1992 (4) TMI 82 - AT - Wealth-tax

Summary

Issues Involved:
1. Jurisdiction under section 25 of the Wealth-tax Act, 1957.
2. Validity of the Wealth-tax assessment order.
3. Conflict between Income-tax and Wealth-tax assessment findings.
4. Proper enquiry by the Wealth-tax Officer (WTO).

Issue-wise Detailed Analysis:

1. Jurisdiction under section 25 of the Wealth-tax Act, 1957:
The appellant challenged the jurisdiction of the Commissioner of Wealth-tax (CWT) to issue a notice under section 25 of the Wealth-tax Act, 1957. The CWT scrutinized the wealth-tax assessment and found it erroneous and prejudicial to the interest of the Revenue due to a lack of proper investigation by the WTO. The CWT noted that the WTO accepted the submissions of the assessee without verifying the facts, which led to an erroneous conclusion that the building was used for business purposes. The CWT thus assumed jurisdiction to set aside the assessment and direct a fresh assessment.

2. Validity of the Wealth-tax assessment order:
The assessee filed a return of wealth on 30-6-1984, claiming exemption for a building at Sunder Nagar, New Delhi, on the ground that it was used for business purposes. The WTO accepted this claim and exempted the building from wealth-tax. However, the CWT later found that the WTO had not properly investigated the matter and had accepted the assessee's submissions without verification. Consequently, the CWT set aside the wealth-tax assessment order, deeming it erroneous and prejudicial to the Revenue.

3. Conflict between Income-tax and Wealth-tax assessment findings:
The CWT observed a conflict between the findings in the Income-tax and Wealth-tax assessments. The Income-tax Officer (ITO) had determined that no business was conducted by the assessee during the relevant year, whereas the WTO had accepted that the building was used for business purposes. The CWT concluded that if no business was conducted, the building could not have been used for business purposes, making the wealth-tax assessment erroneous.

4. Proper enquiry by the Wealth-tax Officer (WTO):
The CWT noted that the WTO had not conducted a proper enquiry while framing the wealth-tax assessment. The WTO had deferred the investigation to the Income-tax assessment proceedings, indicating an absence of thorough investigation. The CWT emphasized the need for proper enquiry and verification before accepting the assessee's claim for exemption. The Tribunal agreed that the WTO's failure to make a proper enquiry resulted in an erroneous and prejudicial assessment, justifying the CWT's decision to set it aside.

Separate Judgments by the Judges:

Judgment by S.S. Mehra, Judicial Member:
S.S. Mehra upheld the CWT's order, emphasizing that the WTO failed to conduct a proper enquiry and accepted the assessee's submissions without verification. He highlighted the conflict between the Income-tax and Wealth-tax assessments and supported the CWT's decision to set aside the wealth-tax assessment for a fresh evaluation.

Judgment by V.P. Elhence, Judicial Member:
V.P. Elhence disagreed with S.S. Mehra, arguing that the CWT did not provide a clear finding that the WTO failed to conduct a proper enquiry. He pointed out that the CWT's decision was influenced by the conflict between the Income-tax and Wealth-tax assessments rather than a lack of enquiry. Elhence emphasized that the CWT could not assume jurisdiction based on subsequent materials not available at the time of the original assessment.

Third Member Order by Ch. G. Krishnamurthy, President:
Ch. G. Krishnamurthy sided with V.P. Elhence, stating that the CWT did not record a categorical finding of lack of enquiry by the WTO. He noted that the WTO had taken precautions by appending a note for verification during Income-tax assessment proceedings. Krishnamurthy concluded that the building's use for business purposes should not be negated by temporary business inactivity and that the CWT's decision to set aside the assessment was not justified.

Final Decision:
The majority opinion, favoring V.P. Elhence's view, concluded that the CWT's order under section 25 of the Wealth-tax Act, 1957, was not justified. The wealth-tax assessment made by the WTO was upheld, and the appeal was allowed.