M RAMANAMMA Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) This reference made by the ITAT arises under the WT Act ("the Act" for short). The reference is made under s. 27(1) of the Act and relates to wealth-tax asst. yrs. 1965-66 to 1969-69 (both years inclusive) and 1970-71 to 1973-74 (both years inclusive). The Tribunal made a consolidated reference in connection with the reference applications filed both by the assessee as well as the CWT. Some questions are referred at the instance at the instance of the Revenue. The questions referred for the opinion of this Court are set out below : A. Questions referred at the instance of the assessee for the wealth-tax asst. yrs. 1965-66 to 1968-69 (both years inclusive) :

(2.) We shall first consider the question concerning the validity of the re-assessment proceedings initiated under s. 17(1)(a) of the Act for the asst. yrs. 1965-66 to 1968-69. The assessee owned considerable extent of land in Kothapadue in West Godavari district, Tallarevu in East Godavari district and also within the municipal limits of Visakhapatnam Municipality. Returns were failed for the wealth-tax asst. yrs. 1965-66 to 1968-69 declaring her net wealth. On the valuation dates Corresponding to these assessment years, a substantial portion of the assessees lands was acquired for the purpose of Railway Port Trust and other public bodies. The relevant notifications acquiring the property were issued between 26-9-1963 and 7-7-1966. It is common ground that, in the wealth-tax returns filed by the assessee, the assessee did not disclose the value of the lands held by her. It is also not in dispute that, in respect of the lands acquired, of which possession was taken before the valuation dates corresponding to the assessment years referred to above, the assessee did not disclose the compensation receivable as an asset. It is also not in dispute that, during the original assessment proceedings, attention of the WTO was not invited to the fact that the assessee was the owner of large extent of land and that a substantial portion of the same was already acquired and vested in the Government enabling the assessee to receive compensation in respect of the lands acquired. The wealth-tax assessments were completed on the basis of the returns filed between 31-10-1965 and 21-2-1969. The assessment completed did not include the value of lands held by the assessee or the compensation receivable. After the completion of the assessments, the WTO came by the above information. Noticing that, in the returns filed, the assessee failed to declare the value of the lands and the compensation receivable pursuant to the acquisition of a substantial portion of the lands, the WTO initiated proceedings under s. 17 of the Act reopening the assessments. The WTO served notices dt. 10-12-1973 on the assessee under s. 17 requiring the assessee to file returns of net wealth for these assessment years. The assessee challenged the validity of the jurisdiction assumed by the WTO under s. 17 by filing Writ Petition Nos. 4003 to 4010 of 1974 in this Court. The writ petition were dismissed upholding the validity of the reassessment jurisdiction assumed by the WTO. Against the order of the ld. single Judge dismissing the writ petitions, the assessee filed writ appeals bearing W.A. Nos. 608 to 615 of 1974. These writ appeals were disposed of by a Division Bench of this Court in 16-9-1974. The appeals filed were dismissed affirming the decision of the ld. single Judge. It may be jurisdiction assumed by the WTO by issuance of notice dt. 10-12-1973 under s. 17 of the Act was upheld basically on the ground that the assessee did not disclose in the wealth-tax return filed by her the value of the lands held by her on the valuation dates corresponding to the assessment years mentioned above and that the assessee failed to disclose in the returns the compensation receivable in respect of the lands acquired. It was also found that, during the course of the original assessment enquiry, the assessee did not disclose any facts concerning the acquisition of the lands, the awards passed or the proceedings pending for enhancement of compensation. The above decisions of this Court should have given a quietus to any further contention on the part of the assessee that the reassessment proceeding were not valid. Even so, the assessee seems to have urged before the authorities below that the reassessment proceedings are invalid, as the WTO did not indicate whether the proceedings were initiated either under s. 17(1)(a) or under s. 17(1)(b) of the Act. The assessee seems to have urged that the lands were agricultural in character and, therefore, there was no obligation to declare the value of the lands held by her and that information regarding acquisition of lands was not furnished because of the inconclusive nature of award proceedings at the relevant time. The WTO rejected the assessees plea that there was disclosure of the material facts and held that there was escapement of wealth in the assessments originally completed by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The