1986 (9) TMI 150 - AT - Wealth-tax

Summary

Issues Involved:
1. Limitation on the Commissioner's order under section 25(2) of the Wealth-tax Act, 1957.
2. Merits of the Commissioner's exercise of powers under section 25(2).
3. Deduction of liabilities for life insurance policies.

Issue-wise Detailed Analysis:

1. Limitation on the Commissioner's order under section 25(2):

The primary contention by the assessee was that the Commissioner's order was hit by limitation. The assessments for the years 1979-80 to 1981-82 were completed on 25-1-1983, and for 1982-83 on 29-3-1983. The assessee argued that the Commissioner should have exercised his powers within two years from the date of assessment, i.e., by 24-1-1985 for the years 1979-80 to 1981-82. The subsequent amendment to section 25(3) effective from 1-10-1984 extended the limitation period to two years from the end of the financial year in which the order sought to be revised was passed. Thus, if the amended period applied, the Commissioner's order dated 25-3-1985 was within time. The assessee argued that the amendment could not retroactively extend the limitation period.

The Tribunal considered various case laws cited by the assessee, including CIT v. Isthmian Steamship Lines and Karimtharuvi Tea Estate Ltd. v. State of Kerala, which established that the law applicable is that in force in the assessment year. However, these cases did not address the issue of procedural limitation. The Tribunal also considered the Gujarat High Court decision in CIT v. Balabhai & Co., which stated that procedural changes in limitation apply to pending proceedings unless a vested right has accrued. The Tribunal concluded that since the limitation had not expired before the amendment, the extended period was available to the Commissioner. Thus, the exercise of powers under section 25(2) for the years 1979-80 to 1981-82 was within the period of limitation.

2. Merits of the Commissioner's exercise of powers under section 25(2):

The Commissioner set aside the assessments on the ground that the nature of the property in T.S. No. 11 at Pollachi was not properly investigated before accepting it as agricultural land. The assessee argued that previous assessments and the AAC's order for 1975-76 and 1976-77 had accepted the property as agricultural. However, the Tribunal noted that the previous assessments merely accepted the assessee's statement without proper enquiry. The AAC's order did not discuss the nature of the land, and the valuer's report indicated that the land had enhanced value for residential or other building purposes. The Tribunal found that the Commissioner was justified in setting aside the assessments for a proper investigation into the nature of the land.

3. Deduction of liabilities for life insurance policies:

The Commissioner found that the liability for loans against LIC policies was allowed as a deduction without proper verification. The assessee explained that the loans were advanced to the HUF, making the liability admissible. The Tribunal noted that the full facts were not available at the time of the original assessments, justifying the Commissioner's direction for re-examination. However, the Tribunal observed that in subsequent assessments resulting from the Commissioner's order, the liabilities were allowed, indicating the assessee's contention was correct. Thus, while the Commissioner's finding was not infirm, the issue had become academic.

Conclusion:

The Tribunal dismissed the appeals against the Commissioner's orders setting aside the assessments for the years 1979-80 to 1982-83, affirming that the Commissioner's actions were within the period of limitation and justified on merits.