1990 (1) TMI 155 - AT - Wealth-tax

Summary

Issues Involved:
1. Valuation of jewelry
2. Legality of reassessment proceedings under Section 17 of the Wealth-tax Act, 1957
3. Validity of notices issued under Section 17(1)(a) and 17(1)(b)

Detailed Analysis:

1. Valuation of Jewelry:
The primary issue revolved around the valuation of diamond jewelry. The assessee had initially declared the value of jewelry based on an estimate from an approved valuer dated 31-3-1976. The Wealth-tax Officer (WTO) reassessed the valuation based on a government valuer's report dated 6-12-1986, obtained during a search of the assessee's premises. The reassessed value was significantly higher at Rs. 1,95,650 compared to the values declared by the assessee for various assessment years ranging from Rs. 40,777 to Rs. 73,440.

2. Legality of Reassessment Proceedings Under Section 17:
The WTO issued notices under Section 17 of the Wealth-tax Act, 1957, alleging that the assessee failed to disclose fully and truly all material facts necessary for the assessments. The assessee argued that the reassessment was based on a mere change of opinion and cited several judicial decisions to support this claim. The WTO, however, relied on decisions like Ganeshi Lal & Sons v. ITO and CIT v. A. Raman & Co., which justified the reassessment on the grounds of new information obtained during the search.

The appellate authority, DCWT(A), upheld the WTO's decision, stating that the appellant had failed to disclose the true value of the jewelry, making the reassessment proceedings under Section 17 valid. The DCWT(A) distinguished the case from Saroj Devi v. WTO, where reassessment was based on audit objections, which was not the case here.

3. Validity of Notices Issued Under Section 17(1)(a) and 17(1)(b):
The assessee contended that the notices under Section 17(1)(a) were invalid as there was full disclosure of primary facts during the original assessments. The counsel for the assessee cited several cases, including Saroj Devi v. WTO and Smt. Gulnar Marfatia v. CWT, arguing that reassessment based on valuation reports was not valid without new material facts.

The Tribunal considered these arguments and noted that the valuation report obtained during the search constituted new information, justifying reassessment under Section 17(1)(b). The Tribunal also referred to the Full Bench decision in Smt. Nirmala Birla v. WTO, which allowed notices issued under Section 17(1)(a) to be treated as notices under Section 17(1)(b) if issued within the limitation period of four years.

Conclusion:
The Tribunal concluded that the reassessment proceedings under Section 17(1)(b) were valid as they were based on new information obtained during the search. The Tribunal directed the WTO to adjust the valuation of the jewelry by reducing Rs. 16,000 per year from the date of the original valuation in 1976. The appeals were allowed to this extent.