TMI Blog1980 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... this is a misuse of s. 16A by the revenue and beyond jurisdiction. This bunch of 11 writ petitions are aimed at closing the deep openings in s. 16A by reopening notices of s. 17 and further penetrating the very existence of jurisdictional facts of " reason to believe " under cl. (a) and "information" under cl. (b) of sub-s. (1) of s. 17 of the W.T. Act (for short, " the Act " hereafter). The two sisters, Anandkumari and Nawal Kanwar, have filed them. The first five, D. B. Civil Writ Petitions Nos. 265, 321, 322, 323 and 324, were filed in 1978 by Kanwarani Anandkumari, wife of Brig. B. Lall against the notices dated March 4, 1978, issued to her by the WTO, A-Ward, jodhpur, under s. 17 of the Act for reopening the assessments for the years 1969-70, 1972-73, 1970-71, 1971-72 and 1973-74, respectively. The other six writ petitions being D. B. Civil Writ Petitions Nos. 315 to 320 of 1978 relate to the notices dated March 7, 1978, for reopening under s. 17 issued to Smt. Kanwarani Nawal Kanwar by the WTO, A-Ward, jodhpur. Anandkumari became the victim of a murder during the pendency of the writ petitions and, therefore, her husband, Brig. B. Lall is now the petitioner in the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show-rooms was valued at Rs. 1,84,000 and, therefore, the petitioner's share was of the value of Rs. 92,000. In this return, the petitioner valued her plot of land and two flats, Golf Links, Jodhpur, at Rs. 17,000 and Rs. 40,000, respectively. During the course of the assessment proceedings, the valuation report and the valuation certificate of the approved valuer were submitted. The WTO assessed the net wealth of the assessee for the assessment year 1969-70, after notice was given to the petitioner under s. 16(2) of the, Act and after the case was discussed with her authorised representative. The assessment order dated December 21, 1971, contained the computation of the total wealth of the petitioner at Rs. 1,74,131 in which, the valuation of the property at Jaipur of the petitioner, as per the valuation certificates and report, was accepted at Rs. 92,000. In respect of the valuation of the immovable property at Jodhpur, non-petitioner No. 1 increased the price of the land by Rs. 3,000 on the ground that the valuation of open land was going up every day. The value of the gallery was also increased. Thus, after an intelligent and conscious application of the mind, the WTO asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner has also filed reply which is supported by the affidavit of Mr. K. V. Singh, the WTO, A-Ward, jodhpur, as document Ex. R-1. According to Ex. R-1, which is a copy of the order sheet on the basis of which notice under s. 17 has been issued, it transpires that the valuation officer of the department valued the property of the assessee at M.I. Road, Jaipur, at Rs. 4,11,000 as on April 1, 1974. The share of the assessee came to Rs. 2,05,000 as on April 1, 1974, and, on this basis, the WTO estimated the value of the property and the assessee's half share at Rs. 1,95,000. On this basis, the WTO observed that he had reason to believe that wealth to the extent of Rs. 1,03,000 had escaped assessment. In the reply to the writ petition, the respondent has submitted that the valuation of the property made by the petitioner in her return was grossly inadequate and since the WTO assessed the wealth on the basis of the return, the wealth escaped assessment. It was asserted that the WTO had sufficient reason to believe that the assessee has not disclosed truly and fully the material facts and due to that, the wealth had escaped assessment. As per the counter filed by the respondent, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner No. 1 to issue the impugned notice on the ground that the conditions precedent for taking action under s. 17 of the Act were not present. It was asserted that the petitioner had fully and correctly disclosed all material facts necessary for assessment and the approved valuer's reports were accepted by the WTO at the time of the original assessment and there was no iota of evidence to suggest that the value was incorrect and that being so, the assessments could not be reopened on a mere change of opinion. The non-petitioner No. 1 gave a reply to the above by letter dated April 14, 1978 and stated, inter alia, that the jodhpur property consisting of Ratanada flats of the petitioner had been referred to the valuation cell for valuation and there was nothing illegal in reopening the assessment under s. 17 of the Act. After the above reply of the revenue, the petitioner filed the writ application on May 19, 1978. The respondent has filed a reply to the writ petition controverting the above facts and this reply is supported by the affidavit of Shri G. S. Gopala, WTO, and a copy of the order dated March 7, 1978, Ex. R-1. According to this, Ex. R-1, the value of the