2008 (4) TMI 473 - HC - Wealth-tax

Wealth Tax - Reassessment - Whether on the facts and in the circumstances of the case and in law, the hon ble Income-tax Appellate Tribunal was justified in holding that the Assessing Officer was not justified in reopening the assessment on the basis of the valuation report obtained by him sub-sequent to the date of completion of assessment ? Held that - the wealth tax officer has in some circumstances, to complete the proceedings for assessment within the time limit set out under the Act. In these circumstances if the report is called for and the report is not received, the time for completing the assessment proceeding is not saved. If the WTO in such circumstance completes the order of assessment before the report is received he could not be precluded from considering the report as information for the purpose of issuing notice for reassessment under section 17(1). This would also be the position in a case where assessment is completed before the report is received irrespective of the issue of limitation for completing the assessment. From the reading of section 16A(4) and (5), it is clear that the report is submitted after giving an opportunity to the assessee who also was entitled to lead this evidence before the valuation officer, before he proceeds to value the property. Such a document will have to be treated as information giving rise to reason to believe that wealth has escaped assessment.

Issues Involved:
1. Reopening of assessment based on DVO's report obtained after the assessment order.
2. Reopening of assessment based on DVO's report called for before but received after the assessment order.

Detailed Analysis:

Issue 1: Reopening of Assessment Based on DVO's Report Obtained After the Assessment Order

Facts and Background:
The appeals concern the assessment years 1988-89 and 1989-90, where the DVO's report was called for after the completion of the assessment. Specifically, for the assessment year 1988-89, the report was called on November 9, 1993, and received on March 29, 1994, after the assessment was completed on March 27, 1992. Similarly, for the assessment year 1989-90, the report was called on April 9, 1993, and received on March 29, 1994, after the assessment was completed on March 27, 1992.

Legal Provisions:
Section 16A of the Wealth-tax Act, 1957, allows the Assessing Officer to refer the valuation of any asset to a Valuation Officer for making an assessment. Section 17 allows the reopening of assessments if the Assessing Officer has reason to believe that net wealth chargeable to tax has escaped assessment.

Judicial Precedents:
1. Tulsidas Kilachand v. D. R. Chawla: The court held that reopening based on a DVO's report obtained after the assessment is not permissible.
2. Mrs. Bella Cajeton Travasso v. Third WTO: The court ruled that the DVO's report must be obtained before the assessment is finalized.
3. Smt. Uma Debi Jhawar v. WTO: The court held that section 16A has no relevance after the assessment is completed.

Court's Conclusion:
The court concluded that it is not permissible for the Wealth-tax Officer to call for a DVO's report after the assessment is completed and use it to reopen the assessment. The jurisdiction to call for such a report is limited to the period when the proceedings are pending. Consequently, the appeals for the assessment years 1988-89 and 1989-90 were dismissed.

Issue 2: Reopening of Assessment Based on DVO's Report Called for Before but Received After the Assessment Order

Facts and Background:
The appeals concern the assessment years 1990-91, 1991-92, and 1992-93, where the DVO's report was called for during the pendency of the proceedings but received after the assessment order was completed. For instance, for the assessment year 1990-91, the report was called on January 9, 1993, but received on December 19, 1994, after the assessment was completed on March 31, 1994.

Legal Provisions:
Section 16A allows the Assessing Officer to refer the valuation of any asset to a Valuation Officer during the assessment proceedings. Section 17 allows reopening if there is reason to believe that net wealth chargeable to tax has escaped assessment.

Judicial Precedents:
1. CWT v. V. Cleetus: The court held that a DVO's report received after the assessment can be used as information for reopening under section 17(1)(b).
2. Dr. Karni Singh Ji of Bikaner (Decd.) v. Deputy CIT: The court upheld the validity of reassessment based on a DVO's report received after the assessment order.

Court's Conclusion:
The court concluded that a DVO's report called for during the pendency of the proceedings but received after the assessment order can be used as information to reopen the assessment under section 17(1). This applies even if the assessment was completed before the report was received. Consequently, the appeals for the assessment years 1990-91, 1991-92, and 1992-93 were remanded back to the Tribunal to decide afresh on the basis that the proceedings for reassessment were legally initiated.

Final Orders:
1. Wealth-tax Appeal Nos. 188 of 2004 and 174 of 2004: Dismissed as the DVO's report was called for after the assessment was completed.
2. Wealth-tax Appeal No. 195 of 2004: Remanded back to the Tribunal for fresh consideration as the DVO's report was called for during the pendency of the proceedings.
3. Wealth-tax Appeals Nos. 163 of 2004 and 196 of 2004: Remanded back to the Tribunal for fresh consideration as the DVO's report was called for during the pendency of the proceedings.

The appeals were disposed of accordingly, with specific directions for the Tribunal to re-evaluate the cases based on the established legal principles.

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