ORDER
S.K. Chander, Accountant Member
1. This appeal by the assessee is directed against the order of the AAC of Wealth-tax N-Range, dated 7-2-1985 relating to the assessment year 1972-73. The main ground taken up in appeal is that the proceedings initiated under Section 17 of the Wealth-tax Act, 1957 (‘the Act’) by the WTO were ab initio void and, therefore, the assessment framed on the basis of such a proceeding is a nullity.
2. On this issue, we have heard both the sides and given careful consideration to the rival submissions as well as the relevant material in the paper book. We have also carefully considered the contents of the orders of the authorities below. We think it necessary to describe the background of the case before we decide the issue in appeal.
3. Mr. Elwin Hotz was domiciled in England on 24-12-1955 and was temporarily residing at that time at Ruo Sao Francisco Funchal Madaire, when he made his last ‘will’ and testament, copy of which appears at pages 1 to 3 of the assessee’s paper book. According to this will he appointed Lloyds Bank Ltd., England as executors and trustees of the will. In the will he mentioned seven beneficiaries, which are as under :
1. Olive Muriel Hotz, wife
2. Albet Carlton Hotz
3. Nancy Marguite Hotz
4. Frank Edwin Hotz
5. Betty Hotz
6. John Robert Hotz
7. Pamela Edwina Hotz
4. He beqeathed all the property both real and personal of which he would be possessed at the time of death over which he had or shall have any disposing power, unto the bank upon trust to sell, call in and convert into money such parts thereof as shall not consist of ready money. After payment of just debts and funeral and customary and testamentary expenses the beneficiaries if more than one had to share the estate in equal shares as tenants-in-common but his wife had to take a double share.
5. Mr. Edwin Hotz died on 9-9-1957 in England. As mentioned supra Lloyds Bank Ltd. was appointed as the sole executor of the will of the deceased. However, the said bank renounced the executorship of the will by executing a deed of renunciation on 23-1-1963. The widow of late Edwin Hotz, Mrs. Olive Muriel Hotz, applied for grant of the letters of administration in her favour to the Circuit Bench of the Punjab High Court at Delhi. As pointed out supra there were seven beneficiaries. The other six next-of-kin of the deceased filed no objection certificate in writing before the Hon’ble Punjab High Court at Delhi in probate case No. 2 of 1965. The Court ordered by its order dated 29-9-1965 that the letters of administration with a copy of the will, be issued to the attorney of the applicant, Shri B.C. Dasgupta, in terms of Section 242 of the Indian Succession Act, 1956, upon filing the estate duty certificate under Section 56 of the Estate Duty Act, 1953 and furnishing administration bond under Section 291 of the Indian Succession Act, with one surety, which may be an insurance company or a bank. The order of letters of administration is at pages 4 and 5 of the paper book.
6. The administrator, Shri B.C. Dasgupta, filed wealth-tax returns regarding the estate of Edwin Hotz (deceased) for the assessment years 1967-68 to 1974-75 for Mrs. Olive Muriel Webb on 15-11-1974, before the WTO, Central Revenue’s Building, Indraprastha Estate, New Delhi. Similarly, it appears that wealth-tax returns for the assessment year 1967-68 to 1975-76 were filed in respect of other beneficiaries. In the case of each beneficiary, the WTO, Survey Circle-IV, made a detailed order for the assessment years 1967-68 and 1968-69. But for the assessment years 1969-70 to 1975-76 the orders were made under Section 16(1) of the Act by the same WTO. In the detailed orders made for the assessment years 1967-68 and 1968-69, the WTO clearly applied his mind as he has recorded in his orders, which appear to be dated 28-3-1977. In these orders, the said WTO noted that the wealth-tax returns have been filed under Section 19A(5) of the Act. It is also recorded that the High Court has appointed Shri B.C. Dasgupta attorney of each assessee to take the letters of administration of the Indian estate of late Edwin Hotz. The WTO further records that the details have been filed before him from which it is explained that Mr. Edwin Hotz was living in India since his birth until the year 1947 when he left the country for good. He was a British national having Indian domicile at the time of his death, i.e., 9-9-1957 in England (in the will, however, the deceased had mentioned that he was domiciled in England). The WTO also records that there are seven beneficiarses who are related to each other and they became the owner of the estate of the deceased. The WTO also records that the beneficiaries ‘are not resident in India and they did not visit or reside in India during the year 1966 or thereafter’. Therefore, for the purpose of assessment he took their status as declared in the return to be that of individual and not citizen of India and ‘non-resident’. The WTO further records that the valuation of ordinary shares of private limited companies has been made properly as he has looked into it. The assessments so framed appear at pages 7 to 83 in respect of the seven beneficiaries.
