C.Kandaiah, J.:-
(1) The income tax appellate tribunal , hyderabad bench submitted a statement of case and referred under section 27 (1) of the wealth - tax act, 1957 (hereinafter called the act) the following three questions of law, the first two at the instance of the assessee and the third at the instance of the revenue , for the opinion of this court:
" (1) whether on the facts and in the circumstances of the case, the wealth - tax officer had jurisdiction to reopen the assessments for the years 1964 - 65, 1965 - 66, and 1966 - 67 under
section 17 (1) (a) of the wealth - tax act? (2) if the answer to the above question is in the affirmative, whether the wealth - tax officer was competent to revise the value of the begumpet property in the reassessments for 1964 - 65 to 1966 - 67 and to disallow the assessees claim for bad debt of rupees 2, 36, 985/ - in the reassessment for 1966 - 67 when the limitation under
section 17 (1) (b) had expired in respect of these two items? (3) whether on the facts and the circumstances of the case the land at maredpalli in nature and its value included in the net wealth of the assessee for the assessment years 1963 - 64 to 1967 - 68?"
(2) This referred case came up before a division bench consisting of obul reddi c. J. , and m. Ramachandra raju, j. , who by their order dated 27 - 9 - 1977, answered question no. 1 in the affirmative and in favour of the revenue and referred question no. 2 to full bench as in their opinion it is an important one and is likely to arise quite often and there should be an authoritative pronouncement. That is how this (question) has come up before us.
(3) In order to appreciate the scope of the question it is necessary to refer briefly to the facts and circumstances indicated in the statement of case. For the assessment years 1963 - 64 to 1967 - 68 the wealth - tax assessments of the assessee were originally completed under section 16 (3) of the act on 6 - 2 - 1965, 5 - 3 - 1965 and 27 - 1 - 1968 respectively, subsequently, the wealth tax officer, having come to know that an item of immovable property consisting of 81/2 acres of open land at maredpalli, secuderabad was not disclosed by the assessee in the original returns, reopened in the first instance the assessments for the years 1975 - 58 and 1958 - 59 and estimated the value of the property at rs. 85, 000/ -. The plea of the assessee that maredpalli land was agricultural land was, therefore, exempt from the purview of the act was abandoned at the time of hearing of the appeal and the plea was confined to the value of the lands. The appellate assistant commissioner determined the value of the lands. The appellate assistant commissioner determined the value of the land at rupees 25, 000/ - in his order dated 5 - 4 - 1969. Thereafter the wealth - tax officer reopened the assessments for the years 1963 - 64 to 1967 - 68 by the issuance of notices under s. 17 (1) (a) of the act on the ground that the assess failed to disclose fully and truly all the relevant and material facts relating to the assessment in question. In the returns field by the assessee in response to the notice issued under section 17 of the act, rs. 25. 000. 00 towards the value of the maredpalli land was included by the assessee, although the assessee objected to the jurisdiction of the wealth - tax officer to reopen the assessment. Overruling the objection relating to the jurisdiction to reopen the assessment, the wealth - tax officer held that the maredpalli land was non - agriculture in nature and its value was liable to wealth - tax. In the returns field for the assessment years 1968 - 69 and 1969 - 70 the assessee himself admitted the values report. In the circumstances for the assessment years 1963 - 64, and 1964 - 65 the value of the land was determined at rs. 75,000. 00 for the assessment years 1965 - 66 and 1966 - 67 at rs. 80,000. 00 and for the assessment year 1967 - 68 at 85,000/ -. The wealth - tax officer also noticed another property known as begumpet property, the value of which was declared by the assessee for the assessment year 1968 - 69 at rs. 3, 83, 801. 00 on the conclusion that there was under of the property which was declared by the assessee at. Rs. 1,60,000. 00 in the original returns and accordingly fixed the value of the property at rs. 2, 75, 000. 00, rs. 3,00,000. 00 rs. 3,25,000/ - , rs. 3, 50,000. 00 and rupees 3, 83, 000/ - for the assessment year 1963 - 64, 1965 - 66, 1966 - 67 and 1967 - 68 respectively.
