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Mrs. Khorshed Shapoor Chenai Vs. Assistant Controller of Estate Duty - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition No. 54 of 1970
Judge
Reported in[1973]90ITR47(AP)
ActsEstate Duty Act, 1953 - Sections 59
AppellantMrs. Khorshed Shapoor Chenai
RespondentAssistant Controller of Estate Duty
Appellant AdvocateY.V. Anjaneyulu, Adv.
Respondent AdvocateP. Rama Rao, Adv.
Excerpt:
direct taxation - market value of land - section 59 of estate duty act, 1953 - assistant controller of estate duty issued notice dated 14.11.1969 to petitioner under section 59 (a) of act to show cause why estate duty assessment made on 30.12.1966 should not be reopened and revised by including enhanced compensation awarded by civil courts in respect of lands - petitioner has challenged validity and legality of notice - contended that no property chargeable to estate duty has escaped assessment - under valuation has occurred by reason of omission or failure on part of accountable person to disclose fully and truly all material facts necessary for making estate duty assessment - accountable person was herself dissatisfied with adequacy of compensation - values adopted by assistant.....sriramulu, j. 1. lands in moosapet village belonging to rashid shapoor chenai were acquired by the government, under the provisions of the land acquisition act, for synthetic drugs project. compensation awarded for those lands by the special deputy collector was received by rashid shapoor chenai. later, land in qutbullapur village belonging to him were also acquired by the government for h.m.t. units i and ii. awards in respect of these lands, which were required for lands at rs. 4,29,360.68. rashid shapoor chenai died on november 4, 1963, and the above compensation was received by the legal heirs of rashid shapoor chenai. estate duty assessment in respect of the properties passing on the death of rashid shapoor chenai was made by the assistant controller of estate duty on march 29, 1966......
Judgment:

Sriramulu, J.

1. Lands in Moosapet village belonging to Rashid Shapoor Chenai were acquired by the Government, under the provisions of the Land Acquisition Act, for synthetic drugs project. Compensation awarded for those lands by the Special Deputy Collector was received by Rashid Shapoor Chenai. Later, land in Qutbullapur village belonging to him were also acquired by the Government for H.M.T. Units I and II. Awards in respect of these lands, which were required for lands at Rs. 4,29,360.68. Rashid Shapoor Chenai died on November 4, 1963, and the above compensation was received by the legal heirs of Rashid Shapoor Chenai. Estate duty assessment in respect of the properties passing on the death of Rashid Shapoor Chenai was made by the Assistant Controller of Estate Duty on March 29, 1966. The values of these lands for the purpose of computing the estate duty in respect of the properties that passed on the death of Rashid Shapoor Chenai were taken at the respective figures of compensation awarded for them by the Special Deputy Collector,

2. The legal heirs of Rashid Shapoor Chenai did not accept the awards made by the Special Deputy Collector in respect of those .lands and objected to the amount of compensation awarded, and, accordingly, required the Special Deputy Collector, by applications filed within the time prescribed, to refer the matter of the determination of compensation, under Section 18 of the Land Acquisition Act, to the civil court. References were, accordingly, made and the civil courts, by their orders of March 6, 1967, enhanced the compensation awarded by the Special Deputy Collector in respect of Moosapet land by Rs. 1,90,000, and by its order dated October 30, 1967, enhanced the compensation in respect of Qutbullapur lands by Rs. 20,45,000.

3. On coming to know that the civil courts had enhanced the compensation in respect of those lands, the Assistant Controller of Estate Duty issued notice to the legal representatives of Rashid Shapoor Chenai under Section 61 of the Estate Duty Act, to show cause why the mistake apparent from the record should not be rectified by including the enhanced compensation awarded by the civil courts in the net value of the dutiable estate The legality and the validity of that notice is being challenged by the legal representative of Rashid Shapoor Chenai in Writ Petition No. 4059/1969. Mrs. Freny Rashid. Chenai v. Assistant Controller of Estate Duty [1973] 90 I.T.R, 81 (A.P).--See Supra,

