Vijaypat Kailashpat Singhania vs S.B. Sharma, Wealth-Tax Officer

M.L. Pendse, J.—The petitioner is an HUF known as ''Vijaypat Singhania'' of which the petitioner is the karta and is assessed to wealth-tax in the status of an HUF for over several years. For the assessment years 1967-68 to 1972-73, the petitioner filed returns before the WTO on diverse dates declaring net wealth. In pursuance of order dated 11-2-1980 passed by the CBDT, the records relating to the petitioner''s assessment were transferred to the ITO, Central Circle, Bombay. The assets of an HUF comprised, inter alia, of interest in the partnership firm of Juggilal Kamlapat Bankers, Kanpur. The petitioner complains that the WTO did not complete the assessment as required under the provisions of law. On 12-4-1984, six notices were served upon the petitioner by the WTO 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 to challenge legality of these notices. The gravamen of the complaint of the petitioner is that it was incumbent upon the WTO to pass order of assessment u/s 16 of the Wealth-tax Act, 1957 (''the Act'') in accordance with the provisions of section 17A of the Act. The petitioner claims that after expiry of the period specified in section 17A, the WTO has no jurisdiction and authority to proceed with any assessment proceedings or to pass order of assessment. The petitioner claims that period of limitation set out u/s 17A is a fetter on the power of the WTO 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, the WTO, has filed return sworn on 16-6-1984. 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 WTO, Kanpur, made a reference to the Valuation Officer u/s 16A 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 writ petition in Allahabad High Court to challenge the reference made u/s 16A. The Allahabad High Court dismissed the writ petition and thereupon the firm and Padampat Singhania preferred an appeal before the Supreme Court of India to challenge legality of order dated 4-10-1977 passed by the Allahabad High Court. The Supreme Court entertained the appeal and on 21-8-1978, passed following order restraining the WTO 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 15-12-1983 by judgment reported in Juggi Lal Kamlapat Bankers and Another Vs. Wealth Tax Officer, Special Circle C-Ward, Kanpur and Others, . The WTO claims that notice dated 12-4-1984 was thereafter served on the petitioner seeking certain clarification. The respondents claimed that till such time the as Valuation Officer was prohibited from valuing the properties of the firm and submitting a report, the WTO could not proceed to make the assessment.

The learned counsel appearing on behalf of the petitioner submitted that the WTO could not have postponed completion of assessment proceedings by ignoring provisions of section 17A as the Supreme Court had not prevented the WTO, Bombay, from completing the assessment. The learned counsel urged that section 16A enables the WTO to make reference to Valuation Officer if the WTO 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 reference is circumscribed by time limit prescribed u/s 17A and it was not permissible to make any order of assessment after expiration of the period of four years commencing from 1-4-1975 or one year from the date of filing of the return. In answer to the contention, Shri Jetley, the learned counsel appearing on behalf of the department, submitted that in computing the period of limitation, the period during which the assessment proceeding Js stayed by an order of injunction of any Court is required to be excluded in accordance with Explanation 1 to section 17A. Shri Jetly submits and in our judgment with considerable merit, that as the Supreme Court has restrained the Wealth-tax Officer, Allahabad, from making order of assessment in pursuance of valuation report sought from the Valuation Officer, it was incumbent upon the WTO, 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 WTO of Allahabad in respect of assessment proceedings of Padampat Singhania and that order should not have deterred the WTO in Bombay from completing the assessment of the petitioner. We are afraid, we cannot accede to the submission. The valuation of share of a partner of the firm can be determined only after ascertaining the value of the assets of the firm. In case where the assessment of share of a partner in a firm could not be completed because of the order of the Court, it is futile to claim that the assessment of valuation of share of another partner should be completed merely because the assessment proceedings are separate. In our judgment, once 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 Valuation Officer to record conflicting findings in regard to the assessment of different partners. In the present case, as the Supreme Court had restrained the WTO, Allahabad, from completing the assessment proceedings which required valuing share of a partner, the WTO in Bombay was perfectly Justified in claiming advantage of period of limitation as prescribed under Explanation 1 to section 17A. In our judgment, the grievance of the petitioner that issuance of 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, orders secured from the Supreme Court would enure to the benefit of all the partners.

Reference to decision of Single Judge of Calcutta High Court delivered on 13-11-1991 was made to urge that in respect of writ petition filed by another partner before the Calcutta High Court, the contention that assessment proceedings were barred by limitation prescribed u/s 17A was upheld. The 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 the department claimed advantage of Explanation 1 to section 17A. It is, therefore, obvious that the decision of the Calcutta High Court can have no application to the facts of the present case. Accordingly, petition falls and rule is discharged with costs.