Mistakes in Computation of Wealth and in calculating Tax Liability: - Income Tax - 569/CBDT

INSTRUCTION NO. 569/CBDT Dated : July 13, 1973 From the objection raised by the Revenue Audit, the Board have noticed that there has been an increase of simple mistakes such as:- a)application of incorrect rates of wealth-tax; b)non-application of the various rules especially Rules 2 and 3 of Part II of the Schedule to the Wealth-tax Act; c)Omission to levy additional wealth-tax on urban immovable properties; d)Wrong totaling of wealth; and e) allowance of double deductions etc.in the Wealth-tax Assessments. A few cases illustrating the above types of mistakes and included in the C AGs Report for 1971-72 are reproduced below:- Mistakes in Computation of Wealth and in calculating Tax Liability: 1) In the case of 8 assessees in four Commissioners charges, for the assessment years 1966-67 to 1970-71 the initial exemption was allowed twice-once while arriving at the net wealth and again at the time of calculation of tax-resulting in under-assessment of wealth of Rs. 15 lakhs and consequent short-levy of tax of Rs.16,796. 2) In one case for 1971-72 even though the assessee had already deducted the basic exemption of Rs. 1 lakh in his wealth-tax return, the deduction was again allowed by the Wealth-tax Officer. In this case there was also a totaling mistake of Rs.1 lakh in the return submitted by the assessee which the department failed to notice. These mistakes resulted in under-assessment of wealth by Rs.2 lakhs. 3) The rates of wealth-tax chargeable on the net wealth in excess of Rs.10 lakhs were enhanced from 2% to 2.5% w.e.f. assessment year 1969-70. In seven Commissioner's charges, in the wealth-tax assessments of nine assessees whose net-wealth exceeded Rs.10 lakhs for the assessment year 1969-70, the tax was erroneously levied at the rates in force prior to 1969-70. This resulted in under-charge of tax of Rs.35,458/- Incorrect Reliefs and Exemptions: 4) For the assessment year 1970-71, a HUF returned a net wealth of Rs.4,74,742/- after exclusion of Rs.1,50,000 towards agricultural lands and Rs.50,000 towards house used as residence as against the maximum admissible exemption of Rs.1,50,000. In the assessment completed in March,1971, the Wealth-Tax Officer allowed a further deduction of Rs.1,50,000 which resulted in under-assessment of wealth by Rs.2 lakhs. Incorrect Levy of or Omission to Levy Additional Wealth-tax 5)In ST cases in 13 Commissioner's charges additional wealth-tax on urban assets valued at Rs.391.36 lakhs was omitted to be levied. This resulted in under-assessment of tax of Rs.2,50,179. Over-Assessment: 6)(i) In the case of three resident assessees who were citizens of India, on a total wealth of Rs.20,06,353 representing assets located outside India, the rebate of tax was not given for the assessment years 1967-68 to 1970-71. This resulted in excess levy of tax of Rs.6,558/- ii) In another case, where the assessee was not a citizen of India, the value of assets outside India was wrongly included in the net-wealth for assessment years 1967-68 and 1968-69 resulting in over-assessment of wealth of Rs.6,77,275 and excess demand of tax of Rs.2,329. Consequent on the incorrect inclusion of the value of these assets there was also excess-levy of penalty of Rs.7,328 and Rs.10,268 respectively for these assessment years for delay in filing the returns of wealth. 2. These mistakes have arisen essentially because of non-scrutiny by the Wealth-tax Officers of the returns and accompanying statements filed by the assessees and failure to indicate in the assessment order, particulars regarding citizenship and residential status of the assessees and the location and nature of the assets. These mistakes could have been avoided if a little more care had been exercised by the Wealth-tax Officers and the assessment orders had been properly written. 3. The Board, therefore, desire that before proceeding to make an assessment the Wealth-tax Officers should invariably check the arithmetical accuracy of the figures and totals furnished in the return. They should also invariably mention in the assessment order location and nature of the assets and also the citizenship and residential status of the assessees. Such a course would not only enable the staff members to compute the tax properly according to the schedules prescribed but enable the Wealth-tax Officers also to have a proper check when the assessment order is signed. 4. These instructions may please be brought to the notice of all the Wealth-tax Officers for strict compliance.