LOKENDRA SINGH RATHORE Vs. WEALTH TAX OFFICER

JUDGEMENT

(1.) THE petitioner, who is an ex-ruler of erstwhile Ratlam State in Madhya Bharat, has filed this petition under Articles 226 and 227 of the Constitution of India in the matter of proceedings for reopening of assessment under Section 17 of the W.T. Act, 1957 (No. 27 of 1957), for the assessment year 1974-75.

(2.) FACTS giving rise to this petition, material for the decision of the case, may be stated in brief thus : The petitioner, who owns movable and immovable properties, has been submitting his wealth-tax returns according to the provisions of the W.T. Act. The assessment year involved in the present petition is 1974-75. In his wealth-tax returns, the petitioner gave all the necessary details about the property held by him as also the sales effected regarding some of those properties. The assessment regarding computation of wealth based on wealth as on March 31, 1974, for the, assessment year 1974-75 was made as per annexure-F and annexure-G dated March 16, 1979, as in the past. In all these assessments, the petitioner has shown Ranjit Vilas Palace, popularly known as old palace, Ratlam, of which he is the owner and in possession, as exempted from wealth-tax by virtue of provisions of Sub-clause (iii) of Sub-section (1) of Section 5 of the said W.T. Act, which relates to any one building in the occupation of a Ruler, being a building which immediately before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was his official residence by virtue of a declaration by the Central Government under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950.

(3.) THE respondents in their returns have contended that the petition is premature as at this stage only a notice has been issued and no action as such has been taken ; that the petitioner has alternative remedies available under the said Act in which there is a provision for appeal before the CWT (Appeals) and thereafter further appeal before the Income-tax Appellate Tribunal. It is further contended that the notice for reopening under Section 17(1)(a) of the W.T. Act for the assessment year 1974-75 was issued not because of difference in valation of agricultural lands as he apprehended, but the assessee had gifted 9,066 sq. ft of land outside the compound of Ranjit Villas Palace in the assessment year 1977-78. According to the respondents, as this land is situated outside the compound-of the palace, it was not exempted under Section 5(1)(iii) of the W.T. Act. THE assessee did not include this asset in the return of net wealth nor was it assessed. THErefore, by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of his net wealth chargeable to tax, the value of the above property has escaped assessment and accordingly notice under Section 17(1)(a) to assess the escaped wealth was issued. It is further submitted that the respondents were not bound to communicate the reasons to the assessee but respondent No. 1 before issuing the notice recorded the reasons on November 27, 1981 (annexure-AA), which have been furnished to this court along with the returns. THE reason to believe is that the assessee gifted 9,066 sq. ft. of land outside the compound of Ranjit Vilas Palace in the previous year relevant to the assessment year 1977-78, and as this land is situated outside the compound of the palace, it was not exempt under Section 5(1)(iii) and that the assessee did not include this asset in the returns of net wealth nor was it assessed. That the value of the said (land 9,066 sq. ft.) as on the valuation date is estimated at Rs. 1,95,000 taking into account the fact that the Department Valuation Cell has estimated the value at the time of gift in 1977-78 assessment at Rs. 2,26,680. Thus, according to the respondents, notice under Section 17 of the Act was issued under Sub-section (1)(a) of Section 17 which provides a limitation of eight years and not under Section 17(1)(b) for which the limitation prescribed is four years.