1987 (11) TMI 110 - AT - Wealth-tax

Summary

Issues Involved:
1. Jurisdiction of the WTO to frame assessments.
2. Proper valuation of immovable properties.
3. Allowance of inherited and disputed tax liabilities.

Detailed Analysis:

1. Jurisdiction of the WTO to Frame Assessments:

The assessee challenged the jurisdiction of the Wealth Tax Officer (WTO) to frame assessments for the assessment years 1966-67 to 1975-76. It was contended that the assessments were based on returns filed under the Voluntary Disclosure Ordinance of Income and Wealth, 1975, which were not valid returns. The Tribunal had previously dismissed appeals challenging the WTO's jurisdiction, making the order of the Commissioner of Wealth Tax (Appeals) final. Therefore, the plea of invalidity of returns was no longer open to the assessee.

2. Proper Valuation of Immovable Properties:

The Commissioner of Wealth Tax (CWT) found that the WTO completed assessments without referring the valuation of properties to the Departmental Valuation Officer, as directed by the CWT (Appeals). However, it was established that no such direction was given by the CWT (Appeals) for the assessment years 1966-67 to 1975-76. The WTO was not bound to refer the valuation to the Valuation Officer under Section 16A. For the assessment years 1980-81 and 1981-82, the WTO did refer the valuation to the Valuation Officer but completed the assessment for 1980-81 without waiting for the report due to the impending expiration of the limitation period on 31-3-1985. This was justified by the precedent set in the case of Ganga Properties v. ITO. However, for the assessment year 1981-82, the WTO completed the assessment without obtaining the report of the Valuation Officer, making the assessment erroneous and prejudicial to the interests of the revenue.

3. Allowance of Inherited and Disputed Tax Liabilities:

The WTO allowed the deduction of inherited and disputed tax liabilities, which were sub judice before the High Court. The CWT held that these liabilities were not allowable under Section 2(m)(iii) of the Wealth Tax Act, 1957. The Tribunal agreed that tax liabilities disputed in a writ petition before the High Court fall within the mischief of clause (a) of Section 2(m)(iii) and are not deductible. However, inherited tax liabilities that were not disputed were correctly allowed.

Conclusion:

For the Assessment Years 1966-67 to 1975-76:

- The CWT wrongly assumed jurisdiction in revising the assessment orders concerning the valuation of immovable properties. Thus, the CWT's order on this point is canceled.
- The CWT was justified in revising the assessments concerning tax liabilities. Only the part of the tax liabilities disputed in the High Court will not be allowed as a deduction.

For the Assessment Year 1980-81:

- The WTO's completion of the assessment without waiting for the Valuation Officer's report was justified due to the limitation period. Thus, the CWT's order on valuation is canceled.
- The CWT was justified in revising the assessment concerning tax liabilities, with the same modification as above.

For the Assessment Year 1981-82:

- The WTO's completion of the assessment without the Valuation Officer's report was erroneous and prejudicial to the interests of the revenue. Thus, the CWT's order on valuation is upheld.
- The CWT's order concerning tax liabilities is modified as above.

Final Outcome:

The appeals for the assessment years 1966-67 to 1975-76, 1980-81, and 1981-82 are partly allowed to the extent indicated in the judgment. The WTO is directed to make fresh assessments concerning the tax liabilities in accordance with the law after giving the assessee an opportunity of being heard.