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TMI Blog2001 (5) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... nstance of the Commissioner of Wealth-tax, these three appeals filed against the common order passed by the Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur, dated June 19, 2001, holding that the initiation of proceedings under section 17 of the Wealth-tax Act, 1957, after the expiry of four years from the end of the relevant assessment years in question, namely, 1981-82, 1982-83 and 1983-84, were barred by time and also that the proceedings were bad because notices have not been issued to all the members of the erstwhile Hindu undivided family which has since been partitioned. As all the appeals raise a common issue on the same set of facts, we have heard the same together and propose to decide by this common order. For convenience we notice the facts relating to assessment year 1982-83. The facts of the case are that the Hindu undivided family, viz., Sewalal Gafarlal, was disrupted by a total partition on November 16, 1982 and order under section 20 of the Wealth-tax Act, 1957, to that effect was recorded on October 3, 1986. The properties were distributed in the hands of the members of the erstwhile Hindu undivided family. Out of seven members, Shri Bhupatilal is being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout notice to other members of the family was a nullity and the assessment was liable to be quashed. On further appeal before the Tribunal, the Tribunal noticed that notices in respect of initiation of proceedings under section 17 were beyond the expiry of the period of four years provided under section 17(1)(b) and barred by time. According to the Tribunal in the aforesaid cases, the Assessing Officer initiated proceedings under section 17 on the basis of the valuation report obtained for the assessment year 1989-90, treating it to be an information furnishing the basis for holding reason to believe regarding escapement of assessment due to under assessment or assessment at too low a rate, obviously the cases fall within section 17(1)(b). In that view of the matter, the initiation of proceedings under section 17 were found to be time-barred in all the above three assessment years under appeal. It is in the aforesaid circumstances, the Revenue has filed these three appeals suggesting the following substantial questions of law said to be arising for consideration in these appeals: "(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 the Assessing Officer shall, before issuing any notice under this sub-section, record his reasons for doing so." For the purpose of clarity we may also reproduce hereunder section 17(1) as it existed prior to the substitution of the aforesaid provision: "17. Wealth escaping assessment.--(1) If the Wealth-tax Officer- (a) has reason to believe that by reason of the omission or failure on the part of any person to make a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t wealth chargeable to tax which has escaped assessment or is likely to have escaped assessment. However, in a case falling under the proviso an embargo has been placed against resorting to section 17 after the expiry of four years from the end of the relevant assessment year. In other words where there is no failure on the part of the assessee as envisaged under the proviso to section 17(1), the limitation for initiating proceedings under section 17 is four years only from the end of the relevant previous year. A comparative reading of section 17(1) as now existing and as it existed before, reveals that in so far as a case falling under clause (b) of section 17(1) and the proviso to new section 17(1) is concerned there is no substantial difference. Under the previous provision cases where escapement of assessment was believed to be as a result of any failure on the part of the assessee in filing returns, or responding to notice or in disclosing truly and correctly all material facts necessary for assessment fell under clause (a) and time for initiating proceedings under section 17 was larger than in cases falling under clause (b), which governed cases other than those where esc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the formation of belief is subjective but the existence of circumstances relevant to the formation of such belief, about escapement having taken place because of failure on the part of the assessee to disclose truly and fully all material facts is the sine qua non for initiating proceedings beyond four years from the end of relevant assessment year. Such reasons are also required to be recorded in writing which led to formation of such belief. To wit in the words of Hidayatullah J. No doubt formation of opinion about escapement of wealth from assessment is subjective, but existence of circumstances relevant to inference as the sine qua non for action must be demonstrable. If the action is questioned on that ground that no circumstance leading to an inference of kind contemplated exists, the action might be exposed to inference, unless the existence of circumstances is made out. Since under section 17 the reason for holding the belief has to be recorded in writing, such existence of circumstances must demonstrably appear from the reasons so recorded. From the facts narrated above, it is apparent that the Assessing Officer who had held the belief that the net wealth chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is to say March 31, 1986, March 31, 1987, and March 31, 1988, respectively, in the case of the assessment years 1981-82, 1982-83 and 1983-84. Apart from the notices being barred by time the reason recorded by the Assessing Officer reveals that the condition precedent in the case of holding the belief about escapement did not exist. The belief said to have been held as per reasons recorded was a mere pretence and not founded on any relevant existing material having nexus to the belief formed. Section 17(1)(b), of course, was not in force when the notices were issued. However, it does not make any difference as discussed above so far as the period of limitation prescribed in respect of cases covered under section 17(1)(b) as it was existing prior to amendment and a case falling in the proviso to section 17(1) as per newly substituted provision. Both operate on the same field, as will appear from a comparative reading of the two provisos. The conclusion of the Tribunal, viz., that there is no satisfaction about the alleged escapement of net wealth from assessment because of any failure on the part of the assessee to file return, or furnish material facts truly and correctly, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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