4. Rashid Shapoor Chenai died leaving behind him his widow and a son, named S. R. Chenai. Unfortunately, within a short period of less than two years, from the date of death of his father, S.R. Chenai died on May 7, 1965. In this writ petition, the petitioner is the widow and the person accountable for payment of estate duty in respect of property passing on the death of S. R. Chenai (hereinafter referred to as ' the deceased '). The deceased held one-half share in the undivided estate of his late father, Rashid Shapoor Chenai. As required by Section 53 of the Estate Duty Act (hereinafter called 'the Act') the petitioner filed an account of the property passing on the death of her husband, the deceased, and the Assistant Controller of Estate Duty completed the estate duty assessment on December 30, 1966. In making the said assessment the Assistant Controller of Estate Duty, as in the case of estate duty assessment in respect of property passing on the death of Rashid Shapoor Chenai, adopted the values of the lands of Rashid Shapoor Chenai, acquired by the Government for synthetic drugs project and H.M.T. at the same figures of compensation respectively awarded by the Special Deputy Collector for those lands.

5. The petitioner filed an appeal against the estate duty assessment before the Appellate Controller and a further appeal before the Income-tax Appellate Tribunal, but on points other than the question of valuation of the above said lands.

6. On the basis of information in his possession regarding the allowance of higher compensation for those lands by the civil courts, the Assistant Controller of Estate Duty issued notice dated November 14, 1969, to the petitioner, under Section 59(a) of the Estate Duty Act, to show cause why the estate duty assessment made on December 30, 1966, should not be reopened and revised by including the enhanced compensation awarded by the civil courts in respect of those lands.

7. In this writ petition, the petitioner challenges the validity and the legality of the said notice dated November 14, 1969, issued by the Assistant Controller of Estate Duty under Section 59(a) of the Act, for reopening the assessment.

8. The petitioner contends that the said notice is illegal and without jurisdiction. The petitioner, accordingly, prayed for the issue of a writ of prohibition or direction against the respondent restraining him from taking further proceedings in pursuance of the above-said notice.

9. The learned counsel for the petitioner, Sri Y.B. Anjaneyulu, raised two contentions before us. They are : (1) no property chargeable to estate duty has escaped assessment; and (2) even assuming that property chargeable to estate duty has escaped assessment, still -the notice dated November 14, 1969, issued by the Assistant Controller of Estate Duty under Section 59(a) of the Act is illegal and without jurisdiction, because such escapement is not due to any omission or failure on the part of the accountable person to disclose fully and truly all material facts necessary for making the assessment.

10. Sri P. Rama Rao, the learned counsel appearing for the revenue, contended to the contra.

11. Developing his arguments, the learned counsel for the petitioner, on the strength of the decision in Calcutta Discount. Company Ltd. v. Income-tax Officer, : [1961]41ITR191(SC) and Bhanji Lavji v. Commissioner of Income-tax, [1967] 63 I.T.R. 1 (Guj.) which was affirmed by the Supreme Court in Commissioner of Income-tax v. Bhanji Lavji submitted that the duty of the accountable person was only to disclose the primary facts which wer.e material for making the assessment, and not the inferential facts. It was for the asessing officer to draw the inferential facts. In the instant case, the accountable person disclosed to the Assistant Controller of Estate Duty, at the time of making the estate duty assessment, that the lands in Moosapet village and Qutbullapur village belonging to Rashid Shapoor Chenai, one-half share of which, on the death of Rashid Shapoor Chenai, devolved upon the deceased in this case, were acquired by the Government and that awards were made in respect of those, lands by the Special Deputy Collector. If the accountable person had not disclosedthose primary facts which were material and necessary for making the assessment, the Assistant Controller of Estate Duty would have jurisdiction to reopen the assessment on the ground that the accountable person had omitted or failed to disclose material facts which were necessary for making the assessment. On the date when the assessment was completed, i.e., on December 30, 1966, the civil courts had not passed their orders enhancing the compensation payable in respect of those lands. That fact was not, therefore, in existence at the time when the assessment was made and, therefore, it could not have been disclosed by the accountable person to the assessing officer. Therefore, omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for making the assessment, which conferred jurisdiction on the assessing officer to reopen the assessment, by the issue of notice under Section 59(a) of the Act, cannot be attributed to the accountable person. The fact that references were filed in the civil courts under Section 18 of the Land Acquisition Act against the awards of the Special Deputy Collector, was disclosed by the accountable person to the assessing officer. That fact, however, is denied by the revenue. In view of the department's denial of that fact, even if it is assumed that 'the accountable person had not established that he had disclosed the fact of making the references to the civil courts against the awards made by the Special Deputy Collector, still it was submitted that it was only an inferential fact. The Assistant Controller of Estate Duty should have inferred that fact from the facts before him disclosed by the accountable person and it was not for the accountable person to disclose that fact. Nor was that fact a material fact necessary for making the assessment, because by the mere filing of references the accountable person could not expect the allowance of an enhanced compensation. Therefore, there was no omission or failure on the part of the accountable person to disclose fully and truly all the material facts necessary for making the assessment.

