MAHABANO ALI Vs. COMMISSIONER OF WEALTH TAX AND YAWAR RASHID AND BEGUM SURIYA RASHID
INCOME TAX APPELLATE TRIBUNAL
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Egbert Singh, Accountant Member -
(1.) ALL the above appeals are by different assessees involving a common point and the facts are also identical. Hence, the appeals are consolidated and are disposed of by this single order for the sake of convenience.
(2.) None is present on behalf of the assessee when the cases are called up for hearing. On behalf of the revenue, the learned departmental representative states briefly the facts of the case and the background in order to clarify the position why the Commissioner took action under Section 25(2) of the Wealth-tax Act, 1957 ('the Act'). According to him, there was full justification for the Commissioner to take action under the above section in view of the facts as narrated by him in the revision order. It is stated that the WTO committed error in allowing liabilities as deduction from the value of the wealth of the assessee which resulted in a loss to the revenue. It is submitted that the Commissioner took action to cancel the assessment orders passed by the WTO under Section 16(3), read with Section 17(1)(a), of the Act. According to the revenue, once the assessment is reopened validly under Section 17(1)(o), the entire proceeding stands open and the assessment would have to be done de novo. In this connection, it may be mentioned that all the assessees are connected since they are beneficiaries of certain trusts. The contention of the revenue is that the liability has wrongly been allowed by the WTO and the same required to be withdrawn which was done by the Commissioner in the present cases and as the ITO's orders were erroneous and prejudicial to the revenue, the orders of the Commissioner may be sustained.
We have perused the papers placed before us along with the submissions made. From the orders of the Commissioner it is seen that from a scrutiny of the wealth-tax records, he found that the liability towards Obedulla Khan Trust had been deducted while computing the net taxable wealth of the assessee for the above years. The Commissioner noted that the liability was initially secured on Shamla Deori Jagir which was converted into a cash annuity in the year 1953. Cash annuity being exempt under Section 2(e)(2)(ii) of the Act, the debt secured against such exempted asset was not deductible from the net wealth of the assessee in view of Section 2(m)(ii) of the Act. He noted that even otherwise, the debts, in question, were not deductible as a liability because it suffered a legal extinction by the time when Nawabzada Rashid-ur-Zaffar Khan died in August 1961. He further noted that in the circumstances, the assessments made by the WTO by ignoring the non-admissibility of the liability, as indicated above, resulted in underassessments and short levy of tax. According to him, the orders of the WTO appeared to be erroneous and prejudicial to the interests of revenue. Accordingly, action under Section 25(2) was taken in respect of all the assessees for all the years under appeals.
(3.) IT was contended before the Commissioner on behalf of the assessee that there was no justification for taking action under Section 25(2) as in the original assessment orders for all the years, the liability, in question, has been allowed and, therefore, there was no jurisdiction for taking action under Section 25(2) when such assessment orders were made on 26-2-1971. IT was contended that Section 25(2) cannot be applied to the reassessment orders passed by the WTO on 13-3-1979 in which the question of the liability was not at all considered. IT was also contended that a liability, in question, was allowed by the Tribunal in the estate duty proceedings of late Nawab Rashid-ur-Zaffar Khan, vide its order dated 10-9-1976. IT was also contended that in the assessment for the assessment year 1957-58 in the case of late Nawab Rashid-ur-Zaffar Khan, the liability was allowed in the wealth-tax case and the cash annuity of Shamla Deori Jagir was held to be taxable. According to the assessee, the liability was not related or secured against exempted assets.;
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