1983 (6) TMI 54 - AT - Wealth-tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner under section 25(2) of the Wealth-tax Act, 1957.
2. Validity of the assessment orders passed by the Wealth Tax Officer (WTO) in breach of section 16A(6) of the Act.
3. Adequacy of the WTO's consideration of the valuation reports submitted by the assessee.
4. Whether the Commissioner can revise orders based on valuation reports received after the WTO's assessment.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner under section 25(2) of the Wealth-tax Act, 1957:
The Commissioner of Wealth Tax (CWT) exercised his jurisdiction under section 25(2) to revise the assessment orders of the WTO. The assessee argued that the CWT erred in law by basing his action on valuation reports of departmental valuers, which were not part of the record when the WTO passed the orders. The Tribunal clarified that the CWT did not base his action solely on the departmental valuers' reports but critically examined the valuation report furnished by the assessee. Citing the Supreme Court decision in CIT v. Electro House, it was emphasized that the Commissioner is not required to fulfill any condition precedent before commencing the inquiry under section 25(2). The Tribunal concluded that the CWT's jurisdiction was validly exercised.

2. Validity of the assessment orders passed by the WTO in breach of section 16A(6) of the Act:
The assessee contended that the assessment orders were void ab initio and non est in law as they were passed in breach of section 16A(6), which mandates that the WTO must wait for the valuation report from the Department's Valuation Officer before completing the assessment. The Tribunal agreed that the WTO's failure to wait for the valuation report constituted a legal infirmity. However, it held that this infirmity justified and strengthened the CWT's action under section 25(2) to remedy the erroneous assessments, as assessments made without proper jurisdiction are prejudicial to the interests of the revenue.

3. Adequacy of the WTO's consideration of the valuation reports submitted by the assessee:
The WTO accepted the valuation reports provided by the assessee without making necessary inquiries or scrutinizing the basis of the valuations. The CWT observed that the WTO's acceptance of the valuation reports without proper scrutiny resulted in under-assessment of wealth. The Tribunal upheld this observation, noting that the WTO's assessment orders merely repeated the valuation report's contents without any qualitative evaluation. It was emphasized that the WTO's role as an investigator requires him to ascertain the truth of the facts stated in the return, and failure to make such an inquiry renders the order erroneous.

4. Whether the Commissioner can revise orders based on valuation reports received after the WTO's assessment:
The assessee argued that the CWT could not revise the WTO's orders based on valuation reports received after the assessments were completed. The Tribunal clarified that the CWT did not base his action on post-assessment valuation reports but on the valuation report furnished by the assessee, which was before the WTO at the time of assessment. The Tribunal also referred to the Supreme Court's decisions in Rampyari Devi Saraogi v. CIT and Smt. Tara Devi Aggarwal v. CIT, which support the CWT's revisional powers under section 25(2) to remedy erroneous orders prejudicial to the interests of the revenue.

Conclusion:
The Tribunal upheld the CWT's orders under section 25(2) for the assessment years 1970-71 to 1974-75, dismissing the appeals. The Tribunal emphasized that the CWT's revisional powers are wide and include the authority to pass orders enhancing, modifying, or canceling assessments and directing fresh assessments. The argument that the assessment orders were prejudicial to the assessee was also dismissed, as the assessee cannot claim prejudice when maintaining that the valuation submitted was correct.