Case: Lok Nath and Company, The Mall, Shimla Vs. Commissioner of Wealth Tax, Patiala

do not feel any necessity of giving a finding whether Section 16(3) assessments in this case were in fact invalid, as argued by Shri B.R. Gupta. What we are keeping in mind is that the Commissioner of Wealth-tax while taking recount (recourse?) to Section 25(2) provisions thought those assessments to be invalid and once such was the case, his application of mind for vacating the assessments which he himself thought to be invalid and void ab-initio could not clothe him with power or authority of ordering fresh assessments. 5. The Tribunal also characterised the reason given by the Commissioner for revising as imaginary and unreal. 6. The High Court answered the question aforesaid in favour of Revenue on three grounds, viz., (1) the orders of the Wealth Tax Officer though purporting to be under Sub-section (3) are in substance and effect under Sub-section (1) of Section 16 of the Act, since he had accepted the revised returns submitted by the assessee. It cannot, therefore, be said that the orders of assessment are defective for violation of Section 16(2) of the Act, (2) the Commissioner was well within his jurisdiction when he was satisfied that all material facts necessary for the assessment had not been disclosed and that there had been an under-assessment. In such cases, the Commissioner is empowered to exercise his jurisdiction under Section 25(2) and (3) even if it is held that the assessment order ere made under Sub-section (3) of Section 16, yet the failure to issue a notice under Sub-section (2) of Section 16, does not affect the jurisdiction of the Wealth Tax Officer and it cannot be said that the orders of assessment are without jurisdiction. 7. As would be evident from the order of the Commissioner, the main ground upon which he exercised his power under Section 25(2) is that the assessment orders made by the Wealth Tax Officer purporting to act under Sub-section (3) of Section 16 were bad since no order of assessment could have been made under Sub-section (3) unless a notice under Sub-section (2) was given. In this case, admittedly no notice under Section 16(2) was issued. Sub-sections (1), (2) and (3) of Section 16, as they stood at the relevant time read as follows: 16.(1) If the Wealth-tax Officer is satisfied without requiring the presence of the assessee or production by him of any evidence that a return made under Section 14 or 15 is correct and complete, he shall assess the net wealth of the assessee and determine the amount of wealth-tax payable by him or the amount refundable to him on the basis of such return. (2) If the Wealth-tax Officer is not so satisfied, he shall serve a notice on the assessee either to attend in person at his office on a date to be specified in the notice or to produce or cause to be produced on that date any evidence on which the assessee may rely in support of his return. (3) The Wealth-tax Officer, after hearing such evidence as the person may produce and such other evidence as he may require on any specified points, and after taking into account all relevant material which the Wealth-tax Officer has gathered, shall, by order writing, assess the net wealth of the assessee and determine the amount of wealth-tax payable by or the amount refundable to him on the basis of such assessment. 8. The Commissioner then expressed the following apprehension, which forms the basis of his order: Such an assessment can always be challenged by the assessee legally even after the period for re-opening the assessment under Section 17 of the Wealth-tax Act, is over. And if this happens, the Department would have no remedy for collecting the wealth-tax dues from the assessee for this year as it will be outside its purview. Therefore, the assessment order made by the Wealth-tax Officer is not only erroneous but also prejudicial to the interests of the revenue. 9. We are of the opinion that once the High Court opined, and in our opinion rightly, that quoting of Sub-section (3) in the assessment orders was really a case of quoting the wrong provision of law and does not affect its legality, question of setting aside the assessment orders did not arise. The revised returns filed by the assessee-appellant were accepted by the Wealth Tax Officer and the assessment made. The assessment order for the Assessment Year 1959-60, which is in identical words as all the assessment orders, is a brief one. It reads: Assessment order. Return declaring total Wealth of Rs. Nil was filed on 30.8.1968 which is late. Consequently notice under Section 18(1)(a) has been issued separately. A revised return declaring total wealth of Rs. 706077/- has been filed by the assessee which is accepted as declared. Assessed. Issue demand notice and challan. 10. (Under the Column Section and sub-section under which the assessment aide, in the Preamble to the order, the Wealth Tax Officer mentioned 16(3).) 11. The assessment order is obviously the one made under Sub-section (1) though wrongly mentioning Section 16(3). Indeed, the High Court has held further that even if the said assessment are deemed to be under Sub-section (3), yet they cannot be held to be without jurisdiction merely because notice under Sub-section (2) was not issued. 12. Now, coming to the apprehension expressed by the Commissioner, which constitutes the basis of his order, it is, in our opinion, a remote one at best. The counsel for the Revenue could not also explain the observation of the Commissioner that if an assessment is made under Sub-section (3) without issuing a notice under Sub-section (2) of Section 16, such an assessment can always be challenged by the assessee legally even after the period of re-opening the assessment under Section 17 is over and in which case, the Revenue will be totally helpless. In our opinion, the Commissioner has acted on certain assumptions which are, at best, too remote, besides being difficult to appreciate.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]7. As would be evident from the order of the Commissioner, the main ground upon which he exercised his power under Section 25(2) is that the assessment orders made by the Wealth Tax Officer purporting to act under Sub-section (3) of Section 16 were bad since no order of assessment could have been made under Sub-section (3) unless a notice under Sub-section (2) was given. In this case, admittedly no notice under Section 16(2) was issued.8. The Commissioner then expressed the following apprehension, which forms the basis of his order: Such an assessment can always be challenged by the assessee legally even after the period for re-opening the assessment under Section 17 of the Wealth-tax Act, is over. And if this happens, the Department would have no remedy for collecting the wealth-tax dues from the assessee for this year as it will be outside its purview. Therefore, the assessment order made by the Wealth-tax Officer is not only erroneous but also prejudicial to the interests of the revenue.9. We are of the opinion that once the High Court opined, and in our opinion rightly, that quoting of Sub-section (3) in the assessment orders was really a case of quoting the wrong provision of law and does not affect its legality, question of setting aside the assessment orders did not arise. The revised returns filed by the assessee-appellant were accepted by the Wealth Tax Officer and the assessment made. The assessment order for the Assessment Year 1959-60, which is in identical words as all the assessment orders, is a brief one. It reads:Assessment order.Return declaring total Wealth of Rs. Nil was filed on 30.8.1968 which is late. Consequently notice under Section 18(1)(a) has been issued separately. A revised return declaring total wealth of Rs. 706077/- has been filed by the assessee which is accepted as declared. Assessed. Issue demand notice and challan.10. (Under the Column Section and sub-section under which the assessment aide, in the Preamble to the order, the Wealth Tax Officer mentioned 16(3).)11. The assessment order is obviously the one made under Sub-section (1) though wrongly mentioning Section 16(3). Indeed, the High Court has held further that even if the said assessment are deemed to be under Sub-section (3), yet they cannot be held to be without jurisdiction merely because notice under Sub-section (2) was not issued.12. Now, coming to the apprehension expressed by the Commissioner, which constitutes the basis of his order, it is, in our opinion, a remote one at best. The counsel for the Revenue could not also explain the observation of the Commissioner that if an assessment is made under Sub-section (3) without issuing a notice under Sub-section (2) of Section 16, such an assessment can always be challenged by the assessee legally even after the period of re-opening the assessment under Section 17 is over and in which case, the Revenue will be totally helpless. In our opinion, the Commissioner has acted on certain assumptions which are, at best, too remote, besides being difficult to appreciate.