Commissioner Of Wealth-Tax, ... vs D.R. Vadera L/H Of Late Shri Hans ...
2000 Latest Caselaw 586 Del

ORDER

Arijit Pasayat CJ.

1. These two reference applications involve identical question and this common judgment shall dispose of each of the cases.

At the instance of Revenue, the Income-tax Appellate Tribunal, Delhi Bench-B (for short the Tribunal) has referred the following questions under Section 27(1) of the Wealth-tax Act. 1957 (for short the Act), for opinion of this Court: "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in concluding that the W. T. O. had no jurisdiction to consider in the present re-assessment proceedings initiated under Section 17(1)(a) of the W. T. Act for the two assessment years 1966-67 and 1967-68 the question of valuation of the two immovable properties the one at 15, Barakhamba Road and the other at Paharganj at New Delhi and enhanced the valuation of the said two properties while completing the said re-assessments under Section 17(1)(a) of the Act?"

2. Factual position as indicated in statement of the case is essentially as follows. For the assessment years 1966-67 and 1967-68 assessee's father late Hans Raj Vadera filed returns of wealth on 5th August, 1966 and 31st October, 1967, disclosing net wealth of Rs.3,71,188/- and Rs. 3,47,924/-, respectively. Original assessments were completed under Section 16(3) of the Act on 15th May, 1968 accepting net wealth declared. Subsequently, the assessments were re-opened under Section 17 of the Act. As in the meantime Shri H.R. Vadera had expired, notices were served on his son, Shri D.R. Vadera (hereinafter referred to as legal heir). In response to the notices he submitted returns and marked them as 'returns under protest'. The Wealth-tax Officer rejected the objections raised about the maintainability of the proceedings and completed re-assessments. Net wealth in respect of the two years was determined at Rs.14,96,612/- and Rs. 16,29,924/- respec-tively. In the re-assessment proceedings value, of the immovable property at 15, Barakhamba Road , New Delhi was taken to be Rs.12,54,100/- for the first year and Rs.13,53,100/- for the subsequent year. Value of the other property at Paharganj was taken at Rs.1,00,000/- and Rs.1,20,000/- respec-tively for the two years. The re-assessment orders were assailed before the Appellate Assistant Commissioner (AAC for short) on several grounds. The main grounds of challenge were that : (a) for re-assessment proceedings were initiated in relation to the shares in various companies and it was not permissible to make enhancement of valuation in relation to properties referred to above, and (b) proceedings for re-opening assessments were not valid. Though challenge was to the legality of the re-opening, it was observed by the AAC that action under Section 17(1)(a) of the Act was validly initiated to re-assess wealth in so far as shares in various compa-nies were concerned and to that extent the re-assessments made were valid. With regard to enhancement of valuation in respect of the two properties indicated above, it was held to be beyond the scope of re-assessment under Section 17(1)(a) of the Act. These conclusions were affirmed by the Tribu-nal. It has to be noted that the assessee did not assail the conclusions of the AAC about the valid initiation of proceeding under Section 17(1)(a) of the Act relating to shares.

On being moved by the Revenue, the Tribunal has referred the question indicated above.

3. Mr. Sanjiv Khanna, learned counsel for the Revenue submitted that once assessment proceedings are re-opened, the entire gamut can be taken note of by the Assessing Officer and re-assessment proceedings are not restricted to only those items for which initially notice was given. Learned counsel appearing for the assessee on the other hand submitted that the scope of re-assessment is restricted to items in respect of which notice was ini-tially issued.

4. Once the Assessing Officer decides to re-open the assessment the previous assessment is wiped out and whole assessment proceedings start afresh. Once valid proceedings are started for re-assessment, the Assessing Officer not only has the jurisdiction but also has a duty to levy tax on the entire income or wealth as the case may be that had escaped assessment during that year. This position was highlighted by the Apex Court in V. Jaganmohan Rao & Others Vs. Commissioner of Income-tax and Excess Profits Tax. Andhra Pradesh (1970) 75 ITR 373. Once the assessment is re-opened no distinction can be made between those items in respect of which re-assess-ment proceedings are initiated, and those which form part of the wealth or income as the case may be will have to be taxed. The re-opening is done to bring into the net of taxation an item which has escaped assessment. The position was succinctly stated by the Apex Court in Commissioner of Income-tax Vs. Sun Engineering Works P. Ltd. (1992) 198 ITR 297. It, is manifest that once an assessment is re-opened, the previous under-assessment is set aside and the whole assessment proceedings start afresh. What is set aside is only the previous under-assessment and not the original assessment proceedings. An order made in respect to the escaped item does not affect the operative force of the original assessment, particularly if it has acquired finality, and the original order retains both its character and identity. It is only in case of "under-assessment", that the assessment of net income/wealth and tax due has to be re-computed on the entire taxable wealth/income, as the case may be.

That being the position, our answer to the identical question referred in the two reference applications is in the negative i.e. in favour of the Revenue and against the assessee.