12. When once the notice to reopen the assessment was issued under Section 59(a) of the Act, and when the jurisdictional fact that there was omission or failure on the part of the accountable person to disclose fully and truly all material facts necessary for making the assessment, was not established, this court cannot convert the said notice into a notice under Section 59(a) of the Act and justify its legality and validity. In support of this argument, the learned counsel for the petitioner relied upon decisions of the Allahabad High Court in Raghubar Dayal Ram Kishan v. Commissioner of Income-tax, [1967] 63 I.T.R. 572 (All.) and Commissioner of Income-tax v. Sundaram & Company (P.) Ltd., : [1970]78ITR162(Mad) . The learned counsel further submitted that, after the awards were made, the legal heirs of the deceased had no right till the orders were passedby the civil courts enhancing the compensation, to get extra compensation for those lands. At best, what the accountable person had, was a claim to extra compensation. It was only an inchoate right. It was not a right or a chose-in-action, which could be assigned or transferred under the provisions of the Transfer of Property Act. For the first time, the claim to extra compensation became converted into a fresh right created in favour of the accountable person to get extra compensation only when the orders of the civil courts were passed and till then it was only a claim, but not a right which could be said to be 'property'. Therefore, no property escaped assessment. The assessing officer valued the properly at the figures of compensation awarded by the Special Deputy Collector. There was no under-valuation and the assessing officer could not change his opinion from a fact which came into existence subsequently and on that basis come to the conclusion that there was under-valuation of the properties which were included in the properties passing on the death of the deceased. In support of the above arguments, the learned counsel relied upon the decisions in Ethel Rodrigues v. Assistant Controller of Estate Duty, [1963] 49 I.T.R. (E.D.) 128 (Mys.), Khan Bahadur Ahmed Alladin & Sons v. Commisssoner of Income-tax, : [1969]74ITR651(AP) and Commissioner of Wealth-tax v. U.C. Mahatab, : [1970]78ITR214(Cal)

13. As against those arguments, Sri P. Rama Rao, the learned counsel appearing for the revenue, submitted that it is not an universal rule that the owner of a land will always not accept the compensation awarded by the Collector in respect of the land acquired by the Government and that he would always file a reference to the court under Section 18 of the Land Acquisition Act. The filing of references to the civil courts against the awards is, therefore, a primary fact and not an inferential fact. The accountable person failed to disclose the fact that he had, under Section 18 of the Land Acquisition Act, filed an application requiring the Collector to refer the question of the amount of compensation to a civil court. Hence there was omission or failure on the part of the accountable person to disclose fully and truly all material facts necessary for making the assessment. That fact was a material fact and it could have put the Assistant Controller of Estate Duty on his guard not to accept the compensation awarded by the Special Deputy Collector as the real and true market value of those lands. In view of the large difference between the compensation awarded for those lands by the Special Deputy Collector and the civil courts, it is obvious that the figures adopted by the Assistant Controller of Estate Duty in the estate duty assessment for the prices of those lands were far below their real and true market value. Therefore, the property chargeable to tax had escaped assessment by reason of under-valuation of those properties. Evenassuming for a moment that there was no failure or omission on the part of the accountable person to disclose fully and truly all material facts necessary for making the assessment, still the department was not bound to disclose under what sub-section of Section 59(a) of the Act the notice has been issued, and if issued under Section 59(a), it could be converted into one and justified its issue under Section 59(a) of the Act. In support of this argument, the learned counsel relied upon a decision of the Supreme Court in Hukumchand Mills Ltd. v. State of Madhya Pradesh, : [1964]52ITR583(SC) . Since no reassessment has been made but we are only at the stage of notice, this court in writ proceedings under Article 226 of the Constitution of India, challenging the jurisdiction of the assessing officer to issue a notice under Section 59(a) of the Act, is only concerned with deciding the question whether the conditions which invested the assessing officer with power to reopen the assessment did exist. It is not within the province of the High Court to record a final decision about the failure to disclose fully and truly all material facts bearing on the assessment, and the consequent escapement of income from assessment to tax. (See Kantamani Venkata Narayana & Sons v. First Additional Income-tax Officer, Rajahmundry, : [1967]63ITR638(SC) . On merits, as to whether there was an escapement of property from assessment by reason of undervaluation, the learned counsel relied upon the decisions in Anne Nagendram and Bomma Reddi Venkayya & Co. v. Commissioner of Income-tax, [1967] 66 I.T.R. 46 (A.P.) and Sowdagar Ahmad Khan v. Income-tax Officer, Nellore, [1967] 66 I.T.R. 55 (A.P.).

