Law:

Section:

Section 17 of the Wealth-tax Act, 1957 - Reassessment - Non-disclosure of primary facts - A palace, 'R', owned by petitioner, an ex-ruler, included certain open lands lying between two projecting towers on outer corners of R - Abovesaid land was parallel to R's wall and petitioner treated it as a part and parcel of R - However, as he was not very sure about it he made specific mention to that effect in sale deed executed by him - WTO treated 'R' including abovesaid land as exempt from wealth-tax under section 5(1)(iii) - Later on, WTO issued notice under section 17 on ground that abovesaid land was situated outside R's complex and was not exempt under section 5(1)(iii) - Whether WTO ought to have held preliminary enquiry and come to a prima facie conclusion that he had reason to believe that there had been a deliberate omission or failure on assessee's part and failure to do so would render notice invalid - Held, on facts, yes Facts On the outer corners of a palace, 'R', owned by the petitioner, who was an ex-ruler, there were towers which were protruding on the street and in between two of these towers there was an open strip of land parallel to R's wall, which the petitioner treated as a part and parcel of R. But as the petitioner was not sure about the same, while selling the abovesaid land, he made a specific mention to that effect in the sale deed. For the assessment year 1974-75, the WTO completed the assessment treating R and the abovesaid land as exempt from wealth-tax by virtue of section 5(1)(iii). Later on, the WTO served a notice under section 17 on the ground that he had reason to believe that net wealth chargeable to tax for the relevant assessment year had escaped assessment. On writ, the petitioner contended that in face of the clear-cut terms of the sale deed if the WTO had any doubts, he ought to have at least made a preliminary enquiry to make a prima facie case prior to issuance of notice under section 17 but as this was not done the impugned notice was without any justification. Held For taking action under section 17 the WTO must have reason to believe that property has escaped assessment. Assessment in this context would refer to the…

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