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TMI Blog2011 (3) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant: Mr. S. Bagchi. For the Respondent: Mr. S.N. Dutta, Md. Nizamuddin. Bhaskar Bhattacharya, J.: A common question of law arises in these three appeals which were heard analogously. The question that arises for determination in these appeals is whether the initiation of a proceeding under Section 17 of the Wealth Tax Act, 1957 describing M/s. Abhudey Properties Pvt. Ltd. as the assessee who had no existence on the date of initiation of such proceedings, having already been merged with the appellant, was valid and whether the conditions for invocation of Section 17(1A)(b)(ii) are required to be reflected in the notice under Section 17 of the Wealth Tax Act for the purpose of initiation of a proceeding under Section 17 of the Act. The following facts are not in dispute: a) M/s. Abhudey Properties Pvt. Ltd. had been wound up by virtue of the order of the Company Court and was amalgamated with the appellant, namely, M/s. I.K. Agencies Pvt. Ltd., with effect from 1st April, 1995. As a result the appellant took all the assets and liability of the wound up company. On the relevant date for the valuation for the assessment year, the wound up company was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of initiation as indicated earlier. By the order impugned in these appeals, the Income Tax Appellate Tribunal allowed the appeal of the Department and dismissed the cross-objection of the appellant. Being dissatisfied, the appellant has come up with these three appeals under Section 27A of the Wealth Tax Act. Mr. Bagchi, the learned Advocate appearing on behalf of the appellant, has, before entering into the merit of the order impugned, restricted his submission on the question of initiation of assessment proceeding on the ground that in the notice under Section 17 of the Act, the appellant not having been named, the initiation of proceeding was illegal, even though, the subsequent notice under Section 16 was issued in the name of the appellant. Mr. Bagchi further contends the conditions mentioned in Section 17(1A) (b) (ii) should be reflected in the notice of initiation of proceedings and in the absence of such satisfaction recorded in the notice, the initiation of reopening of assessment was without jurisdiction. In support of such contention, Mr. Bagchi relies upon the decision of the Supreme Court in the case of Commissioner of Income Tax, Gujarat II vs. Kurban Hu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section for the assessment year concerned (hereafter in this section referred to as the relevant assessment year), and the provisions of this Act shall, so far as may be, apply as if the return were a return required to be furnished under section 14 : Provided that where an assessment under sub-section (3) of section 16 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any net wealth chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 14 or section 15 or in response to a notice issued under sub-section (4) of section 16 or this section or to disclose fully and truly all material facts necessary for his assessment for that assessment year : Provided further that th e Assessing Officer shall, before issuing any notice under this sub-section, record his reasons for doing so. Explanation : Production before the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is noticed by the Assessing Officer that the assessee has understated the net wealth or has claimed excessive exemption or deduction in the return. (1B)(a) In a case where an assessment under sub-section (3) of section 16 or sub-section (1) of this section has been made for the relevant assessment year, no notice shall be issued under sub-section (1) by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice : Provided that after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (b) In a case other than a case falling under clause (a), no notice shall be issued under sub-section (1) by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to reopen a proceeding. As pointed out by the Supreme Court in the case of Commissioner of Income-tax, Andhra Pradesh vs. K. Adinarayana Murty, reported in AIR 1967 SC 1545, where under the scheme of the Income-tax Act, 1922 a notice under Section 34 of the Act was wrongly issued to the assessee in the status of an 'Individual' and not in the correct status of 'Hindu Undivided Family' the notice was held to be illegal and all proceedings taken under that notice were declared as ultra vires and without jurisdiction. The fact that the assessee has filed the return, in response to the notice, in the status of 'Hindu Undivided Family', the Supreme Court proceeded, would not make any difference to the character of the proceeding in pursuance of the said notice. In the subsequent case of the Supreme Court in the case of Commissioner of Income Tax vs. Kurban Hussain Ibrahimji Mithborwala, reported in (1971) 82 ITR 821 (SC), the same view was adopted where in the notice a wrong assessment year was given. A Division Bench of this Court in the case of Commissioner of Income Tax vs. Bibhuti Bhusan Mallick, reported in (1987) 165 ITR 197 (CAL) took into consideration var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its reply to the notices and that, at that stage, the writ-petition was a premature one. Accordingly, the writ-petition was dismissed. Aggrieved by that order, writpetitioner approached the Supreme Court. The Supreme Court disposed of the Appeal by giving a short judgement which is reproduced below: We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. Insofar as the appeals filed against the order of assessment before the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r S. 34 was justified. There is no requirement in any of the provisions of the Act or any Section laying down as a condition for the initiation of the proceedings that the reasons which induced the Commissioner to accord sanction to proceed under S. 34 must also be communicated to the assessee. We, therefore, find that in the cases before us, the authorities below totally overlooked the fact that initiation of the proceedings for reassessment was vitiated for not giving notice under Section 17 of the Wealth Tax Act to the Appellant and the notice issued upon M/s. Abhudey Properties Pvt. Ltd. which was not in existence at that time was insufficient to initiate proceedings against the Appellant who had taken over the liability of M/s. Abhudey Properties Pvt. earlier to the issue of such notice and such fact was also made known to the Revenue. We, thus, set aside the reassessment proceedings on that ground alone. In view of our aforesaid finding, there is no necessity of going into the other grounds of appeal on merit. Appeals are thus allowed on the aforesaid ground alone and the reassessment proceedings are quashed. In the facts and circumstances, there will be however no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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