1975 Supreme(Cal) 194

High Court Of Calcutta
SANKAR PRASAD MITRA, SABYASACHI MUKHERJI, S. K. DUTTA
NIRMALA BIRLA - Appellant
Versus
WEALTH TAX OFFICER, m WARD DIST.V (I) CALCUTTA - Respondent
Constitutional Writ Jurisdiction .   Of  .
Decided On : 07/15/1975

Headnote:

Whether there was any new material before the Wealth Tax Officer unknown to him previously which could provide the reasons for his belief under sections 17 (1) (a) or 17 (1) (b) when he reopened the assessment on the 7th January, 1972 for the assessment year 1968-69.

Fact of the Case:

The petitioners, trustees of the Chandralekha Trust, created the trust for the benefit of their son, wife, and children of their son, and others. The trust held 10,000 shares of the Central India Industries Ltd. The petitioners filed their Return for the assessment year 1968-69 on March 30, 1962. The shares of Central India Industries Ltd. were included in the list of "quoted shares". The case of the petitioners is that the shares were quoted at the Madhya Pradesh Stock Exchange at Indore. The Wealth Tax Officer completed the assessment for the Year 1968-69 on January 7, 1972. He computed the value of the shares in Central India Industries Ltd., on the basis of quotations at the M. P. Stock Exchange. The Rajya Sabha debate, as we have said, took place on the 14th March, 1972 and it appears from that debate that the Board gave directions to take into consideration new facts which came to the knowledge of the Board in all live and pending assessments. In spite of these directions in making assessment for the year 1968-69, the Wealth Tax Officer accepted the quotations of the M. P. Stock Exchange. More than a year after the completion of the assessment for the assessment year 1968-69 V. V. Badami, Director of Inspection (Investigation), of a Special Cell of the Ministry of Finance addressed a long letter to A. C. Mukherjee, Commissioner of Income Tax, West Bengal I, stating inter alia, that the Directorate's enquiry as to the genuineness of the Stock Exchange quotations of the Central India Industries Ltd. was complete and the Directorate had come to a finding that the Company was not either listed on the Indore Stock Exchange or the transactions were bogus. This is the fifth and last basic document on which the Tax Authorities have justified the reopening of the assessment for the year 1968-69 which is the subject matter of the present application.

Finding of the Court:

The Court found that the Wealth Tax Officer had reasons to believe that the wealth of the assessees had escaped assessment, and decided upon reopening the assessment for the year 1968-69. The notice that he gave was a notice under Section 17 of the Wealth Tax Act without referring to the clause under which he had 'reason to believe'.

Issues: 1. Whether the Wealth Tax Officer can hold dichotomy of beliefs or entertain alternative beliefs based either on Section 17 (1) (a) or under Section 17 (1) (b) of the Wealth Tax Act, 1957? 2. Whether the Wealth Tax Officer applied his own mind and exercised his own independent judgment before initiating the proceeding? 3. Whether there was any new material before the Wealth Tax Officer unknown to him previously which could provide the reasons for his belief under sections 17 (1) (a) or 17 (1) (b) when he reopened the assessment on the 7th January, 1972 for the assessment year 1968-69?

Ratio Decidendi: 1. The Court held that the Wealth Tax Officer cannot hold dichotomy of beliefs or entertain alternative beliefs based either on Section 17 (1) (a) or under Section 17 (1) (b) of the Wealth Tax Act, 1957. The Court relied on the judgment of the Allahabad High Court in Raghubar Dayal v. Commissioner of Income Tax, U. P., 63 I. T. R. 572, to support its holding. 2. The Court held that the Wealth Tax Officer applied his own mind and exercised his own independent judgment before initiating the proceeding. The Court relied on the statements made by the Wealth Tax Officer in his affidavit-in-opposition to support its holding. 3. The Court held that there was new material before the Wealth Tax Officer unknown to him previously which could provide the reasons for his belief under sections 17 (1) (a) or 17 (1) (b) when he reopened the assessment on the 7th January, 1972 for the assessment year 1968-69. The Court relied on the letter dated 14th March, 1973 from V. V. Badami, Director of Inspection (Investigation), of a Special Cell of the Ministry of Finance addressed to A. C. Mukherjee, Commissioner of Income Tax, West Bengal I, to support its holding.

Final Decision: The Court dismissed the application and discharged the Rule Nisi.