(4) On appeal the appellate assistant commissioner held that the wealth - tax officer was well within his jurisdiction to reopen the assessments and fixed the value of the maredpalli land rs. 60,000. 00 for the assessment year 1963 - 64, rs. 70,000. 00 for 1964 - 65 and 1965 - 66 and at rs. 80,000. 00 for 1966 - 67 and 1967 - 68 and upheld the assessment in respect of begumpet property. In the further appeal to the income - tax appellate tribunal ,it was contended on behalf of the assessee that there was not escapement of the value of maredpalli land within the meaning of section 17 (1) (a) that in any event, the wealth - tax officer had had jurisdiction to reassess the items of escapement or under assessment which would fall within the category of section 17 (1) (b) as the period of four years limitation had expired, that the maredpalli land was agricultural in nature and as such it was exempt from the tax and that the reassessment and assessment are, consequently, invalid and without jurisdiction. This claim was countered by the departmental representative by standing that the assessee had admitted the fact of non - inclusion of maderpalli property and when noticed was issued seeking reopening of assessment, the assessee included that property in the revised return and hence the wealth - tax officer had jurisdiction to reopen the assessment under section 17 (1) (a) of the act. The assessees (admission) that the maredpalli land was non - agricultural in nature, was made under an erroneous impression of law and that admission of law and that admission was withdrawn before the appellate assistance commissioner in view of the full bench decision of the andhra pradesh high court in officer - incharge (court of wards) v. Commr. Of wealth tax (1969) 72 itr 552). The tribunal agreed with the wealth - tax officer and the appellate assistant commissioner that the omission of maredpalli property in the original return had undoubtedly invested the wealth - tax officer with the jurisdiction to reopen the assessment under section 17 (1) (a) of the act and the attitude of the assessee before the appellate of the assessee before the appellate authorities would not deprive the wealth - tax officer of his power s and jurisdiction to reopen the original assessment. How ever, on the application of the several tests laid down by the andhra pradesh high court in officer - incharge (court of wards) v. Commr. Of wealth - tax (supra) it was found that the land was agricultural in nature and was, there fore, exempt from the purview of the act. The tribunal negatived the contention of the assessees representative that the wealth - tax officer was precluded in the proceedings initiated under section 17 (1) (b) of the act, and consequently, the under assessment pertaining to begumpet property was held to be rightly revised in the reassessment and the disallowance of bad debt of rs. 2, 36, 985. 00 was quite in order in the assessments for the years 1966 - 67 and 1967 - 68. The tribunal determined the value of begumpet property at rs. 3, 50, 000. 00, 3,00,000/ - rupees 2,50,000/ - , rs. 2,00, 000. 00 and rs. 1,60,000. 00 for the assessment years 1967 - 68, 1966 - 67, 1965 - 66, 1964 - 65 and for 1963 - 64 respectively.
(5) The sum and substance of the contention of mr. T. Ramachandra rao, learned counsel for the assessee is that the wealth - tax officer has no jurisdiction to reopen the previous assessment and assess or reassess the net wealth chargeable to tax which escaped assessment whether by reason of under assessment or at too low a rate of assessment or otherwise, in respect of items falling under section 17 (1) (b) after expiry of four years prescribed therefor, in a proceeding initiated by the wealth - tax officer pursuant to a noticed under section 17 (1) (a) of the act. To put it differently, according to the assessee, the reassessment proceedings initiated through a notice under section 17 (1) (a) of the act and in support of this contention the assessees counsel relied strongly upon the decision in virago chattier v. Commr. Of income - tax (1973) 91 itr 116) (mad) and jaganmohan rao v. Commr. Of income - tax ( (1970) 75 itr 373) (sc) and other decisions. This claim of the assessee is resisted by sri p. Rama rao, learned standing counsel for revenue contending, inter alia, that when once the reassessment proceedings initiated under section 17 (1) (a) are valid, the wealth - tax officer has not only jurisdiction but has a statutory duty and obligation to reassess the entire escaped net wealth and complete the assessment and that there is no fetter for the wealth - tax officer to restrict his reassessment proceedings only to the items that would fall under section 17 (1) (a).
