FATESINGHRAI P GAEKWAD vs. COMMISSIONER OF WEALTH-TAX

WTR/59/1983HC GujaratGJHC24012023198306 February 1997Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE R.BALIA7 pages
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What were the facts?

The Income Tax Appellate Tribunal (ITAT) submitted a statement of the case concerning three reference applications under Section 27(1) of the Wealth Tax Act, 1957. These applications related to the reopening of assessments for assessment years (AY) 1964-65, 1965-66, and 1966-67. The assessee filed applications for AY 1964-65 and 1965-66, challenging the reopening under Section 17(1)(b). The revenue filed an application for AY 1966-67, as the ITAT held that while reopening under Section 17(1)(b) was permissible, the notices issued for this AY were time-barred. The Wealth Tax Officer (WTO) had reopened assessments based on reasons recorded concerning trusts executed by the assessee and the value of certain properties.

What did the High Court hold?

The High Court answered Question 1 in the affirmative, holding that the Tribunal was justified in upholding the WTO's action under Section 17(1)(b) and had the jurisdiction to convert proceedings. The reasoning was that if the material on record could lead to a belief of escapement of income, the WTO could act under Section 17(1)(b), even if initially proceeding under Section 17(1)(a). The Court found that the Gujarat High Court's decision in Wealth-tax Ref. 3 & 5 of 1965 constituted 'information' within the meaning of Section 17(1)(b), as it provided relevant material for the assessee's own assessment regarding the includibility of trust assets. This was supported by Supreme Court decisions in Indian and Eastern Newspaper Society v. CIT and A.L.A. Firm v. CIT. Therefore, Question 2 was also answered in the affirmative, in favour of the revenue. Regarding Question 3, the Court agreed with the Tribunal that reopening for AY 1966-67 under Section 17(1)(a) was not sustainable. The reasons recorded did not disclose any failure or omission by the assessee to disclose material facts. The assessee had disclosed primary facts and their estimated values, and the value of an asset is a matter of estimate. The Court held that there was no material before the assessing officer to reach a satisfaction for reopening under Section 17(1)(a). Consequently, Question 3 was answered in the negative, in favour of the assessee. The reference was disposed of accordingly.

What were the issues?

1. Whether, on the facts and in the circumstances, the Tribunal was justified in upholding the WTO's action under Section 17(1)(b) of the Wealth Tax Act, 1957, even though proceedings were admittedly initiated under Section 17(1)(a), and whether the Tribunal had jurisdiction to convert the proceedings. 2. If the answer to Question 1 is affirmative, whether the Tribunal was justified in holding that the Gujarat High Court's decision in 73 ITR 206 constituted information within the meaning of Section 17(1)(b), conferring jurisdiction on the WTO to issue notice under Section 17. 3. Whether, on the facts and in the circumstances, the Tribunal erred in concluding that for AY 1966-67, the assessment could not be reopened under Section 17(1)(a). Assessee's contentions: The assessee argued that the WTO's action was upheld under Section 17(1)(b) despite initial initiation under Section 17(1)(a), questioning the Tribunal's jurisdiction to convert proceedings. The assessee also contended that the Gujarat High Court's decision did not constitute 'information' for Section 17(1)(b) and that for AY 1966-67, reopening under Section 17(1)(a) was unjustified. Revenue's contentions: The revenue contended that the Tribunal was justified in upholding the reopening under Section 17(1)(b) and that the High Court's decision constituted 'information' for Section 17(1)(b). The revenue also argued that the assessment for AY 1966-67 could be reopened under Section 17(1)(a).

Which sections of the Income-tax Act were involved?

Section 27(1),Section 17(1)(b),Section 17(1)(a),Section 17

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

WEALTH TAX REFERENCE No 59 of 1983

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE R.BALIA. ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

The order continues below.

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