14. The point arising for decision in this writ petition involves the interpretation of Section 59(a) of the Estate Duty Act, the relevant portion of which reads as follows:

' 59. If the Controller,--

(a) has reason to believe that by reason of the omission or failure on the part of the person accountable to submit an account of the estate of the deceased under Section 53 or Section 56 or to disclose fully and truly all material facts necessary for assessment, any property chargeable to estate duty has escaped assessment by reason of under-valuation of the property included in the account. . ..

(b) has, in consequence of any information in his possession, reason to believe notwithstanding that there has not been such omission or failure as is referred to in Clause (a) that any property chargeable to estate duty has escaped assessment, whether by reason of under-valuation of the property included in the account.... or otherwise ;

he may, at any time, subject to the provisions of Section 73A require the person accountable to submit an account as required under Section 53and may proceed to .... or reassess such property as if the provisions of Section 58 applied thereto.'

15. On a plain reading of the above section, it is evident that in order to confer jurisdiction on the Assistant Controller of Estate Duty to re-open an assessment under Section 59(a) of the Act, two conditions have to be satisfied. The first is that the Controller of Estate Duty must have reason to believe that property chargeable to estate duty has escaped assessment by reason of under-valuation of the properties included in the account. The second is that he must also have reason to believe that such under-valuation has occurred by reason of the omission or failure on the part of the accountable person to disclose fully and truly all material facts necessary for making the estate duty assessment. Both the conditions are conditions precedent to be satisfied before the Collector of Estate Duty could have jurisdiction to issue a notice under Section 59(a) of the Act.

16. From what has been held by the Supreme Court in Calcutta Discount Ltd. v. Income-tax Officer and Banji Lavji v. Commissioner of Income-tax, which was upheld by the Supreme Court in Commissioner of Income-tax v. Bhanji Lavji, : [1971]79ITR582(SC) it follows that the duty of the accountable person is to disclose only the primary facts which are necessary for making the assessment, and it is for the assessing authority to decide what inference of facts he has to draw from those primary facts, and what ultimate legal inferences he has to draw from the primary facts, disclosed by the accountable person, and the other facts inferred by him on those facts. The material facts which are to be disclosed by the accountable person at the time of assessment are primary facts necessary for making the assessment. What facts are primary facts and what primary facts are material facts necessary for making the assessment must, necessarily, depend on the facts of each case. In a case like this, where lands have been acquired by the Government for a company under the provisions of the Land Acquisition Act, there is no doubt that the fact of acquisition of lands and the amount of compensation awarded by the Collector are primary facts and material facts necessary for the purposes of determining the value of the properties passing on the death of the deceased. Besides those facts, was there any other primary and material fact which was necessary to be disclosed to the Controller of Estate Duty for making the estate duty assessment By the time the assessment was made on December 30, 1966, the accountable person responsible for payment of the estate duty in respect of the property that passed on the death of Rashid Shapoor Chenai, and the person responsible for the estate duty in respect of the property passing on the death of S.R. Chenai, the deceased in this case, knew that, not being satisfied with the amount ofcompensation awarded by the Special Deputy Collector for those lands, applications had been filed to the Collector to refer the matter of determination of the compensation to the City Civil Court, under Section 18 of the Lard Acquisition Act. By the time the assessment was made, the City Civil Court, to which references were made, had not passed orders and, therefore, the accountable person could not have disclosed the fact of enhanced compensation allowed by the City Civil Court. But the fact that references were filed to the civil court against the awards of the Special Deputy Collector was in existence on the date when the assessment was made. The accountable person had asserted that she had disclosed that fact to the Assistant Controller of Estate Duty, but the department has denied that such a fact was disclosed to it. We are not going to decide the disputed questions of fact in this writ petition. Hence, we will proceed on the basis that the accountable person failed to establish that she had disclosed to the Assistant Controller of Estate Duty, at the time of making the assessment, that references against the awards of the Special Deputy Collector were filed in the City Civil Court. However, the question is as to whether the fact of filing the references against the awards in the City Civil Court was a primary, or a material fact, or merely an inferential fact. If it was a primary fact, the duty lay on the accountable person to disclose it to the Assistant Controller of Estate Duty but if it was an inferential fact, no duty lay on the accountable person to disclose it to the Assistant Controller of Estate Duty. Hence, the question of failure or omission on the part of the accountable person to disclose that fact, in the latter case, resulting in escapement of property from assessment on the ground of under-valuation, would not arise.