(6) In order to consider the scope of this plea the provisions of section 17 (1) of the act may be noticed:
"if the wealth - tax officer - (a) has reason to believe that by reason of the omission or failure on the part of any person to make a return under section 14 of his net wealth or the net wealth of any other person in respect of which he is assessment under this act for any assessment year or to disclose fully and truly all material facts necessary for assessment of his net wealth or the net wealth of such other person for that year, the net wealth chargeable for that year, whether by reason of under - assessment of assessment at too low a rate of otherwise; or (b) has, in consequence of any information in possession , reason to believe, notwithstanding that there has been no such omission of failure as is referred to in clause (a) , that the net wealth chargeable to tax has escaped assessment for any year whether by reason of under - assessment pr assessment at too low a rate or otherwise; he may, in cases falling under clause (a) at any time within eight years and in case falling under clause (b) at any time within four years of the end of that assessment year, serve on such person a notice containing all or any of the requirements which may be included in a notice under
sub - section (2) of section 14, and may proceed to assess or re - assess such net wealth, and the provisions of this act shall, so far as may be, apply as if the notice had issued under that sub - section."
(7) We may consider the effect and scope of reassessment proceedings contemplated under section 17 (1) of the act which is in pari materia with section 34 (1) of the income - tax act, 1922, which fell for consideration in several decided cases. The earliest decision is that of the privy council in commr. Of income - tax bengal v. Mahaliram ramjidas (1940) 8 itr 442). Therein it was held that the income - tax officer is not required by section 34 to convene the assessee or to intimate to him the nature of the alleged escapement, or to give him an opportunity of being heard, before he decides to operate the powers conferred on him. The privy council observed at page 449:
"the operative part of section 34 empowers the income - tax officer to proceed de novo under
sub - section (2) of section 22, and that in turn leads, if there should still be a question of the accuracy of the return, to an enquiry under section 23 (2) and (3) , and in that enquiry the assessee has a statutory right to appear and to produce evidence."
There is nothing in the section to indicate that the word "such" would qualify or particularise any portion of the escaped income, or extent of its discovery, or exact nature of definite information. See commr. Of income - tax v. Jagannath maheswari (1957) 32 itr 418) (punj) and abdul sattar v. Commr. Of income - tax (1963) 47 itr 621) (andh pra). A division bench of this court in abdul sattar v. Commr. Of income - tax (1963) 47 itr 621 held that when once a case is reopened under section 34 of the income - tax act, the income - tax officer is not limited to the information which he had received and on the strength of which he had asked for reopening of the assessment and reassessment of the assessee and that the expression such income in section 34 of the income - tax act refers to the entire escaped income, not only to that part of it with respect to which the income - tax officer has definite information, in consequence of which he discovered the escapement. In jaganmohan rao v. Commr. Of income - tax (1970) 75 itr 373) the supreme court had to consider the question whether the income - tax officers jurisdiction is restricted only to the portion of income that escaped assessment. The supreme court did not agree with the assessee and observed at page 380 regarding the scope of the proceedings under section 34 thus:
"once the proceedings under section 34 are taken to be validly initiated with regard to two - thirds share of the income, the jurisdiction of the income - tax officer cannot be confined only to that portion of the income. Section 34 in terms states that once the income - tax officer decides to reopen the assessment he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under section 22 (2) and may proceed to assess or reassess such income, profits or gains. It is, therefore, manifest that once assessment is reopened by issuing a notice under
sub - section (2) of section 22 the previous under - assessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under
section 34 (1) (b) the income - tax officer has not only the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year."
The supreme court had to consider the scope and effect of reassessment under section 19 (1) of the madhya pradesh general sales tax act, 1958 in commr. Of sales tax v. H. M. Essufali h. M. Abdulali (1973) 90 itr 271) (sc). Hedge, j. Speaking for the court ruled at page 280 thus:
"what is true of the assessment must also be true of reassessment because reassessment is nothing but a fresh assessment. When reassessment is made under section 19, the former assessment is completely reopened and in its place fresh assessment is made. While reassessing a dealer, the assessing authority does not merely assess him on the escaped turnover, but it assesses him on his total estimated turnover. While making reassessment under section 19, if the assessing authority has no power to make best judgment assessment, all that the assessee need do to escape reassessment is to refuse to file a return or refuse to produce his account books. If the contention taken on behalf of the assessee is correct, the assessee can escape his liability to be reassessed by adopting an obstructive attitude. It is difficult to conceive that such could be the position in law."
