Commissioner of W.T., Bikaner Vs. Hemchand Golecha - Court Judgment

Excerpt:
- - (9). before proceeding further, it is beneficial to extract section 17(1) and proviso to for better appreciation of the facts and circumstances of the case. it is clearly mentioned therein that the assessing officer shall before issuing any notice under this sub- section, record his reasons for doing so. - at the outset, we would like to make it clear that section 17 of the act had undergone a change with effect from april 1, 1989, by the direct tax laws (amendment) act, 1987. in as much as the impugned notices under section 17 of the act have been issued only on february 15, 1991, it goes without saying that it would be only the amended provisions which would govern the instant case,'(15). in view of the above, we are of the opinion that the contention raised by the learned counsel for the appellant has no merit and we are of the opinion that the order passed by the assessment officer u/section 16(4) of the act is, invalid and ab initio void and accordingly, we confirm the order dated 17th of september, 1993 passed by the cit (a) and the order dt.lakshmanan, c.j. (1) heard shri r.b. mathur, learned counsel appearing for the commissioner, wealth tax, bikaner, headquarters at jaipur. the matter relates to eight reveneue appeals for the assessment years 1981-82 to 1988-89 arising out of the common order dated 17th of september, 1993 passed by the commissioner income tax (appeals) rajaslhan-iii, jaipur holding that the assessment orders are invalid and ab initio void. against the said order of the commissioner, income tax (appeals) (hereinafter referred to as 'the cit(a)'), eight appeals were filed in wealth tax appeal nos. 310 to 31 7/jp/1993 before the income tax appellate tribunal, jaipur bench, jaipur (for short the tribunal') which were also disposed of by the tribunal by a consolidate order as a common issue was involved.(2). the : matter involved in these cases pertains to the assessment years 1981-82 to 1988-89. ' the facts of these appeals are that the department on the basis of theinformation/material in possession of the department, which pointed to the fact that the assessee was in the possession of wealth of a certain value, which had escaped assessment, a notice u/section 17 of the wealth tax act (hereinafter referred to as 'the act') was issued in the name of the legal heirs of the assessee on 12th september, 1990. no reply was filed in its response. for completing the proceedings initiated under section 17 of the act, a notice under section 16(2) of the act was issued which was responded by the authorised representative of the assessee. the assessing officer queried and sought reply from the authorised representative as to why on the basis of the material on record, the assessment should not be completed since no return of wealth was filed by the assessee. the assessee did not comply with the requirement and accordingly the assessment was competed ex parte u/section 16(4) of the act. the assessing officer issued the notice u/section 17 of the act on the basis of major audit objections in respect of assessment years 1981-82 to 1988-89. the wealth assessed and the tax demanded for the assessment years 1981-82 to 1988-89 are as under:-assessmentyearwealth assessedwealth tax demanded1981-821,46,97,00034,95,3541982-831,46,97,00082,94,4741983-841,46,97,00024,93.5941984-851,46,97,00028,92,7141985-861,46,97,00026,91,8341986-871,46,97,0009,98,0751987-881,46,97,0006,60,0311988-891,46,97,0009,26,761copies of the assessment orders have also been filed and marked as annexures in these matters.(3). the assessee preferred appeals against the assessment orders before the cit (a). the cit (a) allowed the appeals of the assessee holding that the notice u/section 17 of the act were issued by the assessing officer without recording the reasons which is a mandatory requirement as per proviso to sub-section (i) of section 17 of the act and that the assessment completed on the basis of such notices were invalid and void ab initio (annexure-2).(4), that being aggrieved with the order of the cit (a), the revenue preferred appeals before the tribunal. the learned tribunal vide its order dated 27th of december, 2000 (annex. 3) dismissed the appeals filed by the appellant revenue holding that the assessment orders passed by the assessing officer u/section 16(4) of the act are invalid and void ab initio and the orders of the cit (a) have been upheld. the tribunal held that recording of reasons is a condition precedent even under the unamended provisions of the act.(5). thus, being aggrieved with the orders passed by the cit (a) and the learned tribunal, the appellant revenue has filed these appeals under section 27a of the act, before this court.