immov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly they should be produced in the court, but they were not produced on record. The first and the foremost contention of the learned counsel for the petitioners is that s. 16A can be invoked only for the purpose of making an assessment and this assessment can include the proceedings of reassessment also after the same has already been initiated but excludes the proceedings where the assessment is complete and such assessment has also not been reopened under s. 17 so far. Our attention was invited to the language of s. 16A, relevant provisions of which are as under: " 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-... (6) On receipt of the order under sub-section (3) or sub-section (5) from the Valuation Officer, the Wealth-tax Officer shall, so far as the valuation of the asset in question is concerned, proceed to complete the assessment in conformity with the estimate of the Valuation Officer. " The learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the property or taking incorrect rents by concealing the real rents received from the property for the relevant years. It is true that these are questions which are required to be considered by the WTO during the reassessment and they can be gone into in detail only at that stage but none the less, for the purposes of deciding these writ applications, the data given in the valuation report would have provided us valuable assistance. If, after the filing of reports, the counsel for the revenue would have submitted any objections, this court would have considered them and decided them according to law. Again, if there were any objections against filing the same, in all fairness, the learned counsel for the revenue should have mentioned them before this court. In the absence of raising any objections to the filing of the same, the withholding of the valuation report and further objecting to its production from the otherside has left the stand of the revenue unintelligible. Be that as it may, the basic fact is not in dispute that after the assessments of the petitioners were completed, the WTO made a reference. The docks are now clear to examine the correctness of the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WTO to the Valuation Officer. Thereafter, under sub-s. (2) the Valuation Officer issues a notice for production of documents, etc. Then two courses are open to the Valuation Officer. The Valuation Officer may either come to the opinion that the valuation has been correctly declared and in that case he shall pass an order in writing to that effect and send a copy of his order to the WTO and to the assessee. But when he does not form any such opinion that it has been correctly declared, then the course open to him is laid down is sub-ss. (4) and (5). For this purpose another notice is to be given by the Valuation Officer when he forms the opinion, inter alia, that the value of the asset is higher than the value declared in the return. At this stage, there is no final formation of opinion. After the procedure in sub-ss. (4) and (5) has been followed and order has been passed under sub-s. (4) this order has got to be sent to the WTO and to the assessee. Upon receipt of such valuation it is the duty of the WTO to complete the assessment in conformity with the estimate of the Valuation Officer. Sub-section (6) itself makes it clear that the purpose of making a reference under s. 16A(1) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax laws and streamlining the machinery for its assessment and realisation. The amendment by the insertion of s. 16A was done as a result of the recommendations of this committee and the objects for the same have already been outlined above. The functions of the Valuation Officer, as summarised by the revenue itself in para. 36 of its Circular No. 96 dated November 25, 1972 is as under: " Functions of the Valuation Officer.-Where the valuation of an asset is referred to the Valuation Officer under section 16A(1) of the Wealth-tax Act, he will proceed to deal with the matter in accordance with the provisions of sub-sections (2) to (5) of section 16A. If the Valuation Officer is of opinion that the value of the asset has been correctly declared in the return, he will pass an order in writing to that effect under s. 16A(3) and send one copy of the order to the WTO and another to the assessee. An order under s. 16A(3) may be passed without requiring the assessee to produce any evidence in this behalf. However, if the Valuation Officer so desires, he may serve on the assessee a notice requiring him to produce or cause to be produced on a date specified in the notice such accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are from Forms Nos. 0-1 to 0-10 and Form No. 0-1 is prescribed for immovable property. New ss. 34AA and 34AB were inserted and the entire Chap. 7B of the W.T. Act relates to the registered valuers. Sections 23 and 24 make provision for appeals from the orders of the Valuation