S. Ranganathan, J.
1. The petitioner is an HUF represented by the karta, R. B. Ganga Saran. In this writ petition, the petitioner challenges the validity of a notice issued by the 1st respondent on the 17th February, 1975, under s. 147 read with s. 148 of the I. T. Act, 1961.
2. The original assessment of the family for the assessment year 1970-71, was completed by the 1st respondent on the 1st September, 1971. One of the items of income that had to be considered for the above assessment year was the capital gain derived by the assessed on the sale of a house property bearing No. 11, Keeling Road, New Delhi, on 28th July, 1969. The assessed filed a copy of the sale deed before the ITO. According to the deed, the consideration for which the property was sold was Rs. 9,50,000. After deducting the cost price of the house which had been purchased by the assessed on 4th January, 1956, and the cost of additions and improvements as well as brokerage, a capital gain of Rs. 7,50,709 was arrived at by the ITO in respect of the sale of the property. A deduction of Rs. 4,70,119 was given under s. 54 of the Act and the balance of Rs. 2,80,590 was processed for assessment under s. 80T of the Act. It may be mentioned that there were, successively, appeals to the AAC and them to the Tribunal from the order of assessment. The point in dispute was whether in the computation of the capital gain, the assessed was entitled to a deduction of Rs. 14,222 claimed by it. On this point, the assessed was successful before the AAC and the Tribunal dismissed the appeal filed by the department on 23rd July, 1973.
3. On 17th February, 1975, the ITO issued a notice under s. 148 of the Act which is annex. 'A' to the writ petition. The notice does not mention whether it is being issued under clause (a) or clause (b) of s. 147 of the I. T. Act, 1961. The assessed wrote to the officer repeatedly seeking to know why the proceedings had been initiated but apart from stating that the notice had been issued under clause (a) of s. 147, no further information was given to the assessed. The assessed, thereforee, filed this writ petition challenging the jurisdiction of the ITO to issue the impugned notice dated 17th February, 1975. Though the assessed had not been informed by the ITO of the reasons for the action taken, the assessed appears to have gathered that the ITO's objections related to the capital gain on the sale of the property. The assessed's case in the writ petition is that all the material facts relevant for the assessment of this item had been disclosed at the time of the original assessment and that, thereforee, the notice said to have been issued under s. 147(a) was without jurisdiction.
4. It was for the first time in a counter-affidavit filed in opposition to a stay petition filed by the assessed and, thereafter, in the counter-affidavit filed in the writ petition that the ITO set out the reasons for which action had been initiated under s. 147. In para 3 (d) of the counter-affidavit, the ITO has stated that after the original assessment was completed it came to the knowledge of the ITO that the assessed-family had made an application to the New Bank of India for loan in connection with which it proposed to offer as security the property in question. In the application dated 15th May, 1968, made to the New Bank of India, the assessed had claimed the value of the property to be Rs. 15,00,000. On 1st June, 1968, the assessed had also obtained a certificate from a valuer, according to which the value of the property above mentioned was Rs. 20,18,030. In connection with the loan proposal, the bank also appears to have undertaken a valuation of the property and according to their estimate the property was of the value of Rs. 13,90,000. In the light of this information which came into his possession subsequent to the original assessment, the ITO was of the opinion that in the original assessment proceedings, the family had grossly understated the sale price and that the capital gain in respect of the sale of the property had been under assessed. In para. 3 (e) of the counter-affidavit it is stated that the ITO also came to know that other similar properties situated either at Barakhamba Road or at Curzon Road had yielded much higher sale prices than that disclosed by the assessed-family. In para. 3 (f) of the counter-affidavit it is submitted that the sale price of the property had been grossly understated by the assessed as was evidenced by the following facts :
(i) the Keeling Road area has been converted into a commercial area under a Government notification during 1964-65;
(ii) the assessed-family had applied to the N. D. M. C. for the construction of a multistoreyed commercial building on the plot;
(iii) a check of the records of the land and Development Office, New Delhi, revealed that the value of such commercial area was being estimated at Rs. 600 per square yard in 1969; and
(iv) as against the price of Rs. 9,50,000 the assessed family's own architect had estimated the value of the land at 11, Keeling Road, at Rs. 425 per square yard on 1st June, 1968.
