9911796707
TMI Blog1994 (7) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ered trust deed dated March 25, 1972. The settlor donated a sum of Rs. 53 lakhs to the trust, vide letter dated March 15, 1974. The money was lying in deposit with Messrs. Marudhar Hotels Pvt. Ltd. free of interest and within 10 years the deposit was to be converted into investments (non-cumulative preference shares carrying on dividend at the rate of 5 per cent. per annum). The said deposit was later on converted into preference shares. The trust filed an application under section 12A of the Income-tax Act, 1961, for registration. The returns of wealth had been filed by the assessee in compliance with the notice issued under section 14(2)/17 of the Wealth-tax Act, and exemption was allowed under section 5(1)(i) of the said Act. The assessment proceedings for the assessment year 1979-80 were dropped, vide order dated June 29, 1984. No assessment order was framed nor any communication in respect thereof was made to the assessee. Similar was the position in respect of proceedings for the assessment years 1978-79, 1980-81 which were dropped on February 5, 1985, and in respect of the assessment years 1981-82 to 1984-85, the proceedings were dropped on October 17, 1985. It was found tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing fatal to the jurisdiction of the Commissioner of Wealth-tax under section 25(2) ? d. Do the observations of the Wealth-tax Officer that he has had consultation with the Inspecting Assistant Commissioner (Asstt.) and the Commissioner of Wealth-tax, have the effect of invalidating the jurisdiction of the successor-Commissioner of Wealth-tax ? e. Has the Commissioner of Wealth-tax been able to point out any error in the order made by the Wealth-tax Officer, which could be said to prejudice the interest of the Revenue ? f. Was the Commissioner of Wealth-tax right in considering the material in the case of Marudhar Hotels Pvt. Ltd. for his action under section 25(2) ?" The Income-tax Appellate Tribunal came to the conclusion that dropping of the proceedings is not contemplated under the Act and the effect of the dropping of the proceedings is akin to a "nil" assessment. The decision of the apex court in the case of Esthuri Aswathiah v. ITO [1961] 41 ITR 539 was also relied upon wherein it was observed that the noting by the Income-tax Officer "no proceeding" meant that he had accepted the return of the assessee and has assessed it at nil income. Similarly, in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contents of the order directing to drop the proceedings. If an assessment order is made and it is not served by which any liability is created on the assessee or his rights are affected then in that case it can be said that it would not be effective unless it is communicated or served on the assessee. While in a case where a plea raised by an assessee is accepted and proceedings are dropped it is not necessary that the order should be communicated and served on the assessee, the assessee could even take a certified copy of the said order and keep it in record. Simply because the order has not been served, it cannot be said that the power could not be exercised by the Commissioner of Wealth-tax under section 25(2) of the Wealth-tax Act, as it would amount to fraud even by the assessing authority. In a given case where there is a liability of tax and the officer in connivance with the assessee or with ulterior motive passes an order dropping the proceedings, then the Revenue would be left with no remedy. The order passed was within the knowledge of the assessee. The view which the Tribunal has taken, therefore, is justified that even in a case where the order is not communicated wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land has been acquired. He has a right to file an appeal against such an order. But in a case where the taxing proceedings are dropped no right is available to the assessee to file an appeal and, therefore, the decision in the case of Raja Harish Chandra Raj Singh v. Dy. Land Acquisition Officer, AIR 1961 SC 1500 is not relevant. Similarly, another decision which was relied upon is CIT v. Oriental Rubber Works [1984] 145 ITR 477 (SC) in which it was observed that when the books and documents of the assessee are seized in the search conducted, then the Revenue is obliged to communicate to the assessee not only the Commissioner's approval but also the reasons recorded. This judgment has been given in a case where the rights of the assessee are affected. The various authorities relied upon by the Madhya Pradesh High Court are such where the rights of the assessees are affected in a case where the order is not communicated to them. The conclusions which have been drawn, therefore, in our respectful view, are not applicable to the taxing statute. It was a case where the order was passed for dropping the proceedings which results in no liability of the assessee. The assessee cannot be sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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