ORDER:
This writ petition is filed to have the order passed by the second respondent dated 06.01.2010 quashed, and to consequently declare that the wealth tax demand, relevant to the assessment years 1998-1999 to 2005-2006, be kept in abeyance till the outcome of O.S.No.32 of 1999 on the file of the IV Additional Metropolitan Sessions Judge, Hyderabad.
The petitioner claims to own an extent of Acs.2.30 guntas of land, in Municipal Plot No.10 at Banjara Hills, Hyderabad, which was purchased for him by his father Sri Mirza Hussain Ali Ceizar vide sale deed dated 18.05.1965 registered with the Office of the Sub-Registrar of Khairtabad, Hyderabad. The petitioner would allege that a conspiracy was hatched to knock away the property; the said property was sold to M/s.Nagarjuna Construction Company Limited; the second respondent initiated proceedings under the Wealth Tax Act, 1957, (hereinafter referred to as the "Act") for the assessment years 1998-1999 to 2005-2006; pursuant to the notice, he filed his return of wealth valuing the aforesaid property at Rs.NIL on the ground that the said property had been illegally sold away to M/s.Nagarjuna Construction Company Limited; and the wealth tax assessment was completed holding that, once the Court passes a decree in his favour, he would be the owner of the land and, keeping in view the limitation of time for completion of wealth tax assessment and as a matter of precaution, the petitioner was liable to pay wealth tax on the value of the aforesaid land. The second respondent, however, kept the demand of Rs.23,28,560/-, comprising of wealth tax of Rs.15,40,920/- and interest under Section 17B of the Act of Rs.7,87,640/-, in abeyance till a final decree was passed in the Civil Suit in O.S.No.32 of 1999; and, thereafter, issued the impugned proceedings dated 06.01.2010 stating that the stay, which was granted by the assessing officer till the disposal of O.S. No.32 of 1999, was being cancelled as the Commissioner of Income Tax (Wealth) (CIT(W)) had dismissed the appeals. Against the order of assessment, the petitioner had earlier preferred appeals to the CIT (W) and, on the said appeals being rejected, appeals were filed before the Income Tax Appellate Tribunal which are said to be still pending.
Sri M.M. Firdous, Counsel for the petitioner, would submit that in as much as the petitioner has not as yet been issued a demand notice, calling upon him to pay the wealth tax as assessed earlier, he cannot be treated as an assessee in default; the impugned order canceling the assessment order, in effect, treats the petitioner as an assessee in default; and the impugned order is without jurisdiction.
On the other hand, Sri J.V. Prasad, Standing Counsel for Income Tax, would submit that the order of assessment to the extent "the demand was kept in abeyance till the final outcome of the Civil Suit in O.S.No.32 of 1999" is itself without jurisdiction since the Wealth Tax Officer has been conferred the power, under Section 30(6) of the Wealth Tax Act, only to keep the assessment order in abeyance till the appeal, either under Section 23 or under Section 23A of the Wealth Tax Act, is disposed of.
The impugned order dated 06.01.2010 cancels the earlier orders of the assessing authority dated 14.06.2005 whereby the tax demanded was kept in abeyance till a decree was passed in the Civil Suit in O.S. No.32 of 1999. In this context it is necessary to note the relevant provisions of the Wealth Tax Act. Chapter VII of the Act relates to payment and recovery of wealth tax. Section 30 relates to the notice of demand and, when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Act, the assessing officer is required to serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable. The counter affidavit makes no mention of any such notice of demand having been issued to the petitioner much less in the prescribed form i.e., Form No. C as prescribed in Section 30 of the Act read with Rule 4 of the Wealth Tax Rules. Under Section 31(1) of the Act, any amount specified as payable in a notice of demand under Section 30 shall be paid within thirty days of service of the notice at the place and to the person mentioned in the notice. Section 31(2) provides that if the amount specified, in any notice of demand under Section 30, is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in Sub-Section (1) and ending with the day on which the amount is paid. Section 30 of the Act, of which the notice of demand forms an important and integral part, requires a vital step to be taken by the assessing officer without which the assessee cannot be termed a defaulter. It is only on a notice of demand being served and, in case the assessee fails to pay the tax within thirty days from the date of receipt of the notice under Section 30 of the Act, issued in Form C under Rule 4 of the Wealth Tax Rules, would he be an "assessee in default". On failure to pay the tax so demanded, not only would the assessee be an "assessee in default", but he would also be liable to pay interest under Sub-Section (2) of Section 31 of the Act provided, of course, the Commissioner has not exercised jurisdiction to review or waive the amount of interest under Section 31(2A) of the Act. Service of a notice of demand has, thus, a vital impact. There can be no recovery without service of a demand notice and, if such a notice is not served, neither can interest be levied nor can recovery proceedings be initiated. The use of the term "shall" in Section 30 of the Act, and Rule 4 of the Wealth Tax Rules, implies that service of a demand notice is mandatory. (Mohan Wahi v. CIT1; ITO v. Seghu Buchiah Setty2; Homely Industries v. STO3). Under Subsection (6) of Section 31 of the Act, where an assessee has presented an appeal under Section 23 or Section 23A, the assessing officer may, in his discretion, and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, during the pendency of the appeal. The power conferred on the assessing officer, under Section 31(6) of the Act to treat the assessee as not being in default, is only in respect of the amount in dispute in the appeal filed either under Section 23 or Section 23A of the Act, and only during the pendency of the said appeal. Under Section 23 of the Act an appeal lies against the order of the assessing officer to the Deputy Commissioner (Appeals), and, under Section 23A, an appeal lies to the Commissioner (Appeals) .It is only when an appeal is pending, either before the Deputy Commissioner (Appeals) or the Commissioner (Appeals), does the Assessing Officer have the power, under Section 31(6) of the Act, to treat the assessee as not being in default, that too only for the amount in dispute in the appeal. The appeal to the Appellate Tribunal is under Section 24 of the Act and, during its pendency, the assessing officer has not been conferred the power to treat the assessee as not being in default. It must, however, be borne in mind that, on the facts and circumstances of each case, the Tribunal has the power to pass such interlocutory orders as it considers appropriate during the pendency of the appeal before it.
It is evident, therefore, that the orders of the assessing authority dated 14.06.2005, keeping the demand in abeyance till the final outcome of the Civil Suit in O.S.No.32 of 1999, is itself without jurisdiction. The impugned order dated 06.01.2010 merely cancels the earlier orders dated 14.06.2005. We consider it appropriate, in such circumstances, to set aside the orders dated 14.06.2005, and the subsequent order 06.01.2010, the earlier orders only to the limited extent the demands were kept in abeyance till the final outcome of the Civil Suit. It is made clear that the remaining part of each of the assessment orders dated 14.06.2005 shall remain in force till it is set aside in appropriate proceedings, including in the appeals which the petitioner claims to be pending before the Income Tax Appellate Tribunal. This order shall also not preclude the respondents from serving notices of demand on the petitioner, and taking action thereafter in accordance with law.
The Writ Petition is disposed of accordingly. No costs.