17. To find out whether the above fact was a primary fact or an inferential fact, we lay down one test, and that is, if it had been disclosed, would it have had, in any way, affected the mind of the Controller of Estate Duty in valuing the properties which were included in the account If the answer to the question is in the affirmative, certainly it would be a primary fact. If, on the other hand, the answer to the above question is in the negative, then it would no more be a primary fact. Because of the fact that the accountable person was herself dissatisfied with the adequacy of the compensation and did not accept the compensation awarded by the Special Deputy Collector for those lands as their market value, certainly, the Assistant Controller of Estate Duty, if he was aware of that fact, would not have accepted the compensation awarded by the Special Deputy Collector, for those lands, as their correct and true market value'. The Assistant Controller of Estate Duty would, at best, have to estimate the value of those lands. We are, therefore, of the opinion that the iact that references were made to the City Civil Court objecting to the amount ofcompensation awarded by the Special Deputy Collector for those lands was a primary fact and a material fact necessary for making the estate duty assessment. Its non-disclosure was a non-disclosure of a material fact and not merely of an inferential fact. If, as a matter of course, every owner of a land acquired by the Government under the provisions of the Land Acquisition Act, will file a reference to the civil court against the compensation awarded by the Collector, then it may be inferred that references were filed. However, there may be cases where awards given by the Collector fixing the compensation for the lands acquired by the Government may be acceptable to the owners. Such cases cannot be ruled out. Therefore, it cannot universally be laid down that references, in every case, will be filed against the awards. It is, therefore, not an inferential fact. We, therefore, hold that it was not an inferential fact. Hence, we have, necessarily, to hold that the accountable person did not disclose the primary fact which was necessary for making the assessment.

18. Then, the next question that arises is whether such non-disclosure resulted in an under-valuation of the properties included in the account, and consequently there was an escapement of the property chargeable to the estate duty from assessment The compensation awarded by the Special Deputy Collector has been enhanced by Rs. 20,45,000 in the case of lands acquired for H.M.T. and by Rs. 1,90,000 for the lands acquired for the synthetic drugs project. Those facts, which came into existence subsequent to the making of the assessment, lead to the conclusion that the values adopted by the Assistant Controller of Estate Duty for those lands were far below their real and true market value.

19. In Kantamani Venkata Narayana & Sons v. First Additional Income-tax Officer, Rajahmundry, : [1967]63ITR638(SC) where it appeared from the affidavit of the Income-tax Officer that considerable increase since 1938, in the investments in the money-lending transactions of the assessee and in its wealth, had been discovered, and the increase in wealth was wholly disproportionate to the known sources of income of the assessee and no attempt was made by the assessee to furnish some reasonable proof of the source of additional wealth, the Supreme Court held that the Income-tax Officer had, prima facie, reasons to believe that the assessee had omitted to disclose fully and truly all material facts and that, in consequence of such non-disclosures, income had escaped assessment and he had, therefore, jurisdiction to issue a notice under Section 34.

20. In the instant case, the enhancement by the city civil court of the compensation awarded by the Special Deputy Collector was so large that no reasonable person could say that the values adopted by the AssistantController of Estate Duty of those lands on the basis of the awards made by the Special Deputy Collector, represented their true and correct market values. No attempt has ever been made by the accountable person to show that the values adopted by the Assistant Controller of Estate Duty represented their true and correct market values. In those circumstances, an inevitable conclusion flows that there was under-valuation of the properties which were included in the account. The Assistant Controller of Estate Duty had, therefore, jurisdiction to issue a notice under Section 59(a) of the Act. We, therefore, hold that the Assistant Controller of Estate Duty had jurisdiction to issue a notice under Section 59(a) of the Estate Duty Act, because the accountable person had failed or omitted to disclose fully and truly all the material facts which were, necessary for making the assessment.