5. The above are the allegations made in the counter-affidavit but the reasons recorded by the ITO on the 17th February, 1975, just before the issue of the notice in question, were as follows :
'Information has come into possession that the assessed got highly understated the consideration in relation to sale of his property No. 11, Tolstoy Marg, New Delhi (old No. 11, Keeling Road, New Delhi), while executing the sale document in favor of Fee Vee Construction Co. Pvt. Ltd., New Delhi, in July, 1969. The market worth of this property at the date of sale was much more than the actual stated consideration of Rs. 9.50 lakhs in the sale deed on the date of sale in the bank record of the New Bank of India wherefrom the assessed had been seeking loan against equitable mortgage of the property. There is also reason to believe that other similar properties of the area stood exchanged at a much better price than the amount shown by the assessed in the sale deed. Thus, owing to omission/failure on the part of the assessed in disclosing full and true facts for this assessment the income chargeable to tax for this year escaped assessment and was highly underassessed. There was also mis-statement while claiming benefit u/s. 54. Hence, notice u/s. 147(a)/148 is issued for this assessment year to bring to charge the income escaping assessment for 1970-71 assessment, which was highly under-assessed.'
6. On behalf of the assessed, it was submitted that the sale price of the property was the only material fact so far as the capital gain was concerned and that the assessed had fully and truly disclosed all the material facts pertaining to the sale transaction even at the time of the original assessment. On the other hand, on behalf of the respondent Shri Verma contended that the market value of the property was very material in order to arrive at the amount of capital gain particularly in view of the provisions contained in s. 52(2). He contended that the assessed, with full knowledge of the fact that the market value as estimated by its own valuer was very much higher than the alleged sale price, had deliberately suppressed the full facts material in this connection and that, thereforee, the case fell within the terms of clause (a) of s. 147. In any event, he submitted that the facts of the case clearly attracted the provisions of clause (b) of s. 147 and he urged that since the notice under s. 147/148 had been issued within the period of four years, its validity could be reference to clause (b) of s. 147.
7. We are of the opinion that the terms of clause (a) of s. 147 are clearly not attracted to the facts of the present case. So far as the assessment of the item of capital gain is concerned, the material facts, in so far as they are relevant here, which the assessed had to disclose were the facts pertaining to the transaction of sale and in particular the details of the consideration which the assessed had received from the vendee. In the present case, the assessed had placed before the ITO the sale deed of the property. He had given full details of the vendee as well as the consideration for which the sale was effected. There is no material which the assessed should have disclosed in this connection but had failed to. Shri Verma laid emphasis on the assessed's failure to disclose the facts pertaining to the market value of the property which were in its possession. We do not think that this is one of the primary material facts which an assessed should disclose. The assessable capital gains on the sale of a property comprise of the difference between the sale consideration received and the original cost. Section 52 is a special provision which enables the ITO to ignore the sale price and adopt the market value of the property but the primary facts for invoking this special provision have to be gathered by the ITO. It will be impractical and unreasonable to interpret the relevant provisions as requiring an assessed, even in the absence of any queries from the ITO, to inform the officer of any information he may possess in regard to the market value of the property, to draw the attention of the ITO to the disparity, if any, between the market value of the property and the sale consideration which he claims to have received on the sale of the property and to invite an investigation into the matter. As we see it, the duty of the assessed was to disclose fully and truly the consideration it had received on the sale of the property and the officer would have been fully justified in initiating action under s. 147(a) if he had any reason to believe that the assessed had not stated the real sale consideration. But, in the present case, all the information which the ITO has received subsequently centres around the possible market value of the property on the date of sale. The mere fact that an estimate of the market value on the date of sale is higher than the sale price recorded does not necessarily mean that the assessed must have sold at the higher market value and so suppressed the true consideration. There was no information or material before the ITO such as for, e.g., positive information regarding the money paid, entries in account books of vendor or vendee, statements by those or connected persons and so on, on the basis of which the officer could conclude that the sale price received had been understated by the assessed and thus attribute a failure or omission on the part of the assessed in his duty of disclosure of material facts. So far as clause (a) of s. 147 is concerned it is not sufficient for the ITO to merely say that since the market value of the property appears to be higher, the assessed must be deemed to have suppressed the true sale price. As we have already stated we do not understand s. 52 or s. 48 to impose upon the assessed an obligation to inform the ITO that the property has been sold at a price which might not be commensurate with the market price on the date of sale. That was a matter for investigation by the ITO. That was not a material or primary fact which has to be disclosed by the assessed. We are, thereforee, of the opinion that the provisions of s. 147(a) are not attracted to the present case.
