- (1.) The Income-tax Appellate Tribunal has referred the following question of law arising out of its order dated May 23, 1988, in respect of the assessment years 1978-79 to 1984-85 under Section 27(1) of the Wealth-tax Act, 1957 : "Whether, on the facts and in the circumstances of the case, the order-sheet entry made by the Wealth-tax Officer dropping the proceedings commenced under Section 14 or initiated under Section 17 of the Wealth-tax Act, 1957, for the assessment years in question, without communicating it to the assessee, amounted to an order, which could be revised by the Commissioner of Wealth-tax in exercise of his powers under Section 25(2) of the Wealth-tax Act, 1957 -
(2.) The brief facts of the case are that the assessee-trust was settled by H.H. Maharaja Gaj Singh of Jodhpur, vide registered trust deed dated March 25, 1972. The settlor donated a sum of Rs. 53 lakhs to the trust, vide letter dated March 15, 1974. The money was lying in deposit with Messrs. Marudhar Hotels Pvt. Ltd. free of interest and within 10 years the deposit was to be converted into investments (non-cumulative preference shares carrying on dividend at the rate of 5 per cent. per annum), The said deposit was later on converted into preference shares. The trust filed an application under Section 12A of the Income-tax Act, 1961, for registration. The returns of wealth had been filed by the assessee in compliance with the notice issued under Section 14(2)/17 of the Wealth-tax Act, and exemption was allowed under Section 5(1)(i) of the said Act. The assessment proceedings for the assessment year 1979-80 were dropped, vide order dated June 29, 1984. No assessment order was framed nor any communication in respect thereof was made to the assessee. Similar was the position in respect of proceedings for the assessment years 1978-79, 1980-81 which were dropped on February 5, 1985, and in respect of the assessment years 1981-82 to 1984-85, the proceedings were dropped on October 17, 1985. It was found that the settlor of trust was one of the directors of Marudhar Hotels Pvt. Ltd., a deluxe hotel run by the ITDC Ltd. Marudhar Hotels Pvt. Ltd. was a subsidiary company of Jodhan Investment and Finance Corporation Pvt. Ltd. and Shri Gaj Singh was one of the nominee directors thereof. The settlor was provided with residential accommodation in Umaid Bhawan Palace Hotel along with the ITC staff (operators). The Commissioner of Wealth-tax set aside the aforesaid orders under Section 25(2) by which the assessment proceedings were dropped. The Commissioner of Wealth-tax gave a finding that the assessee was very well in the know as to the contents of the orders directing to drop the proceedings. Even if it was not conveyed to the assessee, it is not fatal to the proceedings under Section 25(2) of the Act. It was further observed that the authorities below erred in not examining the applicability of Section 21A of the Wealth-tax Act with reference to Section 13 of the Income-tax Act, and the authorities failed to consider the following issues before filing the wealth-tax assessment proceedings : "(1) Whether the investment in the name of the assessee-trust by way of originally interest free deposit and subsequently in the form of preference shares at the fixed rate of dividend with Messrs. Marudhar Hotels Pvt. Ltd. is read with Section 13(1) of the Income-tax Act. (2) Whether Section 13(2) is applicable in view of the rent-free residential accommodation being provided to the premises of Umaid Bhawan Palace, the property of Marudhar Hotels Pvt. Ltd. in which the investment by the assessee-trust to the extent of Rs. 53 lakhs remains undisputed. (3) Whether the chairman and director of Hotels Pvt. Ltd. and also its holding company Jodhan Investment and Finance Corporation Pvt. Ltd. are covered within the ambit of Section 13(3) read with Explanation 3 of the Income-tax Act, 1961. (4) Whether the assessee-trust is liable to wealth-tax within the meaning of Section 21A of the Wealth-tax Act, 1957, in the light of the facts as discussed above."
(3.) In an appeal before the Income-tax Appellate Tribunal, the following questions were framed for determination : a. Is the dropping of proceedings an order contemplated under the Act b. Is the noting in the order-sheet tantamount to an order passed by the Wealth-tax Officer c. Is the non-service of the order-sheet noting fatal to the jurisdiction of the Commissioner of Wealth-tax under Section 25(2) d. Do the observations of the Wealth-tax Officer that he has had consultation with the Inspecting Assistant Commissioner (Asstt.) and the Commissioner of Wealth-tax, have the effect of invalidating the jurisdiction of the successor-Commissioner of Wealth-tax e. Has the Commissioner of Wealth-tax been able to point out any error in the order made by the Wealth-tax Officer, which could be said to prejudice the interest of the Revenue f. Was the Commissioner of Wealth-tax right in considering the material in the case of Marudhar Hotels Pvt. Ltd. for his action under section 25(2) -;