1980 (3) TMI 81 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether the Tribunal was correct in law in holding that the assessee was entitled to a second opportunity under sub-section (5) of section 16 of the Wealth-tax Act, 1957.
2. Whether the Wealth-tax Officer (WTO) was justified in making best judgment assessments under section 16(5) of the Wealth-tax Act, 1957.
3. Whether the Appellate Tribunal's reliance on the Kerala High Court decision was appropriate.
4. Whether there was a violation of principles of natural justice by the WTO.

Detailed Analysis:

1. Entitlement to a Second Opportunity under Section 16(5):
The primary question was whether the Tribunal was correct in holding that the assessee was entitled to a second opportunity under sub-section (5) of section 16 of the Wealth-tax Act, 1957. The Tribunal had set aside the orders of the authorities below and restored the cases to the WTO for reframing the assessments after allowing the assessee another opportunity to show cause. The Tribunal relied on the Kerala High Court decision in T. C. N. Menon v. ITO [1974] 96 ITR 148, which suggested that the assessee should be given a second opportunity to show cause why the wealth declared should not be accepted. However, the High Court found that the Tribunal's reliance on this decision was misplaced. The High Court emphasized that the assessee had been given ample opportunities to comply with the notices and substantiate his claims but failed to do so. The High Court held that the Tribunal's decision to allow a second opportunity was not warranted.

2. Justification for Best Judgment Assessments:
The WTO had issued several notices to the assessee to file returns and produce account books and other materials to substantiate his assets and liabilities. The assessee failed to comply, leading the WTO to proceed with best judgment assessments under section 16(5) of the Wealth-tax Act. The High Court found that the WTO was justified in making best judgment assessments due to the assessee's non-cooperative and recalcitrant attitude. The assessee did not file returns despite being legally obliged to do so after receiving notices under sections 14(2) and 17 of the Wealth-tax Act. The High Court noted that the onus of proving the liabilities rested on the assessee, who failed to furnish confirmatory letters from creditors, most of whom were close relations and jointly residing with him.

3. Tribunal's Reliance on Kerala High Court Decision:
The Tribunal had relied on the Kerala High Court decision in T. C. N. Menon v. ITO [1974] 96 ITR 148, which suggested that the assessee should be given a second opportunity to show cause. However, the High Court found that this reliance was not appropriate. The High Court clarified that while the principles of natural justice require that the assessee be given a reasonable opportunity to be heard, this does not mean that the assessee should be given multiple opportunities to comply with the notices. The High Court emphasized that the assessee had already been given sufficient opportunities to substantiate his claims, and the Tribunal's decision to allow a second opportunity was not justified.

4. Violation of Principles of Natural Justice:
The High Court examined whether there was a violation of the principles of natural justice by the WTO. The High Court found that the WTO had not based his judgment on any material gathered behind the assessee's back. The assessments were primarily based on the statements furnished by the assessee himself. The WTO had repeatedly asked the assessee to substantiate his liabilities, but the assessee failed to do so. The High Court held that there was no violation of the principles of natural justice merely because the WTO did not apprise the assessee of the exact basis on which he proposed to make the assessment. The High Court concluded that the WTO was justified in making best judgment assessments and that there was no need to remand the matter for a second opportunity.

Conclusion:
The High Court answered the question referred to it in the negative and against the assessee. The High Court held that the Tribunal's decision to allow a second opportunity was not justified, and the WTO was justified in making best judgment assessments under section 16(5) of the Wealth-tax Act. The High Court emphasized that the assessee's non-cooperative attitude and failure to comply with the notices warranted the best judgment assessments. The High Court also clarified that there was no violation of the principles of natural justice by the WTO. The High Court left it open for the assessee to move the Tribunal to consider the propriety and fairness of the estimates computed by the WTO.