21. Since we have found that the Assistant Controller of Estate Duty had jurisdiction to issue a notice under Section 59(a) of the Act, the question of its conversion into a notice under Section 59(a) of the Act or justification of its issue under Section 59(a) do not arise at all. In the view we have taken, we do not find any necessity to discuss the decision of the Supreme Court in Hukumchand Mills Ltd. v. State of Madhya Pradesh, cited by the department's counsel, or the decisions in Raghubar Dayal Ram Kishan v. Commissioner of Income-tax and Commissioner of Income-tax v. Sundaram & Company (P.) Ltd., relied upon by the petitioner.

22. In proceedings under Article 226 of the Constitution of India, challenging the jurisdiction of the Assistant Controller of Estate Duty to issue a notice under Section 59(a) of the Act, the High Court is only concerned to decide whether the conditions which invested the Assistant Controller of Estate Duty with power to reopen an assessment, did exist. It is not within the province of the High Court to record a final decision about the failure to disclose fully and truly all material facts bearing on the assessment and the consequent escapement of income from assessment to tax. We find support for our view in the decision of the Supreme Court in Kantamani Venkata Narayana & Sons v. First Additional Income-tax Officer, Rajahmundry.

23. Although it is not necessary for us to record our final finding whether there has been an under-valuation of the properties included in the account or not, it is necessary for us to find out whether there exist circumstances in this case from which the Assistant Controller of Estate Duty could come to a reasonable belief that there was under-valuation of properties included in the account.

24. The right to receive market value on the dates of notifications as compensation for the lands acquired by the Government for a public purpose, or for a company, springs directly from the acquisition of the lands. We are unable to accept the contention of the learned counsel for the accountable person that, for the first time, the right to receive the extra compensation was created when the civil courts pronounced their orders. The right to receive market value as compensation for the lands which were acquired came into existence as soon as the lands were acquired. That right was ' property '. As a matter of fact, the word 'asset' under the Wealth-tax Act has been defined, in Section 2(e) of the said Act, to include property of every description, movable or immovable. The right to receive market value as compensation for the lands acquired by the Government under the Land Acquisition Act, is not an illusory right, but a real right to property.

25. In Ethel Rodrigues v. Assistant Controller of Estate Duty, [1963] 49 J.T.R. (E.D.) 128 (Mys.) the discussion touches the question as to what is the record from which the mistake apparent from the records could be found out, and which could be rectified under Section 61 of the Estate Duty Act. It does not render any assistance to the issue in this case.

26. In Khan Bahadur Ahmed Alladin & Sons v. Commissioner of Income-tax, (1989] 74 I.T.R. 651, 654, 655, 658 (A.P.) a decision rendered by a Division Bench of this court consisting of Jaganmohan Reddy C.J. (as he then was) and Ramachandra Rao J., the facts were these : Government acquired a portion of the land of the assessee under the Land Acquisition Act, on June 23, 1954. The Collector, by his award dated December 10, 1954, fixed the compensation payable to the assessee in respect of those lands at Rs. 1,25,131. That amount was paid to the assessee on March 22, 1956. On a reference, the civil court enhanced the compensation by Rs. 99,245 by its order dated July 12, 1956.

27. On those facts, the question arose as to in which year the profit on the transaction of acquisition of land was to be assessed to tax The Income-tax Officer assessed it in the assessment year 1957-58, the relevant accounting year of which was October 1, 1955, to September 30, 1956, by taking into consideration the date of payment, which was March 22, 1956. On appeal, the Appellate Assistant Commissioner deleted it and directed the Income-tax Officer to reopen the assessment for 1955-56, on the ground that the sale of the land took place on June 23, 1954, i.e., in the accounting year 1953-54, relevant to the assessment year 1955-56. The Income-tax Officer, accordingly, reopened the assessment for 1955-56 under Section 34 and included the profit in the total income of that year, by taking into consideration the enhanced compensation awarded by the district judge. The assessee once again appealed to the Appellate Assistant Commissioneragainst the reassessment for 1955-56, on the ground that the additional profit did not accrue in the relevant accounting year. The Appellate Assistant Commissioner agreed with the assessee's contention that the additional compensation accrued to the assessee on July 12, 1956, which was the date of the order of the district judge. On appeal, the Income-tax Appellate Tribunal held that the enhanced compensation accrued to the assessee on June 23, 1954, when the land was taken by the Collector and, accordingly, allowed the department's appeal.