assessee appealed unsuccessfully on this point to the AAC. In the second appeal filed before the ITAT, the assessee reiterated the plea that the reassessment proceedings were not valid. The Tribunal held that the decision of this Court upholding the validity of the reassessments concluded the question against the assessee and that it was not open to the assessee to re-agitate this question in appeals against the assessments made after the decision of this Court. The Tribunal also held that it was obligatory on the part of the part of the assessee to disclose the extent of lands held by her and put in appropriate claim for exemption if the assessee though that the lands were agricultural in character. There was failure on the part of the assessee to do so when the returns were originally filed. The Tribunal also held that the assessee was entitled to receiver compensation in respect of the lands acquired before the valuation dates corresponding to the assessment years mentioned above. The Tribunal rejected the assessees contention that, because there were some dispute regarding the persons to whom the compensation should be paid and the extent thereof the assessee should be absolved from the obligation to disclose the relevant particulars at the time when the original assessments were made. For these reasons, the Tribunal upheld the validity of the reassessment proceedings initiated under s. 17(1)(a) of the Act. We are satisfied, on looking into the materials on record, that there was omission of failure on the part of the assessee to disclose fully and truly all the material facts in the wealth-tax returns originally filed by her. This was the basis on which the writ petitions and the writ appeals filed by the assessee were dismissed by this Court. The WTO rightly invoked the provisions of s. 17(1)(a) of the Act. In fairness to the ld. counsel for the assessee it should be said that he did not seriously advance any submissions for the acceptance of the assessees claim that the reassessment proceedings were invalid. We accordingly hold that the reassessment proceedings initiated by the WTO under s. 17(1) (a) of the Act for the wealth-tax asst. yrs. 1965-66 to 1968-69 (both years inclusive) are valid. Inasmuch as the reassessment proceedings were initiated under s. 17(1)(a) of the Act, the re-assessments made were not barred by limitation. We accordingly No. 1 in the affirmative, that is to say, in favour of the revenue and against the assessee.

(3.) Question No. 2 referred to this Court at the instance of the assessee may now be considered. Our answer to question No. 2 would also cover the answer to question No. 5 referred at the instance of the assessee. As already stated above, the assessee owned substantial extent of lands in village Marripalem, Dondaparthi, Allipuram and Kancharlapalem within the Visakhapatnam municipal limits. It would appear that the assessee purchased these lands in the years 1960 and 1961. The total extent of lands was found to be in the region of 175 acres from out of which a portion had been acquired for the Railway, Port Trust, etc. as already mentioned. The assessee claimed that the lands held by her were agricultural in character and consequently they could not be considered as "assets" for wealth-tax purposes under s. 2(e)(1)(i) of the Act and including the asst. yrs. 1969-70. Form the asst. yr. 1970-71 onwards, the assessee claimed that she is entitled to exemption upto the extent of Rs. 1,50,000 under s. 5(1)(iva) of the Act. The contention would, therefore, appear to be that, for the wealth-tax asst. yrs. 1965-66 to 1968-69, the value of the agricultural lands cannot enter into the computation of net wealth at all, while, for the wealth-tax asst. yrs. 1970-71 to 1973-74, the value of the agricultural lands could be included consequent on the amendments to the WT Act introduced by the Finance Act, 1969, subject however to the exemption under s. 5(1)(iva) of the Act. The WTO rejected the assessees claims that the lands were agricultural in character for a variety of reasons. On appeal, the AAC upheld the WTOs view that the lands were not agricultural in character. The assessee filed a second appeal before the Tribunal reiterating the contention that the lands were agricultural in character. The Tribunal observed that an identical contention was urged by the assessee in connection with the income-tax asst. yrs. 1966-67 to 1969-70. It would appear that the question whether the lands were agricultural in character had arisen before the Income-tax authorities in connection with the liability to capital gains on the transfer of a portion of the lands under consideration. The Tribunal stated that, by its order dt. 31-1-1979 disposing of the appeals in connection with the income-tax asst. yrs. 1966-67 to 1969-70, it was held that the lands were not agricultural in character. For the same reasons, the Tribunal rejected the assessees contention that the lands should be considered as agricultural lands for purposes of wealth-tax (vide paragraph 26 of the Tribunals order).