Officer and provides for procedure. Section 16 of the Amending Act amended s. 16 of the W.T. Act relating to the prosecution and this now includes the prosecution of registered valuers also in certain circumstances. The above bird's eye-view of the scheme of the provisions of the amendments introduced on account of the Wanchoo Committee Report by the Act of 1972 would show that s. 16A was not introduced in isolation but it was part of the entire scheme of amendments which associated the Valuation Officer with the valuation of assets at the stage of assessment to wealth-tax and to put fetters and limitations on the authority of the WTOs in respect of making their own valuations after they have referred it to the Valuation Officer during the pendency of an assessment or reassessment. In spite of a very careful study of the relevant provisions and the rules about the conditions and circumstances in which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e visualised only in a case of pending assessment and not a completed assessment. Once the assessment is completed and before the reassessment commences the WTO becomes functus officio for the purposes of s. 16A, as he is not in the process of completing any assessment, for the purpose of which he wants to check up from the Valuation Officer, the correctness of the valuation of the assets disclosed by the assessee in the return and which, according to him, are undervalued, looking to the fair market value or as per the standards laid down in cl. (a) or cl. (b) of sub-s.(1). This makes the opening phrase " for the purpose of making an assessment " extremely important and an opening gate through which and through which alone, the WTO can have access and approach to the Valuation Officer. The opening gate of s. 16A is wholly, solely and exclusively governed and contained in the phrase " for the purpose of making an assessment " which, of course, can include the reassessment as per the definition of assessment as mentioned above. Acceptance of the submission of Mr. Parakh would result in the addition of the words " reopening of completed assessment " after the phrase " for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the operation of the Income-tax Act. Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may lawfully be circumvented. " Justice Jagadisan in Aruna Group of Estates v. State of Madras [1965] 55 ITR 642 (Mad) observed (p. 648): " Avoidance of tax is not tax evasion and it carries no ignominy with it, for, it is sound law and, certainly, not bad morality, for anybody to so arrange his affairs as to reduce the brunt of taxation to a minimum. " Justice Rand of America in Commissioner v. Newman (199 F. 2.848 (2d Cir., 1947) observed : " Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor and all do right, for nobody owes any public duty to pay more than the law demands ; taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant. " Such avoidances have been supported from the observation of Lord Atkin in Duke of Westminster v. IRC [1935] 19 TC 490 (HL) at p. 511, wherein he observed: " I do not use the word device in any sinister sense: for it has to be recog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted unless the legislature expressly includes it in s. 16A itself or elsewhere under the W.T. Act by express amendment, as we are required to take strict and stringent view in interpreting s. 16A. The above extraction from the various judgments and observations of the eminent jurists and authors would further show that it is an undisputedly established principle regarding interpretation of statutes that the court cannot make an amendment to the statute by additions of the words which are not there as that tantamounts to legislation, which is out of the scope of interpretation by court. It is not for this court to hold that in the wisdom of the legislature, why the reference to Valuation Officer under s. 16A was not permitted for the purpose of considering the case for reopening under s. 17. It may be that the legislature in its wisdom wanted to provide some finality to the completed assessment because a completed assessment can always be challenged before a hierarchy of authorities by way of appeal, revision, reference, etc., under the provisions of the Act. If that is done, the question of assessment again becomes open before the appellate or revisional forums and in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment including reassessment is a sine qua non for the reference and for giving jurisdiction to the WTO to make reference under s. 16A of the Act. It may be recalled that even before the statutory powers to the Valuation Officers by virtue of the amendment introduced by cl. 9 of Taxation Laws (Amendment) Act, 1972, the procedure for arbitration by valuers at the stage of Appellate Tribunal was provided. This provision and procedure has now been superseded and omitted. The new provision seemingly has been introduced for minimising the