Mandatory balance-sheet valuation cannot be reopened on later-discovered stock unless statutory nondisclosure is shown.

Reopening of wealth-tax assessments under section 17 required reason to believe that wealth had escaped assessment because the assessee failed to disclose fully and truly all material facts. Where unquoted shares were originally valued under section 7(1) read with rule 1D on the company's balance sheet, later disclosure of unaccounted stock by the company did not justify reworking the statutory valuation or disturbing the completed assessment. The mandatory balance-sheet method remained binding, and confidential or subsequently obtained information outside that material did not, by itself, show escapement attributable to nondisclosure by the shareholders. The reassessments were therefore invalid and their cancellation was upheld.

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Issues: Whether the reassessments of wealth-tax could be validly reopened under section 17 of the Wealth-tax Act, 1957 on the basis that unaccounted stock later disclosed by the company meant that the assessee had failed to disclose fully and truly all material facts, and whether the original valuation of unquoted shares under rule 1D of the Wealth-tax Rules, 1957 could be disturbed by reworking the balance-sheet figures.

Analysis: Reopening under section 17 required the Wealth-tax Officer to have reason to believe both that wealth had escaped assessment and that such escapement resulted from omission or failure by the assessee to disclose fully and truly all material facts. The original assessments had been made by applying section 7(1) and rule 1D on the basis of the company's balance sheet. The later voluntary disclosure by the company did not establish that the balance sheet used for valuation was legally invalid or that rule 1D permitted the Wealth-tax Officer to add back undisclosed stock outside the balance sheet figures. The statutory method under rule 1D was binding, and the existence of confidential information or later knowledge about excess stock did not by itself create escapement of wealth from the shareholder's assessment. The assessees, in their capacity as shareholders, were not under a duty to disclose special information that was not part of the balance sheet material required for valuation.

Conclusion: The conditions precedent for invoking section 17 were not satisfied, and the reassessments were invalid.

Final Conclusion: The cancellation of the reassessments was upheld and the revenue's appeals failed.

Ratio Decidendi: Reopening of a wealth-tax assessment is invalid unless both statutory conditions are met, and where share valuation is governed by a mandatory balance-sheet based rule, later discovered or confidential information not forming part of the valuation material does not, by itself, justify reassessment.

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