M/S LOKE NATH AND CO. THE MALL,SHIMLA vs. COMMISSIONER OF WEALTH TAX PATIALA

C.A. No.-009697-009697 - 1995Supreme Court31 October 1995Bench: JEEVAN REDDY B.P. (J)4 pages
For Petitioner: RAJ KUMAR MEHTAFor Respondent: P. PARMESWARAN
AI SummaryAllowed

What were the facts?

For assessment years 1959-60 to 1967-68, the assessee, M/s. Lok Nath and Company, filed returns declaring their house property at Rs. 5,02,762/-. As these were filed late, notices under Section 18(1)(a) were issued. The assessee filed revised returns with higher valuations, which the Wealth Tax Officer accepted and made assessments under Section 16(3). The Commissioner of Wealth Tax, Patiala, initiated revision proceedings under Section 25(2), proposing to revise these orders. The Commissioner's primary reasons were that the Wealth Tax Officer failed to issue a notice under Section 16(2) before making an assessment under Section 16(3), rendering the assessment invalid and prejudicial to revenue, and that the accepted valuation was lower than declared for a subsequent year. The assessee appealed the Commissioner's revised orders to the Income Tax Appellate Tribunal, which vacated the Commissioner's orders.

What did the Supreme Court hold?

The Supreme Court held that the High Court erred in answering the reference in favour of the Revenue. The Court found that the assessment orders, though mentioning Section 16(3), were in substance and effect made under Section 16(1) as the Wealth Tax Officer had accepted the revised returns filed by the assessee. The Court agreed with the High Court's further finding that even if the assessments were considered under Section 16(3), the failure to issue a notice under Section 16(2) did not render them without jurisdiction. The Court also found the Commissioner's apprehension that the assessments could be challenged later, leading to revenue loss, to be remote and difficult to appreciate. The Court concluded that there was no sufficient ground for the Commissioner to exercise his jurisdiction under Section 25(2). Therefore, the appeal was allowed, the High Court's judgment was set aside, and the question referred to the High Court was answered in favour of the assessee.

What were the issues?

1. Whether the Income Tax Appellate Tribunal was right in law in vacating the orders passed by the Commissioner of Wealth Tax under Section 25(2) of the Wealth-Tax Act, 1957, on the ground that the Commissioner wrongly assumed jurisdiction based on his own recorded findings. Assessee's Contentions (as inferred from Tribunal's reasoning): The Tribunal's reasoning suggests the assessee argued that the Commissioner wrongly assumed jurisdiction under Section 25(2) by concluding that the Wealth Tax Officer's assessments under Section 16(3) were invalid due to the non-issuance of a Section 16(2) notice. The assessee likely contended that the Commissioner's belief in the invalidity of the original assessments did not clothe him with the power to order fresh assessments under Section 25(2). Revenue's Contentions (as inferred from High Court's reasoning and Commissioner's order): The Revenue, through the Commissioner, argued that the Wealth Tax Officer's assessments under Section 16(3) were invalid without a prior notice under Section 16(2). The Commissioner apprehended that such assessments could be challenged by the assessee even after the period for reopening under Section 17, leaving the Department without a remedy. The High Court also noted the Revenue's contention that the Commissioner was satisfied that material facts were not disclosed and there was an under-assessment, empowering him under Section 25(2).

Which sections of the Income-tax Act were involved?

Section 27(1),Section 25(2),Section 18(1)(a),Section 16(3),Section 16(2),Section 16(1),Section 17

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4 PETITIONER: M/S. LOK NATH AND COMPANY, THE MALL, SHIMLA. Vs. RESPONDENT: COMMISSIONER OF WEALTH TAX, PATIALA. DATE OF JUDGMENT31/10/1995 BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) MAJMUDAR S.B. (J) CITATION: 1995 SCC Supl. (4) 610 JT 1995 (7) 598 1995 SCALE (6)184 ACT: HEADNOTE:

JUDGMENT: J U D G M E N T B.P. JEEVAN REDDY, J.

Leave granted. Heard counsel for both the parties.

This appeal arises from the judgment of the Himachal Pradesh High Court answering the question referred to it, at the instance of the Revenue, in favour of the Revenue. The question stated under Section 27(1) of the Wealth Tax Act, 1957 reads: "Whether the Income Tax Appellate Tribunal has been right in law in vacating the orders passed by the Commissioner of Wealth Tax under Sec. 25(2) of the Wealth-Tax Act, 1957, for the assessment years 1959-60 to 1967-68 on the ground that on his own recorded findings, the Commissioner wrongly assumed juri iction."

For the Assessment Years 1959-60 to 1967-68, the appellant-assessee filed

The order continues below.

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