2022 (1) TMI 1054 - HC - Wealth-tax

Validity of Reassessment proceedings initiated u/s 17 of the Wealth Tax Act, 1957 - sale consideration of the property at Mugappair owned by the assessee that took place after the assessment years under consideration - HELD THAT - Reopening the assessment by the assessing officer, based on the event of sale, which had taken place subsequently, to redetermine the value of the property for the assessment years in question, is not legally sustainable. Accordingly, the learned single judge rightly held so in the writ petitions filed by the assessee challenging the reassessment proceedings. In the present case, admittedly, the assessee had filed her returns of wealth along with supportive documents; and there was no allegation that she had withheld the material facts or that the facts placed before the Officer are not truly and fully disclosed for assessment. Further, in the notice issued under Section 17, there was no mention about the additional material or document unearthed by the Assessing Officer, which the assessee failed to disclose; and the sub section, under which assessment was reopened. Thus, one of the basic requirements to initiate the reassessment proceedings under Section 17 of the Act, has not been satisfied by the Assessing Officer. In such circumstances, we do not find any justification on the part of the assessing officer to reopen the assessment and pass the reassessment orders dated 26.03.2002. In Commissioner of Income-Tax and another v. Foramer France 2003 (1) TMI 101 - SC ORDER arising under Income Tax Act relating to Sections 147 and 148 of the Income Tax Act, the supreme court pointed out that 'when there was no failure on the part of the assessee to disclose fully and truly all material facts for assessment, the assessment could not be reopened on the basis of change of opinion'. Placing reliance on the same, the learned single Judge has concluded that on a mere change of opinion on the part of assessing officer, there cannot be reopening of the assessment. We are in full agreement with such a conclusion reached by the learned single Judge. As regards the plea of alternative remedy, this court is of the opinion that when the condition precedent for the invocation of reassessment proceedings does not exist, the assessee is entitled to approach this court under Article 226 of the Constitution of India and hence, the question of invoking the alternative remedy available to the assessee, does not arise. The learned single Judge has also rightly rejected the said plea of the Revenue, besides considering the fact of long pendency of the writ petitions.

Issues Involved:
1. Validity of reopening wealth tax assessment under Section 17 of the Wealth Tax Act, 1957.
2. Allegation of non-disclosure of true and full particulars by the assessee.
3. Justification for reassessment based on subsequent sale of property.
4. Availability and invocation of alternative remedy.

Issue-wise Detailed Analysis:

1. Validity of Reopening Wealth Tax Assessment under Section 17 of the Wealth Tax Act, 1957:
The Revenue challenged the order allowing the writ petitions filed by the assessee, which set aside the reopening of wealth tax assessments for the years 1990-91 to 1996-97. The assessee had filed returns for these years, and the assessments were processed under Section 16(1) of the Wealth Tax Act. Notices under Section 17 were issued later, alleging escaped assessment due to the sale of property at Mugappair in 1995 for ?1,33,00,000/-. The assessing officer proposed to revise the assessments by changing the nature of the property from agricultural to commercial land for the years 1990-91 to 1995-96 and estimated the total deposit at ?1,00,00,000/- for 1996-97. The assessee's objections were not considered, and reassessment orders were passed on 26.03.2002.

2. Allegation of Non-disclosure of True and Full Particulars by the Assessee:
The Revenue contended that the assessee did not make a full and true disclosure of wealth, warranting the issuance of notice under Section 17. The property was sold for a higher price, and it was developed as commercial property as of 01.04.1981. However, the assessee argued that the property was agricultural land, and its value was correctly disclosed in the returns. The sale consideration was distributed among family members, and her share was deposited in her husband's name. There was no omission or failure to disclose material facts.

3. Justification for Reassessment Based on Subsequent Sale of Property:
The court referred to Section 17 of the Wealth Tax Act, which allows reassessment if there are reasons to believe that net wealth chargeable to tax has escaped assessment. However, the court emphasized that reassessment should be based on the failure to make full and true disclosure of income wilfully. The court held that reopening the assessment based on the sale of the property, which occurred after the assessment years in question, was not permissible. The decision in Commissioner of Wealth Tax v. Smt. Suguna Mahendran and others (1994) 209 ITR 684 was cited, which stated that relying on a subsequent sale to determine the value of the property for the assessment year is not allowed. The court also referred to Commissioner of Wealth Tax v. V.Vatsala (1989) 177 ITR 120, where it was held that the value reflected in a sale agreement entered into after the assessment year cannot be considered as the value on the valuation date.

4. Availability and Invocation of Alternative Remedy:
The Revenue argued that the assessee had an alternative remedy of appeal against the reassessment orders but approached the court directly. The court rejected this plea, noting that when the condition precedent for invoking reassessment proceedings does not exist, the assessee is entitled to approach the court under Article 226 of the Constitution of India. The court also considered the long pendency of the writ petitions since 2002.

Conclusion:
The court dismissed the writ appeal filed by the Revenue, upholding the order of the learned single Judge. The reassessment proceedings based on the subsequent sale of the property were deemed legally unsustainable. The court found no omission or failure on the part of the assessee to disclose material facts, and there was no justification for reopening the assessments. The plea of alternative remedy was also rightly rejected.

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