1986 (8) TMI 122 - AT - Wealth-tax

Issues Involved:
1. Validity of proceedings initiated under section 17 of the Wealth-tax Act, 1957.
2. Jurisdiction of the Wealth Tax Officer (WTO) to issue notice under section 17.
3. Legality of the assessment framed based on the proceedings under section 17.

Issue-wise Detailed Analysis:

1. Validity of proceedings initiated under section 17 of the Wealth-tax Act, 1957:
The primary contention was that the proceedings initiated under section 17 were ab initio void and thus the assessment framed based on such proceedings was a nullity. The appellant argued that the notice issued by the WTO did not specify whether it was under section 17(1)(a) or 17(1)(b), rendering it illegal and without lawful authority. The Tribunal found that there were no reasons recorded by the WTO for initiating proceedings under section 17, and the initiation of proceedings was without jurisdiction. The Tribunal held that the initiation of proceedings under section 17 was ab initio void, making the resulting assessment non est in law.

2. Jurisdiction of the Wealth Tax Officer (WTO) to issue notice under section 17:
The appellant contended that the WTO lacked jurisdiction to issue the notice under section 17 as it did not indicate the specific clause being invoked. The Tribunal observed that the WTO had two options under section 17:
- Section 17(1)(a) for cases of omission or failure to file a return or disclose material facts.
- Section 17(1)(b) for cases where the WTO had reason to believe that the net wealth chargeable to tax had escaped assessment.
The Tribunal noted that the notice issued on 14-1-1981 did not specify the clause, and there was no evidence of reasons recorded for initiating proceedings under section 17(1)(a). The Tribunal concluded that the WTO merely changed his opinion on the same set of facts without any new material, which did not vest him with lawful jurisdiction to make the assessment under section 17(1)(a).

3. Legality of the assessment framed based on the proceedings under section 17:
The appellant argued that the assessment was a result of a mere change of opinion by the authorities, with no new material justifying the initiation of proceedings under section 17. The Tribunal agreed, citing the Supreme Court's judgment in Indian & Eastern Newspaper Society v. CIT, which held that reappraisal of material considered in the original assessment does not justify reopening the assessment. The Tribunal found that the WTO had no new material other than what was already considered in previous assessments, and the initiation of proceedings was without any factual or legal basis. Consequently, the Tribunal held that the assessment framed based on such proceedings was non est in law and cancelled the orders of the authorities below.

Conclusion:
The Tribunal allowed the appeal, holding that the initiation of proceedings under section 17 was ab initio void and the resulting assessment was non est in law. The orders of the authorities below were cancelled.

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