C W T KOTA vs. H H MAHARAO BHIM SINGH

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B.WEALTH TAX APPEAL NO. 3 / 2005 C W T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent Connected With D.B.WEALTH TAX APPEAL No. 2 / 2005 C W T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.WEALTH TAX APPEAL No. 4 / 2005 C W T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.WEALTH TAX APPEAL No. 5 / 2005 C W T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.WEALTH TAX APPEAL No. 6 / 2005 C W T KOTA

(2 of 7 ) [WTA-3/2005] ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.WEALTH TAX APPEAL No. 7 / 2005 C W T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.WEALTH TAX APPEAL No. 8 / 2005 C W T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.WEALTH TAX APPEAL No. 9 / 2005 C W T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent __________________________________________ For appellant : Ms. Parinitoo Jain For Respondents : Mr. P.K. Kasliwal __________________________________________

(3 of 7 ) [WTA-3/2005] HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE DINESH MEHTA Judgment Per Hon’ble Jhaveri, J. 14/12/2016 1. In all these appeals common questions of law and facts are involved, hence all these appeals are decided by this common judgment. 2. By way of these appeals, the Department has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed appeal in a Wealth Tax Appeal preferred by the assessee in his favour. 3. This Court while admitting the appeals, framed the following substantial questions of law: 1. Whether under the facts and circumstances of the case and in law, the learned Tribunal has justified in holding that the reassessment proceedings initiated under Section 17 of the Act was merely a change of opinion and therefore, the notices are bad in law, whereas there was a failure on part of assessee to disclose fully and truly all material facts necessary for assessment and thus Wealth amounting to Rs 8,87,80,760 has escaped assessment and therefore, the findings of the Tribunal are perverse? 2. Whether under the facts and circumstances of the case and in law, the learned Tribunal is legally justified in holding that the A.O. Should have confined himself to the items which have escaped assessment despite the mandatory provisions of Sec. 17 Which says that A.O. can proceed to bring to tax any other net Wealth chargeable to tax which has escaped assessment? 3. Whether under the facts and circumstances of the case and in law, the learned Tribunal was justified in holding that the assessment framed under the Act was barred by limitation as per

(4 of 7 ) [WTA-3/2005] proviso to Sec. 17 of the Wealth Tax Act? 4. Counsel for the appellant has taken us to the order of the Assessing Officer as well as the CIT (A) and contended that it is not a change of opinion. She further submitted that as the property was exempt from tax, the Land and Building tax paid by the assessee is not required to be allowed as expenses and therefore expenses which was allowed while framing assessment the first time, tax ought to have been deducted. 5. She has relied upon the decision of Guwahati High Court in Commissioner of Wealth Tax Vs. Banwarilal Chowkhani (1983) 144 ITR 84 (Gauhati) wherein speaking for the Bench in paragraph 4, 5 and 6, the Court observed as under: 4. On these facts the present reference has come up. The answer to the question depends on a correct interpretation of Section 2(m)(ii) of the Act. The definition of net wealth in Section 2(m) at the relevant time was as follows : "(m) 'Net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than- (ii) debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth-tax is not payable under this Act." 5. Clause (e) of Section 2 of the Act defines " assets " as follows : "(e) 'Assets' includes property of every description, movable or immovable, but does not include- (i) agricultural land and growing crops, grass or standing trees on such land......" 6. Under Section 3 of the Act, wealth-tax is charged in respect of the " net wealth " of the

