2019 (6) TMI 1200 - AT - Wealth-tax

Reopening of assessment - escapement of wealth - reopening the assessment are based on DVO s report - HELD THAT - DVO s report is not for the year under consideration and secondly, order of Commissioner under section 25(2) of the Act was in exercise of power for assessment year 2002-03. We find merit in the plea of assessee that the report of DVO is not for the relevant years which have been reopened under section 17(1) of the Act. In any case, in the reasons recorded reference is made to valuation as on 31.03.2001, whereas the DVO had valued the property upto 31.03.2003. AO has not applied the last valuation completed in the case of assessee i.e. on 31.03.2003 at ₹ 26.35 crores, but has referred to DVO s value as on 31.03.2001 at ₹ 16.33 crores, being the basis for reopening the assessment. We find no merit in the exercise of jurisdiction by AO in this regard. It cannot be said that reopening of assessment in the hands of assessee is not based on DVO s report. Though reference is made to order of Commissioner under section 25(2) of the Act, but the basis for passing aforesaid order was also DVO s report, wherein the Assessing Officer had made reference to valuation of asset during the course of assessment proceedings, but no such valuation report was received and on a later date, order of revision was passed by Commissioner. Applying the ratio laid down in ACIT Vs. Dhariya Construction Company 2010 (2) TMI 612 - SC ORDER we hold that reasons recorded for reopening the assessment cannot stand as the Assessing Officer had failed to apply his mind to the information collected, if any, and has failed to form a belief vis- -vis reasons recorded for the relevant assessment years. re-assessment proceedings initiated in the case of assessee are without any basis and the consequent order passed under section 16(3) r.w.s. 17(1) of the Act do not stand - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reassessment under section 17(1) of the Wealth-tax Act, 1957.
2. Basis for reopening the assessment using the DVO’s report.

Issue-Wise Detailed Analysis:

1. Validity of Reassessment under section 17(1) of the Wealth-tax Act, 1957:

The primary issue raised by the assessee was the validity of the reassessment initiated by the Assessing Officer (AO) under section 17(1) of the Wealth-tax Act, 1957. The assessee had not filed a return of wealth for the relevant assessment year. The AO recorded reasons for reopening the assessment and issued a notice under section 17(1) of the Act. However, the assessee did not request the reasons for reopening during the assessment proceedings but raised the issue before the CIT(A). The CIT(A) decided the case on merits rather than on jurisdictional grounds.

The Tribunal noted that the jurisdiction to reopen an assessment under section 17(1) can be exercised if there is a reason to believe that wealth has escaped assessment. The AO must record reasons for reopening and issue a notice under section 18 of the Act. In this case, the reasons for reopening were based on an order passed under section 25(2) of the Act by the CIT-II, Pune, which relied on a DVO’s report valuing the property as on 31.03.2001. The Tribunal found that the reasons recorded were undated and that the approval for reopening was sought and granted in March 2012.

2. Basis for Reopening the Assessment Using the DVO’s Report:

The assessee argued that the reopening of the assessment based on the DVO’s report was invalid, referencing the Supreme Court’s decision in ACIT Vs. Dhariya Construction Company, which held that a DVO’s report alone cannot constitute information for reopening an assessment. The Tribunal examined the reasons recorded for reopening, which were based on the CIT’s order under section 25(2) that itself relied on the DVO’s report. The DVO’s report valued the property as on 31.03.2001, while the reassessment was for the year 2005-06.

The Tribunal found that the AO had not independently applied his mind to the information and had relied solely on the DVO’s report. The Tribunal held that the reopening of the assessment was invalid as it was based on an opinion rather than information, and the AO had failed to form a belief based on the information. Consequently, the reassessment proceedings and the orders passed under section 16(3) r.w.s. 17(1) were held to be without basis and were quashed.

Conclusion:

The Tribunal allowed the appeals of the assessee, holding that the reassessment proceedings were invalid due to the improper basis for reopening the assessment. The decision in WTA No.39/PUN/2019 was applied mutatis mutandis to the other appeals (WTA Nos.40/PUN/2019 to 44/PUN/2019), resulting in all appeals being allowed. The order was pronounced on June 24, 2019.