(6). mr. r.b. mathur, learned counsel appearing for the revenue appellant submits that the learned tribunal has seriously erred in holding that even in the unamended, provisions of section 17 of the act, recording of reasons is a condition precedent. the unamended provisions which existed prior to 1st of april, 1989 did not require recording of reasons before issuance of notice u/section 17 of the act. he would further add that the learned tribunal without properly appreciating the provisions of law decided the appeals against the appellant-revenue. it is further submitted that the proviso to section 17(1) of the act which requires that the assessing officer shall, before issuing anynotice under this sub-section record his reasons for doing so was added w.e.f. 1st of april, 1989 and prior to it similar provision was not there. the matters pertains to the year 1981-82 to 1988-89 in which there was no mandatory requirement for recording reasons before issuance of notice. according to learned counsel, the law applicable in the relevant assessment year is to be applied and thus, the c1t (a) and the learned tribunal has seriously erred in setting aside the assessment orders. it is then submitted that the assessing officer had reason to believe on the basis of the material on record consisting of serious audit objections that wealth of assessee had escaped assessment. the assessee was required to furnish wealth tax return by issuance of notice u/section17 of the act and again by the notice issued u/section 16(4) of the act, the assessee instead of submitting the returns and complying with the other requirements, raised frivolous objections and as such the assessing officer was constrained to pass the assessment orders ex parte u/section 16(4) of the act. it is the submission of shri mathur that the assessment orders have been passed in accordance with law and the cit (a) and the learned tribunal have erred seriously in setting aside the assessment orders.(7). we have given our thoughtful consideration to the submissions made by mr. r.b. mathur. in this case, the following questions of law arise for our consideration:-1. whether, in the facts and circumstances of the case, the itat was justified in holding the assessment order as invalid and void ab initio despite of the fact that as per the then existing provisions in the relevant assessment years, the recording of the reasons for issuance of the notice u/section 17(1) was not mandatory? 2. whether, in the facts and circumstances of the case and in law, the tribunal was right in holding that even in the unamended provisions of section 17, the recording of reasons were necessary despite of the fact that the proviso to sub-section (1) of section 17 was added w.e.f.1.4,1989only? (8). we have perused the entire pleadings and the orders passed by the c1t(a) and the learned tribunal.(9). before proceeding further, it is beneficial to extract section 17(1) and proviso to for better appreciation of the facts and circumstances of the case.'17. wealth escaping assessmenl;- (1) if the assessing officer has reasons to believe that the net wealth chargeable to tax in respect of which any person is assessable under this act has escaped assessment for any assessment year whether by reason of under assessment or assessment at too low a rate or otherwise, he may, subject to the other provisions of this section and section i7a, serve on such person a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth the net wealth in respect of which such person is assessable as on the valuation date mentioned in the notice, along with such other particulars as may be required by the notice, and may proceed to assess or reassess such net wealth and also any other net wealth chargeable to lax in respect of which such person is assessable, 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 u/section 14. provided that................................................ 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.' (10). we have also perused the assessment orders (annexure-1). as already noticed, the legal objection taken by the learned counsel for the assessee was with reference to the validity of the notice issued u/section 17 of the act and the assessment completed thereof. it is seen from the order of the tribunal that the assessments were forwarded to the assessing officer for his comments. the assessing officer, presently holding additional charge of circle 3(1), jaipur, submitted his comments vide his letter dated 8th september, 1993 mentioning therein that it is not correct to say that the notices were issued without approval of the cwt. the said approval was conveyed by the ac(1a), jaipur vide d.o. letter no. 6471 dated 23rd of july, 1990 and is available in the assessment cover for the assessment year 1981-82. the learned appellate authority on receipt of the comments from the assessing officer, confronted the learned counsel for the assessee during