1986 (12) TMI 62 - AT - Wealth-tax

Summary

Issues Involved:
1. Reopening of assessments under section 17(1)(a) of the Wealth-tax Act, 1957.
2. Inclusion of capital gain of Rs. 24,330 in the net wealth of the assessee.
3. Disclosure obligations of the assessee regarding gifted assets and subsequent transactions.

Detailed Analysis:

Issue 1: Reopening of Assessments under Section 17(1)(a)
The primary issue was whether the Wealth Tax Officer (WTO) was justified in reopening the assessments for the years 1969-70 to 1972-73 under section 17(1)(a) of the Wealth-tax Act, 1957. The WTO argued that the assessee failed to disclose material facts fully and truly, leading to the reopening of assessments. The assessee contended that the reopening was bad in law as all primary facts were disclosed in the original returns, including the gift of Rs. 1,00,011 to her minor daughter. The Commissioner (Appeals) upheld the assessee's contention, stating that there was no failure to disclose material facts fully and truly, and therefore, the reopening of assessments was not justified. The Tribunal confirmed this finding, emphasizing that the assessee had no legal obligation to disclose the conversion of the gifted amount into shares and subsequent transactions, as these were not required by the prescribed return form.

Issue 2: Inclusion of Capital Gain of Rs. 24,330
The WTO included the capital gain of Rs. 24,330, derived from the sale of shares initially acquired from the gifted amount, in the net wealth of the assessee. The Commissioner (Appeals) and the Tribunal both held that this capital gain was not includible in the net wealth of the assessee. The Tribunal referred to the decisions of the Bombay High Court in CWT v. Kishanlal Bubna and the Madras High Court in CWT v. T. Saraswathi Achi, which supported the view that accretion to the transferred assets could not be included in the wealth of the transferor. The Tribunal also noted that the relevant valuation dates should consider only the value of the original gifted asset, not the subsequent appreciation or conversion.

Issue 3: Disclosure Obligations of the Assessee
The department argued that the assessee was legally bound to disclose the conversion of the gifted property into shares, the capital gains from the sale of shares, and the subsequent purchase of new shares. The Tribunal found that the assessee had disclosed the primary fact of the gift in the original returns and was under no legal obligation to disclose subsequent transactions, as there was no provision in the return form requiring such disclosure. This view was supported by the Supreme Court decision in V.D.M.RM.M.RM Muthiah Chettiar, which held that in the absence of a specific requirement in the return form, non-disclosure of such details did not constitute a failure to disclose material facts fully and truly.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s decision that the reopening of assessments under section 17(1)(a) was not justified due to the absence of failure on the part of the assessee to disclose material facts fully and truly. It also held that the capital gain of Rs. 24,330 was not includible in the net wealth of the assessee. Consequently, the assessments framed by the WTO under section 16(3)/17 were rightly cancelled. All four departmental appeals were dismissed.