1988 (2) TMI 97 - AT - Wealth-tax

Tribunal invalidates action under section 25(2) without CWT's preliminary satisfaction, limits WTO's fresh assessment.

The Tribunal held that the initiation of action under section 25(2) was invalid due to the lack of preliminary satisfaction by the CWT. The WTO's fresh ... Assessment Order, Orders Prejudicial To Interests Issues Involved:1. Validity of the initiation of action under section 25(2) of the WT Act.2. Scope of the WTO's powers in passing fresh assessment orders.3. Jurisdiction of the CWT to revise the WTO's fresh assessment orders.4. Merger of the WTO's orders with the AAC's orders.Detailed Analysis:1. Validity of the initiation of action under section 25(2) of the WT Act:The assessee's counsel, Shri S.E. Dastur, argued that the initiation of action under section 25(2) was invalid as the CWT did not initially state that the orders passed by the WTO were erroneous and prejudicial to the interests of the revenue. The show-cause notice lacked preliminary satisfaction, rendering the initiation of proceedings ab initio void.2. Scope of the WTO's powers in passing fresh assessment orders:Shri Dastur contended that the WTO's fresh assessment orders dated 27-3-1984 were limited in scope to implement the directions of the CWT (Appeals) from the consolidated order dated 30-5-1981, particularly in paras 13 and 14. The WTO's powers were restricted to the specific issues identified by the CWT (Appeals), and the WTO could not go beyond these issues. This argument was supported by the decision in Brihan Maharashtra Sugar Syndicate Ltd. v. P.R. Joglekar, which held that the Commissioner could not revise an order passed to implement a Tribunal's direction.3. Jurisdiction of the CWT to revise the WTO's fresh assessment orders:The counsel further argued that the CWT (Central-II) lacked jurisdiction to revise the WTO's orders as these were passed to comply with the CWT (Appeals)'s specific directions. This was supported by decisions in CIT v. Indo-Aden Salt Works Co., CIT v. Devidayal Metal Industries (P.) Ltd., and CIT v. Rai Bahadur Hardutroy Motilal Chamaria, which emphasized the restricted scope of orders passed to give effect to appellate directions. The CWT's jurisdiction under section 25(2) was limited and could not extend to revising orders passed within such restricted scope.4. Merger of the WTO's orders with the AAC's orders:For the assessment years 1972-73, 1973-74, and 1974-75, the WTO's fresh orders had merged with the AAC's orders dated 18-2-1986, precluding the CWT from revising these orders. This argument was supported by the decision in CIT v. P. Muncherji & Co., which held that once an order merges with an appellate order, it cannot be revised by the Commissioner.Conclusion:The Tribunal found that the initiation of action under section 25(2) was invalid due to the lack of preliminary satisfaction by the CWT. The WTO's fresh assessment orders were limited in scope to the specific issues directed by the CWT (Appeals) and could not be revised by the CWT. Additionally, for certain years, the WTO's orders had merged with the AAC's orders, further precluding revision by the CWT. Consequently, the Tribunal vacated the CWT's order for all the years under consideration and allowed the appeals.