To the same effect is the decision in dy. Commr. Of commercial taxes v. H. R. Sriarmulu (air 1977 sc 870) wherein the question that fell for determination was whether the period of four years for the exercise of revisional powers under section 21 (2) of the mysore sales tax act, 1957 has to be calculated from the date of initial assessment or from the date on which the orders under section 12 - a of that act were made. It was held that the period of four years is to be calculated from the date on which orders under section 12 - a of that act were made. The reason given by khanna, j. Who spoke for the court is:
"once an assessment is reopened the initial order for assessment ceased to be operative. The effect of reopening the assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made on reassessment. The initial order for assessment cannot be said to survive even partially, although the justification for reassessment arises because of turnover escaping assessment in a limited field or only with respect to a part of the matter covered by the initial assessment order. The result of reopening the assessment is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment."
(8) From the aforesaid decisions it is clear that reassessment wipes out the original assessment and the reassessment must be in respect of not only the item that escaped assessment but the entire assessment for the year. The assessing authority, whether under income - tax act or under sales - tax act, has a statutory duty and obligation, apart from having jurisdiction, to include all items that escaped assessment notwithstanding the fact that he had mentioned in the notice only some and complete the assessment as if the reassessment proceedings are de novo and afresh.
(9) The intendment and object of section 17 (1) of the act and the corresponding section 34 (1) of the income - tax act of 1922 is to confer jurisdiction on the assessing authorities to assess or reassess the authorities to assess or reassess the taxable wealth or income etc. Which escaped assessment for any year whether by reason of under - assessment or assessment at too low a rate or otherwise. section 17 (1) (a) will be attracted if the wealth tax officer has reason to believe that by reason of omission or failure on the part of any person to make a return of his net wealth or to disclose fully and truly all material facts necessary for the assessment of his net wealth, the net wealth chargeable to tax has escaped assessment for that year. The escapement may be due to under - assessment or assessment at too low a rate or otherwise. If the aforesaid factors are satisfied, the wealth tax officer may at any time within eight years of the end of the assessment year, serve on such person a notice containing all or any of the requirements which may be included in a notice under sub - section (2) of section 14 and may proceed to assess or reassess such net wealth. In spite of the fact that no such omission or failure as is referred to in clause (a) has been noticed, the wealth - tax officer is empowered under clause (b) to serve a similar notice within a period of four years if he has, in consequence of any information in his possession. Reason to believe that net wealth chargeable to tax has escaped assessment for any year. It is pertinent to notice that the provisions of the act, have been made applicable to such reassessment proceedings and that the notice issued under clause (a) or (b) of sub - section (!) of section 17 of the act must be construed to be a notice issued under section 14 (2) of the act. Section 14 (2) empowers the wealth - tax officer to serve a notice upon any person, who, in his opinion, is assessable under the act in respect of his net wealth, requiring him to furnish within such period not being less than 30 days a return in a prescribed form verified in the prescribed manner, particulars of his net wealth as on the valuation date mentioned in the notice. Form a read with rule 3 of the wealth - tax rules requires a person to furnish particulars of his net wealth in and outside india along with verification.