the course of appellate proceedings on 9th september, 1993. the representative of the assessee after perusing the comments of the assessing officer, reiterated his contention that no reasons for issuance of the notices u/section 17 of the act for all the 8 assessment years were recorded by the assessing officer and therefore, the notices issued under section 17 of the act and the assessment completed as a consequence thereof were invalid as recording of reasons is a condition precedent for assuming jurisdiction and valid issuance of notice u/section 17 of the act. it is thus, seen from the order of the cit (a) that the assessment records were perused in the presence of the parties and after perusing of the assessment records, it was found that the reasons recorded were not available on the assessment record for any of the assessment years. thus, it is seen that the reasons said to have been recorded by the assessing officer were not available on the assessment records of any of the years. therefore, the question to be considered in these appeals is that will the notice issued under section 17 of the act be without jurisdiction and consequently invalid as contended by the learned counsel for the assessee.(11). we have already reproduced section 17 of the act, which was substituted by the direct tax laws (amendment) act, 1987 w.e.f. 1st of april, 1989, the second proviso inserted by the direct tax laws (amendment) act, 1989 which came into effect with effect from 1st of april, 1989 to sub-clause (1) of section 17 has already been extracted. it is clearly mentioned therein that the assessing officer shall before issuing any notice under this sub- section, record his reasons for doing so. thus, w.e.f. 1st of april, 1989, recording of reasons before issuance of notice under section 17(1) of the act was made mandatory. the use of the word 'shall' in the second proviso to section 17(1) makes 'recording of reasons' before issuance of notice u/section 17, cerlain and mandatory. however, as per the law up to 31st of march, 1989, recording of reasons was not mandatory under the wealth tax act,(12). in the cases on hand, notices u/section 17 of the act for all the eight assessment years were issued on 12th september, 1990. since the assessment years involved are assessment years 1981-82 to 1988-89, the question would arise whether the issue of notice u/section 17 will be covered under the provisions of law existing up to 31st of march, 1989 or the provisions of substituted section 17 w.e.f. 1st of april, 1989 while considering this issue, the cit(a) has held that the provisions of section 17 of the act are not peri-meteria with those of section 147 of the income-tax act, but they are similar and synonymous. thus, issuance of notices u/section 17 of the act on 12th of september, 1989 would be governed and covered by the substituted provisions of section 17 of the act, which came into force w.e.f. 1st of april, 1989.(13). when the matter was taken on appeal before the tribunal, the same view was taken by the tribunal on consideration of the records and materials placed before it. thus, the mute question before the tribunal was decided by the cit (a) by affirming the decision of the cit(a).(14). we are of the opinion that recording of reasons is a condition precedent even under the unamended provisions of [he act. since, in these cases, admittedly, no reasons were recorded, therefore, the proceedings initiated u/section 17 are invalid and ab initio void. the tribunal has also referred to the judgment of the madras high court in the case of k.r. venkatesalu v. wto and ors. (1), wherein as per the facts of the cited case the notices u/section 17 for the assessment years 1984-84 and 1985-86 were issued on february 15, 1991 and the high court, decided the issue of applicability of the amended provisions of section 17 of the act as under;-'at the outset, we would like to make it clear that section 17 of the act had undergone a change with effect from april 1, 1989, by the direct tax laws (amendment) act, 1987. in as much as the impugned notices under section 17 of the act have been issued only on february 15, 1991, it goes without saying that it would be only the amended provisions which would govern the instant case,'(15). in view of the above, we are of the opinion that the contention raised by the learned counsel for the appellant has no merit and we are of the opinion that the order passed by the assessment officer u/section 16(4) of the act is, invalid and ab initio void and accordingly, we confirm the order dated 17th of september, 1993 passed by the cit (a) and the order dt. 27th of december, 2000 passed by the learned tribunal. the appeals fails and are, hereby, dismissed. however, we reserve the right of the assessing officer to take remedial measures as per the provisions of the law if he so desirous.