28. The learned Chief Justice, speaking for the court, observed that:

' .... On a consideration of the nature of acquisition proceedings, it appears to us that when lands are notified to be taken by the Government under the Land Acquisition Act, the owner of the land is entitled to payment of compensation at the market value on the date when possession was taken pursuant to a notification under Section 3 of the Hyderabad Land Acquisition Act. It may be stated that on the date when land is taken possession of by the Government, no compensation has in fact been determined, but it has become only payable. The right of the owner is, therefore, an inchoate right. It is like, to borrow a term applicable to movable properties, a chose-in-action, i.e., a present right to take proceedings to recover a debt or damages, and thus inchoate in the sense that the compensation has not in fact been determined or become payable. In so far as the Income-tax Act is concerned, an income is assessable to charge only when it accrues or arises or is deemed to accrue or arise in the year of assessment.'

29. The learned judge went on to observe that:

' But unless the income is determined and becomes payable, merely to have a right to receive compensation or payment of an unspecified amount does not attract tax liability in the year in which the assessee gets such a right. '

30. The learned judge further went on to observe that:

' In our view, unless the amount of compensation actually becomes payable or enforceable, it cannot be said to accrue or deemed to accrue. On the date when the Collector awarded the compensation, it is only that amount which had accrued or deemed to accrue, whether in fact paid or not. But, by no stretch of the words in Section 4(1)(b)(i), could it be said that the right to enhanced compensation, which has not yet been accepted by the proper forum, namely, the court, has also become payable on the date when the original compensation became payable, for being included in that year of assessment. The enhanced compensation accrues only when it becomes payable, i.e., when the court accepts the claim. As has been stated earlier, a mere claim by the assessee, after taking of possession of the land, at a particular rateor for a certain sum is not compensation. It must not be forgotten that, even if a court has awarded enhanced compensation, there is a right of appeal by the Government to the High Court, and the High Court may either disallow that claim or reduce the compensation. As against that judgment, there is a further right of appeal to the Supreme Court, The assessee also can appeal against the insufficiency of the enhanced compensation. Can it be said that the final determination by the highest court of the compensation would entitle the Income-tax Officer, notwithstanding the period of limitation fixed under the Income-tax Act, to reopen the assessment in which he had included the initial compensation awarded by the Collector and recompute the entire income on the basis of the final compensation We do not think there can be any justification for such a proposition. On a proper construction of the terms ' accrue ' or ' arise ', we are of the view that such an interpretation cannot be placed. The interpretation given by us does not afiect the interests of the revenue. At the same time, it safeguards the assessee and prevents harassment. To hold otherwise would be contrary to the provisions of law.'

31. The question that was considered by this court in Khan Bahadur Ahmed Alladin's case, was as to which was the date on which profit arose or accrued to the assessee out of the acquisition of the lands by the Government, and in which assessment year these profits were taxable. For bringing the income to tax, it must have accrued or arisen to an assessee during the relevant accounting year. The learned judges who decided the above case observed that in the relevant accounting year the right to get the compensation at the enhanced rate was inchoate, that is to say, in the relevant accounting year, the learned judges explained, the compensation had not been determined or had become payable.

32. In the Estate Duty Act, the question does not turn on the meaning of the word ' accrual ' or ' arising '. The question that arises under the Estate Duty Act is whether, on the death of the deceased, there was a right to receive compensation for the lands acquired by the Government, and whether it was a debt owed by the Government to the estate of the deceased. If there was a debt due to the estate of the deceased, certainly it formed part of the estate passing on the death of the deceased. If there was a debt payable in future, then the market value of that right to receive the debt at a future date has to be determined. It may be the entire face value of the debt, or it may be something less than the actual value that may be receivable.

33. On a consideration of the nature of the land acquisition proceedings, the learned judges observed that when the lands were notified to be acquired by the Government, the owner of the lands was entitled to thepayment of compensation at the market value on that date. On the date of acquisition or award, the compensation is determined but is not paid. It is payable at a later date. These observations lend support to the department's contention that the right to receive compensation at the market value of these lands on the date of acquisition was a debt owed by the Government to the estate of the deceased.

