1980 (1) TMI 60 - HC - Wealth-tax

Assessment Notice, Assessment Proceedings, Original Assessment, Reassessment Notice, Reassessment Proceedings

Summary

Issues:
Challenge to notices issued under s. 17(1) of the W.T. Act seeking to reopen wealth-tax assessments for assessment years 1971-72, 1972-73, and 1973-74 based on valuation discrepancies of two plots of land owned by the petitioner in Krishnanagar area in Bhavnagar.

Analysis:
The petitioner challenged notices issued under s. 17(1) of the W.T. Act seeking to reopen wealth-tax assessments for three assessment years. The notices alleged under-valuation of the plots owned by the petitioner, leading to the belief that wealth chargeable to tax had escaped assessment due to the petitioner's failure to disclose material facts necessary for assessment. The notices were issued based on the grounds of omission or failure by the assessee, invoking s. 17(1)(a) of the W.T. Act. However, the respondent later claimed to rely on s. 17(1)(b) stating that the valuation discrepancies were discovered after completing the assessment through audit objections and assessment proceedings.

The court examined the grounds for reopening assessments under s. 17(1)(a) and s. 17(1)(b) of the W.T. Act. It was noted that the information available to the Wealth-tax Officer (WTO) was limited to the valuation of another plot in the same area at Rs. 45 per square yard, without specific details on the location or circumstances of that plot. The court emphasized the importance of a valid reason to believe that wealth had escaped assessment, requiring instructive knowledge from an authentic source related to the taxable property. The court cited precedents to highlight that mere suspicion or generalizations cannot constitute valid grounds for reopening assessments.

The court referenced judgments related to income tax law to emphasize the necessity of a genuine and reasonable belief based on solid grounds before reopening assessments. It was highlighted that the belief must be that of an honest and reasonable person founded on reasonable grounds, not mere suspicion or gossip. The court concluded that the information available to the WTO was insufficient to establish a legally sound basis for reopening the assessments, as there was a lack of a close nexus between the material available and the belief of under-assessment. Consequently, the court allowed the special civil application, quashed the notices to reopen assessments, and directed the respondent to bear the costs of the application.