(10) On a careful reading of the provisions of section 17 (1) of the act, we are of the view that once an assessment is validly reopened under section 17 (1) no distinction can be made between the items falling under clause (a) and clause (b) therefore that the reassessment proceeding wipes out the original assessment which results in obtaining the same position as it was prior to the completion of the original assessment and that the assessing authority would, consequently, have jurisdiction to assess the items falling under clause (a) as well as clause (b) of section 17 (1) of the act. The expression
"and may proceed to assess or reassess such net wealth and the provisions of this act shall, so far as may be apply as if the notice had been issued under that sub - section"
Would indicate that the wealth tax officer has not only jurisdiction but has a duty and obligation to assess or reassess the entire escaped net wealth chargeable to tax for that year irrespective of the fact that some of the items fall under clause (a) and others under clause (b) of sub - section (1) of section 17. We have to take note of the fact that the earlier portion of sub - section (1) of section 17, which pertains to issuance of notice containing all or any of the requirements which may be included in a notice under sub - section (2) of section 14, is separated by comma and the later portion of that sub - section is altogether independent as it requires the wealth - tax officer to proceed to assess or reassess such net wealth. The period of limitation of eight years and four years prescribed in clauses (a) and (b) , respectively, govern the right conferred on the assessing authority to issue notice proposing to make assessment whether by reason of underassessment or assessment at too low a rate or otherwise (sic). Where the omission or failure either to file a return or to disclose fully and truly all the primary and material facts, is on the part of assessee, the larger period of eight years is available to the assessing authority to reassess the entire net wealth. The assessing authority would get or acquire jurisdiction to reassess the entire net wealth under section 17 (1) (a) when once the provisions of section 17 (1) (a) are attracted. The provisions of section 17 (1) (a) would be attracted even if one of the items that escaped assessment falls under this category. Where there is not even a single item which falls under clause (a) , the assessing authority has no jurisdiction to make reassessment under clause (a) but has to confine his assessment only to items falling under clause (b). Such a case would arise when the escapement of assessment is caused not due to the failure of the assessee either to file a return in time or to disclose fully and truly all material and primary facts but due to some other reason. The sovereign parliament designedly made this distinction. If the provisions of clause (a) are rightly attracted even in respect of one item and the assessing authority sought to interfere and including such net wealth which would have normally fallen under clause (b) , the assessee cannot complain that the net wealth which would have fallen under clause (b) cannot be assessed or reassessed. It is the assessee that should blame himself for such a situation such he himself has given room or opportunity for reopening of the earlier assessment for reopening of the earlier assessment and for making fresh assessment or reassessment under clause (a). The framers of this section conferred the benefit of lesser period of four years to reopen the assessments of those assesses who filed their returns and disclosed fully and truly all material facts, as they are not, in any way, responsible for the escapement of assessment of any items of net wealth. However, at the same time, jurisdiction was conferred on the assessing authority to reassess within a period of four years under clause (b) any escaped assessment which had been caused for reasons other than the failure or omission on the part of the assessee to file the return or to disclose fully and truly all material facts. This has been done with a view to protect the interests of the public revenue. If this distinction is kept in view, it cannot be said that the wealth - tax officer or income - tax officer, as the case may be, is trying to reopen the assessment indirectly, which he could not do so directly under clause (b). We are, therefore, of the view that when once the assessment is validly reopened under clause (a) of sub - section (1) of section 17 by issuance of a notice thereunder, the powers of the wealth - tax officer are not limited to the items which escaped assessment by reason of the failure or omission on the part of the assessee to file the return in time or to disclose all his net wealth which is subject to tax, but extends to taxing items which were excluded by the wealth - tax officer in the original assessment and which would have fallen under clause (b) , in spite of the fact that the period of four years had already elapsed.
(11) This view of ours gains support from a decision of a division bench of this court in pulavarthi viswanadham v. Commr. Of income - tax (1963) 50 itr 463). It arose under section 34 (1) of the income - tax act of 1922. Therein the income - tax officer initiated proceedings under section 34 (1) (a) of the 1922 act for the year 1945 - 46 as he had reason to believe that the assessee was indulging in extensive money lending and other business activities without disclosing them to the income - tax authorities. In the reassessment he included the sums of rupees 7,553/ - and rs. 478. 00 representing 1/4th share of the profits earned by the assessee and which were originally excluded by the i. T. O. From the taxable income of the assess under the mistaken impression that they belong to the estate of late j. V. Subba rao. The question that fell for consideration was whether the income - tax officer has jurisdiction to include the aforesaid items, which would fall under clause (b) only. Chandra reddy c. J. Speaking for the bench observed at page 465:
"when once the income - tax officer reaches the conclusion on the material that is before him that there has been a non - disclosure as regards part of the income, profits or gains charge able to income - tax by the assessee, he is entitled to issue a notice either under clause (a) or (b) , as the case ma y be, under section 22 (2) of the income - tax act. What emerges from
sub - section (2) of section 22 is that when once an assessee is required to submit a return of his income, he is obliged to disclose the totality of his income. The question that falls to be decided on the language of these two sections is whether after notice is issued under
section 34 (1) (a) the assessment should be limited to items which escaped assessment by reason of the failure on the part of the assessee to disclose all his income, profits or gains, which are subject to tax. The contention of learned counsel for the assessee is that having regard to the terms of clause (b) , it was not within the powers of the income - tax officer to bring to charge such of the items as have escaped from being taxed without any remissness on his part. It is only items that escaped assessment due to omission or failure of the assessee that come within the range and sweep of section 34, countries learned counsel for the assessee. We do not think that we can accede to this proposition. When once the assessment is reopened, no distinction could be made between items falling under clause (a) and those coming within the pale of clause (b). It is futile to contend that it is only such portion of the income which was not included in the original return that would be liable to tax in the reassessment proceedings. The position obtaining after invoking s. 34 (1) (a) is the same as it obtained prior to the completion of the original assessment. In that situation it was open to the department to subject the above said shares of income to tax. If that were the only item which escaped assessment, proceedings would have been started only under s. 34 (1) (b)."
