Vijaypat Kailashpat Singhania vs S.B. Sharma, Wealth-tax Officer and others

M.L. Pendse, J.—The petitioner is an undivided Hindu family known as "Vijaypat Singhania" of which the petitioner is the karta and is assessed to wealth-tax in the status of a Hindu undivided family for over several years. For the assessment years 1967-68 to 1972-73, the petitioner filed the returns before the Wealth-tax Officer on diverse dates declaring the net wealth. In pursuance of an order dated February 11, 1980, passed by the Central Board of Direct Taxes, the records relating to the petitioner''s assessment were transferred to the Income Tax Officer, Central Circle, Bombay. The assets of the Hindu undivided family comprised, inter alia, interest in the partnership firm of Juggilal Kamlapat Bankers, Kanpur. The petitioner complains that the Wealth-tax Officer did not complete the assessment as required under the provisions of law. On April 12, 1984, six notices were served upon the petitioner by the Wealth-tax Officer calling upon him to attend the office in connection with certain points with the returns submitted for the assessment years 1967-68 to 1972-73. The petitioner filed the present petition under article 226 of the Constitution of India to challenge the legality of these notices.

The gravamen of the complaint of the petitioner is that it was incumbent upon the Wealth-tax Officer to pass an order of assessment u/s 16 of the Wealth-tax Act, 1957, in accordance with the provisions of section 17A of the Act. The petitioner claims that after expiry of the period specified in section 17A of the Act, the Wealth-tax Officer has no jurisdiction and authority to proceed with any assessment proceedings or to pass the order of assessment. The petitioner claims that the period of limitation set out u/s 17A of the Act is a fetter on the power of the Wealth-tax Officer to proceed with the assessment and, consequently, the service of notice calling upon the petitioner to explain certain points was without jurisdiction.

In answer to the petition, S. B. Sharma, Wealth-tax Officer, has filed the return sworn on June 16, 1984. The return claims that the petitioner is one of the partners in the firm of Juggilal Kamlapat Bankers, carrying on business at Kanpur. Padampat Singhania was one of the partners in the said firm and in the assessment proceedings of Padampat Singhania, the Wealth-tax Officer, Kanpur, made a reference to the Valuation Officer u/s 16A of the Act with a view to ascertain the value of the assets of the partners in the partnership firm. Padampat Singhania, on his own behalf and on behalf of the partnership firm, filed a writ petition in the Allahabad High Court to challenge the reference made u/s 16A of the Act. The Allahabad High Court (see Juggilal Kamlapat Bankers and Another Vs. Wealth-tax Officer, C-Ward and Others, ) dismissed the writ petition and thereupon the firm and Padampat Singhania preferred an appeal before the Supreme Court of India to challenge the legality of the order dated October 4, 1977, passed by the Allahabad High Court. The Supreme Court entertained the appeal and on August 21, 1978, passed the following order restraining the Wealth-tax Officer from proceeding with the assessment :

"Interim injunction restraining the Wealth-tax Officer from making order of assessment as also the Valuation Officer from making a report to the Wealth-tax Officer, though the Valuation Officer may proceed with the valuation, short of making the final report."

The appeal preferred by the firm and Padampat Singhania ended in dismissal on December 15, 1983, by a judgment in Juggi Lal Kamlapat Bankers and Another Vs. Wealth Tax Officer, Special Circle C-Ward, Kanpur and Others, . The Wealth-tax Officer claims that the notice dated April 12, 1984, was thereafter served on the petitioner seeking certain clarification. The respondents claimed that till such time as the Valuation Officer was prohibited from valuing the properties of the firm and submitting a report, the Wealth-tax Officer could not proceed to make the assessment.

Learned counsel appearing on behalf of the petitioner submitted that the Wealth-tax Officer could not have postponed completion of assessment proceedings by ignoring the provisions of section 17A of the Act as the Supreme Court had not prevented the Wealth-tax Officer, Bombay, from completing the assessment. Learned counsel urged that section 16A enables the Wealth-tax Officer to make a reference to the Valuation Officer if the Wealth-tax Officer is of the opinion that the fair market value of the asset exceeds the value of the asset as returned. It was contended that the power to make a reference is circumscribed by the time-limit prescribed u/s 17A of the Act and it was not permissible to make any order of assessment after the expiration of the period of four years commencing from April 1, 1975, or one year from the date of filing of the return. In answer to the contention, Shri Jetley, learned counsel appearing on behalf of the Department, submitted that in computing the period of limitation, the period during which the assessment proceedings are stayed by an order of injunction of any court is required to be excluded in accordance with Explanation 1 to section 17A of the Act. Shri Jetley submits and in our judgment with considerable merit, that as the Supreme Court has restrained the Wealth-tax Officer, Allahabad, from making the order of assessment in pursuance of the valuation report sought from the Valuation Officer, it was incumbent upon the Wealth-tax Officer, Bombay, to withhold the completion of the assessment. On behalf of the petitioners, it was claimed that the order passed by the Supreme Court merely restrained the Wealth-tax Officer of Allahabad in respect of assessment proceedings of Padampat Singhania and that order should not have deterred the Wealth-tax Officer in Bombay from completing the assessment of the petitioner. We are afraid, we cannot accede to the submission. The valuation of the share of a partner of a firm can be determined only after ascertaining the value of the assets of the firm. In a case where the assessment of the share of a partner in a firm could not be completed because of an order of the court, it is futile to claim that the assessment of the valuation of the share of another partner should be completed merely because the assessment proceedings are separate. In our judgment, once the Valuation Officer determines the assets of the firm and makes the report about the share of the partner, the decision would be required to be applied while assessing the share of other partners even though the assessment proceedings are separate. It is not permissible for the Valuation Officer to record conflicting findings in regard to the assessments of different partners. In the present case, as the Supreme Court had restrained the Wealth-tax Officer, Allahabad, from completing the assessment proceedings which required valuing the share of a partner, the Wealth-tax Officer in Bombay was perfectly justified in claiming the advantage of the period of limitation as prescribed under Explanation 1 to section 17A of the Act. In our judgment, the grievance of the petitioner that issuance of the impugned show-cause notices was without any jurisdiction cannot be accepted. It cannot be overlooked that the appeal before the Supreme Court was preferred not only by one of the partners but also on behalf of the firm and, consequently, the orders secured from the Supreme Court would ensure to the benefit of all the partners.

Reference to the decision of a single judge of the Calcutta High Court delivered on November 13, 1991, was made to urge that in respect of a writ petition filed by another partner before the Calcutta High Court, the contention that the assessment proceedings were barred by limitation prescribed u/s 17A was upheld. A perusal of the judgment of the learned judge establishes that the order of the Supreme Court was not brought to the attention of the Calcutta High Court, nor did the Department claim the advantage of Explanation 1 to section 17A of the Act. It is, therefore, obvious that the decision of the Calcutta High Court can have no application to the facts of the present case.

Accordingly, the petition fails and rule is discharged with costs.