(5 of 7 ) [WTA-3/2005] assessee. Section 4 lays down what net wealth includes. Section 5 provides what assets are to be excluded in assessing the net wealth. According to the definition, "net wealth" is the aggregate value of all assets required to be included in his net wealth minus the aggregate value of all the debts. But Clause (ii) of Section 2(m) provides that debts which have been incurred in relation to any asset in respect of which wealth-tax is not payable cannot be deducted. Similarly, debts which are secured on assets in respect of which wealth-tax is not payable also cannot be deducted. Agricultural income-tax is, undoubtedly, a debt which is incurred in relation to assets, such as agricultural land and growing crops, which are not included in the definition of assets as defined in Clause (e) of Section 2. As agricultural land and growing crops are not included in net wealth as defined in the W.T. Act, wealth-tax has not to be paid on them. As such, Section 2(m)(ii) is applicable so far as the agricultural income-tax is concerned and the assessee will not be entitled to the deduction of the agricultural income-tax incurred by the assessee in arriving at the net wealth of the assessee. 5.1. Counsel for the respondent Mr. Kasliwal has taken us to the judgment of the Tribunal and contended that the view taken by the Tribunal is just and proper and after considering the facts and the law, the Tribunal has come to the conclusion as under: 14 We find that this issue had also been discussed in detail after analyzing the law laid down by the Hon’ble Supreme Court in the case of C.I.T. Vs. Sun Engg. Works (p) Ltd., 198 297, in the case of Vipan Khanna Vs. C.I.T And Others, 255 ITR 220, 233,234 & 235 (P&H). In this case, it was held at page 234 of the order that there is no gainsaying the fact that in the proceedings under section 147 of Income Tax Act, it is only escaped income which has to be assessed or reassessed. Thus, in the case of Vipan Khanna Vs. C.I.T (supra), the Hon’ble High Court held that as per law laid down by the Hon’ble Apex Court in the case of Sun Engg. Works (p) Ltd. (supra) that proceedings under

(6 of 7 ) [WTA-3/2005] section 147 of the Act (section 17 of the Wealth Tax, 1957) are initiated proceedings open only qua items of underassessment. The finality of the assessment proceedings on other issues remains undisturbed. The interpretation placed on the observation in the case of V. Jagmohan Rao’s case (supra) by the AO is not correct. The AO was not correct in holding that once valid proceedings under section 147 are started the whole assessment proceedings start afresh. This issue has been explained by the Apex Court itself in Sun Engg. Works (p) Ltd. 198 ITR 297 at page 319. At page 235, it was held by the Hon’ble P&H High Court that letter dated july 30,1998 issued by the AO in so far as relates to matters unconnected with the issue of depreciation as also the direction issued by the Dy. Commissioner under section 144A of the Act dated Oct. 26, 1998 cannot be sustained . The AO will now proceed under section 147 of the Act any other item of income which may have escaped assessment and which comes to his notice during the course of proceedings under section 147 of the Act. However , for this purpose , he cannot be allowed to make fishing inquiries to proble if any other income had escaped assessment or not. Thus, the AO is to confine himself to items of escapement of income mentioned in the reasons recorded by him or to the items of escapement of income which comes to his notice during proceedings under section 147 of the Income Tax Act. He cannot disturb the items of income which had attained finality. Therefore we are of the opinion that the AO had wrongly proceeded to make addition even on the items which are not mentioned in the reason recorded by him pertaining to escapement of income or allowing deduction of land and building tax. 15. After detailed discussions of the facts of the case, we conclude that reassessment proceedings under section 17 of Wealth Tax Act, 1957 had been initiated due to change of opinion on the same facts which had already been truly and fully disclosed by the assessee. Therefore, the notices issued under section 17 of the Wealth Tax Act, 1957 are held to be invalid and reassessments so framed for the assessment years 1984-85 to 1990-91 are hereby quashed. 16. Since we have held that reassessment proceedings are bad in law. The assessments framed by the AO in pursuance of such

(7 of 7 ) [WTA-3/2005] proceedings under section 16 (3) of Wealth Tax Act, 1957 for all the years had been quashed, we do not consider it necessary to decide other grounds of appeals on merits which the AO had made the additions.” 6. We have heard the learned counsel for the parties. 7. Before proceeding further, it would not be out of place to mention here that the assessee’s land was requisitioned for the defence purposes and the annual amount or requisition compensation was paid by the Central Government. The amount of Land and Building tax required to be paid was a statutory obligation and hence such expenses are required to be allowed. 8. In our view, while considering the case in paragraph 14, 15 and 16, quoted hereinabove, the Tribunal has rightly allowed the appeal of the assessee. 9. We find no merits in the appeals, therefore, all the issues are required to be answered in favour of the assessee against the Department. All the appeals stand dismissed. A copy of this judgment be placed in each file. (DINESH MEHTA)J. (K.S. JHAVERI)J. /bm gandhi 73-80