tax evasion on account of undervaluation of assets and it also provides appeal against the valuation made by the Valuation Officer. This appeal can be filed to the AAC and then to the Appellate Tribunal. In substance, s. 16A curtails the jurisdiction of the WTO under s. 17(1) to ascertain the price of any asset. Once the WTO chooses to make reference to the Valuation Officer, the valuation of the property made by the Valuation Officer is to be accepted by the WTO. A combined reading of sub-s. (1) and sub-s. (6) of s. 16A would show that no discretion has been given to the WTO to reject or vary the report of the Valuation Officer. Contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. We are, therefore, firmly of the opinion that s. 16A has got no relevancy and cannot be applied after the assessment is complete and before reassessment has commenced, that is, for the purposes of consideration of the question whether a completed assessment can be reopened or not or in other words, to decide and consider the question whether the valuation accepted by the WTO was a case of wealth escaping assessment on account of undervaluation. Any reference made under s. 16A cannot lead to the reopening of a closed assessment under s. 17(1) as the report submitted by the Valuation Officer would be in an invalid reference and must be treated as a nullity in the eye of law, non est and void ab initio. Consequently, all the eight notices in these eight writ applications being based on the Valuation Officer's report obtained under s. 16A cannot be sustained and are liable to be quashed on this ground alone. Thus, we are inclined to accept the contention of Mr. Mehta on plain reading, analysis and discussion of the implications, both legal and logical of the various sub-sections of s. 16A, the most important being sub-s. (1) and sub-s. (6) as mentioned above. Sub-section (1) prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reason to believe that on account of failure and omission on the part of the assessee to disclose correct market value, wealth to the extent of Rs. 1,00,300 has escaped assessment. Issue notice under section 17 of Wealth-tax Act, 1957. (Sd.) H. C. Shakarwal, Wealth-tax Officer, A-Ward, jodhpur. The above would show that the Valuation Officer under s. 16A has valued this property as on April 1, 1974. On the basis of the valuation done of the property as on April 1, 1974, the completed assessment of 1969-70, 70-71, 71-72, 72-73 and 73-74, are sought to be reopened. We enquired from Mr. Parakh, whether any principle, formula or any other rational basis was applied by the WTO in coming to the figure of valuation as on March 31, 1969, because Ex. R-1 is conspicuously silent; it only mentioned what was the valuation found by the Valuation Officer as on March 31, 1974, and then abruptly the WTO applied it to each individual year for the five years mentioned by making certain ad hoc deductions in each case. Mr. Parakh, in spite of his vehemence and ability exhibited otherwise during the arguments, had no answer to it and virtually conceded that no such principle or formula or basis c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and making it a reason for belief. This contention cannot be accepted for the simple reason that it is well-established law that if the law permits anything to be done in particular manner or if it prohibits doing a thing in a particular manner, it cannot be allowed to be done in any other manner. The Supreme Court laid down in Narbada Prasad v. Chhaganlal, AIR 1969 SC 395, the above dictum in the following form (p. 397): " It is a well understood rule of law that if a thing is to be done in particular manner it must be done in that manner or not at all. Other modes of compliance are excluded. " We respectfully follow the above principle of law enunciated by the Supreme Court and hold that since the valuation report under s. 16A cannot be obtained for the purpose of deciding the question whether a completed assessment should be reopened or not on the ground that s. 16A cannot be applied in such cases, the same cannot be used by an indirect process of treating it as a non-statutory administrative or executive document. This would be circumventing the provisions of s. 16A and permitting the same effect even after holding that under s. 16A neither this report can be called nor it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and the reopening was upheld by the Kerala High Court. A similar use was permitted as information in CIT v. Chand Kanwarji [1972] 84 ITR 584, by the Delhi High Court where a bank deposit was wrongly treated as earned income. Again, in Vashist Bhargava v. ITO [1975] 99 ITR 148, the Delhi High Court upheld this use as information where the interest paid by the assessee to the credit of his own provident fund account was allowed as an expenditure incurred by the assessee on a wrong assumption of the fact that the provident fund vested in the Government. However, an