34. The right to receive compensation for the lands acquired by the Government at their market value on the date of acquisition is one and indivisible right. There is no right to ' receive compensation ' and a separate right to receive ' extra compensation '. The only right is to receive compensation for the lands acquired by the Government, which is the fair market value on the date of acquisition. The argument of the learned counsel that the right to receive extra compensation accrued when the civil court passed the order and not before, does not merit acceptance. The so-called right to receive extra compensation cannot be torn from or considered separately from the right to receive the market value of the lands acquired by the Government., The right accrues to the owner of the lands as soon as the lands are acquired by the Government. It is, therefore, difficult to accept the argument of the learned counsel for the petitioner that a fresh and an independent right to ' receive extra compensation ' accrued to the heirs of the deceased and that it was owned and possessed by the heirs of the deceased. The lands that were acquired were those of the deceased and not those of the heirs of the deceased. How could there have been an independent right to receive compensation or any part of the compensation by the heirs of the deceased, except as the heirs of the deceased Since the deceased, by the time of receipt of the compensation, had died, the compensation was payable to the heirs of the deceased in their capacity as the heirs of the deceased; that is to say, the compensation that was payable to the deceased for the lands belonging to the deceased which were acquired by the Government was paid to the heirs of the deceased because of the death of the deceased.

35. Similarly, the decision of the Calcutta High Court in Commissioner of the Wealth-tax v. U.C. Mahatab does not render any assistance to the accountable person. In the case under consideration of the Calcutta High Court, the question arose whether on the valuation date the assessee had a right to receive compensation from the Government in respect of the zamindari estate which vested in the Government under the provisions of the West Bengal Estates Acquisition Act, 1953. The learned Acting Chief Justice, P.B. Mukherjee, speaking for the court, pointed out that the provisions of the West Bengal Estates Acquisition Act were not in pan materia with the provisions of the Madras Estates Abolition Act, and the right toreceive compensation under the West Bengal Zamindari Acquisition Act did not accrue on the valuation date, as by that date the compensation roll was not prepared or published.

36. There is, therefore, in our opinion nothing in the observations in either the decision of this court in Khan Bahadur Ahmed Alladin's case or in the decision of the Calcutta High Court in U.C. Mahatab's case which militate against the view that the right to receive compensation for the lands of the deceased that were acquired by the Government was a right in praesenti, to receive the compensation at a future date. That is, undoubtedly, 'property' within the meaning of that word under the Wealth-tax Act. As held in Ahmed G.H. Ariff v. Commissioner of Wealth-tax, : [1970]76ITR471(SC) .property is a term of widest import and subject to any limitations which the context may require, it signifies every possible interest which a person can clearly hold and enjoy. In that case, the right of a beneficiary to receive an aliquot share of the net income from the property comprised in a ' wakf-alal-aulad ' created by a Muslim, professing the ' Hanafi ' school of Mohammedan law, was held to be ' property ' and that it was covered by the definition of ' asset ' in Section 2(e) of the Wealth-tax Act, and the capital value of that property was assessable to wealth-tax. The present right to receive a debt at a future date is, undoubtedly, ' property ' within the meaning of that word ordinarily understood, as well as technically understood, under the Wealth-tax Act. If that right is sold in open market, certainly, it will fetch some price and that price may be the face value of the debt, or something less but, certainly, it has got a definite value.

37. It emerges from the above discussion that the accountable person failed to disclose a primary and a material fact necessary for making the assessment. The Assistant Controller of Estate Duty had, undoubtedly, on the above facts, reason to believe that the property of the deceased chargeable to estate duty had escaped assessment, by reason of the assessee's failure to disclose the material facts. The Assistant Controller of Estate Duty had, therefore, jurisdiction to issue a notice for reopening the assessment under Section 59(a) of the Act. As held by the Supreme Court in Kantamani Venkata Narayana & Sons v. First Additional Income-tax Officer, Rajahmundry, suffice it to say that the Assistant Controller of Estate Duty had jurisdiction to issue a notice for reopening the assessment under Section 59(a) of the Act. It is neither further necessary nor within the province of this court to record a final decision about the failure of the accountable person to disclose fully and truly all material facts bearing on the assessment, and the consequent escapement of property from assessment to tax.

38. The writ petition fails and is, accordingly, dismissed with costs. Advocate's fee Rs. 100.


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