(12) To the same effect are the decisions of this court in anna nagendram and bommareddi venkayya and co. V. Commr. Of income - tax (1967) 66 itr 46) , tadikonda ramulu v. Commr. Of income - tax (r. C. Nos. 54 of 1960 and 5 of 1964, d/ - 12 - 1 - 1964) and commr. Of income - tax v. Jeskaran bhuvaika ( (1970) 76 itr 128).
(13) We shall now advert to the decisions taking the contrary view. The decision of the madras high court in veerappa chettiar v. Commr. Of income - tax ( (1973) 91 itr 116) supports the assessees contention in the present case. That case arose under s. 34 (1) of the income - tax act, 1922. Therein the question that fell for decision was whether on the facts and the circumstances of the case it was open to the income - tax officer under s. 34 (1) (a) of the 1922 act to reconsider the assessees claim in respect of the loss from that chanallur sugar mill business for the assessment years 1953 - 54 and 1954 - 55. It was held that when once the reassessment proceedings are validly initiated in respect of an item of income either under cl. (a) or cl. (b) of section 34 (1) , the jurisdiction of the income - tax officer to reassess is not confined to the item of income in respect of which notice has been issued, but extends to all items of income which have escaped assessment, which may fall either under cl. (a) or cl. (b) of sub - s. (1) of s. 34. Ramanujam, j. Speaking for the court observed at page 124 thus:
"in this case the learned counsel for the assessee fairly concedes, in view of the above decision, the power of the income - tax officer to bring in items of income falling under s. 34 (1) (b) to charge in proceedings validly initiated by him in respect of items coming under s. 34 (1) (a). But what he contends is that though the income - tax officer has got power to bring to charge items falling under s. 34 (1) (b) in reassessment proceedings validly initiated under s. 34 (1) (a) , such power could not be exercised after the period of four years mentioned as regards the cases falling under cl. (b). According to the learned counsel the object of providing a time limit for the issuance of a notice in cases falling under
section 34 (1) (b) is to take away the power of the income - tax officer to reassess the items of income coming under cl. (b) after specified time limit, and that, therefore, the contention of the revenue that once the reassessment proceedings have been validly initiated in respect of the items falling under cl. (a) , the items of income falling under cl. (b) could also be brought to charge without any time limit, overlooks the said object. We are inclined to agree with the contention of the learned counsel for the assessee in this regard."
Having rightly held that the power of the income - tax officer to bring in items of income falling under cl. (b) to charge in the proceedings validly initiated by him in respect of items falling under cl. (a) , there learned judges erred in observing that the aforesaid power of the income - tax officer is curtailed in view of the specification of four years period applicable to items falling under cl. (b). When once the income - tax officer is conceded to have power to bring to charge the items falling under cl. (b) in reassessment proceedings validly initiated under cl. (a) , such power cannot be curtailed to he period of four years indicated in cl. (b). It may also be noticed at page 129 that the decision of this court in pulavarthi viswanadham v. Commr. Of income - tax (1963) 5 - itr 463) has been approved to the extent that
"it is an authority for the proposition that when the reassessment proceedings are initiated by invoking cl. (a) of s. 34 (1) , it is open to the income - tax officer to assess in those proceedings items falling under cl. (b) also."
