Case Note & Summary
The case arose from two special leave appeals by the Commissioner of Wealth Tax, West Bengal, against the Calcutta High Court's refusal to direct the Income-tax Appellate Tribunal to state a case for reference under Section 27 of the Wealth Tax Act, 1957. The respondent, Imperial Tobacco Co. of India Ltd., a company assessee, had claimed deductions for provision for taxation and contingencies in its wealth-tax returns for assessment years 1957-58 and 1958-59. The Wealth Tax Officer originally allowed deductions for contingencies, but later initiated reassessment proceedings under Section 17(b) of the Wealth Tax Act, 1957, alleging that wealth had escaped assessment. For the assessment year 1957-58, the assessee claimed deductions of Rs. 51 lakhs for provision for taxation and Rs. 37 lakhs for provision for contingencies. The original assessment was completed on December 30, 1957, allowing the deductions. Subsequently, the Commissioner of Wealth Tax disallowed the provision for taxation by order dated December 29, 1958 under Section 25(2), but the contingency deduction remained allowed. For 1958-59, assessment completed on December 9, 1958 allowed only the contingency deduction. On March 22, 1960, the Wealth Tax Officer completed assessment for 1959-60 and disallowed the provision for contingencies. On June 2, 1960, he issued two notices under Section 17(b) for reassessment for 1957-58 and 1958-59. On September 24, 1961, reassessment orders under Section 16(3) read with Section 17(b) were passed, including earlier allowed contingency amounts in total wealth. The assessee appealed; the Appellate Assistant Commissioner sustained the reassessments. The Appellate Tribunal, however, allowed the appeals, holding that the reassessment was based on a mere change of opinion and that there was no 'information' in the Wealth Tax Officer's possession as required by Section 17(b) that could lead him to believe chargeable wealth had escaped assessment. The Tribunal noted that the departmental representative could not point to any specific information received after the original assessment. The principal legal issue was whether a referable question of law arose regarding the interpretation of the word 'information' in Section 17(b) of the Wealth Tax Act, 1957, especially given divergent High Court views on the comparable provision Section 34(1)(b) of the Indian Income-tax Act, 1922. The appellant argued that there was a conflict among High Courts on whether a change of opinion by the assessing officer could constitute 'information' justifying reassessment. It relied on the Supreme Court decision in Maharajkumar Kamal Singh v. Commissioner of Income-tax Bihar, which held that information includes correct state of law but left open the specific issue of change of opinion without fresh external information. The appellant cited decisions from Madras, Mysore, and Allahabad High Courts taking a wider view of information, in conflict with Bombay, Nagpur, and Patna High Courts requiring fresh fact or information. The respondent supported the Tribunal's view that no valid information existed, and the reassessment was invalid as based on mere change of opinion. The Supreme Court did not decide the merits of the reassessment but examined the divergence of judicial opinion. It noted that Section 34(1)(b) of the Income-tax Act, 1922, was in pari materia with Section 17(b) of the Wealth Tax Act, 1957. The divergent High Court interpretations on the scope of 'information' meant that a substantial question of law arose. The Court observed that the Tribunal should have referred the question to the High Court. It directed the Tribunal to make a reference either to the High Court under Section 27(1) or to the Supreme Court under Section 27(3A), as appropriate. The Supreme Court allowed the appeals, set aside the orders of the Tribunal and High Court rejecting the reference applications, and directed the Tribunal to state a case on the question of law formulated. The decision favored the revenue's request for a reference, without adjudicating the underlying reassessment validity.
Headnote
A) Wealth Tax - Reassessment - Validity of Notice under Section 17(b) - Requirement of 'Information' in Possession - Wealth Tax Act, 1957, Sections 17(b), 16(3) - Assessment for 1957-58 and 1958-59 originally allowed deductions for contingent liabilities; reassessment notices issued after later assessment year disallowed similar claim; Tribunal held reassessment based on mere change of opinion and invalid; High Court dismissed reference application; Supreme Court held divergence of judicial opinion on 'information' under pari materia Section 34(1)(b) Income-tax Act raised a referable question of law; directed reference under Section 27(1) or Section 27(3A). Held that question of law as to interpretation of 'information' should have been referred. (Pages 175-179) B) Income Tax - Reference to High Court - Duty of Tribunal to State Case - Wealth Tax Act, 1957, Section 27; Indian Income-tax Act, 1922, Section 34(1)(b) - Divergent High Court views on whether change of opinion constitutes information; Supreme Court in Maharajkumar Kamal Singh left open the issue; decisions from Madras, Mysore, Allahabad High Courts conflict with Bombay, Nagpur, Patna High Courts; therefore a substantial question of law arose; Tribunal duty to refer not discretionary. Held that Tribunal should make a reference. (Pages 177-179)
Issue of Consideration
Whether a question of law arose regarding the interpretation of 'information' in Section 17(b) of the Wealth Tax Act, 1957, requiring reference under Section 27, given divergent High Court views on the pari materia provision Section 34(1)(b) of the Indian Income-tax Act, 1922.
Final Decision
Appeals allowed; Tribunal directed to make a reference either to High Court under Section 27(1) or to Supreme Court under Section 27(3A) of Wealth Tax Act, 1957, as question of law arose due to divergent High Court views on interpretation of 'information'.
Law Points
- Legal points not extracted
- Meaning of 'information' under Section 17(b) Wealth Tax Act
- 1957
- Divergence of High Court opinions
- Section 34(1)(b) Income-tax Act in pari materia
- Duty of Tribunal to refer question of law under Section 27 Wealth Tax Act
- Change of opinion as insufficient information
