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2012 DIGILAW 1911 (MAD)

R. Kumaravelu v. Commissioner of Income Tax

2012-04-16

CHITRA VENKATARAMAN, K.RAVICHANDRA BAABU

body2012
Judgment :- CHITRA VENKATARAMAN, J. 1. The assessee is on appeal as against the order of the Tribunal, raising the following substantial questions of law: "(1) Whether on the facts and in the circumstances of the case, there was any failure on the part of the appellant to disclose fully and truly all the material facts necessary for assessment for the assessment year 1992-93 ? (2) Whether the Tribunal was justified in law in holding that Section 17 of the Wealth Tax Act, 1957 had been rightly invoked in the case of the appellant for the said assessment year ? (3) Whether the Tribunal was right in its conclusion that the appellant was assessable under item (2) Part I of Schedule 1 of the Wealth Tax Act, when the Trust was admittedly assessed under Section 21(1) of the Act ? 2. The assessment year under consideration is 1992-93 and the appeal arises under the Wealth Tax Act. The Tribunal upheld the order of reopening the assessment on the sole ground that the Kartha's daughter viz., Minor Tara was the sole beneficiary under the Trust and her assessable wealth was not included in the assessment of HUF. The HUF itself consisted of Kumaravelu, Smt. Homai Kumaravelu and Minor Tara. Admittedly all the three members did not have any taxable wealth. The Tribunal came to the conclusion that when one of the members of the HUF viz., minor Tara was the sole beneficiary of the Trust and the wealth assessable under Section 21(2) of the Act at the hands of the sole beneficiary exceeded the taxable wealth for the relevant assessment year, the assessing authority should have assessed the tax payable at the rate of 3% of the net wealth as specified HUF and not at the rate of 2% as unspecified HUF. Aggrieved by the order of the Tribunal, the assessee is before us. 3. Learned counsel appearing for the assessee placed before us the notice issued under Section 35 of the Wealth Tax Act. Aggrieved by the order of the Tribunal, the assessee is before us. 3. Learned counsel appearing for the assessee placed before us the notice issued under Section 35 of the Wealth Tax Act. Immediately after the first assessment was made, the rectification proceedings were initiated on the ground that the verification of the facts filed by the assessee would show that the assessee's minor daughter Tara was the sole beneficiary of the Trust by name "The Chrysanthimum Trust" and that the benefit arising out of the Trust must be assessed only at her hands and hence the assessment should be revised adopting the status of the asssessee as HUF Specified. The assessee filed its objections immediately on 24.7.1997. However, there was no further proceedings thereon. While so, the reassessment proceedings were subsequently taken up by the Wealth Tax Officer under Section 16(3) read with Section 17 of the Wealth Tax Act 1957 by issuance of notice on 1.3.2001. The grounds on which reassessment proceedings was taken up were the same grounds for initiation of rectification proceedings under Section 35 of the Act also. Thus, placing reliance on the notice issued under Section 35 of the Wealth Tax Act, learned counsel for the assessee pointed out that mere change of opinion itself will not confer jurisdiction to reopen the assessment under Section 17. He submitted that unless and until the Revenue is in a position to say that there was failure on the part of the assessee in making full and true disclosure of all the materials necessary for making the assessment, the assessment could not be reopened just for enhancing the liability of the assessee in the interest of Revenue. In such circumstances, the order of the Tribunal has to be set aside. 4. Learned Standing Counsel for the Revenue supported the proceedings initiated under Section 17 and contended that though a notice under Section 35 of the Wealth Tax Act was issued for revising the assessment, yet, the jurisdiction of the Assessing Officer to reopen the assessment is not ousted, as Section 17 of the Act empowers the Assessing Officer to reopen an assessment in the case of failure on the part of the assessee to disclose fully and truly all material facts. 5. 5. As held by a series of decisions of the Apex Court on the jurisdiction of the Assessing Officer to take up the reassessment, unless there are materials to point out that the disclosure was not true and complete, the reopening could not be upheld under the provisions of the Act. As rightly pointed out by the learned counsel for the assessee, the proceedings for rectification was undertaken by issuance of notice under Section 35 of the Wealth Tax Act. A reading of the said notice dated 25.6.1997 shows as follows: "The Wealth Tax assessment for the Assessment year 1992-93 had been completed in your case treating the status as that of unspecified HUF. However, on verification of the facts filed by you, it is seen that your daughter minor Tara is the sole beneficiary of the trust by name "The Chrysanthimum Trust" and that the benefit arising out of the trust is to be assessed only in the hands of the beneficiary minor Tara..." 6. On going through the said notice, it is evident that the Assessing Officer initiated rectification proceedings only on the score that there is a mistake apparent on the face of the record and hence the assessment was to be revised. Therefore, it is obvious that the Assessing Officer had all the materials before him when he invoked the jurisdiction under Section 35 of the Act for rectification of mistake. On the admitted facts as disclosed by the records, it stands to reason that the issuance of notice under Section 16(2) as if the assessee had not disclosed the material facts fully and truly is totally without any jurisdiction. As rightly pointed out by the leaned counsel for the appellant herein, a reading of the order of reassessment shows that it is more in the nature of review rather than that of reassessment. In such circumstances, we have no hesitation in setting aside the order of the Tribunal. Having regard to the fact that the very basis for exercise of jurisdiction under Section 17 for reassessment is absent, we do not find any ground to go into the merits of the assessment. Consequently, the Tax Case Appeal is allowed. No costs.