It is further stated thus:
"though the observations of the court in that case were to the effect that once an assessment is reopened the income - tax officer has to follow the same procedure as in the case of the original assessment, the court has not gone specifically into the question whether the period of four years mentioned in cl. (b) could be ignored by the income - tax officer in those reassessment proceedings."
with great respect to the learned judges, we hold that the decision and the observations which are in conflict with the view expressed by this court in pulavarthi viswanadhams case, do not represent correct legal position.
(14) The bombay high court in new kaiser - i - hind spinning and weaving co. Ltd. V. Commr. Of income - tax ( (1977) 107 itr 760) differed from the view taken by this court pulavarthi viswanadhams case. The bombay high court did not consider the true effect and import of the observations of the supreme court in jaganmohana rao v. Commr. Of income - tax (1970) 75 itr 373) on the assumption that
"that court was not concerned in that case with the question as to whether the reassessment could be made under
section 34 (1) (a) or s. 34 (1) (b) , but the observations quoted above were made by the supreme court only in reference to and in the context of the contention that was advanced before it (at the top of page 380) that only 2/3rds of the income of mills could be said to have escaped assessment. In fact though the supreme court has in its judgment referred to s. 34 (1) (b) , at the time material for the assessment in the said case, cls. (a) and (b) were not to be found as separate clauses in s. 34 as it then stood. It is in reference to the said contention that the supreme court said that the entire income that had escaped assessment was liable to be reopened in the proceedings initiated in there said case under s. 34 (1) (b)."
With great respect to the learned judges, we are unable to adopt this reasoning. The decision and the observations of the supreme court are really binding on the high courts. That apart, the view expressed by the supreme court in jaganmohana raos case has been reiterated in the latest decisions as pointed out by us earlier. The learned judges laid much stress on the period of limitation of 4 years prescribed for initiating reassessment proceedings in respect of the items falling under cl. (b). It relied mostly upon the decision of the madras high court in veerappa chettiars case ( (1973) 91 itr 116) which we have already dealt with. With due respect to the learned judges, we are of the view that the very approach of the learned judges of the bombay high court does not appear to be correct a may be noticed from the following passage:
"in view of the concession that was made before the madras high court in the said case by the learned counsel for the assessee, the question as to whether, in a notice issued under cl. (a) of s. 34 (1) , items under cl. (b) thereof be reopened, did not arise and was not considered or decided by that court, and the only question before it was, whether the period of limitation prescribed for cases falling under cl. (b) would be applicable to items falling under that clause in case they were sought to be reopened by a notice issued under cl. (a)."
the only real question that falls for decision is that once the reassessment proceedings have been validly initiated under s. 34 (1) (a) , whether the income - tax officer has or has no jurisdiction to reassess the items which escaped assessment or subjected to under - assessment, although they fall under cl. (b) thereof. Therefore, the decision of the bombay high court, in our view, does not lay down the correct proposition of law. The decision of the supreme court in bisi and sons, nainital v. Commr. Of income - tax (air 1979 sc 379) cited by the assessees counsel in support of his contention, that what could not be done directly cannot indirectly be done, has no application to the facts of this cause. The decision of the supreme court in commissioner of income - tax, bombay v. Onkarmal meghraj ( (
1974) 93 itr 233) relied upon by the assessees counsel does not in any way assist the assessee in the present case. That was a case wherein it was held that there was no omission or failure either to file return or to disclose fully and truly all the material facts and, therefore, s. 34 (1) (a) could not apply and the notice should be deemed to have been issued under s. 34 (1) (b). The assessment year being 1944 - 45, the notice issued under s. 34 in april, 1954 was beyond 4 years period specified under s. 34 (1) (b) and consequently the assessment on the sons of n. M. And r were barred by limitation. Hence this case is distinguishable on facts. To the same effect is the decision of allahabad high court in gupta cold storage v. Income - tax officer, special circle, b ward, lucknow ( (
1978) 115 itr 819) cited by the assessees counsel. Therein it was found on facts that the notice issued under s. 148 of the income - tax act, 1961 to reassess the income for the assessment year 1961 - 62 was beyond 8 years from the date of the close of the assessment year 1961 - 62 and, therefore it was clearly beyond time and invalid. Consequently, the notice issued on 14/07/1976 was quashed. The other decision of the supreme court on which strong reliance has been placed by the assessees counsel is parashuram pottery works co. Ltd. V. Income - tax officer, circle i, ward a, rajkot ( (1977) 106 itr 1) (sc). Therein the question that fell for decision was whether there was omission or failure on the part of the appellant to disclose truly and fully all the material facts with regard to depreciation in respect of some of the items of the capital assets. The appellant pleaded that all the material facts were already on the record of the department and it is for the income - tax officer to draw a correct inference. The high court in a writ proceeding rejected the plea of the assessee and held that the assessee did not disclose fully and truly all he material facts and, therefore, the notice under section 147 (a) was validly issued. On appeal to the supreme court it was held the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts necessary for the assessment. The income - tax officer in determining the figures of depreciation for certain items of capital assets did not take note of the fact that the aggregate of the depreciation including the initial depreciation allowed under different heads could not exceed the original cost to the assessee of those items of capital assets. It is really a lapse on the part of the income - tax officer in not applying the law contained in cl. (c) of the proviso to s. 10 (2) (vi) of the act of 1922. On a consideration of the entire facts the court was of the opinion that
"it cannot be said that the excess depreciation was allowed to the appellant - company and its income as such escaped assessment because of its omission or failure to disclose fully and truly all material facts."