auditor, who gives a note that the valuation of the house property made by the officer under s. 7(1) of the Act was wrong, being based on the basis of rent capitalisation and that the higher value determined on land-and-building method should be adopted, exceeds his jurisdiction as in substance, he ventures to dictate to a WTO, who is a judicial officer, that his view on the disputable question of law was wrong and that the mistake should be corrected by taking action under s. 17(1)(b). The Madras High Court in Adityan v. First ITO [1964] 52 ITR 453, has held that the simple duty of the audit is to point out mistakes wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 34(1)(b) of the Act of 1922. We may add that the Income-tax Officer ordering reassessment does not sit as a court of appeal over the Income-tax Officer making the original assessment. Nor is it open to the Income-tax Officer ordering reassessment to substitute his own opinion regarding the method of computing the income for that of the Income-tax Officer who made the original assessment, especially when the method of computation adopted at the time of original assessment was permissible in law. The fact that the adoption of a different method of computation would have resulted in higher yield of tax would not in such a case justify the reopening of the assessment." One of the exceptions to the above settled judicial opinion is the case of R. K. Malhotra, ITO v. Kasturbhai Lalbhai [1977] 109 ITR 537 (SC), wherein on the undisputed facts, the audit note was taken to constitute such an information. The basic observations of their Lordships of the Supreme Court in that case were as under (p. 540) : " It is not in dispute that for determining the annual value of the house which is in the occupation of the owner, s. 23(2) of the Income-tax Act is applicable and that the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct doctrine of law nor can it be permitted to make a generalisation. In Calcutta Discount Company's case [1961] 41 ITR 191 (SC), the Supreme Court observed that not only the court can but it is its duty to intervene and interfere in cases where the very existence of the belief or information is lacking as the assessees-citizens are entitled to claim protection from the courts. It has been repeatedly observed by the hon'ble Supreme Court that under our federal Constitution, a solemn constitutional duty has been cast upon the High Courts to protect citizens from encroachment on their legal and particularly the fundamental rights and the courts are required to act as watch-dogs of the Constitution. That being so, we are satisfied that in the facts of these cases a bald reference in Ex. R-1 to the audit report, which is certainly non-statutory and is a sort of objection by an auditor, cannot provide the existence of reasonable belief that on account of the failure of the assessee to disclose the material facts truly and fully, the wealth has escaped assessment. In reopening a case, the WTO is required to be satisfied on both counts, namely, that wealth has escaped assessment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made after notice to the assessee and after discussion with the authorised representatives of the assessee, and the WTO did apply his mind to the primary facts disclosed in the form of the return and the approved valuer's report produced in support of them. The question which requires serious consideration is whether the mere fact that at a subsequent time, the Valuation Officer has given a different valuation under s. 16A, is sufficient for creating a ground for reasonable belief by the WTO that the petitioner has failed to disclose truly and fully material facts; and in a case covered by s. 17(1)(b), whether they can be a good and valid information for holding that wealth has escaped assessment. The contention of Mr. Mehta that once the primary facts are disclosed and evidence is produced before the WTO, it is not for the assessee to point out to him that that evidence or the facts which have been produced can be also taken for raising various types of other inferences or drawing different conclusions or deductions from them. Mr. Mehta, in support of his contention, has relied upon various judgments of the hon'ble Supreme Court, the first and foremost being the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onjabhai Vanmalidas and Sons v. CIT [1974] 95 ITR 251 [FB], the Gujarat High Court observed as under (p. 275, 276): " All the facts from which the necessary inference can be drawn were before the Income-tax Officer who made the original assessment. It was not for the assessee to point out what possible inference can be drawn by the Income-tax Officer making the original assessment at the time when the assessment was made in 1947. As the Supreme Court has pointed out, the only obligation on the assessee was to place all the primary facts before the Income-tax Officer who made the original assessment and once he placed those primary facts his obligation came to an end. It was open to the Income-tax Officer to draw an inference adverse to the assessee when he passed the order on January 23, 1947, regarding the entire transaction in favour of M/s. K. Nagardas and Co. yet instead of drawing an adverse inference against the assessee, the Income-tax Officer rested himself content with observing that the matter between the assessee and M/s. K. Nagardas Co. bad not been finally settled and the assessee was in possession and ownership of the whole property known as Maganbhai's Vadi. