Krishnadas Govinddas Parikh vs Wealth Tax Officer and Another

D.A. Mehta, J.—This petition is a consolidated petition for asst. yrs. 1983-84 to 1993-94. Two principal issues under challenge are:

(1) Reopening of assessment by issuance of notice u/s 17 of the WT Act, 1957 (the ''Act'') for asst. yrs. 1990-91 to 1992-93;

(2) Reference made to Valuation Cell u/s 16A of the Act for asst. yrs. 1983-84 to 1993-94.

On 29th April, 2008 after hearing the matter for sometime, the Court found it necessary to peruse the reasons recorded for reopening completed assessments for the three assessment years mentioned hereinbefore. Request for time as prayed for by the learned senior standing counsel was granted. Thereafter, on 12th May, 2008, the following order came to be recorded:

Thereafter, the learned advocate for the petitioner (sic-respondent) has prayed for extention of time to comply with the aforesaid direction to place on record reasons recorded by the AO. Despite two opportunities, the learned advocate is not in a position to produce the reasons recorded by the AO.

In the aforesaid set of circumstances, as a final opportunity, the request for time to comply with the order dt. 29th April, 2008 is granted. If on the next date of hearing, the respondent authority is not in a position to place on record the reasons recorded by the AO, the petition shall be disposed of finally considering the fact that the petition is of 1994.

To be listed on 17th June, 2008.

Today, the learned standing counsel has placed on record copies of correspondence exchanged with the respondent authorities commencing from 15th July, 2004 and resting on 13th May, 2008 to show that the learned counsel has been pursuing the matter vigorously with the respondent authorities but till date the reasons recorded for reopening have not been made available.

In the aforesaid set of circumstances, it is not necessary to enter into discussion on merits of the controversy between the parties and hence neither detailed facts nor submissions of the respective sides are required to be recorded. In the absence of reasons recorded, the action of the respondent authorities for reopening completed assessments for asst. yrs. 1990-91 to 1992-93 cannot be sustained on this limited count. Accordingly, the action of the respondent authorities in issuing notices dt. 22nd Aug., 1994 u/s 17 of the Act for the three assessment years, viz., asst. yrs. 1990-91 to 1992-93, is hereby quashed.

Insofar as the second limb of challenge is concerned, Annex. ''C'' is a notice issued u/s 16A of the Act by the office of the DVO, Ahmedabad on 26th Sept., 1994. The said notice pertains to the subject of determining fair market value of properties mentioned in the said notice for asst. yrs. 1983-84 to 1993-94. The case of the petitioner assessee is that the said action is bad in law because the AO could not have initiated the proceedings by making a reference to the Valuation Cell u/s 16A of the Act without any assessment proceedings pending before the AO.

On behalf of the respondent AO, copy of communication dt. 28th July, 1994 has been placed on record whereunder the AO has addressed the Dy. CIT, AR 5, Ahmedabad proposing to reopen the assessments for asst. yrs. 1990-91 to 1992-93. Para No. 5 of the said communication reads as under:

It is seen that upto asst. yr. 1988-89 the assessee has shown the value of property at Rs. 68,600 as per Rule 1BB which is in order. From asst. yr. 1989-90, the assessee has valued this property at Rs. 14,200 under Schedule III of the WT Rules. On verification it is found that there is a mistake in the value shown by the assessee inasmuch as 40 per cent difference between unbuilt area and specified area was not added by the assessee to the value. Thus there is a difference of Rs. 5,680 in the valuation of the house shown by the assessee from asst. yr. 1989-90. Therefore, action u/s 17 of the WT Act from asst. yrs. 1990-91 to 1992-93 is proposed in this case for which permission may be granted. For the asst. yr. 1993-94 as the assessee has not filed the return, notice u/s 16(4) of the WT Act is being issued.

For the assessment year prior to 1989-90 as the wealth escaped is below the required limit, no action is necessary.

In the aforesaid set of circumstances, it is apparent that the reference made to the Valuation Cell on 26th Aug., 1994 by the AO cannot be sustained for all other assessment years except asst. yr. 1993-94 for the following reasons:

(i). In relation to assessment years prior to 1989-90, it is the case of the AO himself that the so called escaped wealth is below the required limit and hence no action is necessary. In other words, the respondent authorities accept the fact that for assessment years prior to 1989-90, not only that no assessment is pending, but there is no proposal even to reopen such assessment prior to 1989-90. Therefore, the reference made to the Valuation Cell for asst. yrs. 1983-84 to 1989-90 cannot be sustained considering the fact that no assessments are pending for the said assessment years.

(ii). In relation to the asst. yrs. 1990-91 to 1992-93, admittedly though a proposal was made to reopen completed assessments for the said three assessment years, the Court has already recorded hereinbefore that such action cannot be upheld in the absence of reasons recorded to establish that the AO had formed a valid opinion, valid in law, for seeking to reopen the completed assessments. Thus, even for asst. yrs. 1990-91 to 1992-93, in the absence of any pending assessment proceedings, no reference could have been made to the Valuation Cell by exercising powers u/s 16A of the Act.

(iii). However, insofar as asst. yr. 1993-94 is concerned, the facts show that return of wealth was filed by the petitioner assessee on 1st Aug., 1994 and the assessment was accordingly pending as on 26th Aug., 1994 when the AO made reference to the Valuation Cell u/s 16A of the Act. Hence the challenge to the reference made for asst. yr. 1993-94 cannot be sustained and the proposal made to the Valuation Officer to arrive at the fair market value of the properties in accordance with the provisions of the Act for asst. yr. 1993-94 does not merit interference.

To summarize:

(i). In the absence of reasons recorded, notice dt. 22nd Aug., 1994 issued u/s 17 of the Act for reopening completed assessments for asst. yr. 1990-91 to 1992-93 is quashed.

(ii). The action of the AO in making reference u/s 16A of the Act to the Valuation Cell for asst. yrs. 1983-84 to 1992-93 is hereby quashed, while action for making reference u/s 16A of the Act for referring the validation to the Valuation Cell for asst. yr. 1993-94 is upheld. The petition, therefore, succeeds to the aforesaid extent.

The petition is allowed accordingly in the aforesaid terms. Rule is made absolute to the aforesaid extent, with no order as to costs.