2019 (5) TMI 863 - AT - Wealth-tax

Wealth tax assessment - non recording of reason showing escapement of wealth from taxation - admission of additional ground - validity of the original order passed u/s 16(3) in appeal against the order passed u/s 25(2) where the original order passed u/s 16(3) which was was subject to revision - HELD THAT - As decided by the coordinate bench in the case of Westlife Development 2016 (6) TMI 1208 - ITAT MUMBAI is in Income Tax matter but the principles laid down squarely applies to the wealth tax matter also as respective section of the assessment, reassessment and revision are similar. In view this, we hold that there is no infirmity in the argument of the AR in challenging the validity of the assessment which is subject to revision. Now as per the earlier order of the coordinate bench in this appeal on the order sheet it was found that the original records were required to be produced by the department. Such records were produced before us by the CIT- DR. On request to show the reasons recorded for issue of notice u/s 17 based on which the assessment u/s 16(3) was made, CIT DR could not show us such reasons recorded from the records. Order sheet of the assessment proceedings also did not show that any such reasons were recorded by the WTO. It is apparent that the original order passed u/s 16(3) of the Act read with section 17 of the WTA Act is passed without recording any reason showing escapement of wealth from taxation. In absence of any such reason shown to us, we do not have any other alternative but to quash the order u/s 25(2) of the WT Act passed by Commissioner of Wealth Tax. Consequently, we hold that order passed u/s 25(2) of the Act is invalid and hence quashed. Accordingly, appeal of the assessee for Assessment Year 2003-04 is allowed.

Summary

Issues:
Challenging the jurisdiction of the Commissioner of Wealth Tax under section 25 of the Wealth Tax Act, 1957 for revising assessment orders passed by the Assistant Commissioner of Wealth Tax. Admissibility of additional grounds of appeal challenging the legality of the original assessment orders. Validity of the original assessment orders passed under section 16(3) read with section 17 of the Wealth Tax Act. Right of the assessee to challenge the original order in revisionary proceedings under section 25 of the Act. Quashing of the order passed under section 25(2) of the Wealth Tax Act for Assessment Years 2003-04 to 2006-07.

Detailed Analysis:

1. The appeals before the Appellate Tribunal ITAT DELHI pertained to four wealth tax appeals for Assessment Years 2003-04, 2004-05, 2005-06, and 2006-07, challenging the order of the Commissioner of Wealth Tax under section 25(2) of the Wealth Tax Act, 1957. The Commissioner had held that the original assessment orders passed by the Assistant Commissioner of Wealth Tax were erroneous and prejudicial to the revenue's interest.

2. The additional ground of appeal raised by the assessee challenged the legality of the order passed under section 25(2) cancelling the assessment passed under section 16(3) read with section 17, claiming it to be illegal and without jurisdiction.

3. The assessee filed an application for admission of additional grounds of appeal, arguing that the original order passed by the Assistant Commissioner of Wealth Tax suffered from jurisdictional lapses, which needed to be addressed.

4. The Appellate Tribunal admitted the additional ground of appeal, considering that it challenged the root of the matter regarding the legality of the original assessment order.

5. The case involved a search operation leading to the issuance of notices under different sections of the Wealth Tax Act, ultimately resulting in discrepancies in the valuation of assets and wealth. The Commissioner of Wealth Tax found errors in the original assessment orders and directed a reassessment.

6. The assessee contended that the assessment was reopened without recording any reason, making the original order and subsequent revision invalid.

7. The Tribunal held that the assessee had the right to challenge the validity of the original order in the revisionary proceedings under section 25 of the Act, citing a similar provision in the Income Tax Act.

8. Upon examination of the records, it was found that the original assessment orders were passed without recording reasons for reopening, leading to the quashing of the orders passed under section 25(2) of the Wealth Tax Act for all the relevant assessment years.

9. Consequently, the appeals of the assessee for all the years in question were allowed, and the orders passed under section 25(2) were deemed invalid and quashed.