Commissioner of Wealth Tax, Delhi-II vs Anokha Singh

Arijit Pasayat, CJ.

Accepting prayer for reference made u/s 27(1) of the Wealth- tax Act, 1957 (for short the Act), the Income Tax Appellate Tribunal, Delhi Bench-C (for short the Tribunal) has referred the following question for opinion of this Court.

"Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in holding that the order of the Commissioner of Wealth-tax passed u/s 25(2) was without jurisdiction and invalid?"

Factual position in a nut-shell is as follows:

For the assessment year 1976-77 Commissioner of Wealth-tax (in short the Commissioner) initiated proceedings u/s 25(2) of the Act and finally directed the Wealth-tax Officer to take fair market value of assessee''s property at 36, Motia Khan Dump Scheme, Rani Jhansi Road, New Delhi at Rs.14,18,000/-as against Rs. 7,44,400/- for the assessment year 1976-77. Basis for taking action u/s 25 of the Act was that the assessment records of the assessed were inspected by the audit party after completion of regular assessment. Objection was raised that the fair market value of the property on the relevant valuation date works out at Rs.20,26,371/- as against Rs.7,44,400/-, returned by the assessed and accepted by the Assessing Officer. On receipt of such audit objections, valuation of the property was referred to the Valuation Officer who determined the fair market value of the property on the relevant date at Rs. 14,18,000/-. On the basis of the aforesaid material, the Commissioner initiated proceedings u/s 25(2) of the Act and made the order as aforesaid. Said order was assailed before the Tribunal. It was assessor�s stand that any material coming into existence subsequent to the assessment cannot form part of the record for the purpose of invoking power u/s 25(2) of the Act. This plea found acceptance by the Tribunal. On being moved by the Revenue for reference, the aforesaid question has been referred.

There is no appearance on behalf of the assessed in spite of service of notice. We have heard learned counsel for the Revenue.

It is submitted that approach of the Tribunal is erroneous inasmuch as it has misconstrued the scope and ambit of Section 25(2). The language of the said provision made it clear that the conclusions arrived at by the authority, whose order is sought to be revised is (a) erroneous and (b) prejudicial to the interests of the Revenue. Records of the proceedings before the lower authorities have to be called for to find out whether the order of the authority concerned is erroneous and prejudicial to the interests of the Revenue. Twin conditions stated above is satisfied and, Therefore, Commissioner''s order was legal and proper and Tribunal was not justified in interfering with the same.

We find that Tribunal based its conclusions primarily on the basis of a decision of the Calcutta High Court in Ganga Properties Vs. Income Tax Officer, . The aforesaid decision was by a learned Single Judge. A Division Bench of the same High Court took a contrary view in Commissioner of Wealth Tax Vs. Ramnarayan Bhojnagarwala, . In that case it was observed that where the assessment is completed without any enquiry whatsoever, the order of assessment is erroneous and prejudicial to the interests of Revenue. While exercising powers to revise such assessment, Commissioner may make further enquiry before cancelling the original order and he can rely on the result of such enquiry. Commissioner may in a given case can term an order as erroneous on the ground that in the circumstances of the case further enquiry was necessary to be done before accepting the figures indicated by the assessed in the Return. The Apex Court in Rampyari Devi Saraogi Vs. Commissioner of Income Tax, West Bengal and Others, observed that where the Commissioner, who exercises jurisdiction, inter alias on the ground that the enquiry as made had revealed that the assessed neither resided nor carried on any business from the address declared in the return, can record the order as erroneous on the ground that further enquiry was contemplated. If Assessing Officer''s order contains some apparent error of reasoning or of law or fact, or where it is a stereo-typed order which simply accepts what the assessed has stated in his return and fails to make enquiries which are called for in the circumstances, Commissioner may term such an order as erroneous. (See: Smt. Tara Devi Aggarwal Vs. Commissioner of Income Tax, West Bengal, Calcutta, ). In Commissioner of Wealth Tax Vs. A. Nageswara Rao, similar was the view expressed by the Andhra Pradesh High Court. The position has been recently dealt with by the Apex Court in MALABAR INDUSTRIAL CO. LTD. Vs. COMMISSIONER OF INCOME TAX, . It was observed thus:

"The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income Tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue".

On a comparison of the provisions contained in Section 263 of the Income Tax Act, 1961 (which was the provision dealt with in aforementioned decisions) with that contained in Section 25(2) of the Act, it is clear that the provisions are identical. It is to be noted that Explantation-2 has been added by Finance Act.1983 with effect from 1st April, 1976. Explanation-(b) to sub-Section (2) of Section 25 of the Act read as under:

"Explanation - For the removal doubts, it is hereby declared that, for the purposes of this sub-section,-

(b) ''record'' shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner;..."

Though the Explanation does not in terms applies to the assessment year in question, but as a general principle, where the Commissioner finds that further enquiry was necessary to be conducted in the facts of a particular case, proceeding u/s 25(2) can be initiated if the assessment, according to the Commissioner, is erroneous and prejudicial to the interests of the Revenue. That being the position, our answer to the question referred is in the negative i.e. in favor of the Revenue and against the assessee.