8. The question still arises as to whether a notice issued s. 147(a) can be supported by reference to clause (b) of s. 147. We shall first consider the question whether on the facts and circumstances of the present case the provision of clause (b) of s. 147 could have been invoked by the ITO. We think this question has to be answered in the affirmative. After the completion of the original assessment the officer came to know that the market value of the property on the date of sale was much higher than the alleged sale price. The disparity between the market value as estimated in connection with the loan transaction with the New Bank of India in 1968 and the alleged sale consideration is so wide that the ITO, on the strength of the information, could have reason to believe that the capital gains on the transaction had been underassessed. In this connection it is necessary also to advert to the provisions of s. 52(2) of the Act. Section 52(2) authorises the ITO, without prejudice to the provisions of s. 52(1), to take the market value of the property as the full value of the consideration for which the property has been sold, if the fair market value of the property on the date of transfer exceeds the full value of the consideration declared by the assessed. In the present case the fair market value of the capital assets was not at all considered by the ITO at the time of original assessment. He had before him merely the figure of the sale price disclosed by the assessed and computed the capital gains on that basis. If he had information that the fair market value of the capital asset was much in excess of the sale price, he might perhaps have taken steps to investigate the correctness of the sale price shown or to invoke the powers provided to him under sub-s. 2 of s. 52. It was only subsequent to the original assessment that he received information regarding the market value of the asset at the time of sale. In the light of this information h e certainly had reason to believe that the amount of capital gain assessable on the sale had escaped assessment. It appear to us, thereforee, that whatever might be the position in regard to clause (a) of s. 147, this is a case to which the provisions of clause (b) of s. 147 were rightly applicable.
9. Learned counsel for the assessed, however, objects to the above line of reasoning. He submits that sale consideration has been actually received in excess of the price stated in the document. This argument relates to the merits of the reassessment with which we are not concerned at present. Sub-s. (2) of s. 52 is very wide in its language and it empowers the ITO to adopt the market value in cases where such market value exceeds the amount of consideration received by the assessed by not less than fifteen per cent. Some judicial decisions have restricted the scope of this sub-section. But this is a point on which there is conflict of judicial opinion and, is in any event, an arguable matter which will be gone into by the ITO when hearing the assessed at the time of reassessment. So far as the jurisdiction to invoke s. 147(b) is concerned, the ITO was entitled to do so in view of the wide language of s. 52(2), in the light of the fact that the information regarding the market value came to his knowledge only subsequent to the original assessment.