In the result the appeal was allowed and the impugned notices under section 147 (a) were quashed. This case would render no assistance to the plea of the assessee. On the other hand it supports our view that the assessee, has adequate and effective remedy if the assessing authority resorts to take aid of the longer period of limitation provided under cl. (a) of s. 17 (1) of the act with a view to are open the items of escapement which fall only under cl. (b). The aforesaid cases are distinguishable on facts.
(15) Hence the decisions relied upon by the assessees counsel in support of his contention, that the assessing authority has no jurisdiction to include the items which would fall under cl. (b) of s. 17 (1) of the act even though the reassessment proceedings have been validly initiated under cl. (a) if a period of four years had lapsed, do not lay down correct principles of law.
(16) It is not open to the assessee to contend that the assessing authority would be resorting to circumvent the provisions pertaining to the limitation, to the detriment of the assessee. Such a contingency will not arise in the case of honest and fair assesses, who have discharged their duty of filing the return in time and fully and truly disclosing all the material facts necessary for the assessment. In such a case no assessment can be reopened or no proceeding for reassessment under cl. (b) , can be entertained. Where any assessing authority attempts to report to this procedure of issuing notice under cl. (a) with a view to reassess the items falling under cl. (b) , the same can validly be challenged in a court of law in view of the completion of four years period of limitation. If the assessee succeeds in his plea that the reassessment proceedings under cl. (a) are without jurisdiction, as no case has been made out to reopen the assessment under cl. (a) or that the very proceedings are barred by limitation of even 8 years , the assessing authority cannot be permitted to proceed with the reassessment proceedings and any reassessment made in such a case or cases would be decided against the revenue and in favour of assessee. Hence it cannot be said that assessee has no remedy in genuine and appropriate cases to protect his interests if he has not committed any default in the discharge of his duty to furnish fully and truly all the material facts necessary for the assessment.
(17) For all the reasons stated above, our answer to the second question is in the affirmative and in favour of the revenue and against the assessee, holding that the wealth - tax officer has not only ample jurisdiction and power but has a statutory duty and obligation to include all the items which fall under cl. (b) in the net wealth of the assessee for the assessments in question.
(18) The decision of the tribunal on question no. 3 is based on the application of the principles of law enunciated by a full bench of this court in officer - in charge (court of wards) v. Commr. Of wealth - tax (supra) which is no longer good law as the same has been overruled by the supreme court in commr. Of wealth - tax, andhra pradesh v. Officer - in - charge (court of wards) , paigah ( (1976) 105 itr 133) (sc). The assessees counsel as well as the standing counsel for the department represented that the matter should go back to the appellate tribunal for determining this question afresh in accordance with the law laid down by the supreme court in commr. Of wealth - tax v. Officer - in - charge (court of wards) , paigah ( (1976) 105 itr 133) with liberty to the parties to adduce fresh evidence if in its opinion it is necessary to lead additional evidence in support of the respective stands taken by the parties and we order accordingly.
(19) The reference is answered accordingly. There shall be no order as to costs.
(20) Answer accordingly