1980 (4) TMI 44 - HC - Wealth-tax

Summary

Issues Involved:
1. Legality and validity of notices issued u/s 17 of the Wealth-tax Act, 1957.
2. Jurisdiction of the WTO to issue notices u/s 17(1)(a) or 17(1)(b).
3. Whether there was a failure to disclose fully and truly all material facts.
4. Whether the agreement to sell the property constitutes "information" u/s 17(1)(b).
5. Actual escapement of wealth chargeable to tax.

Summary:

1. Legality and Validity of Notices Issued u/s 17 of the Wealth-tax Act, 1957:
The petitioner challenged the legality and validity of notices issued by the WTO u/s 17 of the Wealth-tax Act, 1957, for assessment years 1968-69 to 1974-75. The notices were issued on 25th August 1975 and served on 2nd September 1975.

2. Jurisdiction of the WTO to Issue Notices u/s 17(1)(a) or 17(1)(b):
The notices did not specify whether they were issued u/s 17(1)(a) or 17(1)(b). Given that more than four years had elapsed for the assessment years 1968-69, 1969-70, and 1970-71, the intention appeared to be to act u/s 17(1)(a). However, the court held that the same set of facts might constitute information u/s 17(1)(b), allowing action even if there was no omission or failure to disclose fully and truly all material facts.

3. Whether There Was a Failure to Disclose Fully and Truly All Material Facts:
The petitioner had filed a valuation report for the property at 18, Tilak Marg, New Delhi, which was accepted by the WTO in the original assessment. The court found no failure to disclose fully and truly all material facts, as the valuation was supported by an approved valuer's report and had been consistently accepted in previous assessments.

4. Whether the Agreement to Sell the Property Constitutes "Information" u/s 17(1)(b):
The agreement to sell the property to the Iranian Embassy for Rs. 27,65,825, which came into existence in early 1975, was considered "information" in the possession of the WTO. This information was relevant and came to the WTO's knowledge after the original assessments, justifying the issuance of notices u/s 17(1)(b) for the assessment years 1971-72 to 1974-75.

5. Actual Escapement of Wealth Chargeable to Tax:
The court held that the question of actual escapement and its extent is to be examined in the reassessment proceedings. At this stage, the WTO only needed to have reason to believe that there had been escapement of net wealth. The material, including the agreement to sell the property, was relevant and provided sufficient grounds for the WTO's belief.

Conclusion:
The notices dated 25th August 1975 for the years 1968-69, 1969-70, and 1970-71 were quashed, and Civil Writ Petitions Nos. 1264, 1265, and 1266 of 1975 were allowed. However, Civil Writ Petitions Nos. 1267, 1268, 1269, and 1270 of 1975 were dismissed. There was no order as to costs.