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Judgment
The following question has been referred to this court at the instance of the assessee u/s 27(1) :
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the reopening of the assessment u/s 17(1)(a) was valid in law ?"
The dispute relates to the two assessment years, namely, 1969-70 and 1971-72.
The original assessment of the assessee, who is an individual, was reopened u/s 17(1)(a) of the Wealth-tax Act, 1957, on the ground that in the net wealth earlier assessed, the wealth of Rs. 20,500 escaped assessment. The facts lie in a narrow compass :
The assessee took a loan of Rs. 20,500 from the Life Insurance Corporation on the security of a life policy on March 23, 1966, which was deposited in the fixed deposit with Hindustan Commercial Bank. He claimed exemption on the said amount in his wealth-tax return, which was allowed by the Wealth-tax Officer. However, the said assessment was reopened and an addition was made of Rs. 20,500 in the net wealth of the assessee by the Wealth-tax Officer by the order dated February 28, 1979, in respect of both the assessment years by separate orders on identical pleas. The aforesaid reassessment orders were set aside in appeal by the Appellate Assistant Commissioner of Wealth-tax by order dated March 20, 1980, on the finding that it was not a case of non-disclosure of material facts and as such the notice u/s 17(1)(a) of the Wealth-tax Act was held bad.
The Department filed two appeals before the Income Tax Appellate Tribunal for the aforesaid two assessment years which were allowed by a common order dated January 29, 1981.
Aggrieved against the order of the Tribunal at the instance of the assessee, the above reference was made to the High Court.
We have heard Sri Vikram Gulati, advocate, for the assessee, and Sri Bharat Ji Agarwal, senior advocate assisted by Sri A. N. Mahajan, for the Income Tax Department.
The Tribunal has found that mere mention that the amount of Rs. 20,500 was a loan from the Life Insurance Corporation does not amount to disclosure of the fact that this loan was secured against the life policy of the assessee which was exempt from wealth-tax. In the wealth-tax return there was a specific requirement that such debt should not be claimed as deduction. If the assessee claims such a deduction without mentioning the relevant fact that the debt was secured against the life policy of the assessee, it amounts to nondisclosure of the relevant materials for the purposes of assessment.
Sri Bharat Ji Agarwal has placed reliance upon the judgment of the Supreme Court reported in Sri Krishna Private Ltd. Etc. Vs. I.T.O., Calcutta and Others, . It has been held by the Supreme Court that every disclosure is not and cannot be treated to be a true and full disclosure. A disclosure may be a false one or a true one. It may be a full disclosure or it may not be. A partial disclosure may very often be a misleading one. What is required is a full and true disclosure of all material facts necessary for making assessment for that year.
The Tribunal has recorded a specific finding that the loan was secured against the life policy of the assessee which was exempt from the wealth-tax but this was not disclosed in the wealth-tax return. Only this much was mentioned in the return that the amount of Rs. 20,500 was a loan from the Life Insurance Corporation. Till the assessment year 1988-89, if the Assessing Officer had reason to believe that net wealth of a person has escaped assessment due to non-disclosure fully and truly of all material facts necessary for the assessment of his net wealth, he could issue the notice for reassessment. In the present case, all the conditions for reassessing of the assessee as prescribed u/s 17(1)(a) of the Wealth-tax Act existed. Hence in our opinion the reassessment notice was fully justified.
In view of the above, we answer the above question in the affirmative, i.e., against the assessee and in favour of the Department.