2008 (2) TMI 53 - HC - Wealth-tax

Wealth tax - When AO invokes section 17 the provision of section 14 and 16 to the extent applicable for the purpose of making an order of reassessment will have to be followed which will include the time limit for notice u/s 16(2) - therefore while invoking powers u/s 17 AO is bound by the mandate of the proviso to Section 16 (2) & on failure the order of re-assessment will be without jurisdiction & consequently the order of reassessment will have to be set aside

Summary

Issues Involved:
1. Applicability of Section 16(2) notice in reassessment proceedings under Section 17 of the Wealth Tax Act.
2. Time limitation for issuing notice under Section 16(2) in the context of reassessment under Section 17.
3. Interpretation of "so far as may be" in Section 17 concerning the applicability of Sections 14 to 16.

Issue-wise Detailed Analysis:

1. Applicability of Section 16(2) notice in reassessment proceedings under Section 17 of the Wealth Tax Act:

The primary question addressed was whether the Tribunal was correct in canceling the assessment under Section 16(3) read with Section 17 of the Wealth Tax Act by holding that the notice under Section 16(2) was out of time. The Revenue argued that reassessment proceedings under Section 17 are distinct from regular assessment proceedings, and thus, the notice under Section 16(2) is not required for reassessment. However, the Tribunal held that Section 16 is applicable to reassessment under Section 17, implying that the mandatory requirement of giving notice under the proviso to Section 16(2) must be adhered to.

2. Time limitation for issuing notice under Section 16(2) in the context of reassessment under Section 17:

The Tribunal and the High Court emphasized that the proviso to Section 16(2) imposes a time limit for serving the notice, which is twelve months from the end of the month in which the return is furnished. The Tribunal noted that the Assessing Officer issued the notice under Section 16(2) after the expiry of this period, rendering the assessment invalid. The High Court upheld this view, stating that the proviso to Section 16(2) is a limitation on the power of the Assessing Officer and must be observed even in reassessment proceedings under Section 17.

3. Interpretation of "so far as may be" in Section 17 concerning the applicability of Sections 14 to 16:

The phrase "so far as may be" in Section 17 was interpreted to mean that the provisions of Sections 14 to 16 apply to reassessment proceedings under Section 17 to the extent they are relevant. The High Court concluded that the procedural and substantive provisions of Sections 14 to 16, including the time limit for issuing notices under Section 16(2), must be followed in reassessment proceedings under Section 17. The Court rejected the Revenue's argument that Section 17 is a self-contained code, noting that accepting this argument would defeat the purpose of the phrase "so far as may be."

Conclusion:

The High Court upheld the Tribunal's decision to cancel the assessment, affirming that the requirement of issuing a notice under Section 16(2) within the stipulated time frame is mandatory for reassessment proceedings under Section 17. The Court emphasized the need for uniformity and certainty in the application of the provisions of Chapter IV of the Wealth Tax Act, ensuring that the procedural safeguards provided in Sections 14 to 16 are not bypassed in reassessment cases. Consequently, the appeal by the Revenue was dismissed.