2005 (2) TMI 38 - HC - Wealth-tax

Whether Tribunal is right in law in cancelling the order passed by the then Commissioner of Wealth-tax under section 25(2) of the Wealth-tax Act, 1957? Valuation of assets - Revenue argued that the view taken by the Tribunal on the validity of reference made by the Wealth-tax Officer to the Departmental Valuation Officer is patently erroneous and the Commissioner did not commit any illegality by relying on the report dated March 14,1985, because in terms of section 16A(1)(b) r.w.s. 16A(4), reference can be made to the Valuation Officer, even if no return has been filed by the assessee. He further argued that the proceedings of assessment will be deemed to have commenced with the issuance of notice dated November 14, 1981, u/s 17 and, therefore, the Wealth-tax Officer did not commit any illegality when he asked the Departmental Valuation Officer to value the assessee s property - In the present case, the assessee was required to file the return on or before July 31, 1979, which he failed to do. Notice under section 17(1) was issued on November 14, 1981, for filing the return for the purpose of assessment of his wealth. We hold that the proceedings of assessment will be deemed to have commenced on November 14, 1981. - it is held that the Tribunal was not right in cancelling the order passed by the Commissioner under section 25(2)

Issues Involved:
1. Validity of the order passed by the Commissioner of Wealth-tax under section 25(2) of the Wealth-tax Act, 1957.
2. Jurisdiction of the Wealth-tax Officer to refer the valuation of the assessee's property to the Departmental Valuation Officer under section 16A of the Act.
3. Limitation period for framing assessment under section 17A(1)(b) of the Act.

Issue-wise Detailed Analysis:

1. Validity of the order passed by the Commissioner of Wealth-tax under section 25(2) of the Wealth-tax Act, 1957:
The Tribunal had cancelled the order passed by the Commissioner of Wealth-tax under section 25(2) of the Wealth-tax Act, 1957. The Tribunal held that the Wealth-tax Officer did not have the jurisdiction to make a reference to the Valuation Officer under section 16A of the Act before the filing of the return by the assessee. The Tribunal also held that the assessment framed by the Wealth-tax Officer was time-barred. However, the High Court concluded that the Commissioner did not commit any error by relying on the report dated March 14, 1985, of the Departmental Valuation Officer for the purpose of revising the order of assessment passed by the Wealth-tax Officer. The High Court held that the Tribunal committed a grave error by interfering with the revisional order.

2. Jurisdiction of the Wealth-tax Officer to refer the valuation of the assessee's property to the Departmental Valuation Officer under section 16A of the Act:
The High Court analyzed section 16A of the Act and concluded that for the purpose of making the assessment, the Wealth-tax Officer can refer the valuation of any asset to a Valuation Officer. The Court held that the expression "any other case" in clause (b) of section 16A(1) is wide enough to include a case where no return has been filed by the assessee. The Court opined that if a narrow view was taken, the expressions "any other case" and "where no such return has been made" in section 16A(4) would become redundant. Therefore, the Court held that a reference under section 16A can be made even where no return has been filed by the assessee under section 14 or section 15 of the Act.

3. Limitation period for framing assessment under section 17A(1)(b) of the Act:
The High Court examined section 17A(1)(b) of the Act and determined that the time limit for completion of assessment is four years from the end of the assessment year in which the net wealth was first assessable, or one year from the date of the filing of a return or a revised return, whichever is later. In this case, the return was filed on March 7, 1986, and the assessment was framed on March 21, 1986. Therefore, the Court held that the assessment made by the Wealth-tax Officer was within limitation and could not be treated as time-barred. The Court also rejected the argument that the proceedings of assessment cannot be treated to have commenced until the filing of the return, referencing the case of Khazan Chand Nathi Ram v. State of Haryana, which established that the cause of action for assessment arises when the assessee is called upon to furnish a return.

Conclusion:
The High Court held that the Tribunal was not right in cancelling the order passed by the Commissioner under section 25(2) of the Act. Consequently, the reference was answered in the negative, i.e., against the assessee and in favor of the Revenue.

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