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TMI Blog1981 (11) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No. 4) from proceeding with the valuation of the property above mentioned in pursuance of the reference made by the WTO referred to above; and (4) to direct the WTO to allow inspection of the records to the assessee to enable the assessee to satisfy herself regarding the opinion, if any, formed by the WTO under s. 16A of the W.T. Act, before making a reference under the said section to the Valuation Officer and to direct a copy of the order passed by him under s. 16A to be supplied to the petitioner. The writ petition arises in regard to the valuation of the property above mentioned in connection with the wealth-tax assessments of the petitioner for the assessment years 1971-72, 1972-73 and 1973-74. A brief chronology of the relevant events will bring out the points raised by the petitioner and at issue in this writ petition. For the assessment years 1971-72 to 1973-74, the assessee filed a return of net wealth, including therein an one-third share of the value of the above property belonging to the minor. The value had been shown at Rs. 7,97,800 on the basis of a report given by one R. G. Desai, an " approved valuer " as defined in the Act. For the assessment years 1971-72 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inspection of the records, the petitioner filed an application on March 5,1974, before the Commissioner challenging the actions of the WTO in making the reference to the Valuation Officer and in refusing to allow inspection (of the files). This application was dismissed by the Commissioner by his order dated April 24, 1974. The Commissioner dismissed the assessee's application on the short ground that the reference made by the WTO to the Valuation Officer did not amount to an order and that it was not, therefore, amenable to revision under s. 25 of the Act. The Commissioner also dealt with the merits of the revision which had been urged before him by the learned representative for the assessee and came to the conclusion that there was nothing wrong with the impugned action of the WTO. In view of this failure of the representations made before the departmental authorities the assessee filed this writ petition on May 7, 1974, along with an application for stay. The writ petition was admitted on May 13, 1974, and an interim order restraining the respondents from proceeding with the valuation or completing the assessments was passed during the pendency of the writ petition. The inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible that the WTO formed the opinion under s. 16A on no material and, therefore, the reference made to the Valuation Officer was liable to be quashed. To appreciate these contentions, it is necessary to set out the relevant provisions of the Act. Sections 16 and 16A, earlier referred to, occur in Chap. IV of the Act which deals with the procedure for assessment. These proceedings commence with a return of net wealth filed by the assessee, on his own under s. 14(1) or as required by the WTO, under s. 14(2). . Section 15 enables him to file a return or revised return before actual assessment, with which we are not here concerned. Section 16, which deals with assessment ", reads as under: "16. Assessment.-(1) If the Wealth-tax Officer is satisfied without requiring the presence of the assessee or production by him of any evidence that a return made under section 14 or section 15 is correct and complete, he shall assess the net wealth of the assessee and determine the amount of wealth-tax payable by him or the amount refundable to him on the basis of such return. (2) If the Wealth-tax Officer is not so satisfied, he shall serve a notice on the assessee either to attend in person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st January, 1973. It reads as follows: " 16A. Reference to Valuation Officer.-(1) For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, the Wealth-tax Officer may refer the valuation of any asset to Valuation Officer (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer, if the Wealth-tax Officer is of opinion that the value so returned is less than its fair market value; (b) in any other case, if the Wealth-tax Officer is of opinion (i) that the fair market value of the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. (2) For the purpose of estimating the value of any asset in pursuance of a reference under sub-section the Valuation Officer may serve on the assessee a notice requiring him to produce or cause to be produced on a date specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission of the report whether accepting the assessee's valuation under sub-s. (3) or estimating it differently under sub. s. (4) the proceedings revert to the WTO who completes the assessment, incorporating the effect of the report. But it is necessary to bear in mind that the Valuation Officer may not in most cases be called upon to express an opinion regarding all the assets of the assessee and will be asked to report on the value of only some of them. In fact, in every case, there will be assets capable of simple valuation like cash and movables and liabilities to be deducted in the computation and all these have to be considered