TMI Blog1985 (1) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... wealth based on wealth as on March 31, 1974, for the assessment year 1974-75 was made as per annexure-F and annexure-G dated March 16, 1979, as in the past. In all these assessments, the petitioner has shown Ranjit Vilas Palace, popularly known as old palace, Ratlam, of which he is the owner and in possession, as exempted from wealth-tax by virtue of provisions of sub-clause (iii) of sub-s. (1) of s. 5 of the said W.T. Act, which relates to any one building in the occupation of a Ruler, being a building which immediately before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was his official residence by virtue of a declaration by the Central Government under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950. Thereafter by annexure-H dated November 27, 1981, respondent No. sent a notice under s. 17 of the W.T. Act for reopening the assessment for the year 1974-75 on the ground that he had reason to believe that the net wealth chargeable to tax for the assessment year 1974-75 had escaped assessment. The petitioner submitted his reply to the said notice, vide annexu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under s. 17(1)(a) to assess the escaped wealth was issued. It is further submitted that the respondents were not bound to communicate the reasons to the assessee but respondent.No. 1 before issuing the notice recorded the reasons on November 27, 1981 (annexure-AA), which have been furnished to this court along with the returns. The reason to believe is that the assessee gifted 9,066 sq. ft. of land outside the compound of Ranjit Vilas Palace in the previous year relevant to the assessment year 1977-78, and as this land is situated outside the compound of the palace, it was not exempt under s. 5(1)(iii) and that the assessee did not include this asset in the returns of net wealth nor was it assessed. That the value of the said (land 9,066 sq. ft.) as on the valuation date is estimated at Rs. 1,95,000 taking into account the fact that the Department Valuation Cell has estimated the value at the time of gift in 1977-78 assessment at Rs. 2,26,680. Thus, according to the respondents, notice under s. 17 of the Act was issued under sub-s. (1)(a) of s. 17 which provides a limitation of eight years and not under s. 17(1)(b) for which the limitation prescribed is four years. The petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was conveyed as forming part of the palace without any warranty of title and without charging any price for the same. Therefore, there was no question of showing this land in the wealth-tax return for assessment year 1974-75 as belonging to the assessee apart from Ranjit Vilas Palace; that when the part of the land was sold as aforesaid by the sale deed dated June 22, 1976, the sale proceeds were subjected to capital gains in the hands of the assessee in the income-tax return for the assessment year 1977-78 and the sale deed was also produced; that the ITO who is also the WTO was thus fully aware of the position and he had raised no objection in regard to the land of 9,066 sq. ft. referred to above, which is mentioned in the sale deed. It is further stated in the affidavit that the petitioner has no independent title to the said 9,066 sq. ft of land and thus there is no omission or failure on his part in not disclosing the said land in the wealth-tax returns for the assessment year 1974-75. The learned counsel for the petitioner submitted that it is not in dispute that under s. 5(1)(iii) of the W.T. Act, Ranjit Vilas Palace is exempt from wealth-tax. He, therefore, submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale deed, annexure-K, though the petitioner may not have sold the land in question for consideration, at least it is apparent that he has gifted the same treating it to be his own and consequently there is a prima facie case on the basis of the sale deed to indicate that the land in question belongs to the petitioner and this piece of material was sufficient as a good reason for the belief of the WTO. In support of his submissions, the learned counsel placed reliance on the decisions Nanji Co. v. ITO [1979] 120 ITR 593 (Cal), Grahams Trading Co. (India) Ltd. v. ITO [1976] 105 ITR I (Cal), ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC) and Raj Bahadur Bhatnagar v. CIT [1975] 98 ITR 382 (All). The learned counsel, therefore, submitted that if the WTO had the jurisdiction to issue the notice, it is not for this court to interfere therewith in exercise of the writ jurisdiction nor has it to find out whether there was sufficiency or not for issuing the said notice. After hearing the learned counsel and after considering the facts and circumstances of the case as also the case law cited, we are of the opinion that this petition deserve, to be allowed for reasons stated hereinaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonable grounds and not mere guess, gossip, suspicion or rumour. There should be a direct link or nexus with the information or material with the officer and the formation of the belief as to the escapement of net wealth in a particular assessment year. It is no doubt true that while the existence of grounds for such reason is necessary to give jurisdiction to the Taxing Officer, the adequacy of the grounds is not a matter for the court to go into. But the WTO cannot institute fresh enquiries with the object of finding out facts entitling him to reopen the assessment. Action under this section does not lie where the WTO merely changes his opinion. The word " belief " is a stronger word for which there should be some rational basis. Annexure-AA filed on behalf of the respondent also does not indicate that the WTO had applied his mind, carefully while reducing his reasons to believe in writing, but the same has been done in a mechanical manner merely on the basis of certain averments made in the sale deed which have also been apparently clearly explained therein. From the correspondence on record with the Municipality, Ratlam, relating to this land in question about which both par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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