1992 (4) TMI 83 - AT - Wealth-tax

Summary

Issues Involved:
1. Validity of the notice issued under Section 25 of the Wealth Tax (WT) Act, 1957.
2. Legality of the Commissioner of Wealth Tax (CWT) setting aside the Wealth Tax Officer's (WTO) order without proper examination.
3. Conflict between findings in income-tax and wealth-tax assessments.
4. Use of the building at Sunder Nagar for business purposes.

Issue-Wise Detailed Analysis:

1. Validity of the notice issued under Section 25 of the WT Act, 1957:
The appellant challenged the order dated 24th March 1988, issued by the learned CWT, New Delhi, under Section 25 of the WT Act, 1957, for the assessment year 1984-85. The appellant argued that there was no reason or justification before the CWT to issue the notice under Section 25, rendering the proceedings invalid, illegal, and bad in law.

2. Legality of the CWT setting aside the WTO's order without proper examination:
The appellant contended that the CWT erred in setting aside the WTO's order without examining the material placed before him, making the setting aside illegal and bad in law. The WTO had exempted the building at Sunder Nagar from wealth tax, based on the submission that it was used entirely for office purposes. The CWT later scrutinized the assessment record and noted that the WTO accepted the assessee's submissions without proper investigation, which led to the assessment being erroneous and prejudicial to the interest of the Revenue.

3. Conflict between findings in income-tax and wealth-tax assessments:
The CWT noted a conflict between the findings in the income-tax and wealth-tax assessments. The WTO had exempted the building based on its use for business purposes, while the income-tax assessment for the same year concluded that no business of purchase and sale of flowers was conducted by the company. The CWT observed that the wealth-tax assessment was framed without proper investigation, accepting the assessee's contentions without cross-checking and verifying the facts. This lack of enquiry led to the wealth-tax assessment being erroneous and prejudicial to the interest of the Revenue.

4. Use of the building at Sunder Nagar for business purposes:
The assessee claimed that the building at Sunder Nagar was used solely for business purposes and was never used for the personal purposes of the Directors. The CWT, however, set aside the wealth-tax assessment, directing the WTO to redo the assessment after taking into account all the material placed by the company in support of its contention. The learned Departmental Representative supported the CWT's order, arguing that no business was conducted by the assessee, and therefore, the building could not have been used for business purposes.

Separate Judgments Delivered by Judges:

Judgment by V.P. Elhence, J.M.:
V.P. Elhence disagreed with the majority opinion and recorded a separate order. He highlighted that the WTO had issued a notice under Section 16(2) and completed the assessment after considering written submissions from the assessee. The CWT issued a notice under Section 25, stating that the assessee was not conducting any business and that the building was used by the Directors for personal use. Elhence observed that the CWT's order did not contain a finding that due enquiries were not made or that the assessment was completed in undue haste. He emphasized that the CWT could not assume jurisdiction based on the income-tax assessment order completed after the wealth-tax assessment order. Elhence concluded that the order of the CWT under Section 25 was illegal and unsupportable, and the appeal filed by the assessee should succeed.

Judgment by CH. G. Krishnamurthy, President (as Third Member):
CH. G. Krishnamurthy, as the Third Member, addressed the point of difference regarding whether the order under Section 25 of the WT Act, 1957, should be sustained or quashed. He noted that the WTO had granted exemption on the building based on the material presented by the assessee. The CWT scrutinized the assessment records and observed inconsistencies between the wealth-tax and income-tax assessments. Krishnamurthy emphasized that the CWT should have resolved the conflict before setting aside the assessment. He concluded that the CWT was not justified in setting aside the assessment under Section 25 of the WT Act, 1957, and agreed with the view expressed by V.P. Elhence.

Final Decision:
The matter was referred back to the regular Bench for a decision according to the majority opinion, concluding that the appeal by the assessee should succeed, and the order of the CWT under Section 25 of the WT Act, 1957, was quashed.