and the net wealth and tax are determined only by the WTO. It is, therefore, clear that though the Valuation Officer may step into the shoes of the WTO for a limited purpose, the basic position that it is the WTO, who is the assessing officer, remains unaltered. It is the WTO's order that is the order of assessment leading to further consequences, on the one hand, by way of recovery of -tax, etc., and, on the other, by way of proceedings in appeal, revision, etc., under the Act. In the context of these provisions, the first argument raised on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion of an assessment rejecting the returned figure of net wealth; it is not expressly or even impliedly, a condition precedent to a reference under s. 16A. A reference under s. 16A cannot, therefore, be said to be vitiated because it was made before the WTO called upon the assessee under s. 16(2) to produce evidence in support of the return. We are conscious that this line of reasoning is open to one criticism which appears substantial but is not, in our opinion, really valid or forceful and it is this. It could be said that if a notice under s. 16(2) is not served and a reference is made to the Valuation Officer without such notice, the requirement of the sub-section would be rendered puerile and meaningless. No purpose would be achieved by the service of such a notice after the Valuation Officer has made his report, for, under s. 16A(6), the report of the Valuation Officer is binding on the WTO. In a situation where the WTO is statutorily bound to accept the report of the Valuation Officer and has no discretion to accept the assessee's figure even if he finds the evidence produced in response to the notice under s. 16(2) satisfactory, or even to modify the Valuation Officer' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggested on behalf of the petitioner will only introduce a double hearing on the question of valuation, once before the WTO and again before the Valuation Officer. It will be appreciated that the first of these is totally meaningless when it is the second officer who is required by the statute to adjudicate upon the valuation of the asset in question. An interpretation leading to such a redundance in procedure should be avoided. The second reason why we are unable to accept the petitioner's contention in the present case is that this sub-section envisages only a matter in which the assessee has not already placed on record the evidence on which he wants to rely in support of the return made by him and not to a case where the assessee has already done so. In this context, it is necessary to point out that a return, whether of net wealth under the W.T. Act or of total income under the I.T. Act, is only a statement of figures and claims. It only gives a summary of the assessee's case and it need not contain an adequate, or even any, explanation of the details of various figures. For instance, the assessee may give his valuation of an asset owned by him but may not fully disclose the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is all right. It is pointed out that there may be cases in which the WTO may have formed his impression due to some mistake, doubt, ambiguity or misappreciation of facts and law and, given a chance to explain, the assessee may be able to persuade him and thus completely obviate unnecessary harassment of an enquiry and investigation by the Valuation Officer. The rules of natural justice require, it is said, that the assessee should he heard before he is made to face an enquiry by the Valuation Officer. In support of his contention, Sri Sorabjee, relied on three English decisions. The first of these is the decision of the House of Lords in Wiseman v. Borneman [1969] 3 All ER 275 ; [1970] 75 ITR 652, a surtax case, which contains an interesting discussion on the applicability of the principles of natural justice to various types of situations, in particular, situation where an enquiry is a prelude to some further investigation or action. The case arose out of the provisions of s. 28 of the Finance Act, 1960, which was intended to cancel tax advantages from certain transactions in securities. Under sub-s. (1), the section came into operation when the circumstances defined in sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er party to the Tribunal on the merits of the action taken. In the context of these provisions, the question that arose was, whether, on principles of natural justice, the person against whom action was proposed under the section could insist on a right to see and answer the contents of the counter-statement filed by the Commissioners before the Tribunal. The question was answered in the negative but certain observations in the speeches of the learned law Lords have been relied upon by Sri Sorabjee. Lord Guest, after pointing out, that, to some extent, at any rate, the Tribunal under consideration was a judicial Tribunal which had to apply the principles of natural justice and give the taxpayers an opportunity of stating their case, proceeded to deal with a contention, that " as a general rule, where a preliminary point was to be decided, the court would not imply a term that the rules of natural justice should be applied ", in the following words : ".. ...... I can see no reason why, if the principles of natural justice have to be applied to a Tribunal entrusted with a final decision, the same should not be true of a Tribunal which has to decide a preliminary point which may aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Court of Appeal in Re Pergamon Press Ltd. [1970] 3 All ER 535. This was a case under the Companies Act and involved the question of the extent to which the inspectors appointed by the Board of Trade to investigate into the affairs of a company were under a duty to disclose to the company the information and material made available to them. Lord Denning M.R. rejected on the one hand the claim of the directors of the company that they had right to see the transcript of the evidence of witnesses adverse to them and also to see any proposed finding against them before it was included in the inspectors' report, much as if it were a judicial enquiry in a court of law in regard to an offence. But, on the other, he pointed out that the claim on behalf of the inspectors that they were not bound by the rules of natural justice because they were making, not any determination or decision but only an investigation or enquiry was also too extreme to be accepted. It was true that the inspectors did not constitute a court and the proceedings before them were not judicial proceedings; they were not even quasi-judicial for they determined or decided nothing; their enquiries were pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the House of Lords in Pearlberg v. Varty [1972] 2 All ER 6. It is, however, unnecessary to go into these distinctions between a preliminary and final decision in greater depth. For, as pointed out by the Supreme Court in Mohinder Singh v. Chief Election Commissioner, AIR 1978 SC 851 at p. 874, after a consideration of the above and other rulings, " the glory of the law is not that sweeping rules are laid down but that it tailors principles to practical needs, doctors remedies to suit the patient, promotes, not freezes, life's processes ". The Supreme Court referred to Lord Reid's observations in Wiseman's case [1970] 75 ITR 652 (HL) that he would be " sorry to see this fundamental general principle degenerate into a series of hard and fast rules ", to the emphasis of Tucker L.J. in Duke of Norfolk's case [1949] 1 All ER 109 (CA) that " the requirements of natural justice must depend upon the circumstances of the case, the nature of the enquiry, the rules under which the Tribunal is acting, the subject-matter that is being dealt with and so forth " and summed up the position thus : "No doctrinaire approach is desirable but the court must be anxious to salvage the cardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. But the question is whether the omission, failure or even refusal by the WTO to give this chance to the assessee offends one's sense of justice and fair deal. We think that, in this respect, the situation here is very much analogous to that of the taxpayer in the Wiseman's case [1970] 75 ITR 652 (HL) who, had he been confronted with the counter-statement of the Commissioners, would have been in a more advantageous and happier position to meet the prima facie case sought to be made out against him and, as in that case, so here, it seems to us that a failure on the part of the WTO to give a hearing before he formed his prima facie opinion and turned the proceedings over to the Valuation Officer does not offend the principles of natural justice or result in any unfairness, prejudice or inequity to the taxpayer. The third argument of Sri Sorabjee, again a very interesting and plausible one in other contexts, should, it seems to us, fail on the facts and circumstances of the present case. Sri Sorabjee's contention is very brief. He points out that under s. 16A, the reference to the Valuation Officer is not automatic but is dependent on the fulfilment of certain conditions precedent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essments had been made on these assessees for the above years on the basis of the registered valuer's report, the WTO subsequently came to the conclusion that these assessments were erroneous and moved to have them set aside by the CWT under s. 25(2) of the W.T. Act. The CWT by his orders dated February 1, 1973, had set aside the assessments holding that there was a gross under-valuation of the said property and that this should be got redone by reference to the Valuation Officer. Accordingly, the above reference was made to the Valuation Officer and the letter discloses the following material on which the WTO relied for making the reference : (a) The valuer had considered only the land and building method. Even in doing so, he had taken the value of the land at Rs. 50 per sq. yard even though the valuation report itself refers to sales of plots (though smaller in size) at Rs. 250 per sq. yard. A deduction at 50% allowed by the valuer, as the land was leasehold, ignored the fact that the lease would subsist for many more years to come; (b) considering the location of the property, prices of cinema-plots and plots licensed for construction of multi-storeyed commercial buildings, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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