1975 (7) TMI 38 - HC - Wealth-tax

Summary

Issues Involved:
1. Validity of the reopening of assessment under section 17 of the Wealth-tax Act, 1957.
2. Whether the Wealth-tax Officer can hold alternative beliefs under section 17(1)(a) and 17(1)(b).
3. Application of mind by the Wealth-tax Officer.
4. New information justifying the reopening of the assessment.

Detailed Analysis:

1. Validity of the Reopening of Assessment:
The reopening of the assessment for the year 1968-69 was challenged on the basis that the Wealth-tax Officer did not have valid grounds under section 17 of the Wealth-tax Act, 1957. The petitioners argued that the Wealth-tax Officer could not hold alternative beliefs under section 17(1)(a) and 17(1)(b) simultaneously. The court held that the Wealth-tax Officer could form alternative beliefs and proceed with the reopening of the assessment if new information came to light that justified such action. The court emphasized that the Wealth-tax Officer must have his own reasons for belief and cannot act merely on the directions of superior authorities.

2. Whether the Wealth-tax Officer Can Hold Alternative Beliefs:
The court examined whether the Wealth-tax Officer could hold alternative beliefs under section 17(1)(a) and 17(1)(b). It was argued that the Wealth-tax Officer must have a specific belief under either clause (a) or (b) and cannot hold both beliefs concurrently. The court referred to previous judgments, including the Calcutta High Court decision in P. R. Mukherjee v. Commissioner of Income-tax, which supported the view that the notice need not specify the clause under which it was issued. The court concluded that the Wealth-tax Officer could hold alternative beliefs and that the notice of reassessment could be treated under either clause as long as it was within the permissible time frame.

3. Application of Mind by the Wealth-tax Officer:
The petitioners contended that the Wealth-tax Officer did not apply his own mind and acted under the directions of superior authorities. The court examined the documents and affidavits on record and found that the Wealth-tax Officer had indeed applied his mind to the facts of the case and formed his own belief. The court noted that while the Wealth-tax Officer could consider the views of superior authorities, he must exercise his own judgment. The court was satisfied that the Wealth-tax Officer had independently concluded that the wealth had escaped assessment based on new information.

4. New Information Justifying the Reopening:
The court analyzed whether new information had come to light that justified the reopening of the assessment. The court reviewed five basic documents, including reports from the Special Cell of the Directorate of Inspection (Investigation) and the Department of Company Affairs. The documents revealed that the stock exchange transactions involving the shares of Central India Industries Ltd. were manipulated and collusive. The court found that the new facts discovered by the Special Cell provided sufficient grounds for the Wealth-tax Officer to believe that the wealth had escaped assessment. The court held that the reopening of the assessment was justified based on the new information.

Conclusion:
The court dismissed the application, upheld the validity of the notice under section 17 of the Wealth-tax Act, and concluded that the Wealth-tax Officer had valid grounds to reopen the assessment based on new information. The court emphasized that the Wealth-tax Officer could hold alternative beliefs and that the reopening was not a mere command performance but a result of independent application of mind.