10. The second objection raised by the assessed is that the valuation reports on which the ITO has relied are of no relevance at all on the issue of capital gains. In the first place, they merely constituted estimates or mere guess-work in respect of the value of the property and they are not conclusive to show that the assessed received more sale price than has been stated in the sale deed. That apart, learned counsel state that these valuation reports were prepared in the context of a personal to raise a multi-storeyed building on the plot of land in question. He states that the assessed had made an application to the multiple authorities for permission to put up a multi-storeyed building on the plot. This application was rejected on 10th July, 1969. According to the learned counsel, thereforee, the valuation reports which were prepared in 1968 had been prepared on the assumption that the land was of immense value in view of the proposal for developing the plots in question. The sale, however, was effected in July, 1969, after the proposal for putting up the multi-storeyed building had been rejected by the municipal committee. It is, thereforee, submitted by the learned counsel that the ITO could not validity act upon these valuation reports of 1968 for drawing the inference that the sale price of 1969 was inadequate and that capital gains had escape assessment. Here again, we think, the argument touches the merits of the merits of the reassessment of rather than the question of jurisdiction. We do not express any opinion at this stage as to how far the valuation reports referred to by the ITO can constitute a basis for arriving at the conclusion regarding the understatement of sale proceeds in the sale deed. The assessed will be at liberty to try to persuade the ITO in the course of the reassessment proceedings that the sale price of Rs. 9,50,000 in July, 1969, was not only true tut also quite reasonable having regard to the fact that the proposal to put up a multi-storeyed building had been rejected by the municipal authorities by the time the sale took place. The only question we are now concerned with is whether the ITO after completing the original assessment had come to know that the market value of the property in 1968, even according to the assessed, was very much more than the value for which the property was sold and whether this is a act which is material in the computation of the capital gains assessable in the hands of the assessed on the sale of the property. We limit ourselves to the very narrow point that, on this information and in view of the ostensible tenor of s. 52(2), the ITO could invoke the provisions of s. 147(b) of the Act.
11. The principal objection raised on behalf of the assessed, however, is that, in the present case, the ITO has initiated action not under clause (b) but under clause (a) of s. 147. It is pointed out that when the assessed raised this point in the correspondence with the ITO, the ITO stated, in his letter dated 18th October, 1975, that action had been under s. 147(a). In fact, even according, to the counter-affidavit, the reasons recorded by the ITO refer only to s. 147(a) and not s. 147(b). It is, thereforee, contended that the respondents should not be permitted to seek in aid the terms of clause (b) for sustaining the validity of the proceedings initiated under clause (a).
12. It is no doubt unfortunate that, even in their counter-affidavit, the respondents did not take up an alternative contention seeking to sustain the validity of the notice issued on the strength of s. 147(b), but it appears to us that on the undisputed facts, to which we have already made a reference, the question of the applicability of clause (a) and/or clause (b) raises only a matter of interpretation of the section. We think, thereforee, that if it is possible for the department to sustain the notice by reference to the fact that this clause has not been specifically pleaded in the counter-affidavit and is for the first time referred to only in the course of the arguments.
13. The question whether, where a notice has been issued under s. 147(a), its validity could be supported by reference to clause (b) came up for consideration recently before a Bench (of which one of us was a member) in the case of Avtar Singh Sandhu v. WTO (C. W. No. 1264 to 1270 of 1975) : 129ITR531(Delhi) (Denhi) in the context of the corresponding provision contained in s. 17 of the W. T. Act. We have held there, after referring to the decision of Calcutta High Court in the case of Smt. Nirmala Birla v. WTO : 105ITR483(Cal) , that it is possible for the WTO entertain on the same of facts alternate beliefs under clause (a) or clause (b) and that there is nothing to prevent the ITO or the WTO from seeking to the statute. We may mention that the Calcutta High Court had consistently taken in view : Vide Mriganka Mohan Sur v. CIT : 95ITR503(Cal) reiterated in ITO v. Eastern Coal Co. Ltd. : 101ITR477(Cal) and then reaffirmed in Smt. Nirmala Birla v. WTO : 105ITR483(Cal) . This is a contrary view expressed by the Appellate High Court (Vide Raghubar Dayal Ram Kishan v. CIT : 63ITR572(All) ), but we agree with the conclusion of the Calcutta High Court, particularly in view of the decision of the Supreme Court in the cases of L. Hazari Mal Kuthiala v. ITO : 41ITR12(SC) and CIT v. Onkaramal Meghraj : 93ITR233(SC) . The facts on the basis of which the assessment has been reopened are not is issue. The department no doubt purported to have reopened the assessment under clause (a) but if, as held by us above, the facts can sustain the reopening of the assessment under clause (b), we do not see why the validity of the notice issued by the ITO cannot be supported by reference to the appropriate clause or provision.
