W.T. Rules requires the balance-sheet to be furnished, the failure to do so was not fatal and did not amount to non-disclosure of primary facts. The court emphasized that the balance-sheet is not a primary fact but a piece of evidence to substantiate the return.

Conclusion:
The court quashed the notices issued under Section 17 of the W.T. Act, finding them to be based on incorrect and unwarranted grounds. The court also quashed the fresh assessment orders passed during the pendency of the petition. The petitioner was granted relief, and there was no order as to costs.