Wealth-tax reopening requires material negating exemption; mere allegations of misuse of income do not justify reassessment.

Reopening wealth-tax assessments under section 17 required material showing that the statutory exemption under section 5(1)(i) was not available. The Court held that allegations of breach of trust or misuse of income did not, by themselves, negate the position that the property continued to be held under trust or legal obligation for a public charitable or religious purpose in India. Because the revenue's material went only to alleged misapplication of income and not to the basic exemption condition, the reopening notices lacked sufficient basis and were quashed.

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Issues: Whether the notices issued under section 17 of the Wealth-tax Act, 1957, were sustainable in the absence of material to believe that the assessee's wealth had escaped assessment.

Analysis: The exemption under section 5(1)(i) of the Wealth-tax Act, 1957 depends on whether the property is held under trust or other legal obligation for a public purpose of a charitable or religious nature in India. Unlike section 11(1)(a) of the Income-tax Act, 1961, the Wealth-tax Act does not make the availability of exemption turn on the further question of how the income from such property is applied or accumulated. The material relied upon by the revenue only suggested misuse or breach of trust in the administration of the property, not that the property ceased to be held under a trust or legal obligation for a public charitable or religious purpose. Such alleged misapplication of income was therefore not relevant to the statutory condition for reopening under section 17.

Conclusion: The notices were without sufficient basis and were liable to be quashed. The assessee succeeded.

Final Conclusion: Reopening under the Wealth-tax Act could not be justified merely on allegations of breach of trust or misuse of income where the statutory requirement of holding property for a public charitable or religious purpose remained unshaken.

Ratio Decidendi: For reopening wealth-tax assessment, the revenue must have material to believe that the statutory condition for exemption is not satisfied; mere allegation of misapplication of income by trustees does not negate exemption where the property continues to be held under trust for a public charitable or religious purpose.

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