14. A more difficult question may perhaps arise where a notice issued under clause (b) is sought to be supported by reference to clause (a) because is such a case the opinion of the officer regarding the omission or failure of the assessed in his duty of disclosure would not have been formed : (Vide Johri Lal v. CIT : 88ITR439(SC) , explained in Mriganka Mohan Sur : 95ITR503(Cal) , or again, where the notice is issued in fact under s. 34(1)(a) but, on the strength of this notice, the ITO tries to bring into the reassessment items in respect of which action could have been taken only under s. 34(1)(b) - a situation that has been considered by the Madras High Court in Al. Vr. St. Veerappa Chettiar v. CIT : 91ITR116(Mad) and by the Bombay High Court in New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. v. CIT : 107ITR760(Bom) . But for the purpose of the present case, we are not concerned with such situations and we think that the principle of Hazari Mal : 41ITR12(SC) will clearly apply to the present facts.
15. For the reasons above mentioned, we are of the opinion that the notice dated 17th February, 1975, cannot be said to be a notice issued without jurisdiction. We would only add that we do not express any opinion regarding the merits of the reassessment. We should not also be understood as having expressed any concluded opinion regarding the applicability of the provisions of s. 52(2) or the effect or weight to be attached to the valuation reports relied upon by the ITO vis-a-vis the question of the capital gains. We express no opinion regarding the 'comparable' instance of sale and other data referred to by the ITO in the counter-affidavit. These are all matters which can be agitated by the assessed in the course of the reassessment proceedings. We have addressed ourselves only to a very short question as to whether, on the material placed on record, the ITO had the jurisdiction to initiate proceedings under s. 147. In answering this question in the affirmative, we a re basing ourselves only on the ground that the valuation reports filed by the assessed and prepared by the bank constituted information before the ITO that the market value of the property on the date of sale was considerably in excess of the consideration shown in the sale deed and that this information was sufficient to give the officer reason to believe that the capital gains assessable under the Act had escaped assessment.
16. Counsel for the petitioner, Mr. Randhawa, sated that in the case of the vendee, Gee Vee Construction Pvt. Ltd., the assessment made by the ITO, on the basis of the sale consideration of Rs. 9,50,000, had been set aside by the Commissioner by the issue of a notice under s. 263 of the I. T. Act, 1961. The validity of that notice was upheld by this court in a decision which is reported as Gee Vee Enterprises v. Addl. CIT : 99ITR375(Delhi) . The learned counsel stated that subsequent to the order of this court the Tribunal had set aside the order of the Commissioner and upheld the original assessment. The learned counsel for the respondent stated that original assessment. The learned counsel for the respondent stated that he is not aware of the final result and that he is not in a position to give details regarding the assessment of Gee Vee Construction Pvt. Ltd. We may remark that this point made by the learned counsel for the petitioner also has relevance to the merit s of the reassessment and not to the question of jurisdiction which is before us. It is certainly open to the petitioner to place before the ITO the details regarding the assessment in the assessment in the case of Gee Vee Construction and satisfy the ITO that the sale consideration has been correctly stated in the deed.
17. For the reasons above discussed, we are of the opinion that the civil writ petition has to be dismissed. We direct accordingly. The respondents will be entitled to their costs. Counsel's fee Rs. 200.