7. It appears that after all this was done by the WTO, the IAC of Income-tax, Range 4C, Central Revenue’s Building, Indraprastha Estate wrote a letter dated 29/30-3-1976 and this was attended to by B.C. Dasgupta & Co. It appears that the AAC holding that post then was Shri S.K. Roy. The attorneys for the beneficiaries in this letter projected that they had discussion with the IAC on 8-4-1976 when the hearing was adjourned to 15-4-1976. This discussion was regarding the assessment of the beneficiaries to the estate of Edwin Hotz (deceased) and they informed the IAC in this letter that in respect of the assessment years 1967-68 to 1974-75 wealth-tax returns were filed on 16-11-1974. According to this letter, ‘the assessment of these wealth-tax returns is pending with the ITO, Survey Circle-IV, New Delhi’. Again on 24-4-1976 attorneys wrote to the said IAC that the wealth-tax returns for the assessment years 1967-68 to 1975-76 in respect of the beneficiaries to the estate of Edwin Hotz (deceased) the names of which were furnished to him were pending with the WTO, Survey Circle-DC and the said IAC desired that the wealth-tax assessments would be transferred for completing the assessments to Shri D.R. Kapur, ITO, Distt. X(5) who was already conducting the assessments of the income-tax returns in respect of the above estate. Assessments of all the beneficiaries were completed by the WTO in the manner noted in paragraph 6 above in 1977.
8. After this correspondence the assessee received notice dated 14-1-1981 under Section 17 on 28-1-1981 for the assessment year 1972-73, requiring a return of net wealth of the estate of the deceased for that year. This notice, it is common ground did not indicate whether it was under Section 17(1)(a) or 17(1)(b). The assessee wrote a letter dated 21-7-1983 to the ITO, Distt. 10(12), Central Revenue’s Building, Indraprastha Estate appearing at page 96 on the subject of wealth-tax of the estate of Mr. Edwin Hotz. This letter is by the attorneys B.C. Dasgupta & Co. In this letter they pointed out that they have been handed over notice under Section 16(4) for the assessment years 1972-73 to 1977-78 dated 28-6-1983 for production of statement of net wealth on 18-7-1983. It is pointed out that on that date Shri B.C. Dasgupta attended but the officer was not in his seat. Again on 20-7-1983 the matter was discussed with the officer concerned. Thereafter, the impugned assessment was made on 13-1-1984 by the WTO, Distt. 10(12), New Delhi. The status is taken as individual ‘resident’ and the assessment is shown under section ’16(5) read with Section 17(1)(a). In this assessment, the WTO records that no return of net wealth has been filed by the administrators/executors of the estate of Mr. Edwin Hotz under Section 14(1) of the Act. He also records that no notice had been issued under Section 14(2) by the department. Assessment proceedings were initiated under Section 17(1)(a) vide notice on 14-1-1981. The assessment was framed on net wealth of Rs. 6,26,600. This was challenged in appeal before the AAC.
9. The first ground before the AAC was that notice under Section 17 does not lie and, hence, the entire proceedings are void. The learned AAC has made a very brief order in dismissing the appeal with the observation that he found himself unable to agree with the plea advanced.
10. Before us on behalf of the assessee, it was contended by the learned counsel for the assessee that the proceedings for the impugned assessment are ab initio void because the notice issued by the WTO did not indicate the limb of Section 17(1) which he was invoking. In view of the fact that the returns had been filed for all the seven beneficiaries voluntarily by them and they had even been assessed, the notice issued under Section 17 was illegal and without any lawful authority. It was submitted that this was a case of merely of a change of opinion by the authorities concerned, as there was no escapement of net wealth by reason of omission or failure on the part of the assessee either to file the return or to furnish inaccurate particulars of net wealth. A mere change of opinion does not vest the WTO with the jurisdiction to make assessment under Section 17 as held by the Supreme Court in Indian & Eastern Newspaper Society v. CIT [1979] 119 ITR 996. The entire proceedings are, therefore, bad in law and assessment resulting therefrom, is a nullity.
11. The learned counsel supported his submissions by pointing out that there is no reason recorded anywhere for the year under appeal by the WTO and, therefore, the initiation of proceedings was not only bad in law but was without even following the mandatory provisions of law regarding initiation of proceedings. The assessment framed, therefore, is non est in law. It may be cancelled.
12. On the other hand, it was contended on behalf of the revenue that the assessment proceedings under Section 17 were rightly initiated and in view of the ratio of the Supreme Court judgment in the case of Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505, the assessments were properly made. The assessments were to be made on the estate of the deceased till it was finally divided and distributed. Since, it was not done there was escapement of net wealth. It was brought to tax by following the procedure established by law. Reliance for these submissions was also placed upon Jamnadas v. CWT [1965] 56 ITR 648 (Bom.) and CWT v. Keshub Mahindra [1983] 139 ITR 22 (Bom.), respectively.
