1988 (6) TMI 74 - AT - Wealth-tax

Issues Involved:
1. Jurisdiction of WTO, E-Ward over the assessees.
2. Verification of liabilities claimed by the partnership firms.
3. Determination of asset values on the valuation date.
4. Non-declaration of capital invested in the firms by the assessees.
5. Exemption under Section 5(1)(xxxii) of the WT Act.
6. Errors in assessment orders under Sections 16(3), 16(4), and 16(5).
7. Justification of exemption claims under Section 5(1) for assessment years 1978-79 and 1979-80.

Issue-wise Detailed Analysis:

1. Jurisdiction of WTO, E-Ward over the assessees:
The Commissioner held that the WTO, E-Ward had no jurisdiction over the assessees and wrongly framed the assessments. However, it was not disputed that a new ward, Ward-E, was created for assessing new wealth-tax assessees. The assessees, being new wealth-tax assessees, filed their returns before the WTO, E-Ward, who validly made the assessments. This jurisdictional issue was not raised in the initial notices, and the assessees were not given an opportunity to respond, making this ground invalid for setting aside the assessments.

2. Verification of liabilities claimed by the partnership firms:
The Commissioner noted that the liabilities claimed by the firms were not verified. The firms did not maintain regular accounts, and liabilities were estimated. The assessees provided details, including bank account copies, to support their claims. The Commissioner did not find any evidence that there were no liabilities or that the liabilities were of a lesser order. Therefore, the acceptance of the estimated liabilities by the WTO cannot be said to be erroneous or prejudicial to the Revenue.

3. Determination of asset values on the valuation date:
The Commissioner criticized the WTO for accepting the written-down value of assets without considering their market value, as required by Rule 2B(2). However, the Commissioner did not provide any facts showing that the market value exceeded the shown value by more than 20%. The WTO's acceptance of the depreciated value of assets was not proven to be erroneous.

4. Non-declaration of capital invested in the firms by the assessees:
The Commissioner pointed out that the assessees had not declared their capital investments in the firms. However, the assessment orders showed that the WTO had called for and received necessary details before completing the assessments. The Commissioner did not provide conclusive evidence that the non-declaration of capital investments rendered the assessments erroneous.

5. Exemption under Section 5(1)(xxxii) of the WT Act:
The Commissioner argued that the benefit of exemption under Section 5(1)(xxxii) was wrongly allowed, as the issue of whether building construction amounts to an industrial undertaking was under challenge in the High Courts. The WTO had accepted the assessees' contention that their construction business amounted to an industrial undertaking based on certain rulings. The Commissioner shifted his stance in the order, focusing on other requirements for exemption under Section 5(1)(xxxii) and did not provide clear directions on whether the exemption should be allowed, making this ground inconclusive.

6. Errors in assessment orders under Sections 16(3), 16(4), and 16(5):
The Commissioner noted that the assessments were wrongly mentioned under Sections 16(3) and 16(4) instead of Section 16(5). This procedural error was not raised in the initial notices, and the assessees were not given an opportunity to address it. The assessments were completed in a hurry, but mere haste does not invalidate the assessments.

7. Justification of exemption claims under Section 5(1) for assessment years 1978-79 and 1979-80:
The Commissioner argued that in the absence of wealth returns for these years, the exemptions claimed under Section 5(1) were not justified. However, the assessments were based on the wealth assessed for 1983-84, and the WTO had procured the income-tax records of the firms. The Commissioner did not provide conclusive evidence that the exemptions were unjustified.

Conclusion:
The Commissioner failed to provide conclusive findings on the various issues raised, and the reasons assigned for the assessment orders being erroneous and prejudicial to the Revenue in the notices differed from those in the impugned orders. The assessees were not given an opportunity to address new points raised in the orders. Therefore, the appeals by the assessees were allowed, and the orders passed by the CWT, Agra, under Section 25(2) were cancelled.

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