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate. The sufficiency of the grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression " reason to believe " does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence. " Lastly, in the latest case of Parashuram Pottery Works Co. v. ITO [1977] 106 ITR 1, the Supreme Court again reiterated the same principles in the following language (page 9): " The case of the appellant is that in determining the amount of depreciation at the time of the original assessment for the two assessment years in question, the Income-tax Officer relied upon the written down value of the various capital assets as obtaining in the records of the department. This stand has not been controverted. When an Income-tax Officer relies upon his own records for determining the amount of depreciation and makes a mist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce was placed on the judgments of the Supreme Court in CIT v. Simon Carves Ltd. [1976] 105 ITR 212 and of the Madras High Court in CWT v. K.M. Desikar [1973] 92 ITR 101. Lastly, even in relation to the method of valuation, Mr. Mehta submitted that in the rental method a multiplier rate of 8 1/3 times has been upheld and further it has been held that the minimum valuation beneficial to the assessee must be adopted. Reliance was placed on CIT v. Smt. Vimlaben Bhagwandas Patel Smt. Kamlaben Kanjibhai Patel [1979] 118 ITR 134 (Guj), wherein it was observed as under at p. 198: " in our opinion, therefore, the just, reasonable and appropriate rate of capitalisation would be eight and one-third times the net average annual income which would give the yield of 12% per annum on the investment of capital in property. " Jaswant Rai v. CWT [1977] 107 ITR 477 (P H) contained the following observations (p. 481): "In Commissioner of Income-tax v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC), it was held by the Supreme Court that if the language of taxing provision is ambiguous or capable of more meanings than one, then the court has to adopt that interpretation which favours the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income which had escaped assessment. " It was argued that the existence of the belief can be challenged by the assessee but not the sufficiency or the reasons for the same. According to Mr. Parakh, unless the assessee is able to show that the valuation report, on the basis of which the above cases are being reopened is not relevant, for the purposes of s. 17(1)(a) or that it is not rational to consider it for that purpose, the other submissions of Mr. Mehta have got no relevance and are to be rejected solely on the ground that they are irrelevant to the controversy in this case. He relied upon the judgments reported in R. Dalmia v. Union of India [1972] 84 ITR 616 (Delhi) and Assistant CED v. Nawab Sir Mir Osman Ali Khan Bahadur [1969] 72 ITR 376 (SC). In Kantamani Venkata Narayana and Sons v. 1st Addl. ITO [1967] 63 ITR 638 (SC), it was observed as under (p. 638): " The assessee does not discharge his duty to disclose fully and truly material facts necessary for the assessment of the relevant year by merely producing the books of account or other evidence. He has to bring to the notice of the Income-tax Officer particular items in the books of account or portions of docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), the question was again considered and it was observed as under (headnote): "All that clause (a) of section 147 of the Income-tax, Act, 1961, requires is that the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment and not that he should launch an investigation and come to a positive finding before issuing the notice. There should be facts before him that reasonably give rise to the belief. The belief held by him must of course be in good faith. It cannot be a mere pretence ; but the facts on the basis of which he entertained the belief need not at this stage be irrebuttably conclusive to support his tentative conclusion ...... Whether the facts before the Income-tax Officer were in fact true or not and whether these grounds were adequate or not is not a matter for the court to investigate at this stage. Where the items of escaped income in respect of which the assessment is proposed are specific, but the question as to whether the income, if earned, was earned by one person singly or by him along with others is a matter