2019 (12) TMI 1135 - HC - Wealth-tax

Wealth tax assessment - Period of limitation - Order was passed beyond period of one year as required u/s 17A(2) of the WT Act, and consequently the penalty proceedings initiated u/s 18(1)(c) - ITAT which has, confirmed the order made by the Commissioner (Appeals), remanding the matter to the Wealth Tax Officer for re-examination and re-assessment after providing adequate opportunity of being heard to the appellant - HELD THAT - In the impugned order, we are of the opinion that, the observation made therein that explanation (3) to Section 18 of the Wealth Tax Act is applicable, is really a prima facie observation. This is clear from the fact that both the Commissioner (Appeals) as well as the ITAT have directed the Wealth Tax Officer to re-examine the matter, after providing adequate opportunity of being heard to the appellant herein. ITAT has also observed that the issues raised in the matter require investigation of facts. From all this, it is quite clear that the observations made in the impugned orders of the Commissioner (Appeals) as well as the ITAT, are prima facie observations and such observations, are made only for the purpose of remanding the matter to the Wealth Tax Officer for fresh consideration. No reason to interfere with the impugned orders and revoke the remand order by the Commissioner (Appeals) and by the ITAT. The Wealth Tax Officer will have to investigate into the factual aspect and will have to reexamine the matter and thereafter, conclude whether the period of limitation, as prescribed under Section 17 of the Wealth Tax, is indeed attracted in this case, in the light of explanation 3 to Section 18 of the Wealth Tax Act. The issue as to whether, explanation 3 to Section 18 of the Wealth Tax Act, is attracted or not, is a mixed question of law and facts and therefore, the Wealth Tax Officer will have to consider this issue as well. Needless to mention that the Wealth Tax Officer will have to afford an opportunity of hearing before deciding the matter in pursuance of the remand. The substantial questions of law as framed, therefore, cannot be answered in favour of the appellant, at this stage, as raised.

Summary

Issues:
1. Barred by limitation under Section 17A(2) of the WT Act
2. Applicability of Explanation (3) to Section 18(1)(c) of the Wealth Tax Act 1957

Analysis:
1. The appeal challenged the order of the Income Tax Appellate Tribunal (ITAT) remanding the matter to the Wealth Tax Officer for re-examination and re-assessment after providing an opportunity to the appellant. The primary contention was regarding the limitation period for assessment under Section 17A(2) of the Wealth Tax Act. The appellant argued that the assessment order was passed beyond the prescribed time limit of one year, rendering the penalty proceedings unsustainable. The appellant emphasized that the notice served on 29.03.2007 should have led to the assessment order by 31.03.2008, but it was actually passed on 13.06.2008, breaching the limitation period. Despite the appellant not raising the issue of limitation in their reply, it was contended that the respondent should have considered it as it pertains to a fundamental jurisdictional matter. The substantial question of law raised in this regard was whether the order passed by the ACWT dated 30/06/2008 was barred by limitation, affecting the sustainability of penalty proceedings under Section 18(1)(c).

2. Another key issue in the appeal was the applicability of Explanation (3) to Section 18(1)(c) of the Wealth Tax Act 1957. The Commissioner (Appeals) and the ITAT held that Explanation (3) was attracted to the appellant's case for the assessment year 2003-04. This conclusion was based on the fact that the re-assessment notice was issued to the appellant before filing returns, indicating a lack of deliberate intent to delay. The ITAT noted that the appellant did not raise the issue of limitation in their reply. However, the High Court observed that the Commissioner (Appeals) and the ITAT's findings regarding the applicability of Explanation (3) were prima facie in nature. Both authorities directed the Wealth Tax Officer to re-examine the matter, emphasizing the need for a thorough investigation of facts. The High Court clarified that the observations made by the lower authorities were preliminary and meant for the purpose of remanding the matter for fresh consideration. The issue of whether Explanation (3) applies to the appellant's case was deemed a mixed question of law and facts, requiring detailed examination by the Wealth Tax Officer.

In conclusion, the High Court upheld the impugned orders and maintained the remand to the Wealth Tax Officer for further investigation. The Court clarified that the observations on the applicability of Explanation (3) were provisional and directed the Wealth Tax Officer to conduct a detailed reexamination of the matter. The Court emphasized that the issue of limitation and the applicability of Explanation (3) were intertwined with both legal and factual aspects, necessitating a comprehensive review by the Wealth Tax Officer. The substantial questions of law raised by the appellant could not be answered in their favor at this stage, given the need for a detailed factual inquiry. The appeal was disposed of with the clarification that the Wealth Tax Officer must decide the matter on its merits, treating the previous observations as preliminary in nature.