1978 (4) TMI 35 - HC - Wealth-tax

Summary

Issues:
1. Whether the Wealth-tax Officer had reason to believe that the wealth of the assessee had escaped assessment.
2. Whether the income-tax liability in respect of the disclosed income could be deducted in arriving at the net wealth of the appellant.

Analysis:
The judgment pertains to seven references made by the Income-tax Appellate Tribunal under the Wealth-tax Act, 1957, for assessment years 1959-60 to 1965-66. The assessee made a voluntary disclosure under s. 68 of the Finance Act of 1965, declaring undisclosed income. The Wealth-tax Officer (WTO) issued notices under s. 17 of the Wealth-tax Act based on this disclosure. The WTO passed orders of assessment under s. 16(3) read with s. 17, which were appealed and affirmed by the Tribunal. The Tribunal found that the income-tax liability disclosed could not be deducted in computing net wealth.

Regarding the first issue, the Court observed that the WTO had reason to believe wealth had escaped assessment based on the disclosure made by the assessee. The Tribunal was correct in holding so as the disclosure contained material supporting the belief that assessable wealth had been withheld.

On the second issue, the Tribunal's decision not to deduct the income-tax liability was based on a Kerala High Court judgment, which was later reversed by a Division Bench. The Court analyzed the provisions of s. 68 of the Finance Act, 1965, and held that the tax paid under this section was indeed income-tax. The Court disagreed with the Tribunal's view and held that the income-tax liability disclosed should have been deducted in arriving at the net wealth of the assessee.

The Court referred to various High Court decisions, including Gujarat, Allahabad, Calcutta, and Delhi, which disagreed with the Kerala High Court's reasoning. The liability under s. 68 of the Finance Act was deemed to be the same as under the Income-tax Act. The Court emphasized that the charge under s. 68 was not a new charge but a charge imposed under the Income-tax Act at a different rate.

In conclusion, the Court answered the first question affirmatively and the second question negatively, in favor of the assessee. The Court held that the income-tax liability should have been deducted in determining the net wealth.