13. In the rejoinder, the learned counsel for the assessee emphasised the lack of evidence for initiation of proceedings. He emphasised that despite the opportunity given to the revenue by the Bench no reasons recorded by the WTO have been produced, or shown to exist. Only reference to initiation of proceedings is in order sheet dated 12-3-1982 and the office note to the assessment order for the assessment year 1977-78 made on 12-3-1982. He submitted that these are the noting after the issue of notice under Section 17 on 14-1-1981. Therefore, there is complete lack of legal authority for initiation of proceedings under Section 17. The assessment made, therefore, be cancelled.
14. We have given careful consideration to the rival submissions and we find that full details not only of the estate of the deceased but of the shares of the beneficiaries had been filed before the WTO when returns for 1967-68 to 1974-75 were filed. Full particulars, which could enable the WTO to make a judicial decision as to whether the estate should be assessed in the hands of the administrators in one assessment or in the hands of the beneficiaries according to their shares were available to him. With all this evidence before the WTO assessments were raised by him for and from the assessment years 1967-68 to 1975-76 on all the beneficiaries severally, independently and individually. There assessments were valid and they stood as validly made assessments on the day when the notice under Section 17 was issued by the WTO on 14-1-1981 to the present assessee-appellant before us.
15. For the issuance of notice under Section 17 on 14-1-1981 in accordance with law, the WTO had two options open to him. Section 17 ibid provided the first choice that if the WTO had reason to believe that by reason or omission or failure on the part of the assessee to make a return under Section 14 of his net wealth in respect of which he was assessable under the Act for any assessment year or to disclose fully and truly all material facts necessary for assessment of his net wealth, the net wealth chargeable to tax had escaped assessment in that year whether by reason of understatement or assessment at too low a rate or otherwise he could issue notice under Section 17(1)(a).
16. And the second choice open to him was, if he had, in consequence of any information in his possession, reason to believe, notwithstanding that there had been no such omission or failure as is referred to in Clause (a), that the net wealth chargeable to tax had escaped assessment for any year, he may have issued notice under Section 17(1)(b). The time limit available for Section 17(1)(a) notice is within 8 years and for notice under Clause (b) it is 4 years from the end of the assessment year concerned. In the case, before us, the record of the WTO which has been produced before us and for which sufficient opportunity was given to the revenue only shows that the notice under Section 17, without any indication whether it was under Clause (a) or (b) was issued on 14-1-1981 and served on 28-1-1981. Despite opportunity given, we do not have even the order sheets for the assessment years 1967-68 to 1972-73 before us. The order sheet Photostat copy of which has been filed pertains to the assessment years 1977-78 and on 12-3-1982 there is some noting. This noting is subsequent to the issuance of notice under Section 17 for the year under appeal on 14-1-1981. Therefore, it does not help us at all nor it helps the revenue. The facts that we find, therefore, are that there are no reasons recorded by the WTO for initiation of proceedings under Section 17. Though in the assessment order, he has mentioned that the assessment is under Section 17(1)(a) yet, no reasons, no evidence, whatsoever, has been shown to us for assuming lawful jurisdiction under Section 17(1)(a).
17. We have described in detail above the factual background of the case, which includes the scenario developments leading to the assessments on the beneficiaries for and from the assessment years 1967-68 to 1975-76. When we keep that in focus and apply the ratio of the judgment of the Hon’ble Supreme Court-in the case of Indian & Eastern Newspaper Society (supra) in which the Hon’ble Supreme Court was dealing with a case under the Income-tax Act, 1961, we find that the initiation of proceedings was absolutely without jurisdiction in this case. The Hon’ble Court has held that the law in the case of Kalyanji Mavji & Co. v. CIT [1976] 102 ITR 287 (SC), to the effect that a case where income is escaped assessment due to ‘over sight, inadvertence or mistake’ of the ITO must fall within Section 34(1)(b) of the Indian Income-tax Act, 1922, is stated too widely and travels farther than the statute warrants. The Court has pointed that reappraisal of the material considered by the officer in the original assessment cannot be said to be discovering an error in consequence of which escapement is established and reopening of assessment is justified. An error discovered on reconsideration of the same material (and no more) does not give him that power.
18. In the case before us there was no material, whatsoever, other than the material that was before the WTO and had already been considered while making the assessments of the beneficiaries, to enable the WTO to start the proceedings under Section 17. The proceedings were started without any basis either on facts or in law. The WTO was merely changing his opinion, on the same set of facts. Even while doing so the WTO did not record the reasons for initiation of proceedings under Section 17(1)(a). There is not even an iota of evidence to justify these proceedings because a change of opinion, on same set of facts which had earlier been considered, cannot invest the WTO with lawful jurisdiction to make assessment under Section 17(1)(a). It has, therefore, to be held that initiation of proceedings under Section 17 for purpose of making the impugned assessment was ab initio void. Such proceedings could not result into a valid assessment. The impugned assessment, therefore, has to be held as non est in law. We hold so.
19. The orders of the authorities below are, therefore, cancelled.
20. Appeal allowed.