1982 (5) TMI 114 - AT - Wealth-tax

Summary

Issues Involved:
1. Justification of the WTO's action to reopen assessments under Section 17(1)(a) based on the assessee's petitions.
2. Validity of additions to the wealth of the assessee based on alleged fictitious hundi loans.
3. Inclusion of Rs. 50,000 in the wealth of the assessee from the assessment year 1965-66 onwards.
4. Relevance of the assessee's admission in petitions under Section 271(4A) of the IT Act.

Detailed Analysis:

1. Justification of the WTO's action to reopen assessments under Section 17(1)(a):
The WTO initiated proceedings under Section 17(1)(a) based on information obtained from the assessee's petitions filed under Section 271(4A) of the IT Act, offering Rs. 3 lacs for assessment for past years. The WTO used this information to reopen assessments for the years 1962-63 to 1968-69. The Tribunal found that the offer made by the assessee was intended to settle matters and was not accepted by the department. Consequently, the Tribunal opined that the revenue's action of reopening the assessments based on an unaccepted offer was unjust, as it amounted to "blowing hot and cold at one and the same time."

2. Validity of additions to the wealth of the assessee based on alleged fictitious hundi loans:
The WTO added certain hundi loans to the wealth of the assessee, which were deemed fictitious based on the statements of creditors who denied advancing genuine loans. The AAC directed the WTO to add only those cash credits and hundi loans denied by the alleged creditors, following an earlier Tribunal order in ITA Nos. 585 to 587, which treated certain cash credits as genuine. The Tribunal upheld the AAC's decision, emphasizing that the AAC merely followed the Tribunal's previous order, which found specific cash credits to be genuine and only the credits from three parties to be non-genuine.

3. Inclusion of Rs. 50,000 in the wealth of the assessee from the assessment year 1965-66 onwards:
The WTO included Rs. 50,000 in the wealth of the assessee based on findings during a search and seizure operation on 11th November 1975, where ten blank hundi forms were found. The ITO had previously concluded that the assessee advanced Rs. 50,000, which represented undisclosed income. However, the AAC excluded this amount from the wealth of the assessee, citing the Kerala High Court's decision in Mrs. Annamma Paul vs. CIT Kerala, which required establishing that the assessee had the particular asset on the relevant valuation date. The Tribunal agreed with the AAC, noting that the amount was not found during the search and seizure operation, and thus, it was improper to add it to the wealth of the assessee.

4. Relevance of the assessee's admission in petitions under Section 271(4A) of the IT Act:
The revenue argued that the statement in the assessee's petitions amounted to an admission under Section 21 of the Evidence Act and could be used against the assessee. The Tribunal, however, found that the statement was merely an offer to settle and was not accepted by the department. Therefore, it could not be used as a basis for reopening assessments under Section 17(1)(a).

Conclusion:
The Tribunal dismissed the revenue's appeals, supporting the AAC's decisions. The reopening of assessments based on an unaccepted offer was deemed improper, and the inclusion of Rs. 50,000 in the wealth of the assessee was found unjustified. The Tribunal upheld the AAC's direction to add only those cash credits and hundi loans denied by the creditors and exclude the loans treated as genuine in the earlier Tribunal order.