COMMISSIONER OF WEALTH TAX Vs. SIRKAR N R

JUDGEMENT

(1.) THE following three questions are referred to this Court under sub -s. (2) of S. 27 of the WT Act :

(2.) THE building referred in the first question bears No. 69 in Purnadas Road, Calcutta -29. The assessee in this reference is N. R. Sirkar. Rama Sirkar is the spouse of the assessee. She purchased the land on 9th Sept., 1959, for Rs. 24,700. The construction of the building commenced on 15th April, 1960, and completed in four years by March, 1964. The plinth area of the building is 4,824 sq. feet. The assessee advanced amounts on different dates in between the four years, Rs. 18,500 in 1959 - 60 and Rs. 1,46,617 was advanced as loans to her in the calendar years 1960 -62. The amount spent by her on the building was Rs. 1,78,821. She invested her stridhana gifted by her parents and relatives amounting to Rs. 28,204 on the building. The rest of the amount was obtained by her as loan from the assessee. She repaid Rs. 30,000 of the loan. The outstanding debt on 31st March, 1971, was Rs. 1,58,821. The further particulars show that when the land was purchased, her stridhana amounting to Rs. 10,459 and the balance of Rs. 14,241 was paid to the vendor after the loan was obtained by her. The particulars of the loans were shown to the WT authorities in the three returns filed by the assessee on 1st Aug., 1967, for the asst. yrs. 1960 -61, 1961 -62 and 1962 -63. The officer, in the three separate orders, accepted the amounts of loans advanced by the assessee to his spouse. In the order for the asst. year 1964 -65, the loan paid to the spouse in the relevant period was not accepted in view of the Tribunal's order No. 4610 (Gau) of 1971 -72 under the IT Act, 1961, for the asst. yrs. 1963 -64, 1964 -65, 1965 -66, 1966 -67, 1967 -68 for the assessee's spouse was not accepted as a debtor in the assessment orders for 1965 -66, 1966 -67 and 1967 -68 in the appeals and further appeals under the IT Act. The references to this Court are awaiting decision in this reference. The appellate authority confirmed the order of assessment under the WT Act for the year 1963 -64. The Tribunal held that no reliance can be placed on the accounts of the assessee. The returns for 1960 -63 were filed on 1st Aug., 1962. The 1963 -64 IT return was filed on 11th Nov., 1963. Having noted the dates, it was held that wealth -tax assessment orders passed on the returns for 1960 -63 cannot be relied upon. It was held that no repayment of the debt was made before 29th July, 1971. The spouse of the assessee was held as an ostensible owner or to that effect as she has no source of income. The assessee is the "virtual owner" of the building. The income from the house was held to be the income of the assessee. These factors were adverted to in rejecting the assessee's contention. In the three wealth -tax assessments for 1960 -61, 1961 -62 and 1962 -63, the assessee was accepted as the creditor and in the order for 1963 -64, that finding is departed from by the Revenue. That circumstance calls for consideration whether the principles of res judicata and estoppel govern assessment orders. One does not need authority at this distance of time to hold that the principles of res judicata and estoppel are not at all applicable in tax jurisprudence. The orders in taxation proceedings and the enquiries held are concluded every year is accepted as axiomatic we intend to review cases in this reference (sic).

(3.) ADVERTING to the case of Morarka (supra), we do not think that every time a like question arises, the answer to such a question cannot be put in such simple terms, for example, we see in a Full Bench case in the Madras High Court in T. M. M. Sankaralinga Nadar and Bros. vs. CIT AIR 1930 Mad 209, certain deposits made by the female members of the assessee were considered as loan in a particular year but in the following year the Revenue intended to reopen and enquire into the truth or otherwise of the debts. The Madras High Court stated that the taxation authorities, no doubt, are entitled to reopen the question. But the Court qualified the power and stated that where income -tax officials have, after enquiry, proceeded to assess on a certain basis, though they may be entitled to reopen their order, they cannot arbitrarily vary the order simply on the ground that the succeeding officer does not agree with the preceding officer's finding. The Revenue officers may have power to reopen the enquiry, but the Court emphasised that they should reopen only where there were fresh facts to arrive at a different conclusion, otherwise, in the absence of fresh facts, exercise of power will be considered as arbitrary exercise of power. The Madras High Court used the expression "natural justice" to bar the exercise of power. The Court warned that Revenue officers should not capriciously set aside or arbitrarily overlook the finding of their predecessors as findings are recorded after enquiries. It is, in that context, the Court said : "the ITO cannot simply say that he would not be bound by the order of his predecessor affecting a question like the present, namely, whether a certain sum is the capital of the firm or a loan. But if on investigation any additional facts come to his notice which he considers sufficient, he would be entitled to act upon that additional information". That Court considered a similar question in Trustees, Nagore Durgah vs. CIT (1954) 26 ITR 805 (Mad) : TC23R.902 and again the principle of natural justice was referred to and it was held that if there was a prior determination by the income -tax officials, ordinarily there should be no variation from that decision unless there are fresh circumstances to warrant a deviation from the previous decision.