of inquiry, if the Income-tax Officer has reason to believe that it could have been earned either by one pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aliha [1971] 79 ITR 603, Gemini Leather Stores v. ITO [1975] 100 ITR 1, ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 and of the Gujarat High Court in Poonjabhai Vanmalidas and Sons (HUF) v. CIT [1974] 95 ITR 251, establish that once the assessee discloses the primary facts without concealing any material fact there cannot be any basis for the belief that the assessee has failed to disclose material facts truly and correctly resulting in wealth escaping assessment. If from the primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. If any evidence can be discovered from the books and documents produced by the assessee which can be used against the assessee, the assessee is not under an obligation to inform the ITO about the possible inferences which can be raised against him. The omission or failure should be on the part of the assessee. The only obligation on the assessee was to place all the primary facts and once he places those primary facts, his obligation comes to an end. It is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the value from both methods, valuation has been done. All the assessments have been made after calling the assessee and a detailed discussion was had and his mind was applied by the WTO at the time of the initial assessment. Thus, all the primary facts were disclosed truly and fully which were required under the law under s. 14 of the W.T. Act. Under the returns submitted, the valuation were given as on the respective valuation dates. The WTO is required to assess the property valuation under s. 7(1) of the Act. The valuation is a matter of estimate and opinion and to some extent guess-work also. Thus, all having been done, the assessee discharged his duties to disclose truly and fully material facts. In such circumstances, how could the assessee be charged with the failure to communicate all the inferences the WTO might or might not have drawn. It was for the WTO to make further investigation about t he exact dates of the valuer's reports, the rents available from the property for the relevant years and the price of the land and the construction, if he had any doubts about the genuineness or correctness of the data given by the assessee for each year. He should have accepted or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention in the reply of the writ applications, any relevant material, data, details or reasons providing a justification for the reopening notices under s. 17(1)(a) or (b) of the Act, nor any such ground or reason which could have justified them, have been further substantiated by references to the primary facts earlier disclosed by the assessee and which were substantiated by the approved valuer's reports. We are conscious that we cannot go into the adequacy or sufficiency of the reasons which have been either the " reason to believe " under cl. (a) or the information under cl. (b) of s. 17(1) and, therefore, we have concentrated only on the enquiry whether any such reason or fact at all existed. Having found that there has been no existence of such facts or grounds which can constitute the " reason to believe " that the assessee has failed to disclose material facts truly and fully resulting in wealth escaping assessment for the purposes of s. 17(1)(a) and further that there is no information in the eye of law showing that wealth has escaped assessment in these cases as required by s. 17(1)(b), we have no hesitation in holding that the impugned notices for reopening have been issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessing authority for issuing reopening notices on account of the absence of the existence of " reasonable belief " or information " under s. 17(1)(a) and (b) respectively is challenged, as that goes to the very root and relates to the basic jurisdiction of the authority concerned. It may also be made clear that the availability of the alternative remedy which was expressly made a bar to the entertainment of writ application under art. 226 by the amendment of this article by the 42nd amendment has also now disappeared by virtue of the 44th amendment of the Constitution recently made. That being so, the original law as it stood earlier holds the field and on that point, the law being well settled Mr. Parakh himself did not develop this objection any further, except mentioning it for being recorded only. The net result of our above discussion can be summarised as follows: (1) That s. 16(1)(a) of the W.T. Act cannot be invoked for obtaining the valuation officer's report for the purposes of considering whether the wealth has escaped assessment by under-valuation warranting reopening under s. 17 of the Act as this section can be used only for the limited purposes of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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